Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule for Trading on BOX, 1907-1910 [2013-00257]

Download as PDF Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices srobinson on DSK4SPTVN1PROD with securities exchanges.5 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,6 which requires that the rules of an exchange be designed, among other things, to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission believes that the proposal should provide the Exchange with a better metric to evaluate the quote submission quality of SQTs and RSQTs. In particular, the Exchange represented that it could capture the following data in a report for each SQT and RSQT: executed contracts, trade count, total quotes, executed contract to quote ratio and trade count to quote ratio. The Commission believes that such additional information, which is not available today, should enable the Exchange to better judge the quality of quotes provided. The proposal would analyze the number of contracts executed, in addition to the number of quotes received by the Exchange. The Commission believes that the number of executed contracts to quote ratio should provide the Exchange with more useful information to judge actual liquidity supplied on the Exchange. The proposal would also analyze the number of trades to quotes. The Commission believes that this aspect of the proposal is reasonably designed to enable the Exchange to better evaluate smaller participants, who may execute lesser size, but who may still have a high trade-to-quote ratio if they are present at the national best bid or offer. Finally, the Exchange has represented that these standards which would be applied to all members and member organizations of the Exchange in a uniform matter that is equitable and not unfairly discriminatory.7 For the reasons stated above, the Commission believes that the proposal is consistent with the requirements of the Act and is designed to promote just and equitable principles of trade, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. 5 In approving the proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). 6 15 U.S.C. 78f(b)(5). 7 See email from Angela Dunn, Associate General Counsel, Phlx, to Steve Kuan, Special Counsel, Commission, dated January 3, 2013. VerDate Mar<15>2010 16:39 Jan 08, 2013 Jkt 229001 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,8 that the proposed rule change (SR–Phlx–2012– 130), be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.9 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–00201 Filed 1–8–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68578; File No. SR–BOX– 2012–025] Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule for Trading on BOX January 3, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 26, 2012, BOX Options Exchange LLC (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. DATE: I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to amend the Fee Schedule for trading on BOX. In particular, the Exchange proposes to amend certain Exchange Fees for Professionals set forth in Section I of the Fee Schedule so that Professional accounts are assessed the same fees as Broker-Dealers. While changes to the Fee Schedule pursuant to this proposal will be effective upon filing, the changes will become 8 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 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). 9 17 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 1907 operative on January 2, 2013. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s Internet Web site at http:// boxexchange.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Fee Schedule for trading on BOX. In particular, the Exchange proposes to amend certain Exchange Fees for Professionals set forth in Section I of the Fee Schedule so that Professional accounts are assessed the same fees as Broker-Dealers. For Auction Transactions,5 the Exchange proposes to increase Professional fees for Improvement Orders in the PIP and Responses in the Solicitation and Facilitation mechanisms from $0.15 to $0.35, the same fee Broker-Dealers are currently charged. Note that Exchange Fees for Primary Improvement Orders, Facilitation Orders, and Solicitation Orders will continue to be based upon a Participant’s monthly average daily volume (‘‘ADV’’) in Auction Transactions as calculated at the end of each month as set forth in Section I.A. of the Fee Schedule. The Exchange notes that the proposed fees for Professionals are within the range of Professional fees presently assessed in the industry.6 5 Auction Transactions are those transactions executed through the Price Improvement Period (‘‘PIP’’), Solicitation, and Facilitation auction mechanisms. 