[Federal Register Volume 80, Number 130 (Wednesday, July 8, 2015)]
[Notices]
[Pages 39169-39172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16653]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75350; File No. SR-BOX-2015-24]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule on the BOX Market LLC Options Facility
July 1, 2015.
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 June 29, 2015, 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 the
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 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 July 1, 2015. 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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make a number of changes to Section I.A of
the BOX Fee Schedule, Exchange Fees for Non-Auction Transactions.
First, the Exchange proposes to amend certain credits in the
pricing model outlined in Section I.A. (Non-Auction Transactions).\5\
In this section, fees and credits are assessed depending on upon three
factors: (i) The account type of the Participant submitting the order;
(ii) whether the Participant is a liquidity provider or liquidity
taker; and (iii) the account type of the contra party. Non-Auction
Transactions in Penny Pilot Classes are assessed different fees or
credits than Non-Auction Transactions in Non-Penny Pilot Classes. The
Exchange recently adopted this pricing model \6\ and now proposes to
amend certain credits in this section.
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\5\ Non-Auction Transactions are those transactions executed on
the BOX Book.
\6\ See Securities Exchange Act Release No. 73547 (November 6,
2014), 79 FR 67520 (November 13, 2014) (Notice of Filing and
Immediate Effectiveness of SR-BOX-2014-25).
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Specifically, the Exchange proposes to eliminate the Maker and
Taker credits for Public Customers interacting with Professional
Customers/Broker Dealers or Market Makers in both Penny Pilot and Non-
Penny Pilot Classes. Public Customers currently receive a $0.10 credit
(Penny Pilot Classes) and $0.45 credit (Non-Penny Pilot Classes) when
interacting with Professional Customers, Broker Dealers or Market
Makers, regardless of whether they are adding or removing liquidity.
The Exchange proposes to eliminate both these credits.
These transactions will remain exempt from the Liquidity Fees and
Credits outlined in Section II of the BOX Fee Schedule. The revised fee
structure
[[Page 39170]]
for Non-Auction Transactions will be as follows:
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Penny pilot classes Non-penny pilot classes
---------------------------------------------------------------
Account type Contra party Maker fee/ Taker fee/ Maker fee/ Taker fee/
credit credit credit credit
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Public Customer............... Public Customer. $0.00 0.00 0.00 0.00
Professional 0.00 0.00 0.00 0.00
Customer/Broker
Dealer.
Market Maker.... 0.00 0.00 0.00 0.00
Professional Customer or Public Customer. 0.60 0.64 0.95 0.99
Broker Dealer.
Professional 0.25 0.40 0.35 0.40
Customer/Broker
Dealer.
Market Maker.... 0.25 0.44 0.35 0.44
Market Maker.................. Public Customer. 0.51 0.55 0.85 0.90
Professional 0.00 0.05 0.00 0.10
Customer/Broker
Dealer.
Market Maker.... 0.00 0.29 0.00 0.29
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For example, if a Public Customer submitted an order to the BOX
Book in a Penny Pilot Class (making liquidity), the Public Customer
would now be charged no fee if the order interacted with a Market
Maker's order and the Market Maker (taking liquidity) would be charged
$0.55. To expand on this example, if the Market Maker instead submitted
an order to the BOX Book in a Penny Pilot Class (making liquidity), the
Market Maker would be charged $0.51 if the order interacted with a
Public Customer's order and the Public Customer (taking liquidity)
would again be charged no fee.
In Section I.A.1., the Tiered Volume Rebate for Non-Auction
Transactions, the Exchange gives a per contract rebate to Market Makers
and Public Customers based on their average daily volume (``ADV'')
considering all transactions executed on BOX by the Market Maker or
Public Customer, respectively, as calculated at the end of each month.
