[Federal Register Volume 86, Number 227 (Tuesday, November 30, 2021)]
[Notices]
[Pages 68024-68029]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25991]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93659; File No. SR-BOX-2021-27]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Increase 
Position Limits for Options on Certain Exchange-Traded Funds

November 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 November 16, 2021, BOX Exchange LLC (``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 change 
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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend IM-3120-2 to permit [sic] increase 
position limits for options on certain exchange-traded funds 
(``ETFs''). 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 IM-3120-2 to increase position 
limits for options on certain exchange-traded funds (``ETFs''). This is 
a competitive filing that is based on a proposal recently submitted by 
Cboe Exchange, Inc. (``Cboe'') and approved by the Commission.\3\
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    \3\ See Securities Exchange Act Release No. 93525 (November 4, 
2021) (Notice of Filing of Amendment Nos. 2 and 3 and Order Granting 
Accelerated Approval of SR-CBOE-2021-029).
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    Position limits are designed to address potential manipulative 
schemes and adverse market impacts surrounding the use of options, such 
as disrupting the market in the security underlying the options. While 
position limits should address and discourage the potential for 
manipulative schemes and adverse market impact, if such limits are set 
too low, participation in the options market may be discouraged. The 
Exchange believes that position limits must therefore be balanced 
between mitigating concerns of any potential manipulation and the cost 
of inhibiting potential hedging activity that could be used for 
legitimate economic purposes.
    In its filing, Cboe states that it has observed an ongoing increase 
in demand, for both trading and hedging purposes, in options on the 
following exchange-traded products (``ETPs''): (1) iShares iBoxx $ 
Investment Grade Corporate Bond ETF (``LQD'') and (2) VanEck Vectors 
Gold Miners ETF (``GDX''). Though the demand for these options appears 
to have increased, position limits for options on LQD and GDX have 
remained the same. The Exchange believes these unchanged position 
limits may have impeded, and may continue to impede, trading activity 
and strategies of investors, such as use of effective hedging vehicles 
or income generating strategies (e.g., buy-write or put-write), and the 
ability of Market Makers to make liquid markets with tighter spreads in 
these options resulting in the transfer of volume to over-the-counter 
(``OTC'') markets. OTC transactions occur through bilateral agreements, 
the terms of which are not publicly disclosed to the marketplace. As 
such, OTC transactions do not contribute to the price discovery process 
on a public exchange or other lit markets. Therefore, the Exchange 
believes that the proposed increases in position limits for options on 
LQD and GDX may enable liquidity providers to provide additional 
liquidity to the Exchange and other market participants to transfer 
their liquidity demands from OTC markets to the Exchange. As described 
in further detail below, the Exchange believes that the continuously 
increasing market capitalization of LQD and GDX, ETF components, as 
well as the highly liquid markets for each, reduces the concerns for 
potential market manipulation and/or disruption in the underlying 
markets upon increasing position limits, while the rising demand for 
trading options on LQD and GDX for legitimate economic purposes compels 
an increase in position limits.
Proposed Position Limits for Options on LQD and GDX
    Position limits for options on ETFs are determined pursuant to Rule 
3120 and vary according to the number of outstanding shares and the 
trading volumes of the underlying equity security (which includes ETFs) 
over the past six months. Pursuant to Rule 3120, the largest in 
capitalization and the most frequently traded stocks and ETFs have an 
option position limit of 250,000 contracts (with adjustments for 
splits, re-capitalizations, etc.) on the same side of the market; and 
smaller capitalization stocks and ETFs have position limits of 200,000, 
75,000, 50,000 or 25,000 contracts (with adjustments for splits, re-
capitalizations, etc.) on the same side of the market. Options on LQD 
and GDX are currently subject to the standard position limit of 250,000 
contracts as set forth in Rule 3120. IM-3120-2 sets forth separate, 
higher position limits for specific equity options (including options 
on specific ETFs).\4\ The

[[Page 68025]]

Exchange proposes to amend IM-3120-2 to increase the position limits 
and, as a result, exercise limits, for options on LQD and GDX.\5\ The 
table below represents the current, and proposed, position limits for 
options on the ETFs subject to this proposal:
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    \4\ Adjusted option series, in which one option contract in the 
series represents the delivery of other than 100 shares of the 
underlying security as a result of a corporate action by the issuer 
of the security underlying such option series, do not impact the 
notional value of the underlying security represented by those 
options. When an underlying security undergoes a corporate action 
resulting in adjusted series, the Exchange lists new standard option 
series across all appropriate expiration months the day after the 
existing series are adjusted. The adjusted series are generally 
actively traded for a short period of time following adjustment, but 
orders to open options positions in the underlying security are 
almost exclusively placed in the new standard option series 
contracts.
    \5\ By virtue of Rule 3120(d), which is not being amended by 
this filing, the exercise limits for LQD and GDX options would be 
similarly increased.