6 Professional customers are charged $0.33 per contract for Select Symbols on the International Securities Exchange (‘‘ISE’’), $0.32 per contract for taking liquidity on NYSE Amex, and $0.45 or more per contract on the NASDAQ Options Market (‘‘NOM’’) for adding or removing liquidity in non- Continued E:\FR\FM\09JAN1.SGM 09JAN1 1908 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices Also, the Exchange proposes to implement a $0.22 per contract surcharge for Professionals for all transactions in options on the Nasdaq100® Index (NDX) and on the MiniNDX® Index (MNX). BOX currently charges Market Makers and BrokerDealers $0.22 per contract for transactions in NDX and 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 BOX Participants, including Professional accounts. srobinson on DSK4SPTVN1PROD with 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Securities Exchange Act of 1934 (the ‘‘Act’’),7 in general, and Section 6(b)(4) of the Act,8 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among BOX Options Participants and other persons using its facilities. The Exchange believes the proposed fee change for Professionals in Auction Transactions is reasonable, equitable and not unfairly discriminatory because it charges Professionals, whose activity on BOX is akin to the order flow activity and system usage to that of BrokerDealers, the same fee for competing in Auction Transactions as the fee charged to Broker-Dealers. BOX does not assess ongoing systems access fees, ongoing fees 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). BOX notes that as of December 2012, orders for Professionals generally account for a majority of the orders BOX receives on a given trading day. This level of trading activity draws on a greater amount of BOX system resources than that of nonProfessional Public Customers, and thus, greater ongoing BOX operational costs. 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 Penny Pilot securities. See ISE fee schedule, available at: http://www.ise.com/assets/documents/ OptionsExchange/legal/fee/fee_schedule.pdf, NYSE Amex Options Fee Schedule, available at: https:// globalderivatives.nyx.com/sites/ globalderivatives.nyx.com/files/ nyse_amex_options_fee_schedule_12_01_12_.pdf, and see NOM Fee Schedule, available at: http:// www.nasdaqtrader.com/ Micro.aspx?id=OptionsPricing. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(4). VerDate Mar<15>2010 16:39 Jan 08, 2013 Jkt 229001 resources utilized. As such, rather than passing the costs of these higher order volumes along to all market participants, the Exchange believes it is more reasonable and equitable to assess those costs to the persons directly responsible. To that end, BOX aims to recover costs incurred by assessing Professional accounts a market competitive fee for competing in Auction Transactions. The Exchange believes the proposed change to increase Professional fees is not unfairly discriminatory as the fees will apply to all Professionals and Broker-Dealers competing in Auction Transactions equally. Further, Professionals and Broker-Dealers are free to change the manner in which they access BOX. A Professional may, by sending fewer than 390 orders per day across the industry, begin participating as a non-Professional, Public Customer and potentially reduce transaction fees. Additionally, Professionals will still benefit from certain priority advantages as a customer in Auction Transactions.9 As noted above, Professionals’ order sending behavior and trading activity tend to be more similar to BrokerDealers trading on a proprietary basis. This is particularly true in considering orders in response to BOX auction mechanisms. As such, the Exchange believes it is not unfairly discriminatory to charge them the same fee as BrokerDealers when competing for customer order flow in these Auction Transactions. Professionals may elect to register as a Broker-Dealer and, once registered, may apply to become a BOX Market Maker, subject to Exchange Fees based on their ADV. The Exchange believes the proposed Auction Transaction fees for Professionals is equitable and not unfairly discriminatory because such Participants are not subject to the same obligations as Market Makers when providing liquidity to the market. In particular, Market Makers must maintain active two-sided markets in appointed classes, and must meet certain minimum quoting requirements. As such, the Exchange believes it is appropriate that Market Makers be charged comparably lower Auction Transaction fees as compared to Professionals when the Market Makers provide greater volumes of liquidity to the market. In light of the ability to access BOX in a variety of ways, each of which is priced differently, Professionals, Broker-Dealers, and other market participants may each select the most economically beneficial manner to access BOX. Further, the Exchange believes the proposed fee change is equitable and not unfairly discriminatory because it will assure that retail investors (nonProfessional, Public