Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt the Fee Schedule For Trading on BOX, 29740-29746 [2012-12032]
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Federal Register / Vol. 77, No. 97 / Friday, May 18, 2012 / Notices
order flow to competing exchanges
based on many factors, including
technology, functionality, reliability,
fees and customer service.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the Exchange consents,
the Commission shall: (a) By order
approve or disapprove such proposed
rule change, or (b) institute proceedings
to determine whether the proposed rule
change should be 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:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BX–2012–030 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–BX–2012–030. 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 (https://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
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18:21 May 17, 2012
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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
publicly available. All submissions
should refer to File Number SR–BX–
2012–030 and should be submitted on
or before June 8, 2012.
comments on the proposed rule change
from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.63
Kevin M. O’Neill,
Deputy Secretary.
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.
[FR Doc. 2012–12034 Filed 5–17–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66979; File No. SR–BOX–
2012–002]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Adopt the
Fee Schedule For Trading on BOX
May 14, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on May 10, 2012, 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 19b4(f)(2) thereunder,4 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
63 17
CFR 200.30–3(a)(12).
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).
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
BOX Options Exchange LLC (the
‘‘Exchange’’) proposes to amend its Fee
Schedule in preparation for the
expected launch of trading of the BOX
Market facility on May 14, 2012. The
text of the proposed rule change is
available from the principal office of the
Exchange, on the Exchange’s Internet
Web site at https://boxexchange.com,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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 its
Fee Schedule in preparation for the
expected launch of trading of its BOX
Market LLC options trading facility
(‘‘BOX’’) on May 14, 2012. The
Exchange proposes to establish fees
related to trading on BOX.
Exchange Fees
The Exchange proposes Exchange
Fees based on transaction type and
account type. More specifically, the
Exchange proposes fees for Auction
Transactions (transactions executed
through the BOX Price Improvement
Period, Solicitation, and Facilitation
auction mechanisms), and non-Auction
Transactions (transactions executed on
the BOX Book). The account types on
BOX are Public Customer, Professional,
Broker-Dealer, and Market Maker (see
Exchange Rule 100 Series for definitions
of each). All of the proposed fees are
identical to fees currently in place on
the Boston Options Exchange Group,
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LLC, an options trading facility of
NASDAQ OMX BX, Inc.5
For Auction Transactions, the
Exchange proposes a $0.15 fee for
customer Improvement Orders in the
PIP and Responses in the Solicitation
and Facilitation mechanisms.6 The
Exchange proposes a $0.25 fee for
Broker-Dealers and Market Makers for
Improvement Orders in the PIP and
Responses in the Solicitation and
Facilitation mechanisms. Exchange Fees
for Initiating Participants in Auction
Transactions through Primary
Improvement Orders, Facilitation
Orders, or Solicitation Orders will be
based upon a Participants’ monthly
average daily volume (‘‘ADV’’) in
Auction Transactions as calculated at
the end of each month as set forth
below.
Initiating participant monthly ADV
in auction transactions
150,001 contracts and greater
100,001 contracts to 150,000
tracts.
50,001 contracts to 100,000
tracts.
20,001 contracts to 50,000
tracts.
1 contract to 20,000 contracts
Per contract fee
(all account
types)
.......
con-
$0.10
$0.12
con-
$0.15
con-
$0.17
.......
$0.25
For non-Auction Transactions, the
Exchange proposes to impose a per
contract fee of $0.07 for Public
Customers, $0.20 for Professionals, and
$0.40 for Broker-Dealers. Additionally,
the Exchange proposes a tiered, per
contract fee for Market Makers, based
upon their monthly ADV in nonAuction Transactions on BOX as set
forth below:
Per contract fee
150,001 contracts and greater .......
100,001 contracts to 150,000 contracts.
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Market maker monthly ADV in nonauction transactions
$0.13
$0.16
5 The automated electronic trading system
operated by Boston Options Exchange Group, LLC
as an options trading facility of NASDAQ OMX BX,
Inc. will, upon the commencement of the
Exchange’s operations as a national securities
exchange, be operated by BOX Market LLC as a
facility of the Exchange. As such, the operation and
functionalities of the system are the same as are in
effect under the rules of the Boston Options
Exchange Group, LLC facility. The Exchange is not
proposing to adopt the fees currently set forth in
Section 5b (CMS Order Routing Service), Section 5d
(fees assessed to third-party service providers for
testing or support) or Section 6a (compliance
examination assessment) of the Fee Schedule of the
Boston Options Exchange Group, LLC as the fees
will not be applicable to BOX or the Exchange.
6 References to customer in the Fee Schedule and
this proposal include Public Customers and
Professionals, unless otherwise noted.
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Liquidity Fees and Credits for NonAuction Transactions
Orders that add liquidity to the BOX
Book will be charged a transaction fee
upon execution. Any order, including
an order with a Fill and Kill
designation, which executes against an
order that is being exposed before being
placed on the BOX Book, will be
considered to add liquidity. Any order,
including an order with a Fill and Kill
designation, which removes liquidity by
trading immediately upon entry to the
BOX Book or following its exposure as
part of NBBO filtering, will receive a
credit.
The Exchange proposes that orders
that add liquidity to the BOX Book will
be charged a per contract fee of $0.22 for
Penny Pilot Classes, and $0.65 for
adding liquidity in non-Penny Pilot
Classes. Orders that remove liquidity
from the BOX Book (non-Auction
Transactions) will be provided a per
contract credit of $0.22 for transactions
in Penny Pilot Classes, and $0.65 for
removing liquidity in non-Penny Pilot
Classes.
SPY, and IWM) will be assessed a fee for
adding liquidity or provided a credit for
removing liquidity of $0.30, regardless
of account type. PIP Orders (i.e., the
agency orders opposite the Primary
Improvement Order) shall receive the
‘‘removal’’ credit. Improvement Orders
will be charged the ‘‘add’’ fee.
Further, the Exchange proposes a fee
for adding liquidity or a credit for
removing liquidity of $0.75, regardless
of account type, for PIP transactions
where the minimum price variation is
greater than $0.01 (i.e., all non-Penny
Pilot Classes, and Penny Pilot Classes
where the trade price is equal to or
greater than $3.00, excluding QQQ,
SPY, and IWM). The Exchange proposes
that this $0.75 liquidity fee and credit
applicable to these PIP transactions be
operative on a pilot basis until February
28, 2013.
In connection with the pilot, the
Exchange agrees to submit to the
Commission on a quarterly basis during
the pilot period certain monthly PIP
transaction data in series traded in
penny increments compared to series
traded in nickel increments, subdivided
by when BOX is at the NBBO and when
BOX is not at the NBBO, including: (1)
Volume by number of contracts traded;
(2) number of contracts executed by the
Initiating Participant as compared to
others (‘‘retention rate’’); (3) percentage
of contracts receiving price
improvement when the Initiating
Participant is the contra party and when
others are the contra party; (4) average
number of participants responding in
the PIP; (5) average price improvement
amount when the Initiating Participant
is the contra party; (6) average price
improvement amount when others are
the contra party; and (7) percentage of
contracts receiving price improvement
greater than $0.01, $0.02 and $0.03
when the Initiating Participant is the
contra party and when others are the
contra party. Boston Options Exchange
Group, LLC will provide this pilot data
to the Commission for the time period
from February 1, 2012, until the date
BOX begins operations as a facility of
the Exchange. The Exchange will
provide the data to the Commission
from the date BOX begins operations as
a facility of the exchange through the
period until February 1, 2013, and for
any period thereafter as the Commission
may request.
Liquidity Fees and Credits for PIP
Transactions
The Exchange proposes that PIP
Transactions in classes where the
minimum price variation of $0.01 (i.e.,
Penny Pilot classes there the trade price
is less than $3.00 and all series in QQQ,
Liquidity Fees and Credits for
Facilitation and Solicitation
Transactions
The Exchange proposes that Agency
Orders submitted to the Facilitation and
Solicitation mechanisms receive the
‘‘removal’’ credit and Responses
Market maker monthly ADV in nonauction transactions
Per contract fee
50,001 contracts to 100,000 contracts.
10,001 contracts to 50,000 contracts.
1 contract to 10,000 contracts .......
$0.18
$0.20
$0.25
The Exchange proposes a $0.22 per
contract surcharge for Broker-Dealers
and Market Makers for all transactions
in options on the Nasdaq-100® Index
(NDX) and on the Mini-NDX® Index
(MNX). BOX incurs licensing fees for
transactions in these classes of options
and believes it is appropriate and
reasonable to pass that fee through to its
Participants.
