[Federal Register Volume 86, Number 105 (Thursday, June 3, 2021)]
[Notices]
[Pages 29856-29861]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-11691]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92072; File No. SR-BOX-2021-12]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
of Proposed Rule Change To Amend BOX Rule 5050 (Series of Options 
Contracts Open for Trading) To Limit Short Term Options Series 
Intervals

May 28, 2021.
    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 May 18, 2021, BOX 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend BOX Rule 5050 (Series of Options 
Contracts Open for Trading). This proposal seeks to limit Short Term 
Options Series intervals between strikes which are available for 
quoting and trading on BOX. 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 
website at http://boxoptions.com.

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 5050, ``Series of Options 
Contracts Open for Trading.'' Specifically, this proposal seeks to 
limit the intervals between strikes for multiply listed equity options 
classes within the Short Term Options Series program that have an 
expiration date more than twenty-one days from the listing.
Background
    Today, BOX's listing rules within Rule 5050 permits the Exchange, 
after a particular class of options (call option contracts or put 
option contracts relating to a specific underlying stock, Exchange-
Traded Fund Share,\3\ or

[[Page 29857]]

ETN \4\) has been approved for listing and trading on the Exchange, to 
open for trading series of options therein. The Exchange may list 
series of options for trading on a weekly,\5\ monthly \6\ or quarterly 
\7\ basis. BOX Rule 5050(d) sets forth the intervals between strike 
prices of series of options on individual stocks.\8\ In addition to 
those intervals, the Exchange may list series of options pursuant to 
the $1 Strike Price Interval Program,\9\ the $0.50 Strike Program,\10\ 
the $2.50 Strike Price Program,\11\ and the $5 Strike Program.\12\
---------------------------------------------------------------------------