Customers) continue to receive the appropriate marketplace advantages for Auction Transactions on BOX, while furthering fair competition among marketplace professionals by treating them equally when they compete for these desirable customer orders. The Exchange believes it is reasonable and equitable to assess Auction Transaction fees for Professionals that are the same as those fees for Broker-Dealers because it applies a pricing structure that groups these sophisticated market participants together when they are competing in this manner. Generally, competing options exchanges assess Professionals fees at comparable rates to those proposed by the Exchange, and comparable to fees charged to Broker-Dealers.10 The Exchange operates within a highly competitive market in which market participants can readily direct order flow to any of several other competing venues if they deem fees at a particular venue to be excessive. As such, the Exchange believes the proposed increases are reasonable and equitable. The Exchange further believes the proposed fee change is equitable and not unfairly discriminatory because Professionals generally do not initiate Auction Transactions, unlike some Broker-Dealers. Doing so requires, in part, guaranteeing a customer order and execution. Initiating an Auction Transaction for the benefit of the customer order, an [sic] taking on this guarantee provides these Participants potentially discounted fees.11 The Exchange believes it is reasonable, equitable, and not unfairly discriminatory to charge Professional accounts the same fee as Broker-Dealers to compete for customer orders in Auction Transactions because when acting in response to an auction, as opposed to initiating the transaction, Professionals’ behavior, systems’ sophistication, and trading activity are similar to Broker-Dealers, and distinct from the retail investors on the opposite side of the Auction Transaction. The Exchange believes it is equitable and not unfairly discriminatory for Public Customers to be charged lower fees than Professionals and Broker10 Supra, 9 See Rules 7150(f)(4) and 7270 regarding allocation and executions within each BOX auction mechanism. PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 note 6. Section I.A. of the Fee Schedule that provides Tiered Fees with potential discounts for Participants that Initiate Auction Transactions. 11 See E:\FR\FM\09JAN1.SGM 09JAN1 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices Dealers for Auction Transactions 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 the benefit of nonProfessional, Public Customers.12 As such, the Exchange believes the proposed fees for Professional customer transactions are appropriate and not unfairly discriminatory. The Exchange believes it promotes the best interests of investors to have lower Auction Transaction costs for non-Professional, Public Customers, and that the BOX fee structure will continue to attract this customer order flow to these auction mechanisms which BOX believes will provide greater potential price improvement to these investors. 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 these index options, 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 to assess a surcharge fee for Professional transactions in NDX and MNX options to offset the costs BOX incurs for each such transaction. The Exchange believes that passing this cost through to BOX Options Participants that trade these options, including Professionals, is the most equitable means of recovering the costs of the license. The Exchange’s proposal to assess Professionals, Broker-Dealers and Market Makers a $.22 per contract surcharge for transactions in MNX and NDX, as compared to no surcharge being assessed to non-Professional Public Customers, is equitable and not unfairly discriminatory because the Exchange believes that a lower fee for nonProfessional, Public Customers benefits all BOX market participants by incentivizing market participants to transact a greater number of Public srobinson on DSK4SPTVN1PROD with 12 Note that BOX has historically imposed different, and higher, routing fees for Professionals as compared to non-Professional Public Customers. See Securities Exchange Act Release Nos. 65538 (October 12, 2011), 76 FR 64413 (October 18, 2011) (Adopting a $0.50 per contract routing fee for Professionals while providing routing to nonProfessional Public Customers at no charge), and 68149 (November 5, 2012), 77 FR 67693 (November 13, 2012) (Continuing to charge Professionals $0.50 per contract executed on away exchanges and exempting Public Customer accounts from a routing fee for Directed Orders, provided 33% or more of a Participant’s Public Customer Directed Orders received during the month are executed through PIP, and less than 45% of a Participant’s Directed Orders received during the month are routed to and executed on an away exchange). VerDate Mar<15>2010 16:39 Jan 08, 2013 Jkt 229001 Customer orders, which results in increased liquidity on BOX. The Exchange believes that the proposed fees will keep BOX competitive with other exchanges and will apply in an equitable manner among BOX Participants. The Exchange believes the proposed fees are fair and reasonable and must be competitive with fees in place on other exchanges. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The BOX auction mechanisms, the PIP in particular, provide the opportunity for market participants to compete for customer orders. The PIP has no limitations regarding the number of Market Makers, Options Participants that are not Market Makers, and customers that can participate and compete for orders in the PIP. BOX asserts that Participants are actively competing for customer orders, which is clearly supported by the simple fact that price improvement occurs in the PIP. Since the PIP began in 2004, customers have received more than $400 million in savings through better executions on BOX, a monthly average of more than $3.5 million over that time. The Exchange does not believe the proposed fee change will inhibit Professionals’ ability to compete within BOX Auction Transactions. BrokerDealers currently compete actively within the PIP, and BOX does not believe assessing Professionals a $0.35 per contract fee equivalent to that of Broker-Dealers, would impede Professionals’ ability, or the incentive for Professionals, to compete therein. BOX notes that its market model and fees are generally intended to benefit retail customers by providing incentives for Participants to submit their customer order flow to BOX, and the PIP in particular. BOX makes a substantial amount of PIP-related data and statistics available to the public on its Web site www.boxexchange.com. Specifically, PIP Fee Pilot reports are available at: http://boxexchange.com/ boxrReports_en; daily PIP volumes and average price improvement at: http:// boxexchange.com/volumes_en; and BOX execution quality reports at: http://boxexchange.com/ executionQualityReport_en. The data indisputably supports that the PIP provides price improvement for customer orders. The fee change proposed would charge Professionals the same fee as PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 1909 Broker-Dealers when competing in Auction Transactions. Because this change would charge Professionals similarly to Broker-Dealers in this particular circumstance, charge them a fee comparable to what Professionals and Broker-Dealers pay on competing exchanges,13 and for additional reasons as stated above, the Exchange does not believe that the proposed 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 Act 14 and Rule 19b–4(f)(2) thereunder,15 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 the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml ); or • Send an email to rulecomments@sec.gov. Please include File Number SR–BOX–2012–025 on the subject line. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, 13 Supra, note 6. U.S.C. 78s(b)(3)(A)(ii). 15 17 CFR 240.19b–4(f)(2). 14 15 E:\FR\FM\09JAN1.SGM 09JAN1 1910 Federal Register / Vol. 78, No. 6 / Wednesday, January 9, 2013 / Notices Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BOX–2012–025. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml ). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 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– 2012–025 and should be submitted on or before January 30, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–00257 Filed 1–8–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68568; File No. SR– NASDAQ–2012–145] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend Fee Pilot Program for NASDAQ Last Sale January 3, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b-4 thereunder,2 notice is hereby given that on December 20, 2012, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change NASDAQ is proposing to extend for three months the fee pilot pursuant to which NASDAQ distributes the NASDAQ Last Sale (‘‘NLS’’) market data products. NLS allows data distributors to have access to real-time market data for a capped fee, enabling those distributors to provide free access to the data to millions of individual investors via the Internet and television. Specifically, NASDAQ offers the ‘‘NASDAQ Last Sale for NASDAQ’’ and ‘‘NASDAQ Last Sale for NYSE/Amex’’ 3 data feeds containing last sale activity in U.S. equities within the NASDAQ Market Center and reported to the FINRA/NASDAQ Trade Reporting Facility (‘‘FINRA/NASDAQ TRF’’), which is jointly operated by NASDAQ and the Financial Industry Regulatory Authority (‘‘FINRA’’). The purpose of this proposal is to extend the existing pilot program for three months, from January 1, 2013 to March 31, 2013. This pilot program