------------------------------------------------------------------------
                                              Current        Proposal
                 Product                  position limit  position limit
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LQD.....................................         250,000         500,000
GDX.....................................         250,000         500,000
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    The Exchange notes that the proposed position limit for options on 
LQD and GDX are consistent with current position limits for options on 
the iShares MSCI Brazil Capped ETF (``EWZ''), iShares 20+ Year Treasury 
Bond Fund ETF (``TLT''), iShares MSCI Japan ETF (``EWJ''), iShares 
iBoxx High Yield Corporate Bond Fund (``HYG'') and Financial Select 
Sector SPDR Fund [sic] (``XLF''). The Exchange represents that LQD and 
GDX qualify for either (1) the initial listing criteria set forth in 
Rule 5020(h)(2) for ETFs holding non-U.S. component securities, or (2) 
the generic listing standards for series of portfolio depository 
receipts and index fund shares based on international or global indexes 
under which a comprehensive surveillance agreement (``CSA'') is not 
required, as well as (3) the continued listing criteria in Rule 5030 
(for ETFs).\6\ In compliance with its listing rules, the Exchange also 
represents that non-U.S. component securities that are not subject to a 
comprehensive surveillance agreement (``CSA'') do not, in the 
aggregate, represent more than more than 50% of the weight of LQD and 
GDX.\7\
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    \6\ The Exchange notes that the initial listing criteria for 
options on ETFs that hold non-U.S. component securities are more 
stringent than the maintenance listing criteria for those same ETF 
options. See Rule 5020(h)(2).
    \7\ See Rule 5020(h)(2).
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Composition and Growth Analysis for LQD and GDX
    As stated above, position (and exercise) limits are intended to 
prevent the establishment of options positions that can be used to or 
potentially create incentives to manipulate the underlying market so as 
to benefit options positions. The Securities and Exchange Commission 
(the ``Commission'') has recognized that these limits are designed to 
minimize the potential for mini-manipulations and for corners or 
squeezes of the underlying market, as well as serve to reduce the 
possibility for disruption of the options market itself, especially in 
illiquid classes.\8\ LQD and GDX, as well as the ETF components, are 
highly liquid and are based on a broad set of highly liquid securities 
and other reference assets, as demonstrated through the trading 
statistics presented in this proposal. To support the proposed position 
limit increases, Cboe considered the liquidity of LQD and GDX, the 
value of LQD and GDX, their components and the relevant marketplace, 
the share and option volume for LQD and GDX, and, where applicable, the 
availability or comparison of economically equivalent products to 
options on LQD and GDX.
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    \8\ See Securities Exchange Act Release No. 67672 (August 15, 
2012), 77 FR 50750 (August 22, 2012) (SR-NYSEAmex-2012-29).
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    Cboe collected the following trading statistics regarding shares of 
and options on LQD and GDX and the values of LQD and GDX and their 
components:
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    \9\ Average daily volume (ADV) data for ETF shares and option 
contracts, as well as for ETF shares and options on the comparative 
ETFs presented below, are for all of 2020. Additionally, reference 
to ADV in ETF shares and ETF options, and indexes herein this 
proposal are for all of calendar year 2020, unless otherwise 
indicated.
    \10\ Shares Outstanding and Net Asset Values (``NAV''), as well 
as for the comparative ETFs presented below, are as of April 5, 2021 
for all ETFs.
    \11\ Fund Market Capitalization data, as well as for the 
comparative ETFs presented below, are as of January 14, 2021.