    \3\ Exchange-Traded Fund Share shall include shares or other 
securities that are traded on a national securities exchange and are 
defined as an ``NMS stock'' under Rule 600 of Regulation NMS, and 
that (i) represent interests in registered investment companies (or 
series thereof) organized as open-end management investment 
companies, unit investment trusts or similar entities, that hold 
portfolios of securities and/or financial instruments including, but 
not limited to, stock index futures contracts, options on futures, 
options on securities and indexes, equity caps, collars and floors, 
swap agreements, forward contracts, repurchase agreements and 
reverse repurchase agreements comprising or otherwise based on or 
representing investments in broad-based indexes or portfolios of 
securities and/or Financial Instruments and Money Market Instruments 
(the ``Money Market Instruments'') (comprising or otherwise based on 
or representing investments in broad-based indexes or portfolios of 
securities and/or Financial Instruments and Money Market Instruments 
(or that hold securities in one or more other registered investment 
companies that themselves hold such portfolios of securities and/or 
Financial Instruments and Money Market Instruments); or (ii) 
represent interests in a trust that holds a specified non-U.S. 
currency deposited with the trust or similar entity when aggregated 
in some specified minimum number may be surrendered to the trust by 
the beneficial owner to receive the specified non-U.S. currency or 
currencies and pays the beneficial owner interest and other 
distributions on the deposited non-U.S. currency or currencies, if 
any, declared and paid by the trust (``Currency Trust Shares''); or 
(iii) represent commodity pool interests principally engaged, 
directly or indirectly, in holding and/or managing portfolios or 
baskets of securities, commodity futures contracts, options on 
commodity futures contracts, swaps, forward contracts and/or options 
on physical commodities and/or non-U.S. currency (``Commodity Pool 
ETFs'') or (iv) represent interests in the SPDR[supreg] Gold Trust, 
the iShares COMEX Gold Trust, the iShares Silver Trust, the ETFS 
Gold Trust, the ETFS Silver trust, the ETFS Palladium Trust, the 
ETFS Platinum Trust or the Sprott Physical Gold Trust; provided the 
conditions within BOX Rule 5050(h)(1) and (2) are met. See BOX Rule 
5020(h).
    \4\ Securities deemed appropriate for options trading shall 
include shares or other securities (``Equity Index-Linked 
Securities,'' ``Commodity-Linked Securities,'' ``Currency-Linked 
Securities,'' ``Fixed Income Index-Linked Securities,'' ``Futures-
Linked Securities,'' and ``Multifactor Index-Linked Securities,'' 
collectively known as ``Index- Linked Securities'' or ``ETNs'') that 
are principally traded on a national securities exchange and an 
``NMS Stock'' (as defined in Rule 600 of Regulation NMS under the 
Securities Exchange Act of 1934), and represent ownership of a 
security that provides for the payment at maturity, as described 
within BOX Rule 5020(k)(1)(A)-(F). See BOX Rule 5020(k).
    \5\ The weekly listing program is known as the Short Term 
Options Series Program and is described within IM-5050-6.
    \6\ The Exchange will open a minimum of one expiration month and 
series for each class of options open for trading on BOX. See BOX 
Rule 5050(b). The monthly expirations are subject to certain listing 
criteria for underlying securities described within Rule 5020. 
Monthly listings expire the third Friday of the month. The term 
``expiration date'' when used in respect of a series of binary 
options other than event options means the last day on which the 
options may be automatically exercised. In the case of a series of 
event options (other than credit default options or credit default 
basket options) that are be automatically exercised prior to their 
expiration date upon receipt by the Corporation of an event 
confirmation, the expiration date is the date specified by the 
listing Exchange; provided, however, that when an event confirmation 
is deemed to have been received by the Corporation with respect to 
such series of options, the expiration date will be accelerated to 
the date on which such event confirmation is deemed to have been 
received by the Corporation or such later date as the Corporation 
may specify. In the case of a series of credit default options or 
credit default basket options, the expiration date is the fourth 
business day after the last trading day for such series as such 
trading day is specified by the Exchange on which the series of 
options is listed; provided, however, that when an event 
confirmation is deemed to have been received by the Corporation with 
respect to a series of credit default options or single payout 
credit default basket options prior to the last trading day for such 
series, the expiration date for options of that series will be 
accelerated to the second business day following the day on which 
such event confirmation is deemed to have been received by the 
Corporation. ``Expiration date'' means, in respect of a series of 
range options expiring prior to February 1, 2015, the Saturday 
immediately following the third Friday of the expiration month of 
such series, and, in respect of a series of range options expiring 
on or after February 1, 2015 means the third Friday of the 
expiration month of such series, or if such Friday is a day on which 
the Exchange on which such series is listed is not open for 
business, the preceding day on which such Exchange is open for 
business. See The Options Clearing Corporation (``OCC'') By-Laws at 
Section 1.
    \7\ The quarterly listing program is known as the Quarterly 
Options Series Program and is described within IM-6090-1.
    \8\ Except as otherwise provided in IM-5050-6, the interval 
between strike prices of series of options on individual stocks will 
be: (1) $2.50 or greater where the strike price is $25.00 or less; 
(2) $5.00 or greater where the strike price is greater than $25.00; 
and (3) $10.00 or greater where the strike price is greater than 
$200.00. The interval between strike prices of series of options on 
Exchange-Traded Fund Shares approved for options trading pursuant to 
BOX Rule 5020(h) shall be fixed at a price per share which is 
reasonably close to the price per share at which the underlying 
security is traded in the primary market at or about the same time 
such series of options is first open for trading on the Exchange, or 
at such intervals as may have been established on another options 
exchange prior to the initiation of trading on the Exchange. 
Pursuant to IM-5050-1(b), notwithstanding any other provision 
regarding the interval of strike prices of series of options on 
Exchange-Traded Fund Shares in this rule, the interval of strike 
prices on SPDR[supreg] S&P 500[supreg] ETF (``SPY''), iShares Core 
S&P 500 ETF (``IVV''), PowerShares QQQ Trust (``QQQ''), iShares 
Russell 2000 Index Fund (``IWM''), and the SPDR[supreg] Dow 
Jones[supreg] Industrial Average ETF (``DIA'') options will be $1 or 
greater.
    \9\ The $1 Strike Interval Program is described within IM-5050-
2.
    \10\ The $0.50 Strike Interval Program is described within IM-
5050-5.
    \11\ The $2.50 Strike Interval Program is described within IM-
5050-3.
    \12\ The $5.00 Strike Interval Program is described within Rule 
5050(d)(5).
---------------------------------------------------------------------------

