Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Establish Fees for Mini Options on BOX, 18642-18646 [2013-07009]
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Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices
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–MIAX–2013–12 on the
subject line.
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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–MIAX–2013–12. 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, located at 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 will also 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–MIAX–
2013–12 and should be submitted on or
before April 8, 2013.10
10 The Commission believes that a 10-day
comment period is reasonable, given the urgency of
the matter. It will provide adequate time for
comment. The Commission also notes that this
proposal is substantially similar to proposals from
NASDAQ OMX PHLX LLC, The NASDAQ Stock
Market LLC, and NASDAQ OMX BX, Inc. which
were published for comment in the Federal
Register on March 20, 2013. See Securities
Exchange Act Release Nos. 69141 (March 15, 2013),
78 FR 17262 (March 20, 2013) (SR–Phlx–2013–29);
69142 (March 15, 2013), 78 FR 17251 (March 20,
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–07062 Filed 3–26–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule To Establish Fees for
Mini Options on BOX
March 21, 2013.
Pursuant to Section 19(b)(1) under the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 15,
2013, 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.
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 to establish
fees for Mini Options on the BOX
Market LLC (‘‘BOX’’) options facility.
While changes to the fee schedule
pursuant to this proposal will be
effective upon filing, the changes will
become operative on March 18, 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 https://
boxexchange.com.
2013) (SR–NASDAQ–2013–048); and 69140 (March
15, 2013), 78 FR 17255 (March 20, 2013) (SR–BX–
2013–026).
11 17 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).
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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, Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule for trading on BOX to
establish fees for option contracts
overlying 10 shares of a security (‘‘Mini
Options’’).
The Exchange represented in its filing
with the Securities and Exchange
Commission (‘‘SEC’’ or the
‘‘Commission’’) to establish Mini
Options that, ‘‘the current Fee Schedule
will not apply to the trading of minioptions contracts. The Exchange will
not commence trading of mini-options
contracts until specific fees for minioptions contracts trading have been
filed with the Commission.’’ 5 As the
Exchange intends to begin trading Mini
Options on March 18, 2013 it is
submitting this filing to describe the
transaction fees that will be applicable
to the trading of Mini Options.
Mini Options have a smaller exercise
and assignment value due to the
reduced number of shares they deliver
as compared to standard option
contracts. Despite the smaller exercise
and assignment value of Mini Options,
the cost to the Exchange to process
quotes and orders in Mini Options,
perform regulatory surveillance and
retain quotes and orders for archival
purposes is the same as for a standard
contract. This leaves the Exchange in a
position of trying to strike the right
balance of fees applicable to Mini
Options. The Exchange, therefore,
believes that adopting fees for Mini
Options that are in some cases the same,
in some cases proportionally lower, and
in other cases exempt from the fees for
standard contracts, is appropriate,
reasonable, not unfairly discriminatory
5 See Securities Exchange Act Release No. 68771
(January 30, 2013), 79 [sic] FR 8208 (February 5,
2013) (SR–BOX–2013–07).
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and not burdensome on competition
between participants, or between the
Exchange and other exchanges in the
listed options market place. The
Exchange proposes to implement these
changes on March 18, 2013.
The following is a discussion of the
existing Fee Schedule as it relates to the
treatment of Mini Options as compared
to standard option contracts.
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Section I. Exchange Fees
The Exchange proposes to assess Mini
Options transactions 1/10th of the
applicable standard contract Exchange
Fee. Currently the Exchange assesses
Exchange Fees based on transaction
types and account types. Specifically,
the Exchange has distinct 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 Customer,
Broker-Dealer, and Market Maker (see
BOX Rule 100 Series for definitions of
each).
For Auction Transactions in Mini
Options, the Exchange proposes to
assess $0.015 per contract fee for Public
Customer Improvement Orders in the
PIP and Responses in the Solicitation
and Facilitation mechanisms. For NonAuction Transactions in Mini Options,
the Exchange proposes to assess a
$0.007 fee for Public Customers. For
Professional Customers and Broker
Dealers, the Exchange proposes to assess
a $0.035 fee for Mini Options Auction
Transactions in PIP Orders or Agency
Orders, Improvement Orders in the PIP,
and Responses in the Solicitation or
Facilitation Auction Mechanisms. For
Non-Auction Transactions in Mini
Options, the Exchange proposes to
assess a $0.040 fee for Professional
Customers and Broker Dealers.