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                                                                   Shares
                                ADV \9\ (ETF                     outstanding     Fund market
           Product                 shares)       ADV (option        (USD)         cap (USD)    Share value (USD)
                                 (millions)      contracts)      (millions)      (millions)
                                                                    \10\            \11\
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LQD..........................            14.1          30,300           308.1        54,113.7       130.13 (NAV)
GDX..........................            39.4         166,000           419.8        16,170.5        33.80 (NAV)
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    Cboe also collected the same trading statistics, where applicable, 
as above regarding a sample of other ETFs, as well as the current 
position limits for options on such ETFs, to draw comparisons in 
support of proposed position limit increases for options on LQD and GDX 
(see further discussion below):

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                                                          ADV (ETF                         Shares        Fund market                          Current
                       Product                             shares)       ADV (option     outstanding      cap (USD)    Share value (USD)     position
                                                         (millions)      contracts)      (millions)      (millions)                           limits
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EWZ..................................................            29.2         139,400           173.8         6,506.8        33.71 (NAV)         500,000
TLT..................................................            11.5         111,800           103.7        17,121.3       136.85 (NAV)         500,000
EWJ..................................................             8.2          15,500           185.3        13,860.7        69.72 (NAV)         500,000
HYG..................................................            30.5         261,600           254.5        24,067.5        86.86 (NAV)         500,000
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[[Page 68026]]

    The Exchange believes that, overall, the liquidity in the shares of 
LQD and GDX and in their overlying options, the larger market 
capitalizations for each [sic] LQD and GDX, and the overall market 
landscape relevant to each [sic] LQD and GDX support the proposal to 
increase the position limits for each option class. Given the robust 
liquidity in and value of LQD and GDX and their components, the 
Exchange does not anticipate that the proposed increase in position 
limits would create significant price movements as the relevant markets 
are large enough to adequately absorb potential price movements that 
may be caused by larger trades.
    LQD tracks the performance of the Markit iBoxx USD Liquid 
Investment Grade (``IBOXIG'') Index, which is an index designed as a 
subset of the broader U.S. dollar-denominated corporate bond market 
which can be used as a basis for tradable products., such as ETFs, and 
is comprised of over 8,000 bonds.\12\ The Exchange notes that from 2019 
through 2020, ADV has grown significantly in shares of LQD and in 
options on LQD, from approximately 9.7 million shares in 2019 to 14.1 
million through 2020, and from approximately 8,200 option contracts in 
2019 to 30,300 through 2020. LQD also continued to experience 
significant growth in ADV in the first quarter of 2021 with an ADV of 
approximately 140,200 option contracts. Further, LQD generally 
experiences higher ADV in shares than both TLT (11.5 million shares) 
and EWJ (8.2 million shares) and almost double the ADV in option 
contracts than EWJ (15,500 option contracts). Options on each EWZ, TLT 
and EWJ are currently subject to a position limit of 500,000 
contracts--the proposed limit for options on LQD. The NAV of LQD is 
also higher than, or comparable to, that of the NAV of the ETFs 
underlying the options that are currently subject to a position limit 
of 500,000 option contracts (as presented in the table above), which is 
indicative that the total value of its underlying components is 
generally higher or comparable. Per the tables above, LQD's total 
market capitalization of approximately $54.1 billion is also higher 
than or comparable to the total market capitalization of the ETFs 
underlying the options currently subject to a position limit of 
5000,000 [sic] contracts. In addition to this, the Exchange notes that, 
although there are currently no options listed for trading on the 
IBOXIG Index, the components \13\ of the IBOXIG Index, which can be 
used in creating a basket of securities that equate to the LQD ETF, are 
made up of over 8,000 bonds for which the outstanding face value of 
each must be greater than or equal to $2 billion.\14\ The Exchange 
believes that the total value of the bonds in the IBOXIG Index, coupled 