Liquidity Fees and Credits
The Exchange proposes liquidity fees
and credits for all options classes traded
on BOX (unless explicitly stated
otherwise) and proposes that they be
applied in addition to any applicable
Exchange Fees as described above (and
in Section I of the Fee Schedule). The
proposed liquidity fees and credits are
identical to fees and credits currently in
place on the Boston Options Exchange
Group, LLC, an options trading facility
of NASDAQ OMX BX, Inc.
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executed in these mechanisms be
charged the ‘‘add’’ fee. The fee and
credit for all account types for
Facilitation or Solicitation transactions
is proposed to be $0.30 for all options
classes.
Transactions Exempt From Liquidity
Fees and Credits
Transactions which occur on the
opening or re-opening of trading and
Outbound Eligible Orders routed to an
Away Exchange as defined in Exchange
Rule 15000 Series are deemed to neither
‘‘add’’ nor ‘‘remove’’ liquidity, and as
such will be subject only to the
applicable exchange fees described in
Section I of the Fee Schedule, and
exempt from the Liquidity Fees and
Credits.
mstockstill on DSK4VPTVN1PROD with NOTICES
Routing Fees
The Exchange proposes to adopt a
$0.50 per contract routing fee for
Professional accounts.7 The Exchange
proposes this routing fee, in part to
offset the various costs BOX incurs in
providing routing services. BOX uses
third-party broker-dealers to route
orders to other exchanges and incurs
charges for each order routed to an away
market. The Exchange proposes that
BOX will route non-Professional, Public
Customer Orders to an away exchange
without imposing any fee, if more than
40% of the Participants’ total nonProfessional, Public Customer Orders
sent to BOX each month execute on
BOX. Executions on BOX would include
orders executing on the BOX Book, or
through any other BOX mechanism that
may be available to execute Public
Customer Orders (e.g., PIP, Solicitation
or Facilitation Auction Mechanisms). If
60% or more of a Participants’ total nonProfessional, Public Customer Orders
executed through BOX each month are
routed to and executed at an away
exchange, BOX will assess a $0.50 per
contract routing fee to all of a
Participants’ Public Customer orders
routed to an away exchange for
execution for the month. BOX will
calculate the percentage of contracts
executed on BOX compared to the
percentage routed and executed away at
the end of each month. The routing fees
proposed are identical to the routing
fees currently in place on the Boston
Options Exchange Group, LLC, an
options trading facility of NASDAQ
OMX BX, Inc.
7 By comparison, BOX does not route brokerdealer proprietary orders and thus does not assess
them any routing fees.
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Technology Fees
Points of Presence (‘‘PoP’’) are the
sites where BOX Participants connect to
the BOX market network for
communication with BOX. Each PoP is
operated by a third-party supplier under
contract to BOX. The amount to be paid
by each BOX Participant will vary based
on the Participant’s particular
configuration, the determining factors
being the number of physical
connections a BOX Participant has and
the bandwidth associated with each.
‘‘Installation’’ and ‘‘Hosting’’ costs are
related to the physical installation of
equipment (generally routers, though
possibly other hardware) at the PoP site.
BOX Participants will be required to pay
the related fee only if they have physical
installations at the BOX PoP and for
which BOX incurs fees from its own
service suppliers. ‘‘Cross Connect’’ fees
are per physical connection and vary by
size from the smallest (T–1) to the
largest (CAT 6) that BOX may provide.
The one time setup and ongoing
monthly fees associated with Participant
connection to BOX are set forth below.
BOX Options Participants that waive-in
as Options Participants will not be
subject to the setup fees, and
Participants that supply their own
physical cross connections to BOX
would not incur a fee. The Technology
Fees proposed are identical to the
technology fees currently in place on
the Boston Options Exchange Group,
LLC, an options trading facility of
NASDAQ OMX BX, Inc.
Setup (one time charge for new BOX
Participants)
Installation ...........................................
Cross Connect per T–1 ......................
Cross Connect per T–3 ......................
Cross Connect per CAT 5, 5E, 6 8 .....
$350
250
350
500
Monthly
Hosting ................................................
Cross Connect per T–1 ......................
Cross Connect per T–3 ......................
Cross Connect per CAT 5, 5E, 6 .......
200
100
200
250
Additionally, Back Office Trade
Management Software (‘‘TMS’’) is
optional software to which BOX
Participants may subscribe in order to
manage their BOX trades prior to their
transmission by BOX to OCC. The
Exchange proposes a monthly, per user
8 CAT 5E and CAT 6 are not included in the
current Fee Schedule of the Boston Options
Exchange Group, LLC facility. The additions of
these Cross Connect types to the tables for Setup
and Monthly fees are to update the Exchange Fee
Schedule to more accurately reflect the various
types of Cross Connects that are available, including
these newer and larger CAT 5E and CAT 6.
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fee as set forth in the table below,
depending on the number of users per
Participant:
Users 1 to 5 ..........................
Users 6 to 10 ........................
Users 11 and up ...................
$300
250
200
Regulatory Fees
The Exchange proposes an Options
Regulatory Fee (‘‘ORF’’) of $0.003 per
contract to be assessed to each BOX
Options Participant for all options
transactions executed or cleared by the
BOX Options Participant and cleared by
The Options Clearing Corporation (OCC)
in the customer range, regardless of the
exchange on which the transaction
occurs. The ORF is collected indirectly
from BOX Options Participants. The
OCC collects the ORF on behalf of BOX
through each BOX Options Participant’s
clearing broker.
Finally, the Exchange proposes that
its Fee Schedule reflect a number of fees
to be collected and retained by FINRA
in connection with a BOX Options
Participant’s registration of persons
associated with the Participant through
FINRA’s WebCRD system. The specific
fees are set forth below and are identical
to fees in place for Participants of the
Boston Options Exchange Group, LLC
options trading facility.
(1) FINRA CRD Processing Fee: $85.00
(2) FINRA Disclosure Processing Fee:
$95.00
(3) FINRA Annual System Processing
Fee: $30.00
(4) Fingerprinting Fees—vary
depending on the submission:
(a) First card submission: $27.50;
(b) Second card submission: $13.00;
(c) Third card submission: $27.50;
(d) Processing fingerprint results
where the member had prints processed
through a self-regulatory organization
other than FINRA: $13.00.
As mentioned in note 5 above, the
Exchange is not proposing any fees
currently set forth in Section 5b (CMS
Order Routing Service), Section 5d (fees
assessed to third-party service providers
for testing or support) or 6a (compliance
examination assessment) of the Fee
Schedule of the Boston Options
Exchange Group, LLC as the fees will
not be applicable to BOX or the
Exchange.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the Act,9
in general, and Section 6(b)(4) of the
Act,10 in particular, in that it provides
9 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
10 15
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for the equitable allocation of reasonable
dues, fees, and other charges among
BOX Options Participants and other
persons using its facilities.
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Exchange Fees
The Exchange believes the fees
proposed for transactions on BOX are
reasonable. BOX will operate within a
highly competitive market in which
market participants can readily direct
order flow to any of eight other
competing venues if they deem fees at
a particular venue to be excessive. The
proposed fee structure is intended to
attract order flow to BOX by offering
market participants incentives to submit
their orders to BOX.
The Exchange believes it is equitable
and non-discriminatory to provide
Initiating Participants a tiered fee
structure related to its participation in
BOX Auction Transactions. The
proposed fee structure related to trading
activity in BOX Auction Transactions is
available to all BOX Options
Participants and they may choose to
trade on BOX to take advantage of the
discounted fees for doing so, or not. The
Exchange also believes the proposed
fees for the BOX auction mechanisms to
be reasonable. Participants will benefit
from the opportunity to aggregate their
trading in the BOX Facilitation and
Solicitation Auction mechanisms with
their PIP transactions to more easily
attain a discounted fee tier. The tiered
fee structure proposed for trading in the
BOX auction mechanisms aims to attract
order flow to BOX, providing greater
potential liquidity within the overall
BOX market, its auction mechanisms, to
the benefit of all BOX market
participants.
The Exchange believes that providing
a volume discount to Options
Participants that initiate auctions on
customer orders is appropriate to
provide an incentive to BOX
Participants to submit their customer
orders to BOX, particularly into the PIP
for potential price improvement. This
potentially increased volume also
increases potential revenue to BOX, and
would allow BOX and the Exchange to
spread its administrative and
infrastructure costs over a greater
number of transactions, leading to lower
costs per transaction. The decreased per
transaction costs allows BOX to share its
savings with its Participants in the form
of lower tier rates. Furthermore, such a
discount is necessary to limit the
exposure that Initiating Participants will
have to liquidity removal fees, because
as Initiating Participants they will be
adding liquidity and will be charged a
fee should their principal order execute
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against the customer order in any BOX
Auction Transaction.