    The Exchange's proposal seeks to amend the listing of weekly series 
of options as proposed within new Supplementary Material .03(f) of 
Options 4, Section 5, by limiting the intervals between strikes in 
multiply listed equity options, excluding Exchange-Traded Fund Shares 
and ETNs, that have an expiration date more than twenty-one days from 
the listing date. This proposal does not amend monthly or quarterly 
listing rules nor does it amend the $1 Strike Price Interval Program, 
the $0.50 Strike Program, the $2.50 Strike Price Program, or the $5 
Strike Program.
Short Term Options Series Program
    Today, IM-5050-6 permits BOX to open for trading on any Thursday or 
Friday that is a business day (``Short Term Option Opening Date'') 
series of options on an option class that expires at the close of 
business on each of the next five Fridays that are business days and 
are not Fridays in which monthly options series or Quarterly Options 
Series expire (``Short Term Option Expiration Dates''), provided an 
option class has been approved for listing and trading on the 
Exchange.\13\ Today, the Exchange may open up to thirty initial series 
for each option class that participates in the Short Term Option Series 
Program.\14\ Further, if the Exchange opens less than thirty (30) Short 
Term Option Series for a Short Term Option Expiration Date, additional 
series may be opened for trading on the Exchange when the Exchange 
deems it necessary to maintain an orderly market, to meet customer 
demand or when the market price of the underlying security moves 
substantially from the exercise price or prices of the series already 
opened.\15\
---------------------------------------------------------------------------

    \13\ The Exchange may have no more than a total of five Short 
Term Option Expiration Dates, not including any Monday or Wednesday 
SPY Expirations as provided below. If the Exchange is not open for 
business on the respective Thursday or Friday, the Short Term Option 
Opening Date will be the first business day immediately prior to 
that respective Thursday or Friday. Similarly, if the Exchange is 
not open for business on a Friday, the Short Term Option Expiration 
Date will be the first business day immediately prior to that 
Friday. With respect to Wednesday SPY Expirations, the Exchange may 
open for trading on any Tuesday or Wednesday that is a business day 
series of options on the SPDR S&P 500 ETF Trust (SPY) to expire on 
any Wednesday of the month that is a business day and is not a 
Wednesday in which Quarterly Options Series expire (``Wednesday SPY 
Expirations''). With respect to Monday SPY Expirations, the Exchange 
may open for trading on any Friday or Monday that is a business day 
series of options on the SPY to expire on any Monday of the month 
that is a business day and is not a Monday in which Quarterly 
Options. Series expire (``Monday SPY Expirations''), provided that 
Monday SPY Expirations that are listed on a Friday must be listed at 
least one business week and one business day prior to the 
expiration. The Exchange may list up to five consecutive Wednesday 
SPY Expirations and five consecutive Monday SPY Expirations at one 
time; the Exchange may have no more than a total of five Wednesday 
SPY Expirations and a total of five Monday SPY Expirations. Monday 
and Wednesday SPY Expirations will be subject to the provisions of 
this Rule. See IM-5050-6(c) and (d).
    \14\ See IM-5050-6(b)(3).
    \15\ See IM-5050-6(b)(4).
---------------------------------------------------------------------------

    The Exchange may open for trading Short Term Option Series on the 
Short Term Option Opening Date that expire on the Short Term Option 
Expiration Date at strike price intervals of (i) $0.50 or greater where 
the strike price is less than $100, and $1 or greater where the strike 
price is between $100 and $150 for all option classes that participate 
in the Short Term Options Series Program; (ii) $0.50 for option classes 
that trade in one dollar increments and are in the Short Term Option 
Series Program; or

[[Page 29858]]

(iii) $2.50 or greater where the strike price is above $150. During the 
month prior to expiration of an option class that is selected for the 
Short Term Option Series Program (``Short Term Option''), the strike 
price intervals for the related non-Short Term Option (``Related non-
Short Term Option'') shall be the same as the strike price intervals 
for the Short Term Option.\16\
---------------------------------------------------------------------------

    \16\ See IM-5050-1(b).
---------------------------------------------------------------------------

    The Exchange may select up to fifty currently listed option classes 
on which Short Term Option Series may be opened on any Short Term 
Option Opening Date. In addition to the fifty option class restriction, 
the Exchange may also list Short Term Option Series on any option 
classes that are selected by other securities exchanges that employ a 
similar program under their respective rules. For each option class 
eligible for participation in the Short Term Option Series Program, the 
Exchange may open up to thirty Short Term Option Series for each 
expiration date in that class. The Exchange may also open Short Term 
Option Series that are opened by other securities exchanges in option 
classes selected by such exchanges under their respective short term 
option rules.\17\
---------------------------------------------------------------------------

    \17\ See IM-5050-6(b)(1).
---------------------------------------------------------------------------

