[Federal Register Volume 82, Number 225 (Friday, November 24, 2017)]
[Notices]
[Pages 55892-55894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25357]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82113; File No. SR-BOX-2017-35]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Rule 7300
November 17, 2017.
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 November 8, 2017, BOX Options Exchange LLC (the ``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 amend Rule 7300. 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://boxoptions.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 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 proposes to amend Rule 7300. Specifically, the
Exchange is proposing to amend how the quoting requirements for
Preferred Market Makers \3\ are calculated. A Preferred Market Maker
must maintain a continuous two-sided market, pursuant to Rule
8050(c)(1), throughout the trading day, in 99% of the non-adjusted
option series of each class for which it accepts Preferenced Orders,\4\
for 90% of the time the Exchange is open for trading in each such
option class.\5\ Compliance with the Preferred Market Maker quoting
requirement is determined on a monthly basis; however, determining
compliance with this requirement on a monthly basis does not relieve a
Preferred Market Maker from meeting this quoting requirement on a daily
basis, nor does it prohibit the Exchange from taking disciplinary
action against a Preferred Market Maker for failing to meet this
requirement each trading day.
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\3\ The term ``Preferred Market Maker'' means a Market Maker
designated as such by a Participant with respect to an order
submitted by such Participant to BOX. See Rule 7300(a)(2).
\4\ The term ``Preferenced Order'' means any order, whether on a
single option instrument or on a Complex Order Strategy, for which a
Preferred Market Maker is designated with respect to such order,
upon submission of such order to BOX. See Rule 7300(a)(1).
\5\ For purposes of this requirement, a Preferred Market Maker
is not required to quote in intra-day add-on series or series that
have a time to expiration of nine months or more in the classes for
which it receives Preferenced Orders and a Market Maker may still be
a Preferred Market Maker in any such series if the Market Maker
otherwise complies with the requirements.
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Currently, the Exchange applies the quoting requirements on a
class-by-class basis. The Exchange is now proposing that compliance
with the quoting requirements apply to all of a Preferred Market
Maker's classes for which it receives Preferenced Orders collectively.
This change is being proposed as a competitive response to the rules of
another exchange.\6\ The Exchange is not proposing any change to the
actual quoting requirements, only to how the requirements are applied
to Preferred Market Makers.
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\6\ See CBOE Rule 8.13(d).
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The Exchange believes that applying the continuous electronic
quoting requirements for Preferred Market Makers collectively across
all classes is a fair and efficient way for the Exchange and market
participants to evaluate compliance with the continuous electronic
quoting obligation. Applying the continuous electronic quoting
requirements collectively across all classes rather than on a class-by-
class basis is beneficial to Preferred Market Makers by providing some
flexibility to choose which series in their appointed classes they will
continuously electronically quote--increasing the continuous electronic
quoting in the series of one class while allowing for a decrease in the
continuous electronic quoting in the series of another class. This
flexibility, however, does not diminish the Preferred Market Maker's
obligation to continuously electronically quote in a significant
percentage of series for a significant part of the trading day. This
flexibility is especially important for classes that have relatively
few series and may prevent a Preferred Market Maker from reaching the
continuous electronic quoting obligation when failing to quote 90% of
the trading day in more than one series in an appointed class. The
Exchange believes that the proposed rule change will not diminish, and
may in fact increase, market making activity on the Exchange, by
applying continuous electronic quoting obligations in a reasonable
manner, which is already in place on other options exchanges.\7\
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\7\ See e.g., Nasdaq ISE, LLC (``ISE'') Rule 713, Supplementary
Material .03 and Rule 804(e); and NYSE Arca, Inc. (``NYSE Arca'')
Options Rule 6.88-O.
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
[[Page 55893]]
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\8\ in general, and Section 6(b)(5) of the Act,\9\ 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 proposed change will more closely
align how the Exchange applies the quoting requirements for Preferred
Market Makers with another options exchange.\10\ The Exchange believes
the proposed change will provide increased flexibility to Preferred
Market Makers in their ability to provide liquidity, which in turn,
will benefit the public.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ See supra note 7.
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With respect to the application of continuous electronic quoting
obligations collectively, the Exchange believes that providing
Preferred Market Makers with flexibility to satisfy their continuous
electronic quoting obligations collectively across their appointed
classes will not diminish Preferred Market Makers' obligations to
provide continuous electronic quotes in a significant percentage of
series for a significant part of the trading day. BOX believes that the
balance between the obligations imposed on and benefits provided to
Preferred Market Makers under the rules is appropriate. The proposed
rule change does not diminish any of the obligations imposed on
Preferred Market Makers. Rather, it merely changes how the continuous
electronic quoting obligation is applied. The Exchange notes that
Preferred Market Makers are subject to many obligations under the
rules, including the obligation to satisfy bid/ask differential
requirements, to meet minimum quote size requirements, and to
contribute to the maintenance of a fair and orderly market in their
appointed classes, which the Exchange believes will ensure continued
liquidity on the Exchange. BOX believes that its proposed rule change
is consistent with the Act in that providing flexibility does not
detract from the overall market making obligations of Preferred Market
Makers. The proposed rule change better supports a Preferred Market
Maker's continuous obligation to engage in dealings for its own
account. Accordingly, any benefits of the proposed rule change to
provide flexibility to Preferred Market Makers are offset by the
continued responsibilities to provide significant liquidity to the
market to the benefit of all market participants.
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 that is not necessary or appropriate
in furtherance of the purposes of the Act. As discussed above, the
proposed change simply aligns the rules of the Exchange with those of
other options exchanges.\11\ Additionally, the proposed change is only
amending how the quoting obligations are calculated; not the quoting
obligations themselves.
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\11\ See supra note 7.
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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 burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, it has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) thereunder.\13\
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided 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 filing of the proposed rule
change, or such shorter time as designated by the Commission.
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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 Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule change 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-2017-35 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-2017-35. 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. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BOX-2017-35 and should be
submitted on or before December 15, 2017.
[[Page 55894]]
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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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25357 Filed 11-22-17; 8:45 am]
BILLING CODE 8011-01-P