For the remaining types of Exchange
Fees that are based upon a Participant’s
monthly average daily volume (‘‘ADV’’)
in Auction Transactions and NonAuction Transactions, the Exchange
proposes to count Mini Options the
same as a standard contact (i.e., one
contract in a Mini Options will equal
one standard option contract). At each
ADV threshold, the Exchange proposes
to charge Participants a per contract fee
in Mini Options that is 1/10th the
amount charged for standard contracts.
For example, Mini Options Exchange
Fees for Initiating Participants in
Auction Transactions set forth in
Section I.A. of the BOX Fee Schedule
will be as follows:
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execution on BOX, help the Exchange
recover some of the costs incurred in
Initiating participant monthly
providing routing services to
ADV in auction transactions
Participants, and discourages
potentially abusive and predatory order
routing practices to evade fees on other
150,001 contracts and greater .......................................
$0.010 exchanges. The Exchange uses third100,001 contracts to 150,000
party broker-dealers to route orders to
contracts ............................
0.012 other exchanges and incurs charges for
50,001 contracts to 100,000
each order routed to and executed at an
contracts ............................
0.015
away market, in addition to the
20,001 contracts to 50,000
contracts ............................
0.017 transaction fees charged by other
exchanges. Equally applying these fees
1 contract to 20,000 contracts [sic] ..........................
0.025 [sic] to Mini Options will allow the Exchange
to continue to offset the costs it incurs
by routing orders to an away exchange.
The tiered, per contract fee for Market
Participants can still ensure that these
Makers set forth in Section I.B. of the
BOX Fee Schedule will also be adjusted fees are not incurred by choosing to
instruct BOX not to route their customer
for Mini Options as follows:
orders.
Per contract
Furthermore, for purposes of
Market Maker monthly ADV
fee in mini
in non-auction transactions
determining if Non-Professional, Public
options
Customer Directed Orders can qualify
for the Public Customer Directed Order
150,001 contracts and greater .......................................
$0.013 exemption, the Exchange proposes to
100,001 contracts to 150,000
count [sic] the same as standard
contracts ............................
0.016 contracts when calculating the
50,001 contracts to 100,000
percentage of contracts the Public
contracts ............................
0.018
Customer has executed on BOX
10,001 contracts to 50,000
contracts ............................
0.020 [sic] compared to the percentage routed and
executed away.
1 contract to 10,000 conPer contract
fee in mini
options
(all account
types)
tracts [sic] ..........................
0.025 [sic]
Section II. Liquidity Fees and Credits
The Exchange currently assesses
liquidity fees and credits for all options
classes traded on BOX (unless explicitly
stated otherwise) that are applied in
addition to any applicable Exchange
Fees described above. The Exchange
proposes to amend Section II.D (Exempt
Transactions) to state that Mini Options
will also be considered exempt from all
liquidity fees and credits.
Section III. Eligible Orders Routed to an
Away Exchange
All fees on eligible orders routed to an
away exchange will continue to apply to
Mini Options. The Exchange currently
charges customer accounts 6 $0.50 per
contract executed on away exchanges
and exempts Public Customer accounts
from the routing fee for orders received
by BOX via the Directed Order provided
that: (A) 33% or more of a Participant’s
Public Customer Directed Orders
received during the month are executed
through the BOX PIP, and (B) less than
45% of a Participant’s Directed Orders
received are routed to and executed on
an away exchange during the month.
The purpose of this structure is to
provide an incentive to Participants to
submit their customer orders for
6 The term Customer accounts includes both
Professional Customers and Public Customers.