with LQD's share and option volume, total market capitalization, and 
NAV price indicates that the market is large enough to absorb potential 
price movements caused by a large trade in LQD. Also, as evidenced 
above, trading volume in LQD shares has increased over the past few 
years and the Exchange understands that market participants' need for 
options have continued to grow alongside the ETF. Particularly, the 
Exchange notes that in the last year, market participants have sought 
more cost-effective hedging strategies through the use of LQD options 
as a result of the borrow on other fixed income ETFs, such as HYG. 
Therefore, the Exchange believes that because LQD options are being 
increasingly utilized as an alternative to similar products, such as 
HYG options, then it is appropriate that options on LQD be subject to 
the same 500,000 contract position limit that currently exists for 
options on HYG.
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    \12\ See Markit iBoxx USD Liquid Investment Grade Index, 
available at https://cdn.ihsmarkit.com/www/pdf/MKT-iBoxx-USD-Liquid-Investment-Grade-Index-factsheet.pdf (January 14, 2021).
    \13\ Investment grade corporate bonds.
    \14\ See supra note 13.
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    GDX seeks to replicate as closely as possible the price and yield 
performance of the NYSE Arca Gold Miners (``GDMNTR'') Index, which is 
intended to track the overall performance of companies involved in the 
gold mining industry.\15\ ADV in GDX options has increased from 2019 
through 2020, with an ADV of approximately 117,400 option contracts in 
2019 to an ADV of approximately 166,000 option contracts in 2020. The 
Exchange notes that ADV in GDX shares did not increase from 2019 to 
2020. GDX options also experienced an ADV of approximately 287,800 
option contracts in the first quarter of 2021. The Exchange notes that 
the ADV in GDX shares (39.4 million) and options on GDX (166,000 option 
contracts) are greater than the ADV in EWZ (29.2 million shares and 
139,300 option contracts), TLT (11.5 million shares and 111,800 option 
contracts), EWJ (8.2 million shares and 15,500 option contracts) and 
HYG (30.5 million shares and 261,600 option contracts), each of which 
is currently subject to a position limit of 500,000 option contracts--
the proposed limit for options on GDX. GDX also experiences a 
comparable, or higher, market capitalization (approximately $16.2 
billion) than EWZ, TLT and EWZ. The Exchange particularly notes that 
many of the Brazil-based gold mining constituents included in GDX are 
also included in EWZ, which tracks the investment results of an index 
composed of Brazilian equities, and that the Exchange has not 
identified any issues with the continued listing and trading of EWZ 
options or any adverse market impact on EWZ in connection with the 
current 500,000 position limit in place for EWZ options. Additionally, 
like that of LDQ above, there is currently no index option analogue for 
the GDX ETF on the GDMNTR Index approved for options trading, however, 
the components of the GDMNTR Index, which can be used to create the GDX 
ETF, currently must each have a market capitalization greater than $750 
million, an ADV of at least 50,000 shares, and an average daily value 
traded of at least $1 million in order to be eligible for inclusion in 
the GDMNTR Index. The Exchange believes that the GDMNTR Index component 
inclusion requirements, as well as GDX's share and option volume and 
total market capitalization, indicate that the GDX market is 
sufficiently large and liquid enough to absorb price movements as a 
result of potentially oversized trades.
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    \15\ See VanEck Vectors Gold Miners ETF, available at https://
www.vaneck.com/library/vaneck-vectors-etfs/gdx-fact-sheet-pdf\ 
(January 14, 2021).
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Creation and Redemption for ETFs
    The Exchange believes that the creation and redemption process for 
the ETFs subject to this proposal will lessen the potential for 
manipulative activity with options on LQD and GDX. When an ETF provider 
wants to create more shares, it looks to an Authorized Participant 
(``AP'') (generally a Market Maker or other large financial 
institution) to acquire the underlying components the ETF is to hold. 
For instance, when an ETF is designed to track the performance of an 
index, the AP can purchase all the constituent securities in the exact 
same weight as the index, then deliver those shares to the ETF 
provider. In exchange, the ETF provider gives the AP a block of equally 
valued ETF shares, on a one-for-one fair value basis. The price is 
based on the NAV, not the market value at which the ETF is trading. The 
creation of new ETF units can be conducted during an entire trading day 
and is not subject to position limits. This process works in reverse 
where the ETF provider seeks to decrease the number of shares that are 
available to trade. The creation and redemption processes for LQD and 
GDX creates a direct link to the underlying

