[Federal Register Volume 85, Number 103 (Thursday, May 28, 2020)]
[Notices]
[Pages 32085-32086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-11475]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88934; File No. SR-BOX-2020-04]


Self-Regulatory Organizations; BOX Exchange LLC; Order Granting 
Approval of a Proposed Rule Change To Amend the Provisions of the 
Limited Liability Company Agreement and Bylaws

May 22, 2020.

I. Introduction

    On February 4, 2020, BOX Exchange LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to amend the 
provisions of the Exchange's limited liability company agreement and 
bylaws to accommodate the Exchange's potential regulation of multiple 
facilities. The proposed rule change was published for comment in the 
Federal Register on February 25, 2020.\3\ On April 2, 2020, pursuant to 
Section 19(b)(2) of the Act,\4\ the Commission designated a longer 
period within which to approve the proposed rule change, disapprove the 
proposed rule change, or institute proceedings to determine whether to 
disapprove the proposed rule change.\5\ The Commission received no 
comment letters on the proposed rule change. The Commission is 
approving the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 88236 (February 19, 
2020), 85 FR 10765 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 88542, 85 FR 19787 
(April 8, 2020). The Commission designated May 25, 2020, as the date 
by which the Commission shall approve or disapprove, or institute 
proceedings to determine whether to disapprove, the proposed rule 
change.
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II. Description of the Proposed Rule Change \6\

    According to the proposal, the Exchange currently regulates one 
facility, BOX Options Market LLC (``BOX Options Market''). The Exchange 
now proposes to amend the provisions of its limited liability company 
agreement (``LLC Agreement'') and bylaws (``Bylaws'') (collectively 
``Governing Documents'') to accommodate the Exchange's regulation of 
potential multiple facilities.\7\ According to the Exchange, the 
proposed changes to the Governing Documents are designed to: (i) 
Provide sufficient flexibility to contemplate multiple Exchange 
facilities under the Exchange's regulatory authority; (ii) simplify the 
defined terms in the Governing Documents; and (iii) make certain other 
changes to the terms of the Governing Documents to align them with the 
structure of the Exchange and its relationships.\8\
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    \6\ For a more complete description of all the changes as 
proposed, see Notice, supra note 3.
    \7\ See id. at 10765.
    \8\ See id. at 10765-66.
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    Among other things, to provide for flexibility to accommodate more 
than one facility, the Exchange proposes to replace the term ``BOX 
Options'' and ``BOX Options Market'' with the term ``Exchange 
Facility'' in the LLC Agreement. Likewise, the Exchange would replace 
in the LLC Agreement the term ``BOX Options Participant'' with 
``Exchange Facility Participant.'' And to simplify the defined terms in 
the Governing Documents, the Exchange proposes, for example, to remove 
the definition of ``Related Agreements'' from the LLC Agreement. 
According to the Exchange, the term is used in only one section of the 
LLC Agreement, and the Exchange believes that the deletion of the 
defined term would not otherwise affect the LLC Agreement.\9\ Lastly, 
to align the Governing Documents with the structure of the Exchange and 
its relationships, the Exchange proposes to remove BOX Holdings Group 
LLC (``BOX Holdings''), the parent and 100% owner of BOX Options 
Market, as a party to the LLC Agreement, as well as remove its right to 
appoint a director to the Exchange Board of Directors (``Exchange 
Board''). In connection with these changes, the Exchange also proposes 
to provide Exchange Facility
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    \9\ See id. at 10767.
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representation on the Exchange Board and its nominating committee 
(``Nominating Committee''), rather than BOX Holdings representation, as 
is currently provided in the Governing Documents.\10\ According to the 
Exchange, because BOX Holdings is the 100% owner of BOX Options Market 
and the composition of the board of directors for each entity is the 
same, the close alignment between the entities and their interests has 
allowed BOX Options Market to be fairly represented on the Exchange 
Board through BOX Holdings. However, the Exchange now proposes that any 
Exchange Facility would have direct representation on the Exchange 
Board and the Nominating Committee, rather than through BOX 
Holdings.\11\
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    \10\ See id. at 10765, 10768-71.
    \11\ Specifically, the Exchange proposes to amend its Bylaws to 
ensure that each Exchange Facility would have a representative on 
the Exchange Board (``Facility Director''). According to the 
Exchange, the Facility Director would come from the leadership of 
and be directly designated by the Exchange Facility, rather than BOX 
Holdings. In addition, as is the case today, the Facility Director 
would serve on certain committees of the Exchange Board. See Notice, 
supra note 3, at 10771.
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    Finally, the Exchange proposes various technical amendments to the 
Governing Documents to effectuate the changes discussed above.\12\
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    \12\ For example, the Exchange proposes to amend the definition 
of ``Confidential Information'' in the LLC Agreement to remove the 
reference to ``BOX Options Market'' and replace it with a reference 
to the newly proposed defined term ``Exchange Facility.'' See 
Notice, supra note 3, at 10766-67.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange. In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(1) of the Act,\13\ which requires a 
national securities exchange to be so organized and have the capacity 
to carry out the purposes of the Act and to comply, and to enforce 
compliance by its members and persons associated with its members, with 
the provisions of the Act. The Commission also finds that the proposed 
rule change is consistent with Section 6(b)(3) of the Act,\14\ which 
requires that the rules of a national securities exchange assure a fair 
representation of its members in the selection of its directors and the 
administration of its affairs and provide that one or more directors 
shall be representative of issuers and investors and not be associated 
with a member of the exchange, broker, or dealer. The Commission 
further finds that the

