[Federal Register Volume 83, Number 56 (Thursday, March 22, 2018)]
[Notices]
[Pages 12625-12627]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05792]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82889; File No. SR-BOX-2018-09]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Correct an Error in IM-7600-2
March 16, 2018.
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 March 12, 2018, 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 correct an inadvertent error in IM-7600-2.
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://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 purpose of the proposed rule change is to amend IM-7600-2 to
correct an inadvertent error that was [sic] subject of a prior rule
filing. In August 2017, the Securities and Exchange Commission
(``SEC'') approved BOX's filing to establish rules for an open-outcry
trading floor.\3\ The Exchange notes that it mistakenly referenced
``Public Customers'' rather than ``Customers'' in IM-7600-2(h) when
establishing these rules.
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\3\ See Securities Exchange Release No. 81292 (August 2, 2017),
82 FR 37144 (August 8, 2017) (Order Approving SR-BOX-2016-48 as
modified by Amendment Nos. 1 and 2).
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Under IM-7600-2(h) a Floor Broker must deliver written notification
prior to entering a tied hedge order on behalf
[[Page 12626]]
of their client. The intent of the rule was to require Floor Brokers to
provide notice to all clients when entering in a tied hedge order on
their behalf; however, the term ``Customer'' was inadvertently changed
to ``Public Customer'' in the drafting process. Under the BOX Rules,
the term ``Customer'' means either a Public Customer or a broker-
dealer,\4\ whereas the term ``Public Customer'' means a person that is
not a broker or dealer in securities.\5\ As such, the rule as it is
currently written does not require the Floor Broker to notify non-
Public Customer clients prior to entering a tied hedge order on their
behalf; which was not the intent of the rule. The Exchange believes it
is reasonable and appropriate for all of a Floor Broker's clients,
regardless of Participant type, to receive written notice prior to the
Floor Broker entering in a tied hedge order on their behalf as it will
provide transparency to the client.
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\4\ See Rule 100(a)(17).
\5\ See Rule 100(a)(52).
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Therefore, the Exchange proposes to replace the term ``Public
Customer'' with the term ``Customer'' in Rule IM-7600-2(h). The
Exchange believes the term ``Customer'' is more appropriate as broker-
dealers should not have been excluded from the requirements of Rule IM-
7600-2(h) when it was initially adopted. Additionally, the proposed
correction is similar to the language used in the rules of another
options exchange.\6\
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\6\ See NYSE Arca (``Arca'') Rule 6.47-O.01(h). The Exchange's
reading of Arca's rule is that the term ``customer'' includes
broker-dealers as well as Public Customers.
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The Exchange notes that it is not proposing to amend any other part
of the tied-hedge rule and the BOX rules already allow for Floor
Brokers to submit tied hedge orders on behalf of broker dealers.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\7\ in general, and Section
6(b)(5) of the Act,\8\ in particular, in that it is designed to protect
investors and the public interest, promote just and equitable
principles of trade, and foster cooperation and coordination with
persons engaged in facilitating transactions in securities by
correcting an inadvertent error that was made in the adoption of the
rule. Specifically, the Exchange proposes to change the reference from
``Public Customers'' to ``Customers'' in Rule IM-7600-2(h). The
Exchange believes the term ``Customer'' is more appropriate as broker-
dealers should not have been excluded from the requirements of Rule IM-
7600-2(h) when it was initially adopted. Further, the Exchange believes
it is reasonable and appropriate for all of a Floor Broker's clients,
regardless of Participant type, to receive written notice prior to the
Floor Broker entering in a tied hedge order on their behalf.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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As noted above, the proposed correction is similar to the language
used in the rules of another options exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change will not impose any burden on competition
not necessary or appropriate in furtherance of the purposes of the Act
as the proposed rule change is simply seeking to eliminate investor
confusion with regard to the incorrect reference in Rule IM-7600-2(h).
As such, 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.
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 foregoing 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, the proposed rule
change has become effective pursuant to Section 19(b)(3)(A) of the Act
\9\ and subparagraph (f)(6) of Rule 19b-4 thereunder.\10\
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\9\ 15 U.S.C. 78s(b)(3)(A)(iii).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
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. The Exchange has satisfied this requirement.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \11\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \12\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposal may become operative immediately upon filing. The Exchange
notes that waiver of the operative delay would allow it to implement
the proposal immediately and would require a Floor Broker to provide
written notice to its non-Public Customer clients, as well as its
Public Customer clients, prior to entering a tied hedge order on their
behalf. The Commission believes that waiving the 30-day operative delay
is consistent with the protection of investors and the public interest
because the proposed rule change is designed to provide clarity and
transparency to non-Public Customers regarding the usage of tied hedge
orders by Floor Brokers and the Exchange's tied hedge order procedures.
The Commission also notes that the proposed rule change does not change
the Exchange's existing tied hedge rule that permits Floor Brokers to
submit tied hedge orders on behalf of non-Public Customers. Rather, the
proposed rule change would simply require Floor Brokers to provide the
same type of notice to non-Public Customers as is currently required to
be provided to Public Customers. Accordingly, the Commission hereby
waives the operative delay and designates the proposal operative upon
filing.\13\
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\11\ 17 CFR 240.19b-4(f)(6).
\12\ 17 CFR 240.19b-4(f)(6)(iii).
\13\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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:
[[Page 12627]]
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-2018-09 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-2018-09. 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 the 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-2018-09 and should be submitted on
or before April 12, 2018.
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. 2018-05792 Filed 3-21-18; 8:45 am]
BILLING CODE 8011-01-P