
[Federal Register Volume 81, Number 35 (Tuesday, February 23, 2016)]
[Notices]
[Pages 9063-9065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03662]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77154 ; File No. SR-BOX-2016-08]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Reduce the Order Handling Period for Directed Orders From Three Seconds 
to One Second

February 17, 2016.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 5, 2016, BOX Options Exchange LLC (the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to reduce the order handling period for 
Directed Orders from three seconds to one second. The text of the 
proposed rule change is available from the principal office of the 
Exchange, at the Commission's Public Reference Room and also on the 
Exchange's Internet Web site at http://boxexchange.com.

[[Page 9064]]

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 8040(d)(4) (Obligations of 
Market Makers) of the BOX Trading Rules, and the corresponding IM-8040-
1 to reduce the order handling period for Directed Orders from three 
seconds to one second.\3\ Based on trading and order management systems 
technology today, a three second period for a Market Maker to determine 
how to proceed with a Directed Order on BOX is simply unnecessary and 
BOX believes one second to act upon a Directed Order is more 
appropriate.
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    \3\ A Directed Order is any Customer Order to buy or sell which 
has been directed to a particular Market Maker by an Order Flow 
Provider (``OFP''). See BOX Rule 100(a)(19).
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    Currently, upon receipt of a Directed Order, an Executing 
Participant (``EP'') has three seconds to either submit the Directed 
Order to the Price Improvement Period (``PIP'') \4\ or send the 
Directed Order to the BOX Book. If, three seconds after receipt of a 
Directed Order, an EP has not taken any action on the Directed Order, 
then BOX automatically releases the Directed Order to the BOX Book. The 
Exchange proposes to reduce the amount of time that an EP has to act on 
a Directed Order to one second.
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    \4\ See BOX Rule 7150.
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    IM-8040-1 currently provides that Market Makers are expected to act 
upon Directed Orders as immediately as practicable, which must not 
exceed three seconds. The Exchange proposes that this be reduced to one 
second.
    When approving previous reductions in order handling and exposure 
periods on BOX, the Commission concluded that, in the electronic 
environment of BOX, ``reducing each of these exposure periods from 
three seconds to one second could facilitate the prompt execution of 
orders, while continuing to provide market participants with an 
opportunity to compete for exposed bids and offers.'' \5\ While BOX 
recognizes that exposure and handling periods are different, BOX 
believes that reducing the handling period from three seconds to one 
second falls under the same rationale that the Commission approved for 
the reduction of the exposure period.\6\ Specifically, both situations 
involve decision making by a Participant's systems, whether it be to 
respond to the exposed order or how to handle a Directed Order. 
Therefore, the Exchange believes that the same rational [sic] should be 
used in determining the validity of the proposed change. Additionally, 
like the reduction of the exposure period, the reduction of the 
handling period from three seconds to one second could result in more 
timely executions of orders on BOX due to the shorter decision making 
time for the EPs. BOX also recognizes that one second is not long 
enough to allow human interaction when an EP receives a Directed Order. 
However, all EPs on BOX operate sufficiently automated electronic 
systems so that they can react and respond to receipt of a Directed 
Order in a meaningful way within fractions of a second and no longer 
need the three second period.\7\
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    \5\ See Securities Exchange Act Release Nos. 59638 (March 27, 
2009), 74 FR 15020 (April 2, 2009) (SR-BX-2009-015) (Order Granting 
Approval of Reduction of Certain Order Handling and Exposure Periods 
on BOX From Three Seconds to One Second). See also 68965 (February 
21, 2013), 78 FR 13387 (February 27, 2013) (SR-BOX-2013-08) (Notice 
of Filing of Proposed Rule Change to Reduce the Directed Order 
Exposure Period on BOX From Three Seconds to One Second).
    \6\ Id.
    \7\ The Exchange spoke with BOX Participants who unanimously 
confirmed that their respective systems can react and respond to 
receipt of a Directed Order within fractions of a second.
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    BOX believes that further reducing its Directed Order handling 
period from three seconds to one second will benefit customer orders 
submitted by OFPs. BOX believes it is in all participants' best 
interests to minimize the time of any order processing period. Further, 
BOX believes that reducing the Directed Order handling period to one 
second will continue to provide EPs sufficient time to appropriately 
respond to receipt of Directed Orders. As discussed above, reducing the 
handling period from three seconds to one second will result in a 
shorter decision making time for the EPs, which in turn could cause the 
Directed Orders to be handled more quickly. Thus, reducing the handling 
period from three seconds to one second could provide investors and 
other market participants with more timely executions of their orders 
on BOX. EPs on BOX are able to respond to orders in fractions of a 
second and BOX believes it is appropriate and beneficial for EPs to act 
upon receipt of Directed Orders within one second rather than three 
seconds.
    Within 90 days of the proposed rule change being operative, and at 
least one week prior to implementation, BOX will issue a regulatory 
circular to inform BOX Participants of the implementation date for the 
reduction of the Directed Order handling period from three seconds to 
one second. BOX has discussed the implementation of the change with the 
relevant Participants and believes this will give EPs adequate time to 
make any necessary system modifications to coincide with the 
implementation date.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\8\ in general, and Section 
6(b)(5) of the Act,\9\ in particular, in that it is designed to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism for a 
free and open market and a national market system and, in general, to 
protect investors and the public interest. In particular, reducing the 
handling period from three seconds to one second will result in a 
shorter decision making time for the EPs, which in turn could cause the 
Directed Orders to be handled more quickly. Accordingly, the proposed 
rule change may provide investors with more prompt and timely execution 
of Directed Orders on BOX. Therefore, the proposed rule change is 
consistent with the requirements above.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes the proposed rule change is not unfairly 
discriminatory because the time period for acting upon Directed Orders 
would be the same for all EPs. As such, the Exchange believes that a 
reduction in the Directed Order handling time on BOX would not be 
unfairly discriminatory and would benefit investors.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed change is not unfairly 
discriminatory because the handling time for Directed

[[Page 9065]]

Orders would be the same for all Participants. All Participants on BOX 
have today, and will continue to have, an equal opportunity to respond 
to Directed Orders exposed on BOX. As such, the Exchange believes that 
a reduction in the Directed Order handling period on BOX would not be 
unfairly discriminatory and would benefit investors. For these reasons, 
the Exchange does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the foregoing proposed rule change does not: (i) Significantly 
affect the protection of investors or the public interest; (ii) impose 
any significant burden on competition; and (iii) become operative for 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) 
thereunder.\13\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission. The 
Exchange has satisfied this requirement.
    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.\14\ If the 
Commission takes such action, the Commission shall institute 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ Id.
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2016-08 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2016-08. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2016-08 and should be 
submitted on or before March 15, 2016.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-03662 Filed 2-22-16; 8:45 am]
BILLING CODE 8011-01-P