[[Page 32086]]

proposed rule change is consistent with Section 6(b)(5) of the Act,\15\ 
which requires, among other things, that the rules of a national 
securities exchange be designed to prevent fraudulent and manipulative 
acts and practices, to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating, clearing, settling, and processing information with respect 
to, and facilitating transactions in, securities, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system and, in general, to protect investors and the public 
interest.
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    \13\ 15 U.S.C. 78f(b)(1).
    \14\ 15 U.S.C. 78f(b)(3).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange proposes to modify the Governing Documents to 
accommodate a potential for multiple facilities. To that end, the 
Exchange proposes to amend certain terms so that the Governing 
Documents more generally reference the Exchange's facility rather than 
BOX Options Market specifically. The Exchange also proposes to make 
certain ministerial amendments throughout its Governing Documents, such 
as deleting terms that are not deemed necessary.\16\ With respect to 
such changes and to changes that provide the Exchange with flexibility 
to operate more than one facility, the Commission finds that they are 
technical in nature, do not raise any material concerns, and are 
therefore consistent with the Act.
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    \16\ For example, the Exchange proposes to delete the terms 
``MX,'' ``System'' and ``TOSA'' from the LLC Agreement because these 
definitions have limited use in the LLC Agreement and removing them 
will simplify the structure of the defined terms in the LLC 
Agreement. See Notice, supra note 3, at 10767-68. See also supra 
note 9 and text discussing removal of defined term ``Related 
Agreements.''
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    As discussed above, the proposal would also modify the Governing 
Documents to remove BOX Holdings as a party to the LLC Agreement and 
allow the Exchange's facility to have direct representation on the 
Exchange Board and Nominating Committee, rather than through BOX 
Holdings. In its proposal, the Exchange states that ``it is in keeping 
with the original intent of the LLC Agreement with respect to BOX 
Options Market to have BOX Options Market's rights reside directly in 
BOX Options Market, rather than with its upstream owner, and that 
similar rights will reside directly with any other new Exchange 
Facility. . . .'' \17\ The Exchange further states that ``it is 
appropriate to provide direct representation on the Exchange Board to 
facilities of the Exchange to promote their fair representation in the 
administration of the Exchange's affairs and the selection of its 
directors.'' \18\ Further, the Exchange believes that the proposed 
removal of BOX Holdings from the LLC Agreement is consistent with the 
Act because BOX Holdings is only a party to the LLC Agreement with 
respect to its rights to appoint individuals to serve on the Exchange 
Board and the Nominating Committee, and the right to appoint a director 
to the Exchange Board is now proposed to reside in each Exchange 
Facility.
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    \17\ See Notice, supra note 3, 10769.
    \18\ See id. at 10768.
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    The Commission finds that the changes with respect to BOX Holdings 
and the representation of the Exchange's facility on the Exchange Board 
is consistent with the Act. The Commission believes that, to the extent 
that these changes provide mechanisms whereby a facility of the 
Exchange would have more direct representation on the Exchange Board, 
the changes are appropriate.
    Based on the foregoing, the Commission therefore finds that the 
proposed rule change is consistent with the Act.\19\
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    \19\ In approving these proposed rule changes, the Commission 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-BOX-2020-04) be, and hereby 
is approved.
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    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-11475 Filed 5-27-20; 8:45 am]
BILLING CODE 8011-01-P


