[Federal Register Volume 78, Number 157 (Wednesday, August 14, 2013)]
[Notices]
[Pages 49584-49586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-19672]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70138; File No. SR-BOX-2013-40
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Fees for Jumbo SPY Option Transactions
August 8, 2013.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of
1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on August 1, 2013, BOX Options Exchange LLC (the
``Exchange'') filed with the Securities and Exchange Commission (the
``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
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule to
amend fees for Jumbo SPY Option transactions on the BOX Market LLC
(``BOX'') options facility. While changes to the fee schedule pursuant
to this proposal will be effective upon filing, the changes will become
operative on August 1, 2013. 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
Web site 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.
Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, Proposed Rule Change
1. Purpose
The Exchange began listing and trading a new options product, Jumbo
SPY Options,\5\ on May 10, 2013.\6\ Except for the difference in the
number of deliverable shares, Jumbo SPY Options have the same terms and
contract characteristics as regular-sized options contracts (``standard
options''), including exercise style. The purpose of this filing is to
amend the transaction fees to further promote trading in Jumbo SPY
Options.
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\5\ Option contracts overlying 1,000 shares of the SPDR[supreg]
S&P[supreg] 500 Exchange-Traded Funds. ``SPDR[supreg],'' ``Standard
& Poor's[supreg],'' ``S&P[supreg],'' ``S&P 500[supreg],'' and
``Standard & Poor's 500'' are registered trademarks of Standard &
Poor's Financial Services LLC. The SPY ETF represents ownership in
the SPDR S&P 500 Trust, a unit investment trust that generally
corresponds to the price and yield performance of the SPDR S&P 500
Index.
\6\ See Securities Exchange Act Release No. 69511 (May 03, 2013)
78 FR 27271 (May 9, 2013) (Order Approving SR-BOX-2013-06).
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Section I. Exchange Fees
The Exchange proposes to remove the Exchange Fees for Jumbo SPY
Option transactions. Currently the Exchange assesses a distinct fee for
both Auction and Non-Auction Transactions in Jumbo SPY Options based on
account type. The Exchange proposes to amend this category and assess a
$0.00 per Jumbo SPY Option contract fee for all account types.
Specifically, the Exchange proposes to lower the per-contract fee for
Professional Customers and Broker-Dealers from $0.25 to $0.00. For
Market Makers, the Exchange proposes to lower the per-contract fee from
$0.25 or the tiered per-contract execution fee based upon the
Participant's monthly average daily volume (``ADV'') to $0.00. The
$0.00 per contract fee for Public Customers will not change.
Jumbo SPY Options transactions will continue to count the same as
standard options transactions for the purposes of ADV under Section
I.A. and I.B. For example, a Broker-Dealer initiating a Jumbo SPY
Option Primary Improvement Order would be charged according to the
proposed Jumbo SPY Options transaction sub-section outlined above, or
$0.00. However, this transaction would count toward that Broker-
Dealer's ADV in Auction Transactions under Section I.A.
Section II. Liquidity Fees and Credits
The Exchange currently assesses liquidity fees and credits for all
options classes traded on BOX (unless explicitly stated otherwise) that
are applied in addition to any applicable Exchange Fees as described
above. The Exchange proposes to amend Section II. (Liquidity Fees and
Credits) to adopt a pricing model for Jumbo SPY Options where the
Exchange will credit liquidity providers and assess a fee on liquidity
takers. Specifically, the Exchange proposes to assess a $0.30 credit
for Jumbo SPY Options transactions that add liquidity and charge a
$0.50 fee for Jumbo SPY Options transactions that remove liquidity.
These fees and credits would apply to both Auction and Non-Auction
transactions in Jumbo SPY Options.
The Exchange notes that the liquidity pricing proposed for Jumbo
SPY Options is different from the liquidity pricing currently in place
under Section II. The pricing model proposed above for Jumbo SPY
Options is commonly known as a ``Make/Take'' model; for all other
options classes the Exchange has adopted a ``Take/Make'' model whereby
orders that add liquidity to the BOX Book are charged a fee, and orders
that remove liquidity receive a credit. The Exchange believes the
``Make/Take'' model is more appropriate to promote liquidity for the
Jumbo SPY Options product. Jumbo SPY Options were designed to help
institutional investors mitigate the risks inherent in managing large
portfolios,\7\ and these investors are more familiar with being
rewarded for providing liquidity.\8\
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\7\ Id.