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Section IV. Regulatory Fees
Presently the Exchange charges an
Options Regulatory Fee (‘‘ORF’’) of
$0.0030 per contract. The Options
Regulatory Fee is assessed on each BOX
Options Participant for all options
transactions executed or cleared by the
BOX Options Participant that are
cleared by The Options Clearing
Corporation (OCC) in the customer
range regardless of the exchange on
which the transaction occurs. The
Exchange is proposing to charge the
same rate for transactions in Mini
Options, since the costs to the Exchange
to process quotes, orders, trades and the
necessary regulatory surveillance
programs and procedures in Mini
Options are the same as for standard
contracts. As such, the Exchange feels
that it is appropriate to charge the ORF
at the same rate as the standard contract.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the Act,7
in general, and Section 6(b)(4) of the
Act,8 in particular, in that it provides for
the equitable allocation of reasonable
dues, fees, and other charges among
BOX Participants and other persons
using its facilities and does not unfairly
7 15
8 15
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U.S.C. 78f(b).
U.S.C. 78f(b)(4).
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discriminate between customers,
issuers, brokers or dealers.
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Exchange Fees
The Exchange has determined to
charge fees for orders in Mini Options
at a rate that is 1/10th the rate of fees
the Exchange currently charges for
trading in standard options. The
Exchange believes the proposed fees
and rebates are reasonable and equitable
in light of the fact that while Mini
Options do have a smaller exercise and
assignment value, specifically 1/10th
that of a standard option contract, the
cost to the Exchange to process quotes
and orders in Mini Options is the same
as for a standard contract. Furthermore,
Mini Options have been approved [sic]
for trading at several other competing
exchanges and market participants can
readily direct order flow to any these
venues if they deem the Mini Options
fees to be excessive.9
The Exchange believes it is equitable
and not unfairly discriminatory that
Public Customers be charged lower fees
in both Auction Transactions in Mini
Options and non-Auction Transactions
in Mini Options 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 in Mini Options 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
reduction in Mini Options fees will
attract Public Customer order flow to
BOX.
Moreover, the Exchange believes that
assessing the same per executed
contract fee for Professionals and
Broker-Dealers in both Auction
Transactions in Mini Options and nonAuction Transactions in Mini Options
are reasonable, equitable and not
unfairly discriminatory because these
types of Participants are more
9 See Securities Exchange Act Release Nos. 67948
(September 28, 2012), 77 FR 60735 (October 4,
2012) (SR–NYSE–Arca–2012–64) (SR–ISE–2012–
58); No. 68132 (November 1, 2012), 77 FR 66904
(November 7, 2012) (SR–Phlx–2012–126); No.
68656 (January 15, 2013), 78 FR 4526 (January 22,
2013) (SR–CBOE–2013–001); No. 69018 (March 1,
2013), 78 FR 15090 (March 8, 2013) (SR–BATS–
2013–013); No. 68720 (January 24, 2013), 78 FR
6382 (January 30, 2013) (SR–NASDAQ–2013–011);
No. 68719 (January 24, 2013), 78 FR 6391 (January
30, 2013) (SR–BX–2013–006).
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sophisticated and have higher levels of
order flow activity and system usage.
This level of trading activity draws on
a greater amount of BOX system
resources than that of Public Customers,
and thus, greater ongoing BOX
operational costs. 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
Professionals and Broker-Dealers a
market competitive fee. As stated above,
BOX operates within a highly
competitive business. The proposed fees
charged to Professionals and BrokerDealers in Mini Options have been
designed to be comparable to the fees
that such accounts would be charged at
competing venues. Further, the
Exchange believes that charging
Professionals and Broker-Dealers the
same fee for all transactions in Mini
Options [sic] not unfairly discriminatory
as the fees will apply to all Professionals
and Broker-Dealers equally.
Professionals and Broker-Dealers remain
free to change the manner in which they
access BOX.
The Exchange believes its proposal to
include Mini Options volume in the
ADV tiers for Initiating Participants in
Auction Transactions is reasonable,
equitable and not unfairly
discriminatory. The Exchange believes
that providing a volume discount to
Options Participants that initiate
auctions on Customer orders
incentivizes these 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 allows
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
allow BOX to share its savings with its
Participants in the form of lower tier
rates.
Further, the Exchange believes it is
equitable and non-discriminatory to
provide Initiating Participants a tiered
fee structure related to their
participation in Auction Transactions.