    The Exchange notes that listings in the weekly program comprise a 
significant part of the standard listing in options markets and that 
the industry has observed a notable increase over approximately the 
last five years in compound annual growth rate (``CAGR'') of weekly 
strikes as compared to CAGR for standard third-Friday expirations.\18\
---------------------------------------------------------------------------

    \18\ See Securities Exchange Act Release No. 91125 (February 12, 
2021), 86 FR 10375 (February 19, 2021) (SR-BX-2020-032) (``BX Strike 
Interval Approval Order''); and SR-2020-BX-032 as amended by 
Amendment No. 1 (February 10, 2021) available at: https://www.sec.gov/comments/sr-bx-2020-032/srbx2020032-8359799-229182.pdf 
(``BX proposal''); see also BX Options Strike Proliferation Proposal 
(February 25, 2021) available at: https://www.nasdaq.com/solutions/bxoptions-strike-proliferation-proposal).
---------------------------------------------------------------------------

Proposal
    The Exchange proposes to widen the intervals between strikes in 
order to limit the number of strikes listed for equity options 
(excluding options on ETFs and ETNs) listed as part of the Short Term 
Option Series Program that have an expiration date more than 21 days 
from the listing date, by adopting proposed Rule 4.5(d)(6). The 
Exchange notes that this proposal is substantively identical to the 
strike interval proposal recently submitted by Nasdaq BX, Inc. (``BX'') 
and approved by the Securities and Exchange Commission 
(``Commission'').\19\
---------------------------------------------------------------------------

    \19\ See BX Strike Interval Approval Order, id.
---------------------------------------------------------------------------

    The proposal widens intervals between strikes for expiration dates 
of equity option series (excluding options on ETFs and ETNs) beyond 21 
days utilizing the three-tiered table in proposed IM-5050-11 (presented 
below) which considers both the Share Price and Average Daily Volume 
for the option series. The table indicates the applicable strike 
intervals and supersedes IM-6090-2(b)(4), which currently permits 10 
additional series to be opened for trading on the Exchange when the 
Exchange deems it necessary to maintain an orderly market, to meet 
customer demand or when the market price of the underlying security 
moves substantially from the exercise price or prices of the series 
already opened. As a result of the proposal, IM-6090-2(b)(4) would not 
permit an additional series of an equity option to have an expiration 
date more than 21 days from the listing date to be opened for trading 
on the Exchange despite the noted circumstances in subparagraph (b)(4) 
when such additional series may otherwise be added.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                            Share Price
                                                                         -------------------------------------------------------------------------------
                   Tier                         Average daily volume                        $25 to less     $75 to less    $150 to less       $500 or
                                                                           Less than $25     than $75        than $150       than $500        greater
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.........................................  Greater than 5,000..........           $0.50           $1.00           $1.00           $5.00           $5.00
2.........................................  Greater than 1,000 to 5,000.            1.00            1.00            1.00            5.00           10.00
3.........................................  0 to 1,000..................            2.50            5.00            5.00            5.00           10.00
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Share Price would be the closing price on the primary market on 
the last day of the calendar quarter. This value would be used to 
derive the column from which to apply strike intervals throughout the 
next calendar quarter. The Average Daily Volume would be the total 
number of options contracts traded in a given security for the 
applicable calendar quarter divided by the number of trading days in 
the applicable calendar quarter. Beginning on the second trading day in 
the first month of each calendar quarter, the Average Daily Volume 
shall be calculated by utilizing data from the prior calendar quarter 
based on Customer-cleared volume at OCC. For options listed on the 
first trading day of a given calendar quarter, the Average Daily Volume 
shall be calculated using the calendar quarter prior to the last 
trading calendar quarter.\20\ Under current rules, if the Exchange is 
not open for business on the respective Thursday or Friday, the Short 
Term Option Opening Date will be the first business day immediately 
prior to that respective Thursday or Friday, as is the case today for 
STOs as specified within IM-5050-6.
---------------------------------------------------------------------------

    \20\ For example, options listed as of January 4, 2021 would be 
calculated on January 5, 2021 using the Average Daily Volume from 
July 1, 2020 to September 30, 2020.
---------------------------------------------------------------------------