With regard to exchange fees for
transactions on the BOX Book, the
Exchange believes it is equitable and not
unfairly discriminatory for BOX Market
Makers to have the opportunity to
benefit from a potentially discounted fee
less than that charged to broker-dealers.
The Exchange believes that the
proposed tiered and potentially
discounted fees for Market Makers that
on a daily basis, trade an average daily
volume (as calculated at the end of the
month) of 10,000 contracts or more on
BOX represents a fair and equitable
allocation of reasonable dues, fees, and
other charges as it is aimed at
incentivizing these participants to
provide a greater volume of liquidity.
The Exchange believes that giving
incentives for this activity results in
increased volume on BOX. Such
increased volume increases potential
revenue to BOX, and would allow BOX
and the Exchange to spread its
administrative and infrastructure costs
over a greater number of transactions,
leading to lower costs per transaction.
The decreased per transaction costs
allows BOX to share its savings with its
Participants in the form of lower tier
rates.
The increased liquidity also benefits
all investors by deepening the BOX
liquidity pool, supporting the quality of
price discovery, promoting market
transparency and improving investor
protection. The Exchange believes that
the volume based discounts such as the
reducing tiered execution fee proposed
for Market Makers are equitable because
they are open to all Market Makers on
an equal basis and provide discounts
that are reasonably related to the value
to an exchange’s market quality
associated with higher levels of market
activity, such as higher levels of
liquidity provision and introduction of
higher volumes of orders into the price
and volume discovery processes.
Finally, Market Makers have obligations
that other Participants do not. In
particular, they must maintain active
two-sided markets in the classes in
which they are appointed, and must
meet certain minimum quoting
requirements. As such, the Exchange
believes it is appropriate that Market
Makers be charged potentially lower
transaction fees on BOX when they
provide greater volumes of liquidity to
the market.
The Exchange also believes it is
equitable and not unfairly
discriminatory that Public Customers be
charged lower fees in non-Auction
Transactions than Professionals and
broker-dealers on BOX. The securities
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29743
markets generally, and BOX in
particular, have historically aimed to
improve markets for investors and
develop various features within the
market structure for customer benefit.
As such, the Exchange believes the
proposed fees for Public Customer
transactions are appropriate and not
unfairly discriminatory. The Exchange
believes comparably lower customer
transaction fees are reasonable. The
Exchange believes it promotes the best
interests of investors to have lower
transaction costs for Public Customers,
and that the proposed reduction in fees
will attract Public Customer order flow
to BOX. The Exchange believes the
proposed fees charged to broker-dealers,
and market makers are reasonable
because they are designed to be
comparable to the fees that such
accounts would be charged at
competing venues.
Further, the Exchange believes the
proposed $0.20 fee per executed
contract for Professional accounts in
non-Auction Transactions to be
equitable, reasonable, and not unfairly
discriminatory. BOX does not assess
ongoing systems access fees, ongoing
fess for access to BOX market data, or
fees related to order cancellation.
Professional accounts, while Public
Customers by virtue of not being brokerdealers, generally engage in trading
activity more similar to broker-dealer
proprietary trading accounts (more than
390 orders per day on average). This
level of trading activity draws on a
greater amount of BOX system resources
than that of non-Professional Public
Customers. Simply, the more orders
submitted to BOX, the more messages
sent to and received from BOX, the
more orders potentially routed to away
exchanges, and the more BOX system
resources utilized. This level of trading
activity by Professional accounts results
in greater ongoing operational costs to
BOX. As such, BOX aims to recover its
costs by assessing Professional accounts
a market competitive fee for nonAuction Transactions. Generally,
competing options exchanges assess
Professionals fees at rates more
comparable to fees charged to brokerdealers. Sending orders to and trading
on BOX are entirely voluntary. Under
these circumstances, BOX transaction
fees must be competitive to attract order
flow, execute orders, and grow its
market. As such, BOX believes its
trading fees proposed for Professional
accounts are fair and reasonable. While
comparably higher transaction fees than
those assessed to Public Customers,
BOX is assessing Professional accounts
transaction fees at a rate ($0.20) lower
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than that charged to broker-dealer
proprietary trading firms.
Moreover, the Exchange believes the
transaction fees proposed for brokerdealers in non-Auction Transactions are
reasonable. As stated above, BOX
operates within a highly competitive
business. The proposed fees charged to
broker-dealers are designed to be
comparable to the fees that such
accounts would be charged at
competing venues. Further, and as
stated above, the Exchange believes that
participants that add liquidity on BOX
will not be impaired by the level of fees
on broker-dealer proprietary accounts
proposed. The Exchange believes other
parts of the proposed BOX fee structure
(e.g., tiered Initiating Participant fees
and Liquidity Fees and Credits) will
provide incentives for broker-dealers to
send order flow to BOX.
The Exchange believes it is equitable
and not unfairly discriminatory to
charge broker-dealer proprietary
accounts comparably higher fees than
BOX Market Makers. Market Makers
have obligations that other Participants
do not. In particular, they must
maintain active two-sided markets in
the classes in which they are appointed,
and must meet certain minimum
quoting requirements. As such, the
Exchange believes it is appropriate that
Market Makers be charged lower
transaction fees on BOX. The Exchange
also believes it is equitable and not
unfairly discriminatory that customers,
including Professionals, be charged
lower transaction fees than brokerdealers on BOX. The securities markets
generally, and BOX in particular, have
historically aimed to improve markets
for investors and develop various
features within the market structure for
customer benefit. As such, the Exchange
believes the proposed fees for brokerdealers, as compared to customers, is
appropriate and not unfairly
discriminatory.
Regarding the surcharge for
transactions in NDX and MNX, due to
a licensing agreement with The
NASDAQ OMX Group, Inc. (‘‘NASDAQ
OMX’’) to use various indices and
trademarks in connection with the
listing and trading of index options on
NDX and MNX, BOX will pay a per
contract license fee of $0.22 to NASDAQ
OMX for NDX and MNX options
contracts traded on BOX. The Exchange
proposes this surcharge fee for
transactions in NDX and MNX options
to offset the costs incurred by BOX for
each transaction in these options. The
Exchange believes that passing this cost
through to BOX Options Participants
that trade these instruments is the most
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18:21 May 17, 2012
Jkt 226001
equitable means of recovering the costs
of the license.
The Exchange’s proposal to assess
broker-dealers and Market Makers a $.22
per contract surcharge for transactions
in MNX and NDX, as compared to no
surcharge being assessed to customers,
is equitable and not unfairly
discriminatory because the Exchange
believes that a lower customer fee
benefits all market participants by
incentivizing market participants to
transact a greater number of customer
orders, which results in increased
liquidity.
The Exchange believes that the
proposed Exchange Fees will keep BOX
competitive with other exchanges as
well as apply in such a manner so as to
be equitable among BOX Participants.
The Exchange believes the proposed
fees are fair and reasonable and must be
competitive with fees in place on other
exchanges. Further, the Exchange
believes that this competitive
marketplace impacts the fees proposed
for BOX.
Liquidity Fees and Credits
The Exchange believes that it is
reasonable and equitable to provide a
credit to any Participant that removes
liquidity from BOX. The Exchange
further believes these credits will attract
order flow to BOX, resulting in greater
liquidity to the benefit of all market
participants. The Exchange believes that
the proposed fees for adding liquidity
and credits for removing liquidity are
equitable and not unfairly
discriminatory because such fees and
credits apply uniformly to all categories
of participants, across all account types.
As stated above, BOX operates within a
highly competitive market in which
market participants can readily direct
order flow to any of eight other
competing venues if they deem fees at
a particular venue to be excessive. The
proposed fees and credits are intended
to attract order flow to BOX by offering
incentives to all market participants to
submit their orders to BOX.
The Exchange believes it is equitable
and non-discriminatory to assess the
proposed fees for the BOX Solicitation
and Facilitation Auction mechanisms
because the proposed fee for adding
liquidity and credit for removing
liquidity will apply uniformly to all
categories of participants, across all
account types. The Exchange also
believes the proposed fees and credits
for the BOX auction mechanisms to be
reasonable. The fee structure proposed
for these auction mechanisms, in
particular, the proposed credit for
removing liquidity, aims to attract order
flow to these BOX auction mechanisms,
PO 00000
Frm 00157
Fmt 4703
Sfmt 4703
providing greater potential liquidity
within the overall BOX market to the
benefit of all BOX market participants.