supports the aspiration of Regulation NMS to increase the availability of proprietary data by allowing market forces to determine the amount of proprietary market data information that is made available to the public and at what price. During the pilot period, the program has vastly increased the availability of NASDAQ proprietary market data to individual investors. Based upon data from NLS distributors, NASDAQ believes that since its launch in July 2008, the NLS data has been viewed by over 50,000,000 investors on Web sites operated by Google, Interactive Data, and Dow Jones, among others. The text of the proposed rule change is below. Proposed new language is italicized; proposed deletions are in brackets. * * * * srobinson on DSK4SPTVN1PROD with Users/mo Price Quotes 1–9,999 .................................................. 10,000–49,999 ....................................... 50,000–99,999 ....................................... $0.30/usermonth .................................. $0.24/usermonth .................................. $0.18/usermonth .................................. 0–10M .................................................. 10M–20M ............................................. 20M–30M ............................................. 16 17 1 15 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). VerDate Mar<15>2010 16:39 Jan 08, 2013 2 17 CFR 240.19b–4. filing reflects the change of the name of the product from ‘‘NASDAQ Last Sale for NYSE/Amex’’ 3 This Jkt 229001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 * 7039. NASDAQ Last Sale Data Feeds (a) For a three month pilot period commencing on [October 1, 2012] January 1, 2013, NASDAQ shall offer two proprietary data feeds containing real-time last sale information for trades executed on NASDAQ or reported to the NASDAQ/FINRA Trade Reporting Facility. (1) ‘‘NASDAQ Last Sale for NASDAQ’’ shall contain all transaction reports for NASDAQ-listed stocks; and (2) ‘‘NASDAQ Last Sale for NYSE/ [Amex]NYSE MKT’’ shall contain all such transaction reports for NYSE- and NYSE [Amex]MKT-listed stocks. (b) Each distributor of the NASDAQ Last Sale Data Feeds may elect between two alternate fee schedules, depending upon the choice of distributors to report usage based on either a username/password entitlement system or a quote counting mechanism or both. All fees for the NASDAQ Last Sale Data Products are ‘‘stair-stepped’’ in that the fees are reduced for distributors with more users but the lower rates apply only to users in excess of the specified thresholds rather than applying to all users once a threshold is met. In addition, there shall be a maximum fee of $50,000 per month for NASDAQ Last Sale for NASDAQ and NASDAQ Last Sale for NYSE/ [Amex]NYSE MKT. (1) Firms that choose to report usage for either a username/password entitlement system or quote counting mechanism or both shall elect between paying a fee for each user or a fee for each query. A firm that elects to pay for each query may cap its payment at the monthly rate per user. Firms shall pay the following fees: (A) No change. (B) NASDAQ Last Sale for NYSE/ [Amex]NYSE MKT Price $0.0015/query. $0.0012/query. $0.0009/query. to ‘‘NASDAQ Last Sale for NYSE/NYSE MKT’’ in the text of Rule 7039, due to the change in the name of NYSE Amex to NYSE MKT. E:\FR\FM\09JAN1.SGM 09JAN1

Agencies

[Federal Register Volume 78, Number 6 (Wednesday, January 9, 2013)]
[Notices]
[Pages 1907-1910]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-00257]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68578; File No. SR-BOX-2012-025]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Fee Schedule for Trading on BOX

DATE: January 3, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 26, 2012, BOX Options Exchange LLC (the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I, II and III below, 
which Items have been prepared by the Exchange. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ 
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule for 
trading on BOX. In particular, the Exchange proposes to amend certain 
Exchange Fees for Professionals set forth in Section I of the Fee 
Schedule so that Professional accounts are assessed the same fees as 
Broker-Dealers. While changes to the Fee Schedule pursuant to this 
proposal will be effective upon filing, the changes will become 
operative on January 2, 2013. The text of the proposed rule change is 
available from the principal office of the Exchange, at the 
Commission's Public Reference Room and also on the Exchange's Internet 
Web site at http://boxexchange.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule for trading on BOX. 
In particular, the Exchange proposes to amend certain Exchange Fees for 
Professionals set forth in Section I of the Fee Schedule so that 
Professional accounts are assessed the same fees as Broker-Dealers.