    The Exchange proposes that Short Term Options Series that are newly 
eligible for listing pursuant to Rule 5020(a) will not be subject to 
this proposed IM-5050-11 until after the end of the first full calendar 
quarter following the date the option class was first listed for 
trading on any options market.\21\ The Exchange would be permitted to 
list options on newly eligible listings, without any curtailment in 
strike intervals, until the end of the first full quarter after they 
were listed. BOX's proposal would thereby permit BOX to add strikes to 
meet customer demand in the options class. By deferring the curtailment 
until after the end of the first full calendar quarter, additional 
information on the underlying security would be available to market 
participants and public investors. During this period of deferment the 
price of the underlying would have an opportunity to settle based on 
the price discovery that has occurred in the primary market. An options 
class that represents a newly listed primary security may fluctuate in 
price after its initial listing; such volatility reflects a natural 
uncertainty about the security. Also, BOX would have the ability to 
list as many strikes as are permissible for the Short Term

[[Page 29859]]

Options Series once the expiry is within twenty-one days. Short Term 
Options Series which have an expiration date less than twenty-one days 
from the listing date are not subject to the curtailment, thereby 
allowing BOX to list additional, and potentially narrower, strikes in 
the event of market volatility or other market events.
---------------------------------------------------------------------------

    \21\ For example, if an options became newly eligible for 
listing pursuant to Rule 5020 on March 1, 2021, the first full 
quarterly lookback would be available on July 1, 2021. This option 
would become subject to the curtailment on July 2, 2021.
---------------------------------------------------------------------------

    In the event of a corporate action, the Share Price of the 
surviving company would be utilized. These metrics are intended to 
align expectations for determining which strike intervals will be 
utilized. Finally, notwithstanding the limitations imposed by proposed 
IM-5050-11, this Strike Interval Proposal does not amend the range of 
strikes that may be listed pursuant to IM-5050-6, regarding the Short 
Term Option Series Program.
    By way of example, if the Share Price for a symbol was $142 at the 
end of a calendar quarter, with an Average Daily Volume greater than 
5,000, thereby, requiring strike intervals to be listed $1.00 apart, 
that strike interval would apply for the calendar quarter, regardless 
of whether the Share Price changed to greater than $150 during that 
calendar quarter.\22\
---------------------------------------------------------------------------

    \22\ The Exchange notes that any limits on intervals imposed by 
the Exchange's Rules will continue to apply. In this example, the 
strikes would be in $1 intervals up to $150, which is the upper 
limit imposed by IM-5050-6(b)(5).
---------------------------------------------------------------------------

    The proposed table within IM-5050-11 takes into account the 
notional value of a security, as well as Average Daily Volume in the 
underlying stock, in order to limit the intervals between strikes in 
the Short Term Options listing program. BOX would utilize OCC Customer-
cleared volume, as customer volume is an appropriate proxy for demand. 
The OCC Customer-cleared volume represents the majority of options 
volume executed on the Exchange that, in turn, reflects the demand in 
the marketplace. The options series listed on BOX are intended to meet 
customer demand by offering an appropriate number of strikes. Non-
Customer cleared OCC volume represents the supply side. The strike 
intervals for listing strikes in certain options are intended to remove 
repetitive and unnecessary strike listings across the weekly expiries. 
BOX's Strike Interval Proposal seeks to reduce the number of strikes in 
the furthest weeklies, where there exist wider markets and therefore 
lower market quality.
    The proposed table within IM-5050-11 is intended to distribute 
strike intervals in multiply listed equity options where there is less 
volume as measured by the Average Daily Volume tiers. Therefore, the 
lower the Average Daily Volume, the greater the proposed spread between 
strike intervals. Options classes with higher volume contain the most 
liquid symbols and strikes, therefore the finer the proposed spread 
between strike intervals. Additionally, lower-priced shares have finer 
strike intervals than higher-priced shares when comparing the proposed 
spread between strike intervals.
    Today, weeklies are available on 16% of underlying products. The 
Exchange's Strike Interval Proposal curtails the density of strike 
intervals listed in series of options, without reducing the classes of 
options available for trading on BX. Short Term Options Series with an 
expiration date greater than twenty-one days from the listing date 
equates to 7.5% of the total number of strikes in the options market, 
which equals 81,000 strikes.\23\ The Exchange expects this proposal to 
results in the limitation of approximately 20,000 strikes within the 
Short Term Options Series which is 2% of the total strikes in the 
options markets.\24\ The Exchange understands there has been an 
inconsistency of demand for series of options beyond 21 calendar 
days.\25\ The proposal takes into account customer demand for certain 
options classes, by considering both the Share Price and the Average 
Daily Volume, in order to remove certain strike intervals where there 
exist clusters of strikes whose characteristics closely resemble one 
another and, therefore, do not serve different trading needs,\26\ 
rendering these strikes less useful. The Exchange also notes that the 
proposal focuses on strikes in multiply listed equity options, and 
excludes ETFs and ETNs, as the majority of strikes reside within equity 
options.
---------------------------------------------------------------------------