The Exchange notes that the proposed
fees and credits for transactions on BOX
offset one another in any particular
transaction. The result is that BOX will
collect a fee from Participants that add
liquidity on BOX and credit another
Participant an equal amount for
removing liquidity. Stated otherwise,
the collection of these liquidity fees will
not directly result in revenue to BOX,
but will simply allow BOX to provide
the credit incentive to Participants to
attract order flow. The Exchange
believes it is appropriate to provide
incentives to market participants to
direct order flow to remove liquidity
from BOX, similar to various and
widely-used, exchange sponsored
payment for order flow programs.
Further, the Exchange believes that fees
for adding liquidity on BOX will not
deter Participants from seeking to add
liquidity to the BOX market so that they
may interact with those participants
seeking to remove liquidity.
The Exchange believes it is reasonable
to assess the proposed liquidity fees and
credits at lower rates ($0.22 and $0.30)
in series that trade in $0.01 increments
compared to higher rates ($0.65 and
$0.75) in series that trade in increments
of $0.05 or more. The Exchange believes
that options that trade at these wider
spreads of $0.05 or more merit offering
greater inducement for market
participants. In particular, within the
PIP, minimum increments of $.05 or
$.10 provide greater opportunity for
market participants to offer price
improvement. As such, BOX believes
that the opportunity for additional price
improvement provided by these wider
spreads, again merits offering greater
incentive for Participants to increase the
potential price improvement for
customer orders in these PIP
transactions.
Routing Fees
BOX believes that the proposed
routing fee structure for routing
customer orders to other market venues
is reasonable because the fee will allow
BOX to recoup its transaction costs
attendant with offering routing services
that are optional for Participants. BOX
uses third-party broker-dealers to route
orders to other exchanges and incurs
charges for each order routed to and
executed at an away market, in addition
to the transaction fees charged by other
exchanges. In order to better recover
those related costs and to potentially
generate additional revenue, the
Exchange proposes a routing fee
structure associated with providing this
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18MYN1
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optional service. The Exchange is
proposing a routing fee structure to
continue to provide routing services for
non-Professional, Public Customer
Order at no charge if the Participants
trade on BOX 40% of their nonProfessional Public Customer volume
traded through BOX each month.
Additionally, the Exchange believes
that the proposed fee for routing
Professional customer orders to various
markets is reasonable, equitable, and not
unfairly discriminatory in that the fee
will further allow BOX to recoup its
costs attendant with offering optional
routing services. BOX does not route
broker-dealer proprietary orders, and
therefore, does not assess routing fees
on such orders. BOX Participants can
manage their own routing to different
options exchanges or can utilize a
myriad of other routing solutions that
are available to market participants.
Further, the characteristics of
Professional accounts tend to be more
similar to broker-dealers than to nonProfessional Public Customers. As such,
BOX believes Professionals are more
likely to be able to route their orders to
the exchange venues where they wish to
trade. By assessing a fee for routing
certain orders, BOX aims to recover its
costs in providing this optional service.
The Exchange believes that providing
non-Professional, Public Customers a
preferred rate for routing is consistent
with the long history in the options
markets of such customers being given
preferred fees. The Exchange believes
the proposed routing fee structure is
equitable and not unfairly
discriminatory because the incentive to
trade on BOX it is available to all
Participants on an equal basis.
The Exchange believes it is
reasonable, equitable, and not unfairly
discriminatory to assess Participants a
fee for routing non-Professional, Public
Customer Orders to away exchanges, if
those Participants are submitting such
orders to BOX so as to evade other
exchanges’ fees and take advantage of
BOX routing services. Based on market
data related to activity on the Boston
Options Exchange Group, LLC, an
options trading facility of NASDAQ
OMX BX, Inc., BOX believes that it is
reasonable to charge Participants a fee if
they intentionally submit orders to BOX
when limited liquidity is on BOX at the
NBBO. This limited liquidity may not
be enough to fill the orders submitted,
and thus, BOX is required, in
accordance with its obligations to
customer orders under the national
market system plan for Options Order
Protection and Locked/Crossed Markets,
to route such orders to a market that is
displaying liquidity at the NBBO. The
VerDate Mar<15>2010
18:21 May 17, 2012
Jkt 226001
market data indicates that the Boston
Options Exchange, LLC facility
generally routes significantly less than
60% of a Participant’s non-Professional,
Public Customer Orders to an away
exchange for execution. As such, the
Exchange believes that this proposed
routing fee will only impact Participants
submitting orders to BOX intending to
evade other exchanges’ fees and take
advantage of BOX routing services.
The Exchange believes the proposed
routing fee structure is equitable and not
unfairly discriminatory because the
incentive to trade on BOX is available
to all Participants on an equal basis. The
Exchange believes it is reasonable and
equitable to provide Participants (A) an
incentive to trade on BOX, and (B) the
ability to route customer orders at no
cost, because transactions executed on
BOX increase BOX market activity and
market quality. Greater liquidity and
additional volume executed on BOX
aids the price and volume discovery
process. Participant trading on BOX also
results in revenue that BOX is able to
use to provide routing services at no
cost to Participants. Accordingly, the
Exchange believes that the proposal is
not unfairly discriminatory because it
promotes enhancing BOX market
quality. The routing fees proposed are
intended to provide an incentive to BOX
Participants to submit orders for
execution on BOX and not engage in
abusive and predatory practices to
evade fees on other exchanges.
BOX therefore believes that assessing
the fee only to those Participants that
have 60% or more of their total nonProfessional, Public Customer Orders
routed to an away exchange for
execution is reasonable, and an
equitable allocation of its fees for
providing routing services. The
Exchange believes that permitting a
Participant to have up to 60% of such
orders routed to an away exchange for
execution without being assessed any
routing fee is reasonable and
appropriate.
Technology Fees
The Exchange believes that the
proposed Technology Fees constitute an
equitable allocation of fees, and not
unfairly discriminatory, as all similarly
situated Options Participants and other
market participants would be charged
the same amounts for the same services.
Additionally, access to the BOX market
will be offered on fair and nondiscriminatory terms. The proposed
Technology Fees are expected to offset
the costs BOX and the Exchange incur
in maintaining, and implementing
ongoing improvements to BOX,
including increasing connectivity costs,
PO 00000
Frm 00158
Fmt 4703
Sfmt 4703
29745
costs based on gateway software and
hardware enhancements and resources
dedicated to gateway development,
quality assurance, and technology
support. The Exchange believes that its
proposed fees are reasonable in that
they are competitive with those charged
by other venues.
Regulatory Fees
The Exchange believes the proposed
ORF is reasonable because it is lower
than many competitor exchanges. The
ORF will help the Exchange offset
regulatory expenses. The Exchange
believes that the ORF is equitable and
not unfairly discriminatory because it is
objectively allocated to BOX Options
Participants in that it would continue to
be charged to all Participants on all of
their transactions that clear as customer
at OCC. The Exchange believes that the
amount of resources required to regulate
non-customer trading activity will be
significantly less than the amount of
resources the Exchange must dedicate to
regulate customer trading activity.
Regulating customer trading activity is
more labor intensive and requires
greater expenditure of human and
technical resources than regulating noncustomer trading activity. Surveillance
and regulation of non-customer trading
activity tends to be more automated and
less labor-intensive. As a result, the
costs associated with administering the
customer component of the Exchange’s
overall regulatory program are
anticipated to be higher than the costs
associated with administering the noncustomer component of its regulatory
program. As such, the Exchange
proposes assessing higher fees to those
firms that will require more Exchange
regulatory services based on the amount
of customer options business they
conduct.
As previously stated, the OCC collects
the ORF on behalf of BOX through each
BOX Options Participant’s clearing
broker. In addition, the ORF seeks to
recover the costs of supervising and
regulating Participants, including
performing routine surveillances, and
policy, rulemaking, interpretive, and
enforcement activities. The Exchange
will continue to monitor the amount of
revenue collected from the ORF to
ensure that it, in combination with its
other regulatory fees and fines, do not
exceed regulatory costs. If the Exchange
determines regulatory revenues exceed
regulatory costs, the Exchange will
adjust the ORF by submitting a fee
change filing to the Commission.
Finally, the Exchange believes it is
reasonable, equitable and not unfairly
discriminatory for the FINRA fees to be
included on the Exchange Fee Schedule
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Federal Register / Vol. 77, No. 97 / Friday, May 18, 2012 / Notices
because these fees are not being
assessed or set by BOX or the Exchange,
but by FINRA, and will be assessed to
broker-dealers that register associated
persons through FINRA’s WebCRD
system.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe 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
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 11
and Rule 19b–4(f)(2) thereunder,12
because it establishes or changes a due,
fee, or other charge applicable only to a
member.