    For Auction Transactions,\5\ the Exchange proposes to increase 
Professional fees for Improvement Orders in the PIP and Responses in 
the Solicitation and Facilitation mechanisms from $0.15 to $0.35, the 
same fee Broker-Dealers are currently charged. Note that Exchange Fees 
for Primary Improvement Orders, Facilitation Orders, and Solicitation 
Orders will continue to be based upon a Participant's monthly average 
daily volume (``ADV'') in Auction Transactions as calculated at the end 
of each month as set forth in Section I.A. of the Fee Schedule. The 
Exchange notes that the proposed fees for Professionals are within the 
range of Professional fees presently assessed in the industry.\6\
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    \5\ Auction Transactions are those transactions executed through 
the Price Improvement Period (``PIP''), Solicitation, and 
Facilitation auction mechanisms.
    \6\ Professional customers are charged $0.33 per contract for 
Select Symbols on the International Securities Exchange (``ISE''), 
$0.32 per contract for taking liquidity on NYSE Amex, and $0.45 or 
more per contract on the NASDAQ Options Market (``NOM'') for adding 
or removing liquidity in non-Penny Pilot securities. See ISE fee 
schedule, available at: http://www.ise.com/assets/documents/OptionsExchange/legal/fee/fee_schedule.pdf, NYSE Amex Options Fee 
Schedule, available at: https://globalderivatives.nyx.com/sites/globalderivatives.nyx.com/files/nyse_amex_options_fee_schedule_12_01_12_.pdf, and see NOM Fee Schedule, available at: http://www.nasdaqtrader.com/Micro.aspx?id=OptionsPricing.

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[[Page 1908]]

    Also, the Exchange proposes to implement a $0.22 per contract 
surcharge for Professionals for all transactions in options on the 
Nasdaq-100[supreg] Index (NDX) and on the Mini-NDX[supreg] Index (MNX). 
BOX currently charges Market Makers and Broker-Dealers $0.22 per 
contract for transactions in NDX and 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 BOX Participants, including 
Professional accounts.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\7\ in general, and Section 6(b)(4) of the Act,\8\ in 
particular, in that it provides 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed fee change for Professionals in 
Auction Transactions is reasonable, equitable and not unfairly 
discriminatory because it charges Professionals, whose activity on BOX 
is akin to the order flow activity and system usage to that of Broker-
Dealers, the same fee for competing in Auction Transactions as the fee 
charged to Broker-Dealers. BOX does not assess ongoing systems access 
fees, ongoing fees 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). BOX notes that as of 
December 2012, orders for Professionals generally account for a 
majority of the orders BOX receives on a given trading day. This level 
of trading activity draws on a greater amount of BOX system resources 
than that of non-Professional Public Customers, and thus, greater 
ongoing BOX operational costs. 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. As such, rather than passing the costs of these higher order 
volumes along to all market participants, the Exchange believes it is 
more reasonable and equitable to assess those costs to the persons 
directly responsible. To that end, BOX aims to recover costs incurred 
by assessing Professional accounts a market competitive fee for 
competing in Auction Transactions.
    The Exchange believes the proposed change to increase Professional 
fees is not unfairly discriminatory as the fees will apply to all 
Professionals and Broker-Dealers competing in Auction Transactions 
equally. Further, Professionals and Broker-Dealers are free to change 
the manner in which they access BOX. A Professional may, by sending 
fewer than 390 orders per day across the industry, begin participating 
as a non-Professional, Public Customer and potentially reduce 
transaction fees. Additionally, Professionals will still benefit from 
certain priority advantages as a customer in Auction Transactions.\9\ 
As noted above, Professionals' order sending behavior and trading 
activity tend to be more similar to Broker-Dealers trading on a 
proprietary basis. This is particularly true in considering orders in 
response to BOX auction mechanisms. As such, the Exchange believes it 
is not unfairly discriminatory to charge them the same fee as Broker-
Dealers when competing for customer order flow in these Auction 
Transactions.
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    \9\ See Rules 7150(f)(4) and 7270 regarding allocation and 
executions within each BOX auction mechanism.
