[Federal Register Volume 79, Number 16 (Friday, January 24, 2014)]
[Notices]
[Pages 4207-4209]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-01400]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71346; File No. SR-BOX-2014-04]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To Add
Rule 7290 (Price Protection for Limit Orders)
January 17, 2014.
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 January 6, 2014, BOX Options 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 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 Substance
of the Proposed Rule Change
The Exchange proposes to add Rule 7290 (Price Protection for Limit
Orders) to codify an existing price protection feature. The text of the
proposed rule change is available from the principal office of the
Exchange, on the Exchange's Web site at http://boxexchange.com, at the
Commission's Public Reference Room, and on the Commission's Web site at
http://sec.gov.
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 is proposing to add BOX Rule 7290 (Price Protection
for Limit Orders) to codify and clarify a price protection feature
already available on the Exchange. Specifically, the Exchange currently
has a price check feature in place that prevents incoming limit orders
\3\ and limit order modifications from automatically executing at
potentially erroneous prices. The Exchange believes this feature helps
maintain a fair and orderly market by mitigating the risks associated
with erroneously priced limit orders that have the potential to cause
price dislocation.
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\3\ See BOX Rule 7110(c)(1). Limit Orders entered into the BOX
Book are executed at the price stated or better.
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Proposed Rule 7290 will codify the price protection feature in the
BOX Rulebook and provide clarity on its functionality. As set forth in
proposed Rule 7290, the Exchange employs a filter on all incoming limit
orders and limit order modifications, pursuant to which the Trading
Host will cancel these orders if priced outside an acceptable price
parameter set by the Exchange. Specifically, as the Exchange receives
limit orders and limit order
[[Page 4208]]
modifications, the Trading Host compares the price of each order
against the contra-side NBBO at the time of order entry to determine if
the price is outside the acceptable price parameter.\4\ If the order is
priced outside of the acceptable price parameter, it will be rejected.
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\4\ The price parameter is set by the Exchange and is a
percentage of the NBBO on the opposite side of the incoming order.
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Unless determined otherwise by the Exchange and announced to the
Participants via Informational Circular, the price parameters will be
set at the price 100% greater than the NBO (for incoming buy orders),
and 100% less than the NBB (for incoming sell orders), when the NBB/NBO
is priced at or below $0.25; and the price parameters will be set at
the price 50% greater than the NBO (for incoming buy orders), and 50%
less than the NBB (for incoming sell orders), when the NBB/NBO is
priced above $0.25. The Exchange will reject all incoming buy (sell)
orders that are priced above (below) those parameters. For example, if
the NBO is $1.20, a buy order priced at or above $1.80 ($1.20 * 1.50)
will be rejected. Likewise, if the NBB is $1.10, a sell order priced at
or below $0.55 ($1.10 * 0.50) will be rejected. If the NBO is $0.10, a
buy order priced at or above $0.20 ($0.10*2.00) will be rejected.
However, if the NBB is less than or equal to $0.25, the default limits
set above will result in all incoming sell orders being accepted
regardless of their limit.
The price protection feature will be operational each trading day
after the opening until the close of trading, and will apply only to
incoming limit orders and limit order modifications.\5\ The Exchange
further notes that this feature will be available to all Participants;
however, it will be disabled until the Participant enables it by
contacting the BOX Market Operations Center (``MOC'').
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\5\ Pursuant to Rule 7110(g) orders can be modified once they
are held in the BOX Book. If the price of a limit order on the BOX
Book is modified by a Participant, the updated price will be checked
against the contra-side NBBO to determine whether the order's new
price is outside the acceptable price range. If the modified order
price is outside the price range the order will be rejected,
regardless of whether the original price of the limit order was
within the price range.
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The Exchange believes this feature will prevent the entry of limit
orders that are priced so significantly beyond the prevailing market
price that the execution of such orders could cause substantial price
dislocation in the market. The Exchange also believes that this feature
will further serve to mitigate the occurrence of erroneous executions.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\6\ in general, and Section
6(b)(5) of the Act,\7\ 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. In particular, the Exchange believes
that rejecting incoming limit orders which are priced a significant
percentage away from the NBB or NBO assures that executions will not
occur at erroneous prices, thereby promoting a fair and orderly market.
Additionally, the Exchange believes that the proposed feature is
reasonable as it will protect Participants by mitigating the risk of
having orders executed at erroneous prices. Furthermore, Participants
may choose whether or not to subscribe to this feature.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
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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 the
proposal will provide market participants with additional protection
against erroneous executions. The Exchange does not believe the
proposed rule change imposes any burden on intramarket competition as
the feature is available to all Participants. The Exchange also notes
that it is not mandatory for Participants to use this feature and it is
only enabled when requested by the Participant. Thus, the Exchange does
not believe the proposal creates any significant impact on competition.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \8\ and Rule 19b-4(f)(6) thereunder.\9\ Because
the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act\10\ and Rule 19b-
4(f)(6) thereunder.\11\
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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6).
\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires the Exchange to give the Commission written notice of the
Exchange's 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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At any time within 60 days of the filing of such 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 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-2014-04 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-2014-04. This file
number should be included on the
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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, 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-2014-04, and should be submitted on or before
February 14, 2014].
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01400 Filed 1-23-14; 8:45 am]
BILLING CODE 8011-01-P