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 Exchange 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BOX–2012–002 on the
subject line.
mstockstill on DSK4VPTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
11 15
12 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Mar<15>2010
18:21 May 17, 2012
All submissions should refer to File
Number SR–BOX–2012–002. 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 (https://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 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;
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–
2012–002 and should be submitted on
or before June 8, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–12032 Filed 5–17–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[File No. 500–1]
In the Matter of QPC Lasers, Inc.,
Sweet Success Enterprises, Inc.,
Trinsic, Inc., Veridicom International,
Inc., Windswept Environmental Group,
Inc., and Wyndstorm Corp.; Order of
Suspension of Trading
By the Commission.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2012–12208 Filed 5–16–12; 4:15 pm]
BILLING CODE 8011–01–P
May 16, 2012.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of QPC Lasers,
Inc. because it has not filed any periodic
13 17
Jkt 226001
reports since the period ended June 30,
2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Sweet
Success Enterprises, Inc. because it has
not filed any periodic reports since the
period ended September 30, 2007.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Trinsic, Inc.
because it has not filed any periodic
reports since the period ended
September 30, 2006.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Veridicom
International, Inc. because it has not
filed any periodic reports since the
period ended September 30, 2006.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Windswept
Environmental Group, Inc. because it
has not filed any periodic reports since
the period ended March 31, 2008.
It appears to the Securities and
Exchange Commission that there is a
lack of current and accurate information
concerning the securities of Wyndstorm
Corp. because it has not filed any
periodic reports since the period ended
October 31, 2008.
The Commission is of the opinion that
the public interest and the protection of
investors require a suspension of trading
in the securities of the above-listed
companies.
Therefore, it is ordered, pursuant to
Section 12(k) of the Securities Exchange
Act of 1934, that trading in the
securities of the above-listed companies
is suspended for the period from 9:30
a.m. EDT on May 16, 2012, through
11:59 p.m. EDT on May 30, 2012.
PO 00000
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 77, Number 97 (Friday, May 18, 2012)]
[Notices]
[Pages 29740-29746]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12032]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66979; File No. SR-BOX-2012-002]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To Adopt
the Fee Schedule For Trading on BOX
May 14, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on May 10, 2012, 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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
BOX Options Exchange LLC (the ``Exchange'') proposes to amend its
Fee Schedule in preparation for the expected launch of trading of the
BOX Market facility on May 14, 2012. The text of the proposed rule
change is available from the principal office of the Exchange, on the
Exchange's Internet Web site at https://boxexchange.com, and at the
Commission's Public Reference Room.
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 its Fee Schedule in preparation for
the expected launch of trading of its BOX Market LLC options trading
facility (``BOX'') on May 14, 2012. The Exchange proposes to establish
fees related to trading on BOX.
Exchange Fees
The Exchange proposes Exchange Fees based on transaction type and
account type. More specifically, the Exchange proposes fees for Auction
Transactions (transactions executed through the BOX Price Improvement
Period, Solicitation, and Facilitation auction mechanisms), and non-
Auction Transactions (transactions executed on the BOX Book). The
account types on BOX are Public Customer, Professional, Broker-Dealer,
and Market Maker (see Exchange Rule 100 Series for definitions of
each). All of the proposed fees are identical to fees currently in
place on the Boston Options Exchange Group,
[[Page 29741]]
LLC, an options trading facility of NASDAQ OMX BX, Inc.\5\
---------------------------------------------------------------------------
\5\ The automated electronic trading system operated by Boston
Options Exchange Group, LLC as an options trading facility of NASDAQ
OMX BX, Inc. will, upon the commencement of the Exchange's
operations as a national securities exchange, be operated by BOX
Market LLC as a facility of the Exchange. As such, the operation and
functionalities of the system are the same as are in effect under
the rules of the Boston Options Exchange Group, LLC facility. The
Exchange is not proposing to adopt the fees currently set forth in
Section 5b (CMS Order Routing Service), Section 5d (fees assessed to
third-party service providers for testing or support) or Section 6a
(compliance examination assessment) of the Fee Schedule of the
Boston Options Exchange Group, LLC as the fees will not be
applicable to BOX or the Exchange.
---------------------------------------------------------------------------
For Auction Transactions, the Exchange proposes a $0.15 fee for
customer Improvement Orders in the PIP and Responses in the
Solicitation and Facilitation mechanisms.\6\ The Exchange proposes a
$0.25 fee for Broker-Dealers and Market Makers for Improvement Orders
in the PIP and Responses in the Solicitation and Facilitation
mechanisms. Exchange Fees for Initiating Participants in Auction
Transactions through Primary Improvement Orders, Facilitation Orders,
or Solicitation Orders will be based upon a Participants' monthly
average daily volume (``ADV'') in Auction Transactions as calculated at
the end of each month as set forth below.
---------------------------------------------------------------------------
\6\ References to customer in the Fee Schedule and this proposal
include Public Customers and Professionals, unless otherwise noted.
------------------------------------------------------------------------
Initiating participant monthly ADV in Per contract fee (all
auction transactions account types)
------------------------------------------------------------------------
150,001 contracts and greater............. $0.10
100,001 contracts to 150,000 contracts.... $0.12
50,001 contracts to 100,000 contracts..... $0.15
20,001 contracts to 50,000 contracts...... $0.17
1 contract to 20,000 contracts............ $0.25
------------------------------------------------------------------------
For non-Auction Transactions, the Exchange proposes to impose a
per contract fee of $0.07 for Public Customers, $0.20 for
Professionals, and $0.40 for Broker-Dealers. Additionally, the Exchange
proposes a tiered, per contract fee for Market Makers, based upon their
monthly ADV in non-Auction Transactions on BOX as set forth below:
------------------------------------------------------------------------
Market maker monthly ADV in non-auction
transactions Per contract fee
------------------------------------------------------------------------
150,001 contracts and greater............. $0.13
100,001 contracts to 150,000 contracts.... $0.16
50,001 contracts to 100,000 contracts..... $0.18
10,001 contracts to 50,000 contracts...... $0.20
1 contract to 10,000 contracts............ $0.25
------------------------------------------------------------------------
The Exchange proposes a $0.22 per contract surcharge for Broker-
Dealers and Market Makers for all transactions in options on the
Nasdaq-100[supreg] Index (NDX) and on the Mini-NDX[supreg] Index (MNX).
BOX incurs licensing fees for transactions in these classes of options
and believes it is appropriate and reasonable to pass that fee through
to its Participants.
Liquidity Fees and Credits
The Exchange proposes liquidity fees and credits for all options
classes traded on BOX (unless explicitly stated otherwise) and proposes
that they be applied in addition to any applicable Exchange Fees as
described above (and in Section I of the Fee Schedule). The proposed
liquidity fees and credits are identical to fees and credits currently
in place on the Boston Options Exchange Group, LLC, an options trading
facility of NASDAQ OMX BX, Inc.
Liquidity Fees and Credits for Non-Auction Transactions
Orders that add liquidity to the BOX Book will be charged a
transaction fee upon execution. Any order, including an order with a
Fill and Kill designation, which executes against an order that is
being exposed before being placed on the BOX Book, will be considered
to add liquidity. Any order, including an order with a Fill and Kill
designation, which removes liquidity by trading immediately upon entry
to the BOX Book or following its exposure as part of NBBO filtering,
will receive a credit.
The Exchange proposes that orders that add liquidity to the BOX
Book will be charged a per contract fee of $0.22 for Penny Pilot
Classes, and $0.65 for adding liquidity in non-Penny Pilot Classes.
Orders that remove liquidity from the BOX Book (non-Auction
Transactions) will be provided a per contract credit of $0.22 for
transactions in Penny Pilot Classes, and $0.65 for removing liquidity
in non-Penny Pilot Classes.
Liquidity Fees and Credits for PIP Transactions
The Exchange proposes that PIP Transactions in classes where the
minimum price variation of $0.01 (i.e., Penny Pilot classes there the
trade price is less than $3.00 and all series in QQQ, SPY, and IWM)
will be assessed a fee for adding liquidity or provided a credit for
removing liquidity of $0.30, regardless of account type. PIP Orders
(i.e., the agency orders opposite the Primary Improvement Order) shall
receive the ``removal'' credit. Improvement Orders will be charged the
``add'' fee.
Further, the Exchange proposes a fee for adding liquidity or a
credit for removing liquidity of $0.75, regardless of account type, for
PIP transactions where the minimum price variation is greater than
$0.01 (i.e., all non-Penny Pilot Classes, and Penny Pilot Classes where
the trade price is equal to or greater than $3.00, excluding QQQ, SPY,
and IWM). The Exchange proposes that this $0.75 liquidity fee and
credit applicable to these PIP transactions be operative on a pilot
basis until February 28, 2013.
