[Federal Register Volume 77, Number 197 (Thursday, October 11, 2012)]
[Notices]
[Pages 61808-61810]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-24956]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67984; File No. SR-BOX-2012-015]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule for Trading on BOX
October 4, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on September 25, 2012, BOX Options Exchange
LLC (the ``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 Substance
of the Proposed Rule Change
BOX Options Exchange LLC (the ``Exchange'') proposes to add
language to its Fee Schedule for trading on its options facility, BOX
Market LLC (``BOX'') to specifically reference certain order types. The
text of the proposed rule change is available from the principal office
of the Exchange, on the Exchange's Internet Web site at http://boxexchange.com, and at the Commission's Public Reference Room.
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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes additional language in Section I (Exchange
Fees) of its Fee Schedule for trading on its options facility, BOX
Market LLC (``BOX'') to specifically reference Auction Transaction \5\
order types, PIP Orders and Agency Orders. A PIP Order is a Customer
Order (an agency order for the account of a Public Customer,
Professional Customer, or a broker-dealer) designated for the BOX Price
Improvement Period (``PIP''). An Agency Order is a block-size order
that a BOX Order Flow Provider seeks to facilitate as agent through the
BOX Facilitation Auction or Solicitation Auction mechanism.\6\ These
Auction Transaction order types were assessed an Exchange Fee on BOX
prior to May 14, 2012, and have continued to be assessed an Exchange
Fee since the launch of trading on BOX on May 14, 2012. Note that prior
to May 14, 2012, BOX was operated by Boston Options Exchange Group, LLC
as an options trading facility of NASDAQ OMX BX, Inc. Upon the
commencement of the Exchange's operations as a national securities
exchange on May 14, 2012, the same automated trading system is now
operated by BOX Market LLC as a facility of the Exchange. As such, the
operation and functionalities of the system are the same as was in
effect under the rules of the Boston Options Exchange Group, LLC
facility. Additionally, the Exchange stated in its proposed rule change
to establish fees for trading on BOX that all of the BOX fees as of May
14, 2012, were identical to fees in place prior to that date on the
Boston Options Exchange Group, LLC options trading facility of NASDAQ
OMX BX, Inc.\7\ The Exchange Fee for Auction Transactions for Broker-
Dealers ($0.35) and Market Makers (a tiered fee set forth in Section
I.B. of the fee schedule based on the Market Maker's average daily
volume on BOX) were in place on the Boston Options Exchange Group, LLC
facility and the Exchange fully intended for these Exchange Fees to be
carried over and included on the BOX Market LLC facility of the
Exchange. Similarly, the Exchange Fees for customer orders in Auction
Transactions ($0.00 for Public Customers and Professional Customers)
were inadvertently omitted from the initial Exchange fee schedule. This
proposal will correct these clerical errors as of the date of this
filing.
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\5\ Auction Transactions are those transactions executed on BOX
through the Price Improvement Period (``PIP''), the Solicitation
Auction mechanism, and Facilitation Auction mechanism.
\6\ Note that the addition of the definitions of these order
types in proposed footnote 2 cause the remaining footnotes on the
fee schedule to be renumbered to 3 through 5.
\7\ See Securities Exchange Act Release No. 66979 (May 14, 2012)
77 FR 29740 (May 18, 2012) (Notice of Immediate Effectiveness of
Proposed Rule Change To Adopt the Fee Schedule For Trading on BOX).
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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,\8\ in general, and Section
6(b)(5) of the Act,\9\ that the rules of an exchange be designed to
promote just and equitable principles of trade, to prevent fraudulent
and manipulative acts, to remove impediments to and to perfect the
mechanism for a free and open market and a national market system,
[[Page 61809]]
and, in general, to protect investors and the public interest.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the exchange fees for agency orders in
Auction Transactions are reasonable. The proposed fee structure is
intended to attract order flow to BOX, and the PIP in particular, by
offering market participants incentives to submit their agency orders
to BOX.