    \23\ The Exchange notes that this proposal is an initial attempt 
at reducing strikes and anticipates filing additional proposals to 
continue reducing strikes. The above referenced data, specifically 
the percentage of underlying products and percentage of and total 
number of strikes, are approximations and may vary slightly at the 
time of this filing.
    \24\ From information drawn from time period between January 
2020 and May 2020. See BX proposal, supra note 19.
    \25\ See BX proposal, supra note 19.
    \26\ See BX proposal, supra note 19.
---------------------------------------------------------------------------

    This Strike Interval Proposal serves to respond to comments 
received from industry members with respect to the increasing number of 
strikes that are required to be quoted by market makers in the options 
industry. BOX requires Market Makers to quote a certain amount of time 
in the trading day in their assigned options series to maintain 
liquidity in the market.\27\ With an increasing number of strikes being 
listed across options exchanges, Market Makers must expend their 
capital to ensure that they have the appropriate infrastructure to meet 
their quoting obligations on all options markets in which they are 
assigned in options series. The Exchange believes that this Strike 
Interval Proposal would limit the intervals between strikes, reducing 
the number of strikes listed on BOX, and thereby allow Market Makers to 
expend their capital in the options market in a more efficient manner. 
Due to this increased efficiency, the Exchange believes that this 
Strike Interval Proposal would improve overall market quality on BOX by 
limiting the intervals between strikes in multiply listed equity 
options that have an expiration date more than twenty-one days, from 
the listing date.
---------------------------------------------------------------------------

    \27\ See Rule 8050.
---------------------------------------------------------------------------

Implementation
    The Exchange proposes to implement the proposed changes on July 1, 
2021. The Exchange will issue a notice to its Participants with the 
date of implementation. Lastly, the Exchange will issue a notice to its 
Participants whenever the Exchange is the first exchange to list an 
eligible Short Term Option Series.\28\
---------------------------------------------------------------------------

    \28\ When the Exchange is the first exchange to list an option 
class under IM-5050-11 the Exchange shall provide a notice to its 
Participants regarding the Short Term Option Series to be listed. 
Such notice will include for each eligible option class: The closing 
price of the underlying, the Average Daily Volume of the option 
class; and the eligible strike category (per the proposed table) in 
which the eligible option class falls under as a result of the 
closing price and the Average Daily Volume.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\29\ in general, and Section 6(b)(5) of the Act,\30\ in 
particular, in that it is 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 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. The Strike Proposal seeks to limit the intervals 
between strikes listed in the Short Term Options Series program that 
have an expiration date more than twenty-one days. While the current 
listing rules permit BOX to list a number of weekly strikes on its 
market, the Exchange's Strike Interval Proposal removes impediments to 
and

[[Page 29860]]