In connection with the pilot, the Exchange agrees to submit to the
Commission on a quarterly basis during the pilot period certain monthly
PIP transaction data in series traded in penny increments compared to
series traded in nickel increments, subdivided by when BOX is at the
NBBO and when BOX is not at the NBBO, including: (1) Volume by number
of contracts traded; (2) number of contracts executed by the Initiating
Participant as compared to others (``retention rate''); (3) percentage
of contracts receiving price improvement when the Initiating
Participant is the contra party and when others are the contra party;
(4) average number of participants responding in the PIP; (5) average
price improvement amount when the Initiating Participant is the contra
party; (6) average price improvement amount when others are the contra
party; and (7) percentage of contracts receiving price improvement
greater than $0.01, $0.02 and $0.03 when the Initiating Participant is
the contra party and when others are the contra party. Boston Options
Exchange Group, LLC will provide this pilot data to the Commission for
the time period from February 1, 2012, until the date BOX begins
operations as a facility of the Exchange. The Exchange will provide the
data to the Commission from the date BOX begins operations as a
facility of the exchange through the period until February 1, 2013, and
for any period thereafter as the Commission may request.
Liquidity Fees and Credits for Facilitation and Solicitation
Transactions
The Exchange proposes that Agency Orders submitted to the
Facilitation and Solicitation mechanisms receive the ``removal'' credit
and Responses
[[Page 29742]]
executed in these mechanisms be charged the ``add'' fee. The fee and
credit for all account types for Facilitation or Solicitation
transactions is proposed to be $0.30 for all options classes.
Transactions Exempt From Liquidity Fees and Credits
Transactions which occur on the opening or re-opening of trading
and Outbound Eligible Orders routed to an Away Exchange as defined in
Exchange Rule 15000 Series are deemed to neither ``add'' nor ``remove''
liquidity, and as such will be subject only to the applicable exchange
fees described in Section I of the Fee Schedule, and exempt from the
Liquidity Fees and Credits.
Routing Fees
The Exchange proposes to adopt a $0.50 per contract routing fee for
Professional accounts.\7\ The Exchange proposes this routing fee, in
part to offset the various costs BOX incurs in providing routing
services. BOX uses third-party broker-dealers to route orders to other
exchanges and incurs charges for each order routed to an away market.
The Exchange proposes that BOX will route non-Professional, Public
Customer Orders to an away exchange without imposing any fee, if more
than 40% of the Participants' total non-Professional, Public Customer
Orders sent to BOX each month execute on BOX. Executions on BOX would
include orders executing on the BOX Book, or through any other BOX
mechanism that may be available to execute Public Customer Orders
(e.g., PIP, Solicitation or Facilitation Auction Mechanisms). If 60% or
more of a Participants' total non-Professional, Public Customer Orders
executed through BOX each month are routed to and executed at an away
exchange, BOX will assess a $0.50 per contract routing fee to all of a
Participants' Public Customer orders routed to an away exchange for
execution for the month. BOX will calculate the percentage of contracts
executed on BOX compared to the percentage routed and executed away at
the end of each month. The routing fees proposed are identical to the
routing fees currently in place on the Boston Options Exchange Group,
LLC, an options trading facility of NASDAQ OMX BX, Inc.
---------------------------------------------------------------------------
\7\ By comparison, BOX does not route broker-dealer proprietary
orders and thus does not assess them any routing fees.
---------------------------------------------------------------------------
Technology Fees
Points of Presence (``PoP'') are the sites where BOX Participants
connect to the BOX market network for communication with BOX. Each PoP
is operated by a third-party supplier under contract to BOX. The amount
to be paid by each BOX Participant will vary based on the Participant's
particular configuration, the determining factors being the number of
physical connections a BOX Participant has and the bandwidth associated
with each.
``Installation'' and ``Hosting'' costs are related to the physical
installation of equipment (generally routers, though possibly other
hardware) at the PoP site. BOX Participants will be required to pay the
related fee only if they have physical installations at the BOX PoP and
for which BOX incurs fees from its own service suppliers. ``Cross
Connect'' fees are per physical connection and vary by size from the
smallest (T-1) to the largest (CAT 6) that BOX may provide. The one
time setup and ongoing monthly fees associated with Participant
connection to BOX are set forth below. BOX Options Participants that
waive-in as Options Participants will not be subject to the setup fees,
and Participants that supply their own physical cross connections to
BOX would not incur a fee. The Technology Fees proposed are identical
to the technology fees currently in place on the Boston Options
Exchange Group, LLC, an options trading facility of NASDAQ OMX BX, Inc.
------------------------------------------------------------------------
------------------------------------------------------------------------
Setup (one time charge for new BOX Participants)
------------------------------------------------------------------------
Installation.................................................... $350
Cross Connect per T-1........................................... 250
Cross Connect per T-3........................................... 350
Cross Connect per CAT 5, 5E, 6 \8\.............................. 500
------------------------------------------------------------------------
Monthly
------------------------------------------------------------------------
Hosting......................................................... 200
Cross Connect per T-1........................................... 100
Cross Connect per T-3........................................... 200
Cross Connect per CAT 5, 5E, 6.................................. 250
------------------------------------------------------------------------
Additionally, Back Office Trade Management Software (``TMS'') is
optional software to which BOX Participants may subscribe in order to
manage their BOX trades prior to their transmission by BOX to OCC. The
Exchange proposes a monthly, per user fee as set forth in the table
below, depending on the number of users per Participant:
---------------------------------------------------------------------------
\8\ CAT 5E and CAT 6 are not included in the current Fee
Schedule of the Boston Options Exchange Group, LLC facility. The
additions of these Cross Connect types to the tables for Setup and
Monthly fees are to update the Exchange Fee Schedule to more
accurately reflect the various types of Cross Connects that are
available, including these newer and larger CAT 5E and CAT 6.
------------------------------------------------------------------------
------------------------------------------------------------------------
Users 1 to 5............................................ $300
Users 6 to 10........................................... 250
Users 11 and up......................................... 200
------------------------------------------------------------------------
Regulatory Fees
The Exchange proposes an Options Regulatory Fee (``ORF'') of $0.003
per contract to be assessed to each BOX Options Participant for all
options transactions executed or cleared by the BOX Options Participant
and cleared by The Options Clearing Corporation (OCC) in the customer
range, regardless of the exchange on which the transaction occurs. The
ORF is collected indirectly from BOX Options Participants. The OCC
collects the ORF on behalf of BOX through each BOX Options
Participant's clearing broker.
Finally, the Exchange proposes that its Fee Schedule reflect a
number of fees to be collected and retained by FINRA in connection with
a BOX Options Participant's registration of persons associated with the
Participant through FINRA's WebCRD system. The specific fees are set
forth below and are identical to fees in place for Participants of the
Boston Options Exchange Group, LLC options trading facility.
(1) FINRA CRD Processing Fee: $85.00
(2) FINRA Disclosure Processing Fee: $95.00
(3) FINRA Annual System Processing Fee: $30.00
(4) Fingerprinting Fees--vary depending on the submission:
(a) First card submission: $27.50;
(b) Second card submission: $13.00;
(c) Third card submission: $27.50;
(d) Processing fingerprint results where the member had prints
processed through a self-regulatory organization other than FINRA:
$13.00.
As mentioned in note 5 above, the Exchange is not proposing any
fees currently set forth in Section 5b (CMS Order Routing Service),
Section 5d (fees assessed to third-party service providers for testing
or support) or 6a (compliance examination assessment) of the Fee
Schedule of the Boston Options Exchange Group, LLC as the fees will not
be applicable to BOX or the Exchange.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\9\ in general, and Section
6(b)(4) of the Act,\10\ in particular, in that it provides
[[Page 29743]]
for the equitable allocation of reasonable dues, fees, and other
charges among BOX Options Participants and other persons using its
facilities.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Exchange Fees
The Exchange believes the fees proposed for transactions on BOX are
reasonable. BOX will operate within a highly competitive market in
which market participants can readily direct order flow to any of eight
other competing venues if they deem fees at a particular venue to be
excessive. The proposed fee structure is intended to attract order flow
to BOX by offering market participants incentives to submit their
orders to BOX.
The Exchange believes it is equitable and non-discriminatory to
provide Initiating Participants a tiered fee structure related to its
participation in BOX Auction Transactions. The proposed fee structure
related to trading activity in BOX Auction Transactions is available to
all BOX Options Participants and they may choose to trade on BOX to
take advantage of the discounted fees for doing so, or not. The
Exchange also believes the proposed fees for the BOX auction mechanisms
to be reasonable. Participants will benefit from the opportunity to
aggregate their trading in the BOX Facilitation and Solicitation
Auction mechanisms with their PIP transactions to more easily attain a
discounted fee tier. The tiered fee structure proposed for trading in
the BOX auction mechanisms aims to attract order flow to BOX, providing
greater potential liquidity within the overall BOX market, its auction
mechanisms, to the benefit of all BOX market participants.
