[Federal Register Volume 86, Number 122 (Tuesday, June 29, 2021)]
[Notices]
[Pages 34290-34293]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13783]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92238; File No. SR-BOX-2021-15]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule on the BOX Options Market LLC Facility

June 23, 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 June 10, 2021, BOX Exchange LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Exchange filed the proposed rule 
change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule on 
the BOX Options Market LLC (``BOX'') facility. 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://boxexchange.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 Exchange 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 Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

[[Page 34291]]

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 Section II (Manual Transaction Fees) 
on the BOX Fee Schedule. Specifically, the Exchange proposes to amend 
QOO Order Fees for Market Makers in Section II.A of the Fee Schedule. 
Currently, Floor Market Makers are charged $0.25 per contract for QOO 
Orders for Penny and Non-Penny Interval Classes. The Exchange proposes 
to modify the rates charged for QOO Orders to $0.35 for Market Makers 
in Penny and Non-Penny Interval Classes. The proposed changes are 
intended to provide consistency between the Exchange's fees for manual 
transactions by Floor Market Makers and those charged by other 
markets.\5\ The Exchange notes that the disparity in fees between Floor 
Market Makers and other Floor Participants on the BOX Trading Floor are 
similar to disparities that currently exist at other trading floors in 
the industry.\6\
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    \5\ See e.g., Nasdaq PHLX LLC (``Phlx'') Pricing Schedule, 
available at: https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207 (providing $0.35 per contract rate for manual 
transactions by market makers); Cboe Exchange, Inc. (``Cboe'') Fee 
Schedule, available at: https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf (providing $0.35 per contract rate for manual 
transactions by market makers). The Exchange notes that Cboe filed 
to increase the Market Maker manual transaction fee--thereby 
increasing the fee disparity between Floor Market Makers and all 
other Floor Participants--in October 2020. See Securities Exchange 
Act Release No. 90232 (October 20, 2020), 85 FR 67782 (SR-CBOE-2020-
097).The Exchange also notes that NYSE Arca LLC (``NYSE Arca'') 
recently filed a proposed change for immediate effectiveness that 
increased their manual transaction fees for Market Makers to $0.35. 
In their filing, NYSE Arca stated that the purpose of the change was 
to better align their fees with other markets in the industry. BOX 
notes that the purpose of this filing is the same--to align its fees 
with other exchanges with trading floors. See SR-NYSEArca-2021-042 
available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/rule-filings/filings/2021/SR-NYSEArca-2021-42.pdf.
    \6\ Currently, BOX Floor Brokers are charged $0.25 per contract 
for manual transactions on the BOX Trading Floor. At Phlx, Cboe, and 
NYSE American, Floor Brokers are charged $0.25 per contract for 
manual transactions. As discussed above, Floor Market Makers at 
Phlx, Cboe, and NYSE American are charged $0.35 per contract for 
manual transactions. The Exchange also notes that BOX charges 
Professional Customers $0.10 for manual transactions. The Exchange 
believes that the disparity between the Professional Customers and 
the proposed Floor Market Maker fee is reasonable as a similar 
disparity currently exists at another options exchange with a 
trading floor. See Cboe Fee Schedule. At Cboe, Professional 
Customers are charged $0.12 for manual transactions and Floor Market 
Makers are charged $0.35 for manual transactions. Lastly, BOX notes 
that Public Customers are not charged for manual transactions on the 
BOX Trading Floor while Floor Market Makers are charged $0.35 for 
manual transactions. This is consistent with the fee disparities 
currently in place at the other exchanges with physical trading 
floors.
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2. Statutory Basis