\8\ The ``Make/Take'' model is currently used by the Chicago
Board Options Exchange Incorporated (``CBOE''), the International
Securities Exchange LLC.(``ISE') and NASDAQ OMX PHLX LLC.
(``PHLX'').
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[[Page 49585]]
Accordingly, the Exchange also proposes to remove the statement in
Section II.E. (Exempt Transactions) which exempts Jumbo SPY Options
transactions from liquidity fees and credits.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\9\ in general, and Sections
6(b)(4) and 6(b)(5) of the Act,\10\ 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4) and (5).
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Exchange Fees
The Exchange believes it is reasonable and equitable to lower all
Exchange Fees for Jumbo SPY Options to $0.00. This is a new options
product and assessing a lower fee than would otherwise apply will help
generate additional trading in Jumbo SPY Options. The Exchange also
believes it is equitable and not unfairly discriminatory to charge no
Exchange Fees for Jumbo SPY Options as this applies equally to all
Participants on the Exchange.
Liquidity Fees and Credits
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to adopt liquidity fees and credits for Jumbo SPY
Options because pricing by symbol is a common practice on many U.S.
options [sic] as a means to incentivize order flow.\11\
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\11\ See supra, note 8.
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The Exchange's proposed Jumbo SPY Options fees and credits, which
are commonly known as a ``Make/Take'' pricing model, are reasonable
because the Exchange desires to incentivize market participants to
transact a greater number of Jumbo SPY Options. The Exchange is
offering pricing specific to Jumbo SPY Options because this is a new
options product offered only on the Exchange, and the Exchange believes
adopting this type of pricing model will increase liquidity in Jumbo
SPY Options by incentivizing participants to provide more order flow in
this product, ultimately benefiting all market participants through
increased liquidity, tighter markets and increased order interaction.
The Exchange believes it is reasonable for Participants to be
charged a higher fee for orders removing liquidity in Jumbo SPY Options
transactions when compared to the credit they will receive for orders
that add liquidity. As stated above, this is a common model in the
options industry. Further, the Exchange's proposed pricing model for
Jumbo SPY Options is equitable and not unfairly discriminatory as these
liquidity fees and credits apply equally to all Participants and across
all account types on the Exchange.
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 believes that
removing all Exchange fees and adopting a ``Make/Take'' pricing model
for Jumbo SPY Options will encourage order flow to be directed to the
Exchange, which will benefit all market participants by increasing
liquidity on the Exchange. Specifically, the Exchange believes this
will incentivize market participants to trade this new product and will
not impose a burden on competition among various market participants on
the Exchange but rather will continue to promote competition on the
Exchange.
The Exchange believes that the adopting of the proposed fees for
Jumbo SPY Options will not impose any unnecessary burden on intermarket
competition because even though Jumbo SPY Options are currently only
listed on the Exchange, the Exchange operates in a highly competitive
market compromised of eleven exchanges, any of which may determine to
trade a similar product. Also, Jumbo SPY Options should result in
increased options volume and greater trading opportunities for all
market participants.
The Exchange also believes that adopting fees on Jumbo SPY Options
will not impose a burden on competition among various market
participants on the Exchange. The proposed fees apply equally to all
Participants and across all account types on the Exchange.
Accordingly, the fees that are assessed by the Exchange described
in the above proposal are influenced by these robust market forces and
therefore must remain competitive with fees charged by other venues for
other products, and therefore must continue to be reasonable and
equitably allocated.
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 \12\ and Rule 19b-4(f)(2)
thereunder,\13\ because it establishes or changes a due, or fee, or
other charge applicable only to a member.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 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 [email protected]. Please include
File Number SR-BOX-2013-40 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-2013-40. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent
[[Page 49586]]
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 10:00 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; 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-2013-40 and should be submitted on or before
September 4, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19672 Filed 8-13-13; 8:45 am]
BILLING CODE 8011-01-P