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    Professionals may elect to register as a Broker-Dealer and, once 
registered, may apply to become a BOX Market Maker, subject to Exchange 
Fees based on their ADV. The Exchange believes the proposed Auction 
Transaction fees for Professionals is equitable and not unfairly 
discriminatory because such Participants are not subject to the same 
obligations as Market Makers when providing liquidity to the market. In 
particular, Market Makers must maintain active two-sided markets in 
appointed classes, and must meet certain minimum quoting requirements. 
As such, the Exchange believes it is appropriate that Market Makers be 
charged comparably lower Auction Transaction fees as compared to 
Professionals when the Market Makers provide greater volumes of 
liquidity to the market. In light of the ability to access BOX in a 
variety of ways, each of which is priced differently, Professionals, 
Broker-Dealers, and other market participants may each select the most 
economically beneficial manner to access BOX.
    Further, the Exchange believes the proposed fee change is equitable 
and not unfairly discriminatory because it will assure that retail 
investors (non-Professional, Public Customers) continue to receive the 
appropriate marketplace advantages for Auction Transactions on BOX, 
while furthering fair competition among marketplace professionals by 
treating them equally when they compete for these desirable customer 
orders. The Exchange believes it is reasonable and equitable to assess 
Auction Transaction fees for Professionals that are the same as those 
fees for Broker-Dealers because it applies a pricing structure that 
groups these sophisticated market participants together when they are 
competing in this manner.
    Generally, competing options exchanges assess Professionals fees at 
comparable rates to those proposed by the Exchange, and comparable to 
fees charged to Broker-Dealers.\10\ The Exchange operates within a 
highly competitive market in which market participants can readily 
direct order flow to any of several other competing venues if they deem 
fees at a particular venue to be excessive. As such, the Exchange 
believes the proposed increases are reasonable and equitable.
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    \10\ Supra, note 6.
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    The Exchange further believes the proposed fee change is equitable 
and not unfairly discriminatory because Professionals generally do not 
initiate Auction Transactions, unlike some Broker-Dealers. Doing so 
requires, in part, guaranteeing a customer order and execution. 
Initiating an Auction Transaction for the benefit of the customer 
order, an [sic] taking on this guarantee provides these Participants 
potentially discounted fees.\11\ The Exchange believes it is 
reasonable, equitable, and not unfairly discriminatory to charge 
Professional accounts the same fee as Broker-Dealers to compete for 
customer orders in Auction Transactions because when acting in response 
to an auction, as opposed to initiating the transaction, Professionals' 
behavior, systems' sophistication, and trading activity are similar to 
Broker-Dealers, and distinct from the retail investors on the opposite 
side of the Auction Transaction.
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    \11\ See Section I.A. of the Fee Schedule that provides Tiered 
Fees with potential discounts for Participants that Initiate Auction 
Transactions.
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    The Exchange believes it is equitable and not unfairly 
discriminatory for Public Customers to be charged lower fees than 
Professionals and Broker-

[[Page 1909]]

Dealers for Auction Transactions 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 the benefit of non-Professional, Public Customers.\12\ As 
such, the Exchange believes the proposed fees for Professional customer 
transactions are appropriate and not unfairly discriminatory. The 
Exchange believes it promotes the best interests of investors to have 
lower Auction Transaction costs for non-Professional, Public Customers, 
and that the BOX fee structure will continue to attract this customer 
order flow to these auction mechanisms which BOX believes will provide 
greater potential price improvement to these investors.
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    \12\ Note that BOX has historically imposed different, and 
higher, routing fees for Professionals as compared to non-
Professional Public Customers. See Securities Exchange Act Release 
Nos. 65538 (October 12, 2011), 76 FR 64413 (October 18, 2011) 
(Adopting a $0.50 per contract routing fee for Professionals while 
providing routing to non-Professional Public Customers at no 
charge), and 68149 (November 5, 2012), 77 FR 67693 (November 13, 
2012) (Continuing to charge Professionals $0.50 per contract 
executed on away exchanges and exempting Public Customer accounts 
from a routing fee for Directed Orders, provided 33% or more of a 
Participant's Public Customer Directed Orders received during the 
month are executed through PIP, and less than 45% of a Participant's 
Directed Orders received during the month are routed to and executed 
on an away exchange).