The Exchange believes that providing a volume discount to Options
Participants that initiate auctions on customer orders is appropriate
to provide an incentive to BOX Participants to submit their customer
orders to BOX, particularly into the PIP for potential price
improvement. This potentially increased volume also increases potential
revenue to BOX, and would allow BOX and the Exchange to spread its
administrative and infrastructure costs over a greater number of
transactions, leading to lower costs per transaction. The decreased per
transaction costs allows BOX to share its savings with its Participants
in the form of lower tier rates. Furthermore, such a discount is
necessary to limit the exposure that Initiating Participants will have
to liquidity removal fees, because as Initiating Participants they will
be adding liquidity and will be charged a fee should their principal
order execute against the customer order in any BOX Auction
Transaction.
With regard to exchange fees for transactions on the BOX Book, the
Exchange believes it is equitable and not unfairly discriminatory for
BOX Market Makers to have the opportunity to benefit from a potentially
discounted fee less than that charged to broker-dealers. The Exchange
believes that the proposed tiered and potentially discounted fees for
Market Makers that on a daily basis, trade an average daily volume (as
calculated at the end of the month) of 10,000 contracts or more on BOX
represents a fair and equitable allocation of reasonable dues, fees,
and other charges as it is aimed at incentivizing these participants to
provide a greater volume of liquidity. The Exchange believes that
giving incentives for this activity results in increased volume on BOX.
Such increased volume increases potential revenue to BOX, and would
allow BOX and the Exchange to spread its administrative and
infrastructure costs over a greater number of transactions, leading to
lower costs per transaction. The decreased per transaction costs allows
BOX to share its savings with its Participants in the form of lower
tier rates.
The increased liquidity also benefits all investors by deepening
the BOX liquidity pool, supporting the quality of price discovery,
promoting market transparency and improving investor protection. The
Exchange believes that the volume based discounts such as the reducing
tiered execution fee proposed for Market Makers are equitable because
they are open to all Market Makers on an equal basis and provide
discounts that are reasonably related to the value to an exchange's
market quality associated with higher levels of market activity, such
as higher levels of liquidity provision and introduction of higher
volumes of orders into the price and volume discovery processes.
Finally, Market Makers have obligations that other Participants do not.
In particular, they must maintain active two-sided markets in the
classes in which they are appointed, and must meet certain minimum
quoting requirements. As such, the Exchange believes it is appropriate
that Market Makers be charged potentially lower transaction fees on BOX
when they provide greater volumes of liquidity to the market.
The Exchange also believes it is equitable and not unfairly
discriminatory that Public Customers be charged lower fees in non-
Auction Transactions than Professionals and broker-dealers on BOX. The
securities markets generally, and BOX in particular, have historically
aimed to improve markets for investors and develop various features
within the market structure for customer benefit. As such, the Exchange
believes the proposed fees for Public Customer transactions are
appropriate and not unfairly discriminatory. The Exchange believes
comparably lower customer transaction fees are reasonable. The Exchange
believes it promotes the best interests of investors to have lower
transaction costs for Public Customers, and that the proposed reduction
in fees will attract Public Customer order flow to BOX. The Exchange
believes the proposed fees charged to broker-dealers, and market makers
are reasonable because they are designed to be comparable to the fees
that such accounts would be charged at competing venues.
Further, the Exchange believes the proposed $0.20 fee per executed
contract for Professional accounts in non-Auction Transactions to be
equitable, reasonable, and not unfairly discriminatory. BOX does not
assess ongoing systems access fees, ongoing fess for access to BOX
market data, or fees related to order cancellation. Professional
accounts, while Public Customers by virtue of not being broker-dealers,
generally engage in trading activity more similar to broker-dealer
proprietary trading accounts (more than 390 orders per day on average).
This level of trading activity draws on a greater amount of BOX system
resources than that of non-Professional Public Customers. Simply, the
more orders submitted to BOX, the more messages sent to and received
from BOX, the more orders potentially routed to away exchanges, and the
more BOX system resources utilized. This level of trading activity by
Professional accounts results in greater ongoing operational costs to
BOX. As such, BOX aims to recover its costs by assessing Professional
accounts a market competitive fee for non-Auction Transactions.
Generally, competing options exchanges assess Professionals fees at
rates more comparable to fees charged to broker-dealers. Sending orders
to and trading on BOX are entirely voluntary. Under these
circumstances, BOX transaction fees must be competitive to attract
order flow, execute orders, and grow its market. As such, BOX believes
its trading fees proposed for Professional accounts are fair and
reasonable. While comparably higher transaction fees than those
assessed to Public Customers, BOX is assessing Professional accounts
transaction fees at a rate ($0.20) lower
[[Page 29744]]
than that charged to broker-dealer proprietary trading firms.
Moreover, the Exchange believes the transaction fees proposed for
broker-dealers in non-Auction Transactions are reasonable. As stated
above, BOX operates within a highly competitive business. The proposed
fees charged to broker-dealers are designed to be comparable to the
fees that such accounts would be charged at competing venues. Further,
and as stated above, the Exchange believes that participants that add
liquidity on BOX will not be impaired by the level of fees on broker-
dealer proprietary accounts proposed. The Exchange believes other parts
of the proposed BOX fee structure (e.g., tiered Initiating Participant
fees and Liquidity Fees and Credits) will provide incentives for
broker-dealers to send order flow to BOX.
The Exchange believes it is equitable and not unfairly
discriminatory to charge broker-dealer proprietary accounts comparably
higher fees than BOX Market Makers. Market Makers have obligations that
other Participants do not. In particular, they must maintain active
two-sided markets in the classes in which they are appointed, and must
meet certain minimum quoting requirements. As such, the Exchange
believes it is appropriate that Market Makers be charged lower
transaction fees on BOX. The Exchange also believes it is equitable and
not unfairly discriminatory that customers, including Professionals, be
charged lower transaction fees than broker-dealers on BOX. The
securities markets generally, and BOX in particular, have historically
aimed to improve markets for investors and develop various features
within the market structure for customer benefit. As such, the Exchange
believes the proposed fees for broker-dealers, as compared to
customers, is appropriate and not unfairly discriminatory.
Regarding the surcharge for transactions in NDX and MNX, due to a
licensing agreement with The NASDAQ OMX Group, Inc. (``NASDAQ OMX'') to
use various indices and trademarks in connection with the listing and
trading of index options on NDX and MNX, BOX will pay a per contract
license fee of $0.22 to NASDAQ OMX for NDX and MNX options contracts
traded on BOX. The Exchange proposes this surcharge fee for
transactions in NDX and MNX options to offset the costs incurred by BOX
for each transaction in these options. The Exchange believes that
passing this cost through to BOX Options Participants that trade these
instruments is the most equitable means of recovering the costs of the
license.
The Exchange's proposal to assess broker-dealers and Market Makers
a $.22 per contract surcharge for transactions in MNX and NDX, as
compared to no surcharge being assessed to customers, is equitable and
not unfairly discriminatory because the Exchange believes that a lower
customer fee benefits all market participants by incentivizing market
participants to transact a greater number of customer orders, which
results in increased liquidity.
The Exchange believes that the proposed Exchange Fees will keep BOX
competitive with other exchanges as well as apply in such a manner so
as to be equitable among BOX Participants. The Exchange believes the
proposed fees are fair and reasonable and must be competitive with fees
in place on other exchanges. Further, the Exchange believes that this
competitive marketplace impacts the fees proposed for BOX.
Liquidity Fees and Credits
The Exchange believes that it is reasonable and equitable to
provide a credit to any Participant that removes liquidity from BOX.
The Exchange further believes these credits will attract order flow to
BOX, resulting in greater liquidity to the benefit of all market
participants. The Exchange believes that the proposed fees for adding
liquidity and credits for removing liquidity are equitable and not
unfairly discriminatory because such fees and credits apply uniformly
to all categories of participants, across all account types. As stated
above, BOX operates within a highly competitive market in which market
participants can readily direct order flow to any of eight other
competing venues if they deem fees at a particular venue to be
excessive. The proposed fees and credits are intended to attract order
flow to BOX by offering incentives to all market participants to submit
their orders to BOX.
The Exchange believes it is equitable and non-discriminatory to
assess the proposed fees for the BOX Solicitation and Facilitation
Auction mechanisms because the proposed fee for adding liquidity and
credit for removing liquidity will apply uniformly to all categories of
participants, across all account types. The Exchange also believes the
proposed fees and credits for the BOX auction mechanisms to be
reasonable. The fee structure proposed for these auction mechanisms, in
particular, the proposed credit for removing liquidity, aims to attract
order flow to these BOX auction mechanisms, providing greater potential
liquidity within the overall BOX market to the benefit of all BOX
market participants.
