[Federal Register Volume 83, Number 1 (Tuesday, January 2, 2018)]
[Notices]
[Pages 182-184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28309]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82407; File No. SR-BOX-2017-39]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule To Adjust the QOO Order Rebate
December 27, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 22, 2017, BOX Options Exchange LLC (the ``Exchange'')
filed with the Securities and Exchange Commission (``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 to
amend the Fee Schedule [sic]. While changes to the fee schedule
pursuant to this proposal will be effective upon filing, the changes
will become operative on January 2, 2018. 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
website 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 amend the Fee Schedule for trading on BOX
to amend section II.C, QOO Order Rebate. Specifically, the Exchange
proposes to adjust the QOO Order Rebate from $0.05 per contract to
$0.075 per contract for all QOO Orders presented to the Trading Floor.
The Exchange notes that it is not making any other changes to the
rebate and that the QOO rebate will continue to apply to both sides of
the QOO Order. The rebate will not apply to Public Customer executions,
executions subject to the Strategy QOO Order Fee Cap, and Broker Dealer
executions where the Broker Dealer is facilitating a Public Customer.
Further, the total monthly rebate for Broker Dealer executions will
continue to be capped at $30,000 per month per Broker Dealer.
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,\5\ 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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\5\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed change to the QOO Order
Rebate for Floor Brokers is reasonable, equitable and not unfairly
discriminatory.
The Exchange notes that it does not offer a front-end order entry
on the Trading Floor, unlike some competing exchanges. The Exchange
notes that Participants have two possible means of bringing orders to
the Exchange's Trading Floor for possible execution: (1) They can
invest in the technology, systems and personnel to participate on the
Trading Floor and deliver the order to the Exchange matching engines
for validation and execution; or (2) they can utilize the services of
another Participant acting as a Floor Broker. The Exchange believes
that increasing the rebate will allow Floor Brokers to price their
services at a level that would enable them to attract QOO order flow
from participants who would otherwise utilize the front-end order entry
mechanism offered by the Exchange's competitors instead of incurring
the cost in time and resources to install and develop their own
internal systems to deliver QOO orders directly to the Exchange system.
As such, the Exchange believes it is necessary from a competitive
standpoint to continue to offer this rebate to the executing Floor
Broker on a QOO Order. Further, the Exchange believes that the QOO
Order Rebate is reasonable as it is similar to a rebate program offered
to Floor Brokers
[[Page 183]]
on a competing exchange.\6\ Similar to the Floor Broker Rebate for
Executed QCC Transactions on Arca, BOX's QOO Order Rebate is applied to
both sides of the paired order and is directed to the Floor Broker, and
not to the Participant who is assessed the QOO Order fee. Finally,
similar to the BOX QOO Rebate, the NYSE Arca QCC rebate is only applied
when the Floor Broker executes the QCC Order manually on the NYSE Arca
trading floor. No rebate is given when the QCC Order is executed
electronically.
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\6\ See NYSE Arca, Qualified Contingent Cross (``QCC'')
Transactions Fees and Rebate. The Floor Broker Rebate for Executed
Orders is a flat rebate and is applied to both sides of the QCC
Order except when a Customer is on both sides of the QCC
transaction.
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The Exchange believes that this rebate structure is appropriate as
it allows Floor Brokers to price their services at a level that would
enable them to attract QOO order flow from participants who would
otherwise utilize the front-end order entry mechanism offered by the
Exchange's competitors instead of incurring the cost in time and
resources to install and develop their own internal systems to deliver
QOO orders directly to the Exchange system.
Lastly, the Exchange believes that the increased rebate is
reasonable and appropriate. The BOX Trading Floor is a new
functionality for the Exchange, and assessing a higher rebate will help
generate additional trading on the BOX Trading Floor. The Exchange
believes that the proposed rebate reflects a competitive environment
and falls in line with rebate levels assessed on another options
exchange in the industry.\7\
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\7\ See NASDQ [sic] PHLX LLC (``Phlx'') Pricing Schedule. Phlx
assesses a per contract rebate for QCC transactions ranging from
$0.00 to $0.11.
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The Exchange believes that it is equitable and not unfairly
discriminatory to only apply the rebate to Floor Brokers and not to
Floor Market Makers. Floor Market Makers only represent their own
interest on the Trading Floor and therefore do not need additional
incentive. Further, the Exchange believes it is equitable and not
unfairly discriminatory to not apply the rebate to Public Customer
executions or Broker Dealer executions where the Broker Dealer is
facilitating a Public Customer, as these executions are not assessed a
fee for their QOO Orders. Further, the Exchange believes it is
equitable and not unfairly discriminatory to continue to not apply the
rebate to executions subject to the Strategy QOO Order Fee Cap because
additional incentives for these orders are not necessary.
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 notes that it
operates in a highly competitive market in which market participants
can readily favor competing venues if they deem fee levels at a
particular venue to be excessive, or rebate opportunities available at
other venues to be more favorable. In such an environment, the Exchange
must continually adjust its fees to remain competitive with other
exchanges. Because competitors are free to modify their own fees in
response, the Exchange believes that the degree to which fee changes in
this market may impose any burden on competition is limited. For the
reasons discussed above, the Exchange believes that the proposed
changes do not impose an undue burden on competition.
Further, the Exchange does not believe that offering a rebate to
Floor Brokers will impose an undue burden on intra-market competition
because all Floor Brokers are eligible to transact QOO Orders and
receive a rebate. Further, the Exchange believes that the rebate will
promote competition by allowing Floor Brokers to competitively price
their services and for the Exchange to remain competitive with other
exchanges that offer front-end order entry on their trading floors.
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 \8\ and Rule 19b-4(f)(2)
thereunder,\9\ because it establishes or changes a due, or fee.
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\8\ 15 U.S.C. 78s(b)(3)(A)(ii).
\9\ 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-2017-39 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-2017-39. 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 website (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 website 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. 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-2017-39, and should be submitted on
or before January 23, 2018.
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\10\ 17 CFR 200.30-3(a)(12).
[[Page 184]]
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
Brent J. Fields,
Secretary.
[FR Doc. 2017-28309 Filed 12-29-17; 8:45 am]
BILLING CODE 8011-01-P