perfects the mechanism of a free and open market and a national market 
system by encouraging Market Makers to deploy capital more efficiently 
and improving market quality overall on BOX through limiting the 
intervals between strikes when applying the strike interval table to 
multiply listed equity options that have an expiration date more than 
twenty-one days from the listing date. Also, as BOX's Strike Interval 
Proposal seeks to reduce the number of weekly options that would be 
listed on its market in later weeks, Market Makers would be required to 
quote in fewer weekly strikes as a result of the Strike Interval 
Proposal. Amending BOX's listing rules to limit the intervals between 
strikes for multiply listed equity options that have an expiration date 
more than twenty-one days causes less disruption in the market as the 
majority of the volume traded in weekly options exists in options 
series which have an expiration date of twenty-one days or less. The 
Exchange's Strike Interval Proposal curtails the number of strike 
intervals listed in series of options without reducing the number of 
classes of options available for trading on BOX.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Strike Interval Proposal takes into account customer demand for 
certain options classes by considering both the Share Price and the 
Average Daily Volume in the underlying security to arrive at the manner 
in which weekly strike intervals would be listed in the later weeks for 
each multiply listed equity options class. The Exchange utilizes OCC 
Customer-cleared volume, as customer volume is an appropriate proxy for 
demand. The OCC Customer-cleared volume represents the majority of 
options volume executed on the Exchange that, in turn, reflects the 
demands in the marketplace. The options series listed on BOX is 
intended to meet customer demand by offering an appropriate number of 
strikes. Non-Customer cleared OCC volume represents the supply side.
    The Strike Interval Proposal for listing strikes in certain 
multiply listed equity options is intended to remove certain strikes 
where there exist clusters of strikes whose characteristics closely 
resemble one another and, therefore, do not serve different trading 
needs that renders the strikes less useful and thereby protects 
investors and the general public by removing an abundance of 
unnecessary choices for an options series, while also improving market 
quality. BOX's Strike Interval Proposal seeks to reduce the number of 
strikes in the furthest weeklies, where there exist wider markets, and, 
therefore, lower market quality. The implementation of the proposed 
table is intended to spread strike intervals in multiply listed equity 
options, where there is less volume that is measured by the average 
daily volume tiers. Therefore, the lower the average daily volume, the 
greater the proposed spread between strike intervals. Options classes 
with higher volume contain the most liquid symbols and strikes, 
therefore the finer the proposed spread between strike intervals. 
Additionally, lower-priced shares have finer strike intervals than 
higher-priced shares when comparing the proposed spread between strike 
intervals.
    Beginning on the second trading day in the first month of each 
calendar quarter, the Average Daily Volume shall be calculated by 
utilizing data from the prior calendar quarter based on OCC Customer-
cleared volume. Utilizing the second trading day allows the Exchange to 
accumulate data regarding OCC Customer-cleared volume from the entire 
prior quarter. Beginning on the second trading day would allow trades 
executed on the last day of the previous calendar quarter to have 
settled \31\ and be accounted for in the calculation of Average Daily 
Volume. Utilizing the previous three months is appropriate because this 
time period would help reduce the impact of unusual trading activity as 
a result of unique market events, such as a corporate action (i.e., it 
would result in a more reliable measure of average daily trading volume 
than would a shorter period).
---------------------------------------------------------------------------

    \31\ Options contracts settle one business day after trade date. 
Strike listing determinations are made the day prior to the start of 
trading in each series.
---------------------------------------------------------------------------

    As stated, the proposal is substantively identical to the strike 
interval proposal recently submitted by BX and approved by the 
Commission.\32\ The Exchange believes that varied strike intervals will 
continue to offer market participants the ability to select the 
appropriate strike interval to meet that market participants' 
investment objectives.
---------------------------------------------------------------------------

    \32\ See BX Strike Interval Approval Order, supra note 19.
---------------------------------------------------------------------------

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

    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. The Exchange does not believe 
that the proposed rule change will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act as the proposed rule change limits the number of 
Short Term Option Series strikes available for quoting and trading on 
the Exchange for all market participants. Therefore, all market 
participants will equally be able to transact in options series in the 
strikes listed for trading on the Exchange. The proposal is intended to 
reduce the number of strikes for weekly options listed in later weeks 
without reducing the number of classes of options available for trading 
on the Exchange while also continuing to offer an appropriate number of 
strikes the Exchange believes will meet market participants' investment 
objectives.
    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act as it only 
impacts the permissible strike intervals for certain options series 
listed on the Exchange. Additionally, another options exchange has 
recently implemented a substantively identical to the strike interval 
proposal recently submitted by BX and approved by the Commission.\33\ 
The proposal is a competitive response that will permit the Exchange to 
list the same series in multiply listed options as another options 
exchange.
---------------------------------------------------------------------------

    \33\ See BX Strike Interval Approval Order, supra note 19.
---------------------------------------------------------------------------

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)(iii) \34\ of the Act and Rule 19b-4(f)(6) thereunder.\35\ 
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)(iii) of the Act and subparagraph (f)(6) of Rule 
19b-4 thereunder.\36\
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \35\ 17 CFR 240.19b-4(f)(6).
    \36\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of its intent to file 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.

---------------------------------------------------------------------------

[[Page 29861]]

    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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

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-2021-12 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-2021-12. 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 website (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 website 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 the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BOX-2021-12, and should be submitted on 
or before June 24, 2021. For the Commission, by the Division of Trading 
and Markets, pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11691 Filed 6-2-21; 8:45 am]
BILLING CODE 8011-01-P