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    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 these index options, 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 to assess a surcharge fee for Professional 
transactions in NDX and MNX options to offset the costs BOX incurs for 
each such transaction. The Exchange believes that passing this cost 
through to BOX Options Participants that trade these options, including 
Professionals, is the most equitable means of recovering the costs of 
the license.
    The Exchange's proposal to assess Professionals, Broker-Dealers and 
Market Makers a $.22 per contract surcharge for transactions in MNX and 
NDX, as compared to no surcharge being assessed to non-Professional 
Public Customers, is equitable and not unfairly discriminatory because 
the Exchange believes that a lower fee for non-Professional, Public 
Customers benefits all BOX market participants by incentivizing market 
participants to transact a greater number of Public Customer orders, 
which results in increased liquidity on BOX.
    The Exchange believes that the proposed fees will keep BOX 
competitive with other exchanges and will apply in an equitable manner 
among BOX Participants. The Exchange believes the proposed fees are 
fair and reasonable and must be competitive with fees in place on other 
exchanges.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The BOX auction mechanisms, the 
PIP in particular, provide the opportunity for market participants to 
compete for customer orders. The PIP has no limitations regarding the 
number of Market Makers, Options Participants that are not Market 
Makers, and customers that can participate and compete for orders in 
the PIP. BOX asserts that Participants are actively competing for 
customer orders, which is clearly supported by the simple fact that 
price improvement occurs in the PIP. Since the PIP began in 2004, 
customers have received more than $400 million in savings through 
better executions on BOX, a monthly average of more than $3.5 million 
over that time.
    The Exchange does not believe the proposed fee change will inhibit 
Professionals' ability to compete within BOX Auction Transactions. 
Broker-Dealers currently compete actively within the PIP, and BOX does 
not believe assessing Professionals a $0.35 per contract fee equivalent 
to that of Broker-Dealers, would impede Professionals' ability, or the 
incentive for Professionals, to compete therein. BOX notes that its 
market model and fees are generally intended to benefit retail 
customers by providing incentives for Participants to submit their 
customer order flow to BOX, and the PIP in particular. BOX makes a 
substantial amount of PIP-related data and statistics available to the 
public on its Web site www.boxexchange.com. Specifically, PIP Fee Pilot 
reports are available at: http://boxexchange.com/boxrReports_en; daily 
PIP volumes and average price improvement at: http://boxexchange.com/volumes_en; and BOX execution quality reports at: http://boxexchange.com/executionQualityReport_en. The data indisputably 
supports that the PIP provides price improvement for customer orders.
    The fee change proposed would charge Professionals the same fee as 
Broker-Dealers when competing in Auction Transactions. Because this 
change would charge Professionals similarly to Broker-Dealers in this 
particular circumstance, charge them a fee comparable to what 
Professionals and Broker-Dealers pay on competing exchanges,\13\ and 
for additional reasons as stated above, the Exchange does not believe 
that the proposed change will impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \13\ Supra, note 6.
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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 Act \14\ and Rule 19b-4(f)(2) thereunder,\15\ 
because it establishes or changes a due, fee, or other charge 
applicable only to a member.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \15\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml ); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2012-025 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary,

[[Page 1910]]

Securities and Exchange Commission, 100 F Street NE., Washington, DC 
20549-1090.

All submissions should refer to File Number SR-BOX-2012-025. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml 
). Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 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-2012-025 and should be 
submitted on or before January 30, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-00257 Filed 1-8-13; 8:45 am]
BILLING CODE 8011-01-P