[[Page 68027]]

components of the ETF and serves to mitigate potential price impact of 
the ETF shares that might otherwise result from increased position 
limits for the options on LQD and GDX.
    The Exchange understands that the ETF creation and redemption 
processes seek to keep an ETF's share price trading in line with the 
product's underlying net asset value. Because an ETF trades like a 
stock, its share price will fluctuate during the trading day, due to 
simple supply and demand. If demand to buy an ETF is high, for 
instance, an ETF's share price might rise above the value of its 
underlying components. When this happens, the AP or issuer believes the 
ETF may now be overpriced, so it may buy shares of the component 
securities or assets and then sell ETF shares in the open market. This 
may drive the ETF's share price back toward the underlying net asset 
value. Likewise, if an ETF share price starts trading at a discount to 
the component securities or assets it holds, the AP or issuer can buy 
shares of the ETF and redeem them for the underlying components. Buying 
undervalued ETF shares may drive the share price of an ETF back toward 
fair value. This arbitrage process helps to keep an ETF's share price 
in line with the value of its underlying portfolio.
Surveillance and Reporting Requirements
    The Exchange believes that increasing the position limits for the 
options on LQD and GDX would lead to a more liquid and competitive 
market environment for these options, which will benefit customers 
interested in trading these products. The reporting requirement for the 
options on LQD and GDX would remain unchanged. Thus, the Exchange would 
still require that each Participant that maintains positions in the 
options on the same side of the market, for its own account or for the 
account of a customer, report certain information to the Exchange. This 
information would include, but would not be limited to, the options' 
positions, whether such positions are hedged and, if so, a description 
of the hedge(s). Market-Makers would continue to be exempt from this 
reporting requirement, however, the Exchange may access Market-Maker 
position information.\16\ Moreover, the Exchange's requirement that 
Participants file reports with the Exchange for any customer who held 
aggregate large long or short positions on the same side of the market 
of 200 or more option contracts of any single class for the previous 
day will remain at this level for the options subject to this proposal 
and will continue to serve as an important part of the Exchange's 
surveillance efforts.\17\
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    \16\ The Options Clearing Corporation (``OCC'') through the 
Large option Position Reporting (``LOPR'') system acts as a 
centralized service provider for Participant compliance with 
position reporting requirements by collecting data from each 
Participant, consolidating the information, and ultimately providing 
detailed listings of each Participant's report to the Exchange, as 
well as Financial Industry Regulatory Authority, Inc. (``FINRA''), 
acting as its agent pursuant to a regulatory services agreement 
(``RSA'').
    \17\ See Rule 3150 for reporting requirements.
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    The Exchange believes that the existing surveillance procedures and 
reporting requirements at the Exchange and other SROs are capable of 
properly identifying disruptive and/or manipulative trading activity. 
The Exchange also represents that it has adequate surveillances in 
place to detect potential manipulation, as well as reviews in place to 
identify potential changes in composition of LQD and GDX and continued 
compliance with the Exchange's listing standards. These procedures 
utilize daily monitoring of market activity via automated surveillance 
techniques to identify unusual activity in both options and the 
underlyings, as applicable.\18\ The Exchange also notes that large 
stock holdings must be disclosed to the Commission by way of Schedules 
13D or 13G,\19\ which are used to report ownership of stock which 
exceeds 5% of a company's total stock issue and may assist in providing 
information in monitoring for any potential manipulative schemes.
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    \18\ The Exchange believes these procedures have been effective 
for the surveillance of trading the options subject to this proposal 
and will continue to employ them.
    \19\ 17 CFR 240.13d-1.
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    The Exchange believes that the current financial requirements 
imposed by the Exchange and by the Commission adequately address 
concerns regarding potentially large, unhedged positions in the options 
on LQD and GDX. Current margin and risk-based haircut methodologies 
serve to limit the size of positions maintained by any one account by 
increasing the margin and/or capital that a Participant must maintain 
for a large position held by itself or by its customer.\20\ In 
addition, Rule 15c3-1 \21\ imposes a capital charge on Participants to 
the extent of any margin deficiency resulting from the higher margin 
requirement.
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    \20\ See Rule 10100 for a description of margin requirements.
    \21\ 17 CFR 240.15c3-1.
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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''),\22\ in general, and Section 6(b)(5) of the Act,\23\ 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. Additionally, the Exchange believes the proposed rule 
change is consistent with the Section 6(b)(5) \24\ requirement that the 
rules of an exchange not be designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers.
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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(5).
    \24\ Id.
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    The Exchange believes that the proposed increase in position limits 
for options on LQD and GDX will remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, protect investors and the public interest, because it will 
provide market participants with the ability to more effectively 
execute their trading and hedging activities. The proposed increases 
will allow market participants to more fully implement hedging 
strategies in related derivative products and to further use options to 
achieve investment strategies (e.g., there are other exchange-traded 
products (``ETPs'') that use options on the ETFs subject to this 
proposal as part of their investment strategy, and the applicable 
position limits as they stand today may inhibit these other ETPs in 
achieving their investment objectives, to the detriment of investors). 
Also, increasing the applicable position limits may allow Market Makers 
to provide the markets for these options with more liquidity in amounts 
commensurate with increased consumer demand in such markets. The 
proposed position limit increases may also encourage other liquidity 
providers to shift liquidity, as well as encourage consumers to shift 
demand, from OTC markets onto the Exchange, which will enhance the 
process of price discovery conducted on the Exchange through increased 
order flow.
    In addition, the Exchange believes that the structure of LQD and 
GDX, the considerable market capitalization of the funds and underlying 
components,