In the Public Customer's Monthly ADV section the Exchange proposes to
adjust the volume tiers and adopt different per contract rebates for
Penny Pilot Classes and Non-Penny Pilot Classes. The new per contract
rebates for Public Customers in Non-Auction Transactions as set forth
in Section I.A.1. of the BOX Fee Schedule will now be as follows:
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Per contract rebate
-------------------------------
Public customer monthly ADV Penny pilot Non-penny
classes pilot classes
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65,001 contracts and greater............ ($0.40) ($0.70)
40,001 contracts to 65,000 contracts.... ($0.25) ($0.50)
15,001 contracts to 40,000 contracts.... ($0.15) ($0.40)
1 contract to 15,000 contracts.......... $0.00 $0.00
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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, in general, and Section
6(b)(4) and 6(b)(5)of the Act,\7\ 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. The proposed changes will allow the Exchange to be
competitive with other exchanges and to apply fees and credits in a
manner that is equitable among all BOX Participants. Further, the
Exchange operates within a highly competitive market in which market
participants can readily direct order flow to any other competing
exchange if they determine fees at a particular exchange to be
excessive.
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\7\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes amending the Non-Auction Transaction credits
for Public Customers is reasonable, equitable and not unfairly
discriminatory. The fee structure for Non-Auction Transactions has been
well received by Participants and the industry since it was adopted
last year, and the Exchange believes it is now appropriate to eliminate
the credits for Public Customers.\8\ The proposed fee structure is
intended to attract order flow to the Exchange by offering all market
participants incentives to submit their Non-Auction orders to the
Exchange. The practice of providing additional incentives to increase
order flow is, and has been, a common practice in the options
markets.\9\ Further, the Exchange believes it is appropriate to provide
incentives for market participants which will result in greater
liquidity and ultimately benefit all Participants trading on the
Exchange.
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\8\ See supra, note 6. Prior to adopting the Non-Auction
Transaction fee structure, Public Customers were charged $0.07 for
each Non-Auction transaction.
\9\ See BATS Exchange, Inc. (``BATS'') BATS Options Exchange Fee
Schedule ``Standard Rates''; Chicago Board Options Exchange, Inc.
(``CBOE'') Fee Schedule ``Volume Incentive Program'' (page 4); ISE
Gemini, LLC (``Gemini'') Schedule of Fees, Section I. Regular Order
Fees and Rebates ``Penny Symbols and SPY, and Non-Penny Symbols''
(page 4); Miami International Securities Exchange, LLC (``MIAX'')
Fee Schedule Section I(a)(i) ``Market Maker Transaction Fees'' and
``Market Maker Sliding Scale'', and Section I(a)(iii) ``Priority
Customer Rebate Program''; NASDAQ OMX BX, Inc. (``BX Options'')
Chapter XV, Section 2 BX Options Market--Fees and Rebates; NASDAQ
OMX PHLX,(``PHLX''), Pricing Schedule Section B, ``Customer Rebate
Program''; NASDAQ Stock Market LLC (``NOM'') Chapter XV, Section 2
NASDAQ Options Market--Fees and Rebates; NYSE Amex, Inc. (``AMEX'')
Fee Schedule Section I.C. NYSE Amex Options Market Maker Sliding
Scale--Electronic; and NYSE Arca, Inc (``Arca'') Options Fees and
Charges, ``Customer and Professional Customer Monthly Posting Credit
Tiers and Qualifications for Executions in Penny Pilot Issues''(page
4).
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The Exchange also believes it is equitable, reasonable and not
unfairly discriminatory to assess fees according to the account type of
the Participant
[[Page 39171]]
originating the order and the contra party. This fee structure has been
in place on the Exchange since last year and the Exchange is simply
adjusting certain credits within the structure.\10\ The result of this
structure is that a Participant does not know the fee it will be
charged when submitting certain orders. Therefore, the Participant must
recognize that it could be charged the highest applicable fee on the
Exchange's schedule, which may, instead, be lowered or changed to a
credit depending upon how the order interacts.
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\10\ See supra, note 6.