    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act, in general, and Section 
6(b)(4) and 6(b)(5)of the Act,\7\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among BOX Participants and other persons using its facilities 
and does not unfairly discriminate between customers, issuers, brokers 
or dealers.
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    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange believes that the proposed rule change is designed to 
bring the Exchange's fees for Market Maker manual transactions into 
alignment with those charged on other markets with trading floors. The 
Exchange believes it is reasonable to increase certain fees, consistent 
with fees offered by competing options exchanges for similar 
transactions.\8\ Further, the Exchange believes that the proposed 
increased charge for manual transactions for Market Makers but not for 
other market participants is reasonable because the resulting disparity 
would align the Exchange's fees for manual transactions with the fees 
charged on other exchanges.\9\ In addition, the Exchange believes that 
other pricing incentives offered by the Exchange would continue to 
encourage Market Makers to conduct manual transactions on the 
Exchange.\10\ The Exchange thus believes the proposed changes, even 
though they are increased fees, would not discourage Market Makers from 
continuing to conduct manual transactions on the Exchange and would 
continue to attract volume and liquidity to the Exchange generally and 
would therefore benefit all market participants (including those that 
do not participate in manual transactions) through increased 
opportunities to trade.
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    \8\ See supra note 5.
    \9\ See supra note 6.
    \10\ See BOX Fee Schedule Section II.A (Strategy QOO Order Fee 
Cap and Rebate). While the fee cap on Strategy transactions is 
available to all Participants, the Exchange notes that Floor Market 
Makers have a time and place advantage by virtue of their presence 
on the Trading Floor to participate in such transactions and 
therefore benefit from the fee cap.
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    Further, the Exchange believes the proposed rule change is 
reasonable and equitable as the proposal is based on the type of 
business transacted on the Exchange, and Market Makers can opt to 
participate in manual transactions or not. Finally, to the extent the 
proposed fees continue to encourage Market Makers to participate in 
manual transactions on the Exchange, the Exchange believes the proposed 
changes would continue to improve the Exchange's overall 
competitiveness and strengthen its market quality for all market 
participants. In the backdrop of the competitive environment in which 
the Exchange operates, the proposed rule change is a reasonable attempt 
by the Exchange to maintain its market share relative to its 
competitors.
    Further, the Exchange believes the proposed change is equitable and 
not unfairly discriminatory as the proposed modifications would apply 
to all Floor Market Makers who execute manual transactions on an equal 
and non-discriminatory basis. The Exchange also believes that 
increasing fees for manual transactions by Market Makers, but not for 
other market participants, is not unfairly discriminatory given that 
the proposed rates (and resulting disparities) are a competitive 
response to rates charged on options exchanges for manual transactions 
by Market Makers and because these Participants may avail themselves of 
other incentives offered by the Exchange. Further, the Exchange 
believes the proposed change is reasonable, equitable, and not unfairly 
discriminatory because it is consistent with the manner in which other 
options exchanges with trading floors currently assess fees for Market 
Maker manual transactions. As discussed above, the Exchange notes that 
the disparity in fees between the Floor Market Makers and other Floor 
Participants on the BOX Trading Floor are similar to disparities that 
currently exist at other trading floors in the industry.\11\
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    \11\ See supra note 6.
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    The Exchange notes that it operates in a highly competitive market. 
The Commission has repeatedly expressed its preference for competition 
over regulatory intervention in determining prices, products, and 
services in the securities markets. In Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current regulation of the 
market system ``has been remarkably successful in promoting market 
competition in its broader forms that are most important to investors 
and listed companies.'' \12\
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    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (S7-10-04) (``Reg NMS 
Adopting Release'').
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    There are currently 16 registered options exchanges competing for 
order flow. Based on publicly available information, and excluding 
index-based

[[Page 34292]]

options, no single exchange has more than 16% of the market share of 
executed volume of multiply-listed equity and ETF options trades.\13\ 
Therefore, currently no exchange possesses significant pricing power in 
the execution of multiply-listed equity & ETF options order flow. More 
specifically, in April 2021, the Exchange had less than 6% market share 
of executed volume of multiply-listed equity and ETF options 
trades.\14\
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    \13\ The OCC publishes options and futures volume in a variety 
of formats, including daily and monthly volume by exchange, 
available here: https://www.theocc.com/Market-Data/Market-Data-Reports/Volume-and-OpenInterest/Monthly-Weekly-Volume-Statistics.
    \14\ Based on a compilation of OCC data for monthly volume of 
equity-based options and monthly volume of ETF-based options, see 
id.
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    The Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue or reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain options exchange transaction fees. Stated otherwise, changes 
to exchange transaction fees and rebates can have a direct effect on 
the ability of an exchange to compete for order flow. As such, the 
Exchange believes that the proposed change is reasonable, equitable, 
and not unfairly discriminatory as discussed above.

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. Instead, as discussed above, 
the Exchange believes that the proposed changes would be consistent 
with fees for similar transactions at other markets. As a result, the 
Exchange believes that the proposed changes further the Commission's 
goal in adopting Regulation NMS of fostering integrated competition 
among orders, which promotes ``more efficient pricing of individual 
stocks for all types of orders, large and small.'' \15\
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    \15\ See Reg NMS Adopting Release, supra note 12, at 37499.
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    The Exchange does not believe that the proposed change will impose 
any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Particularly, 
the proposed change will apply uniformly to all Market Makers on the 
BOX Trading Floor. That is, all Market Makers transacting orders on the 
BOX Trading Floor will be assessed the proposed fees. The Exchange 
believes that the proposed increased fees for manual transactions by 
Market Makers, but not for other market participants, would not impose 
any burden on intermarket competition that is not necessary or 
appropriate because the proposed fees (and resulting disparities) are 
consistent with fees charged for manual transactions by Market Makers 
on other exchanges and because these Participants may avail themselves 
to other incentives offered by the Exchange.\16\ Further, the Exchange 
does not believe 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 because, as noted above, 
competing options exchanges with trading floors have similar fees for 
identical transactions on their respective trading floors.\17\
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    \16\ See supra notes 5, 6, and 10.
    \17\ See supra note 5.
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    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act \18\ and Rule 19b-4(f)(2) 
thereunder,\19\ because it establishes or changes a due, or fee.
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    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further 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-2021-15 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-2021-15. 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 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. 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-2021-15, and should be submitted on 
or before July 20, 2021.
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    \20\ 17 CFR 200.30-3(a)(12).


[[Page 34293]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-13783 Filed 6-28-21; 8:45 am]
BILLING CODE 8011-01-P


