[Federal Register Volume 78, Number 207 (Friday, October 25, 2013)]
[Notices]
[Pages 64046-64048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-25119]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70726; File No. SR-BOX-2013-50]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend BOX Rules 4020 (Opening of Accounts), 4050 (Discretionary
Accounts), and 4060 (Confirmation to Public Customers) To Conform to
the Corresponding Rules of FINRA
October 21, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on October 9, 2013, BOX Options Exchange LLC (the
``Exchange'' or ``BOX'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I and II below, which Items have been substantially prepared by
the Exchange. BOX has designated the proposed rule change as
constituting a ``non-controversial'' rule change under Exchange Act
Rule 19b-4(f)(6),\3\ which renders the proposal effective upon receipt
of this filing by 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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend the BOX Rules to conform to the
corresponding rules of the Financial Industry Regulatory Authority,
Inc. (``FINRA''). 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend BOX Rules 4020 (Opening of
Accounts), 4050 (Discretionary Accounts), and 4060 (Confirmation to
Public Customers) to conform to the corresponding rules of FINRA.\4\
The Exchange believes the proposed amendments would clarify to Order
[[Page 64047]]
Flow Providers (``OFPs'') their requirements with respect to
supervision of their public customer options business and confirmations
to public customers. In addition, the Exchange believes that the
proposed amendments would align the Exchange's rules with FINRA's
rules, thereby facilitating FINRA's enforcement of the Exchange's
rules.
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\4\ See FINRA Rule 2360(b)(12), (16), and (18).
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First, the Exchange proposes to amend BOX Rule 4020(f)(3) to
clarify the person responsible for approving accounts that do not meet
the specific criteria and standards for writing uncovered short options
transactions and for maintaining written records of the reasons for
every account so approved. Specifically, the Exchange proposes to
replace the terms ``Senior Options Principal and/or Compliance Options
Principal'' with the term ``a specific Options Principal(s).'' The
terms ``Senior Options Principal and/or Compliance Options Principal''
are not used anywhere else in the BOX Rules, while the term ``Options
Principal'' is used in similar provisions and is already defined in the
BOX Rules.\5\ The new term would have the same significance as the
terms it is replacing, as the Exchange currently treats these three
terms interchangeably when deciding if the OFP has met it supervision
requirements. Moreover, the Exchange believes that using the term ``a
specific Options Principal(s)'' in Rule 4020(f)(3) would align its rule
with the corresponding FINRA rule,\6\ thereby facilitating FINRA's
enforcement of the Exchange's rules.
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\5\ See BOX Rule 100(a)(41).
\6\ FINRA Rule 2360(b)(16)(E)(iii).
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In addition, the Exchange proposes to amend Rule 4050. First, the
Exchange proposes to remove section (a)(2). The Exchange believes that
the requirement found in section (a)(2)--that each discretionary order
be reviewed and approved on a daily basis--is no longer necessary and
consequently overly burdensome. Second, the Exchange proposes to add a
new section to Rule 4050, entitled ``Discretion as to Price or Time
Excepted''. The Exchange believes that adding this section would
clarify the duration and circumstances surrounding a price and time
discretion exemption as well as facilitate FINRA's enforcement of the
BOX Rules. In addition, the Exchange believes that removing section
(a)(2) and adding the new language would align BOX Rule 4050 with the
corresponding FINRA rule,\7\ thereby facilitating FINRA's enforcement
of the Exchange's rules.
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\7\ FINRA Rule 2360(b)(18)(A)(ii).
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Finally, the Exchange proposes to add language to Rule 4060(b) to
state that written confirmations relating to options transactions do
not need to specify the exchange or exchanges on which an option is
executed. The Exchange believes that requiring written confirmations
relating to options transactions specify the exchange or exchanges on
which an option is executed is overly burdensome in light of the recent
increase in order routing to away exchanges.\8\ Furthermore, even with
this information removed from the transaction confirmation, a Public
Customer would be able to receive this detail upon request. Finally,
the Exchange believes that this change would help FINRA enforce the BOX
Rules by aligning Rule 4060(b) with the corresponding FINRA rule.\9\
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\8\ The Exchange is a participant in the Options Order
Protection and Locked/Crossed Market Plan (``Plan''). The Plan
requires the Participating Options Exchanges to adopt rules
``reasonably designed to prevent Trade Throughs.'' Under the Plan,
the Exchange cannot execute orders at a price that is inferior to
the National Best Bid and Offer, nor can the Exchange place an order
on its books that would cause the Exchange's best bid or offer to
lock or cross another exchange's quote. If the Exchange cannot
execute or book an order, it will route the order to an Away
Exchange on behalf of the Options Participant who submitted the
Eligible Order through a third-party broker dealer.
\9\ FINRA Rule 2360(b)(12).
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The Exchange believes the proposed rule change would provide
greater certainty to OFPs regarding the Exchange's rules by aligning
them more closely with the corresponding FINRA rules. Moreover, the
Exchange believes that aligning these rules more closely with the
corresponding FINRA rules would aid in FINRA's enforcement of the
Exchange's rules. Finally, the Exchange believes the proposed rule
change would remove provisions that are no longer necessary and are now
overly burdensome.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Exchange Act Section 6(b),\10\ in general, and Exchange
Act Section 6(b)(5),\11\ 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.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes the proposed rule change would
promote consistency between the Exchange's rules and FINRA's rules and
provide uniform rules governing how OFPs conduct business with the
public. By promoting consistency with FINRA's rules, the Exchange
believes the proposed rule change would facilitate FINRA's enforcement
of the Exchange's rules. By providing uniform rules governing how OFPs
conduct business with the public, the Exchange believes the proposed
rule change would foster certainty for market participants.
Accordingly, the Exchange believes that the proposed rule change would
promote a free and open market and a national market system and the
protection of investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
As stated above, the Exchange believes that the proposed rule
change would clarify certain provisions of the Exchange's rules and
make them substantially similar to the corresponding FINRA rules.\12\
Specifically, the Exchange believes the proposed rule change is
necessary to establish uniform rules regarding how OFPs conduct
business with the public. The Exchange does not believe that the
proposed rule change would impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. In this regard, the Exchange does not believe the proposed rule
change would impose any burden on any intramarket competition as it
applies to all OFPs. In addition, the Exchange does not believe the
proposed rule change would bring any unnecessary burden on intermarket
competition as it is consistent with the corresponding FINRA rules.
Therefore, the Exchange does not believe the proposed rule change would
impose a burden on competition.
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\12\ See supra note 4.
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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 proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant
[[Page 64048]]
burden on competition; and (iii) become operative for 30 days from date
on which it was filed, or such shorter time as the Commission may
designate, it has become effective pursuant to Exchange Act Section
19(b)(3)(A) \13\ and Rule 19b-4(f)(6) thereunder.\14\
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f)(6). Pursuant to Exchange Act Rule 19b-
4(f)(6)(iii), the Exchange is required to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and the text of the proposed rule
change, at least five business days prior to the date of the filing
of the proposed rule change, or such shorter time as designated by
the Commission. The Commission has determined to waive the
requirement that the Exchange provide the Commission with written
notice of its intent to file the proposed rule change at least five
business days prior to the filing date.
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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. 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 Exchange 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-2013-50 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-2013-50. 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 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, on official business days between
the hours of 10:00 a.m. and 3:00 p.m., located at 100 F Street NE.,
Washington, DC 20549. 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-2013-50 and
should be submitted on or before November 15, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-25119 Filed 10-24-13; 8:45 am]
BILLING CODE 8011-01-P