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The Exchange believes that the proposed fees for Public Customers
in Non-Auction Transactions are reasonable. Under the proposed Non-
Auction Transaction fee structure Public Customers will never pay a fee
for their Non-Auction transactions and may be eligible for a per
contract rebate depending on their monthly ADV for all transactions
executed on BOX. Therefore the Exchange believes that it is appropriate
and therefore consistent with the Act to eliminate the credits for
Public Customers in Section 1.A. The Exchange believes the Non-Auction
transaction fees for Public Customers are reasonable as they are in
line with the current fees assessed by other competing exchanges.\11\
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\11\ Many U.S. Options Exchanges do not differentiate their fees
between auction and non-auction transactions. However, Public
Customers are charged anywhere from $0.00 to $0.85 within the
following options exchange fee schedules. See NASDAQ OMX BX (``BX'')
Options Pricing, Chapter XV, Sec. 2; NYSE Arca Options (``Arca'')
Fees and Charges page 3; International Securities Exchange (``ISE'')
Schedule of Fees, Section I.
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Tiered Volume Rebate for Non-Auction Transactions
BOX believes it is reasonable, equitable and not unfairly
discriminatory to adjust the tiered volume based rebates for Public
Customers in Non-Auction Transactions. The volume thresholds and
applicable rebates are meant to incentivize Public Customers to direct
order flow to the Exchange to obtain the benefit of the rebate, which
will in turn benefit all market participants by increasing liquidity on
the Exchange. Other exchanges employ similar incentive programs; \12\
and the Exchange believes that the proposed changes to the volume
thresholds and rebates are reasonable and competitive when compared to
incentive structures at other exchanges.
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\12\ See Section B of the PHLX Pricing Schedule entitled
``Customer Rebate Program;'' ISE Gemini's Qualifying Tier Thresholds
(page 6 of the ISE Gemini Fee Schedule); and CBOE's Volume Incentive
Program (VIP). CBOE's Volume Incentive Program (``VIP'') pays
certain tiered rebates to Trading Permit Holders for electronically
executed multiply-listed option orders which include AIM orders.
Note that some of these exchanges base these rebate programs on the
percentage of total national Public Customer volume traded on their
respective exchanges, which the Exchange is not proposing to do.
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The Exchange continues to believe it is equitable and not unfairly
discriminatory to offer these rebate structures to Public Customers in
Non-Auction transactions. The practice of incentivizing increased
Public Customer order flow is common in the options markets. The
Exchange believes the proposed changes to the tiers and per contract
rebates are reasonable, as Public Customers will benefit from the
opportunity to obtain a greater rebate in most situations. For example,
under the current schedule a Public Customer with an ADV of 17,000
would receive a per contract rebate of $0.12. Under the proposed
schedule this same Public Customer would receive a per contract rebate
of $0.15 for Penny Pilot Classes and $0.40 for Non-Penny Pilot Classes.
The Exchange believes it is reasonable to offer a higher per
contract rebate for transactions in Penny Pilot Classes [sic] compared
to Non-Penny Pilot Classes [sic] because Non-Penny Pilot Classes are
typically less actively traded and have wider spreads. The Exchange
believes that offering a higher rebate will incentivize Public Customer
order flow in Non-Penny Pilot issues on the Exchange, ultimately
benefitting all Participants trading on 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.
The Exchange believes that the proposed adjustments to fees and
rebates in the Non-Auction Transactions fee structure will not impose a
burden on competition among various Exchange Participants. Rather, BOX
believes that the changes will result in the Participants being charged
appropriately for these transactions and are designed to enhance
competition in Non-Auction transactions on BOX. Submitting an order is
entirely voluntary and Participants can determine which type of order
they wish to submit, if any, to the Exchange. Further, the Exchange
believes that this proposal will enhance competition between exchanges
because it is designed to allow the Exchange to better compete with
other exchanges for order flow.
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 \13\ and Rule 19b-4(f)(2)
thereunder,\14\ because it establishes or changes a due, or fee.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 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-2015-24 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-2015-24. 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
[[Page 39172]]
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-2015-24, and should be
submitted on or before July 29, 2015.
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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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16653 Filed 7-7-15; 8:45 am]
BILLING CODE 8011-01-P