[[Page 68028]]

and the liquidity of the markets for the applicable options and 
underlying components will mitigate concerns regarding potential 
manipulation of the products and/or disruption of the underlying 
markets upon increasing the relevant position limits. As a general 
principle, increases in market capitalizations, active trading volume, 
and deep liquidity of the underlying components do not lead to 
manipulation and/or disruption. This general principle applies to the 
recently observed increased levels of market capitalization and trading 
volume and liquidity in shares of and options on LQD and GDX (as 
described above), and, as a result, the Exchange does not believe that 
the options markets or underlying markets would become susceptible to 
manipulation and/or disruption as a result of the proposed position 
limit increases. Indeed, the Commission has previously expressed the 
belief that not just increasing, but removing, position and exercise 
limits may bring additional depth and liquidity to the options markets 
without increasing concerns regarding intermarket manipulation or 
disruption of the options or the underlying securities.\25\
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    \25\ See Securities Exchange Act Release No. 62147 (October 28, 
2005) (SR-CBOE- 2005-41), at 62149.
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    Further, the Exchange notes that the proposed rule change to 
increase position limits for select actively traded options is not 
novel and the Commission has approved similar proposed rule changes to 
increase position limits for options on similar, highly liquid and 
actively traded ETPs.\26\ Furthermore, the Exchange again notes that 
that the proposed position limits for options on LQD and GDX are 
consistent with existing position limits for options on other ETFs in 
IM-3120-2.
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    \26\ See Securities Exchange Act Release Nos. 88768 (April 29, 
2020), 85 FR 26736 (May 5, 2020) (SR-CBOE-2020-015); 83415 (June 12, 
2018), 83 FR 28274 (June 18, 2018) (SR-CBOE-2018-042); and 68086 
(October 23, 2012), 77 FR 65600 (October 29, 2012) (SR-CBOE-2012-
066).
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    The Exchange's surveillance and reporting safeguards continue to be 
designed to deter and detect possible manipulative behavior that might 
arise from increasing or eliminating position and exercise limits in 
certain classes. The Exchange believes that the current financial 
requirements imposed by the Exchange and by the Commission adequately 
address concerns regarding potentially large, unhedged position in the 
options on LQD and GDX, further promoting just and equitable principles 
of trading, the maintenance of a fair and orderly market, and the 
protection of investors.

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. In this regard and as indicated 
above, the Exchange notes that the rule change is being proposed as a 
competitive response to a filing submitted by Cboe that was approved by 
the Commission.\27\ The Exchange does not believe 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 
because the increased position limits (and exercise limits) will be 
available to all market participants and apply to each in the same 
manner. The Exchange believes that the proposed rule change will 
provide additional opportunities for market participants to more 
efficiently achieve their investment and trading objectives of market 
participants.
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    \27\ See supra, note 3.
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    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 Act. On the contrary, the Exchange 
believes the proposal promotes competition because it may attract 
additional order flow from the OTC market to exchanges, which would in 
turn compete amongst each other for those orders. The Exchange believes 
market participants would benefit from being able to trade options with 
increased position limits in an exchange environment in several ways, 
including but not limited to the following: (1) Enhanced efficiency in 
initiating and closing out position; (2) increased market transparency; 
and (3) heightened contra-party creditworthiness due to the role of OCC 
as issuer and guarantor. The Exchange notes that other options 
exchanges may choose to file similar proposals with the Commission to 
increase position limits on options on LQD and GDX.

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

    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 \28\ and Rule 19b-
4(f)(6) thereunder.\29\
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    \28\ 15 U.S.C. 78s(b)(3)(A).
    \29\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its 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.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \30\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \31\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has asked the Commission to waive the 30-day operative delay so that 
the proposed rule change may become operative upon filing. The Exchange 
states that waiver of the operative delay would be consistent with the 
protection of investors and the public interest because it will ensure 
fair competition among the exchanges by allowing the Exchange to 
immediately increase the position limits for the products subject to 
this proposal, which the Exchange believes will provide consistency for 
BOX Participants that are also members at Cboe where these increased 
position limits are currently in place. For this reason, the Commission 
believes that waiver of the 30-day operative delay is consistent with 
the protection of investors and the public interest. Therefore, the 
Commission hereby waives the operative delay and designates the 
proposal as operative upon filing.\32\
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    \30\ 17 CFR 240.19b-4(f)(6).
    \31\ 17 CFR 240.19b-4(f)(6)(iii).
    \32\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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

[[Page 68029]]

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 change 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 [email protected]. Please include 
File Number SR-BOX-2021-27 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-2021-27. 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-2021-27, and should be submitted on 
or before December 21, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25991 Filed 11-29-21; 8:45 am]
BILLING CODE 8011-01-P