Additionally, the Exchange believes it is equitable and not
unfairly discriminatory for BOX Market Makers to have the opportunity
to benefit from a potentially discounted fee less than that charged to
broker-dealers. Market Makers have obligations that other Participants
do not. In particular, they must maintain active two-sided markets in
the classes in which they are appointed, and must meet certain minimum
quoting requirements. As such, the Exchange believes it is appropriate
that Market Makers be charged potentially lower transaction fees on BOX
when they provide greater volumes of liquidity to the market.
Further, the Exchange believes that the proposed tiered and
potentially discounted fees for Market Makers that on a daily basis,
trade an average daily volume (as calculated at the end of the month)
of 10,000 contracts or more on BOX represents a fair and equitable
allocation of reasonable dues, fees, and other charges as it is aimed
at incentivizing these participants to provide a greater volume of
liquidity to the market. The Exchange believes that giving incentives
for this activity results in increased volume on BOX. Such increased
volume increases potential revenue to BOX, and would allow BOX and the
Exchange to spread its administrative and infrastructure costs over a
greater number of transactions, leading to lower costs per transaction.
The Exchange also believes it is equitable and not unfairly
discriminatory that Public and Professional Customers not be charged
fees for their agency orders in Auction Transactions as compared to
broker-dealers on BOX. The securities markets generally, and BOX in
particular, have historically aimed to improve markets for investors
and develop various features within the market structure for customer
benefit. As such, the Exchange believes the exchange fees for Public
and Professional Customer Auction Transactions are appropriate and not
unfairly discriminatory. The Exchange believes comparably lower
customer transaction fees are reasonable. The Exchange believes it
promotes the best interests of investors to have lower transaction
costs for Public and Professional Customer orders in Auction
Transactions, and that the low fees attract participants to submit
order flow to the BOX Auction Transactions. The Exchange believes the
fees charged to broker-dealers, and market makers are reasonable
because they are designed to be comparable to the fees that such
accounts would be charged at competing venues.\10\
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\10\ See e.g., Taker Fees or Fees for Removing Liquidity on the
ISE Fee Schedule and NASDAQ Options Pricing as of September 2012.
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Moreover, the Exchange believes the exchange fees for broker-dealer
customer orders in Auction Transactions are reasonable. As stated
above, BOX operates within a highly competitive business. The fees
charged to broker-dealers are designed to be comparable to the fees
that such accounts would be charged at competing venues. As stated, the
Exchange believes it is equitable and not unfairly discriminatory to
charge broker-dealer proprietary accounts comparably higher fees than
BOX Market Makers and customers. As discussed, Market Makers have
obligations that other Participants do not. In particular, they must
maintain active two-sided markets in the classes in which they are
appointed, and must meet certain minimum quoting requirements. As such,
the Exchange believes it is appropriate that Market Makers be charged
lower fees on BOX. The Exchange also believes it is equitable and not
unfairly discriminatory that customers, including Professionals, be
charged lower exchange fees for their customer orders in Auction
Transactions than broker-dealers. The securities markets generally, and
BOX in particular, have historically aimed to improve markets for
investors and develop various features within the market structure for
customer benefit. As such, the Exchange believes the proposed fees for
broker-dealers, as compared to customers, is appropriate and not
unfairly discriminatory.
The Exchange believes that the BOX Exchange Fees for customer
orders in Auction Transactions will keep BOX competitive with other
exchanges as well as apply in such a manner so as to be equitable among
BOX Participants. The Exchange believes the BOX Exchange Fees are fair,
reasonable, and competitive with fees in place on other exchanges.
Further, the Exchange believes that this competitive marketplace
impacts the fees proposed for BOX.
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.
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 \11\ and Rule 19b-4(f)(2)
thereunder,\12\ because it establishes or changes a due, fee, or other
charge applicable only to a member.
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\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 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 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 Exchange Act.
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-2012-015 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BOX-2012-015. 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
[[Page 61810]]
post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
amendments, all written statements with respect to the proposed rule
change that are filed with the Commission, and all written
communications relating to the proposed rule change between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Room, 100 F Street NE., Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 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; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-BOX-2012-015 and should be submitted on or before
November 1, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-24956 Filed 10-10-12; 8:45 am]
BILLING CODE 8011-01-P