The Exchange notes that the proposed fees and credits for
transactions on BOX offset one another in any particular transaction.
The result is that BOX will collect a fee from Participants that add
liquidity on BOX and credit another Participant an equal amount for
removing liquidity. Stated otherwise, the collection of these liquidity
fees will not directly result in revenue to BOX, but will simply allow
BOX to provide the credit incentive to Participants to attract order
flow. The Exchange believes it is appropriate to provide incentives to
market participants to direct order flow to remove liquidity from BOX,
similar to various and widely-used, exchange sponsored payment for
order flow programs. Further, the Exchange believes that fees for
adding liquidity on BOX will not deter Participants from seeking to add
liquidity to the BOX market so that they may interact with those
participants seeking to remove liquidity.
The Exchange believes it is reasonable to assess the proposed
liquidity fees and credits at lower rates ($0.22 and $0.30) in series
that trade in $0.01 increments compared to higher rates ($0.65 and
$0.75) in series that trade in increments of $0.05 or more. The
Exchange believes that options that trade at these wider spreads of
$0.05 or more merit offering greater inducement for market
participants. In particular, within the PIP, minimum increments of $.05
or $.10 provide greater opportunity for market participants to offer
price improvement. As such, BOX believes that the opportunity for
additional price improvement provided by these wider spreads, again
merits offering greater incentive for Participants to increase the
potential price improvement for customer orders in these PIP
transactions.
Routing Fees
BOX believes that the proposed routing fee structure for routing
customer orders to other market venues is reasonable because the fee
will allow BOX to recoup its transaction costs attendant with offering
routing services that are optional for Participants. BOX uses third-
party broker-dealers to route orders to other exchanges and incurs
charges for each order routed to and executed at an away market, in
addition to the transaction fees charged by other exchanges. In order
to better recover those related costs and to potentially generate
additional revenue, the Exchange proposes a routing fee structure
associated with providing this
[[Page 29745]]
optional service. The Exchange is proposing a routing fee structure to
continue to provide routing services for non-Professional, Public
Customer Order at no charge if the Participants trade on BOX 40% of
their non-Professional Public Customer volume traded through BOX each
month.
Additionally, the Exchange believes that the proposed fee for
routing Professional customer orders to various markets is reasonable,
equitable, and not unfairly discriminatory in that the fee will further
allow BOX to recoup its costs attendant with offering optional routing
services. BOX does not route broker-dealer proprietary orders, and
therefore, does not assess routing fees on such orders. BOX
Participants can manage their own routing to different options
exchanges or can utilize a myriad of other routing solutions that are
available to market participants. Further, the characteristics of
Professional accounts tend to be more similar to broker-dealers than to
non-Professional Public Customers. As such, BOX believes Professionals
are more likely to be able to route their orders to the exchange venues
where they wish to trade. By assessing a fee for routing certain
orders, BOX aims to recover its costs in providing this optional
service. The Exchange believes that providing non-Professional, Public
Customers a preferred rate for routing is consistent with the long
history in the options markets of such customers being given preferred
fees. The Exchange believes the proposed routing fee structure is
equitable and not unfairly discriminatory because the incentive to
trade on BOX it is available to all Participants on an equal basis.
The Exchange believes it is reasonable, equitable, and not unfairly
discriminatory to assess Participants a fee for routing non-
Professional, Public Customer Orders to away exchanges, if those
Participants are submitting such orders to BOX so as to evade other
exchanges' fees and take advantage of BOX routing services. Based on
market data related to activity on the Boston Options Exchange Group,
LLC, an options trading facility of NASDAQ OMX BX, Inc., BOX believes
that it is reasonable to charge Participants a fee if they
intentionally submit orders to BOX when limited liquidity is on BOX at
the NBBO. This limited liquidity may not be enough to fill the orders
submitted, and thus, BOX is required, in accordance with its
obligations to customer orders under the national market system plan
for Options Order Protection and Locked/Crossed Markets, to route such
orders to a market that is displaying liquidity at the NBBO. The market
data indicates that the Boston Options Exchange, LLC facility generally
routes significantly less than 60% of a Participant's non-Professional,
Public Customer Orders to an away exchange for execution. As such, the
Exchange believes that this proposed routing fee will only impact
Participants submitting orders to BOX intending to evade other
exchanges' fees and take advantage of BOX routing services.
The Exchange believes the proposed routing fee structure is
equitable and not unfairly discriminatory because the incentive to
trade on BOX is available to all Participants on an equal basis. The
Exchange believes it is reasonable and equitable to provide
Participants (A) an incentive to trade on BOX, and (B) the ability to
route customer orders at no cost, because transactions executed on BOX
increase BOX market activity and market quality. Greater liquidity and
additional volume executed on BOX aids the price and volume discovery
process. Participant trading on BOX also results in revenue that BOX is
able to use to provide routing services at no cost to Participants.
Accordingly, the Exchange believes that the proposal is not unfairly
discriminatory because it promotes enhancing BOX market quality. The
routing fees proposed are intended to provide an incentive to BOX
Participants to submit orders for execution on BOX and not engage in
abusive and predatory practices to evade fees on other exchanges.
BOX therefore believes that assessing the fee only to those
Participants that have 60% or more of their total non-Professional,
Public Customer Orders routed to an away exchange for execution is
reasonable, and an equitable allocation of its fees for providing
routing services. The Exchange believes that permitting a Participant
to have up to 60% of such orders routed to an away exchange for
execution without being assessed any routing fee is reasonable and
appropriate.
Technology Fees
The Exchange believes that the proposed Technology Fees constitute
an equitable allocation of fees, and not unfairly discriminatory, as
all similarly situated Options Participants and other market
participants would be charged the same amounts for the same services.
Additionally, access to the BOX market will be offered on fair and non-
discriminatory terms. The proposed Technology Fees are expected to
offset the costs BOX and the Exchange incur in maintaining, and
implementing ongoing improvements to BOX, including increasing
connectivity costs, costs based on gateway software and hardware
enhancements and resources dedicated to gateway development, quality
assurance, and technology support. The Exchange believes that its
proposed fees are reasonable in that they are competitive with those
charged by other venues.
Regulatory Fees
The Exchange believes the proposed ORF is reasonable because it is
lower than many competitor exchanges. The ORF will help the Exchange
offset regulatory expenses. The Exchange believes that the ORF is
equitable and not unfairly discriminatory because it is objectively
allocated to BOX Options Participants in that it would continue to be
charged to all Participants on all of their transactions that clear as
customer at OCC. The Exchange believes that the amount of resources
required to regulate non-customer trading activity will be
significantly less than the amount of resources the Exchange must
dedicate to regulate customer trading activity. Regulating customer
trading activity is more labor intensive and requires greater
expenditure of human and technical resources than regulating non-
customer trading activity. Surveillance and regulation of non-customer
trading activity tends to be more automated and less labor-intensive.
As a result, the costs associated with administering the customer
component of the Exchange's overall regulatory program are anticipated
to be higher than the costs associated with administering the non-
customer component of its regulatory program. As such, the Exchange
proposes assessing higher fees to those firms that will require more
Exchange regulatory services based on the amount of customer options
business they conduct.
As previously stated, the OCC collects the ORF on behalf of BOX
through each BOX Options Participant's clearing broker. In addition,
the ORF seeks to recover the costs of supervising and regulating
Participants, including performing routine surveillances, and policy,
rulemaking, interpretive, and enforcement activities. The Exchange will
continue to monitor the amount of revenue collected from the ORF to
ensure that it, in combination with its other regulatory fees and
fines, do not exceed regulatory costs. If the Exchange determines
regulatory revenues exceed regulatory costs, the Exchange will adjust
the ORF by submitting a fee change filing to the Commission.
Finally, the Exchange believes it is reasonable, equitable and not
unfairly discriminatory for the FINRA fees to be included on the
Exchange Fee Schedule
[[Page 29746]]
because these fees are not being assessed or set by BOX or the
Exchange, but by FINRA, and will be assessed to broker-dealers that
register associated persons through FINRA's WebCRD system.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe 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
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 \11\ and Rule 19b-4(f)(2)
thereunder,\12\ because it establishes or changes a due, fee, or other
charge applicable only to a member.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78s(b)(3)(A)(ii).
\12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
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 Exchange 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BOX-2012-002 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-2012-002. 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 (https://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 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; 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-2012-002 and should be
submitted on or before June 8, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
---------------------------------------------------------------------------
\13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-12032 Filed 5-17-12; 8:45 am]
BILLING CODE 8011-01-P