As stated above, the Exchange believes
assessing 1/10th of the standard contract
fee is reasonable and equitable in light
of the fact that Mini Options do have a
smaller exercise and assignment value,
specifically 1/10th that of a standard
option contract. The proposed fee
structure for Mini Options is related to
trading activity in BOX Auction
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Transactions and is available to all BOX
Options Participants; 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
Mini Options fees for the BOX auction
mechanisms are 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 in the BOX
auction mechanisms aims to attract
order flow to BOX, providing greater
potential liquidity within the overall
BOX market and its auction
mechanisms, to the benefit of all BOX
market participants.
Finally, with regard to Mini Options
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 other Participants.
Market Makers have obligations that
other Participants do not. In particular,
they must maintain active two-sided
markets in the Mini Options 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 Mini Options
transaction fees on BOX.
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 5,000 contracts or more [sic]
on BOX represent a fair and equitable
allocation of reasonable dues, fees, and
other charges as they are 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
allow BOX to share its savings with its
Participants in the form of lower tier
rates.
The Exchange believes that the
proposed Market Maker tiered execution
fee for Mini Options is equitable
because it is available to all Market
Makers on an equal basis and provides
discounts that are reasonably related to
the size of the contract (1/10th that of
a standard contract), and the value to an
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exchange’s market quality associated
with higher levels of market activity.
For the reasons listed above, the
Exchange believes it is appropriate that
Market Makers be charged potentially
lower transaction fees for Mini Options
on BOX when they provide greater
volumes of liquidity to the market.
The Exchange also believes it is
reasonable, equitable and not unfairly
discriminatory to combine volume in
standard options and Mini Options to
calculate the tier a Market Maker has
reached because doing so will provide
the Market Maker with an opportunity
to qualify for increased rebates and,
therefore, incentivize Participants to
trade more of such order flow on the
Exchange.
The Exchange believes that the
proposed Mini Options Exchange Fees
will keep BOX competitive with other
exchanges as well as be applied in such
a manner so as to be equitable among all
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
BOX believes that it is reasonable,
equitable and not unfairly
discriminatory to exempt Mini Options
from Liquidity Fees and Credits.
Liquidity fees and credits are intended
to attract order flow to BOX by offering
incentives to all market participants to
submit their orders to BOX, and while
the Exchange believes that Mini Options
fill a need in the Marketplace by making
options overlying highly priced
securities more readily available as an
investing tool and at more affordable
and realistic prices, due to the unique
and novel nature of Mini Options the
Exchange believes it is reasonable to not
provide an incentive to market
participants to submit orders in these
products.
Further, since the five issues that
Mini Options will trade on are among
the most actively traded issues, the
Exchange does not believe that an added
incentive to increase volume in these
issues is needed. In standard contract
transactions BOX collects a fee from
Participants that add liquidity on BOX
and credits another Participant an equal
amount for removing liquidity. Stated
otherwise, the collection of these
liquidity fees does not directly result in
revenue to BOX, but simply allows BOX
to provide the credit incentive to
Participants to attract order flow. The
Exchange believes that it is reasonable
and equitable to exempt Mini Options
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from liquidity fees and credits since
these fees and credits for transactions
offset one another in any particular
transaction.
Further, it is not unfairly
discriminatory as the exemption of Mini
Options from liquidity fees and credits
applies equally to all Participants and
across all account types on the
Exchange. As stated above, BOX
operates within a highly competitive
market in which market participants can
readily direct order flow to any of eight
[sic] other competing venues if they
deem fees at a particular venue to be
excessive. The Exchange believes that
exempting Mini Options from liquidity
fees and credits is reasonable compared
to the similar fees and credits offered by
the other exchanges since liquidity fees
and credits do not directly result in
revenue to BOX.
Routing Fees
BOX believes that applying the
current routing fee structure for routing
customer orders in Mini Options to
other market venues is reasonable,
equitable and not unfairly
discriminatory for the following
reasons. Presently, the Exchange charges
customer accounts $0.50 per contract
executed on away exchanges and
exempts Public Customer accounts from
the routing fee for orders received by
BOX via Directed Order when certain
execution thresholds are met. This fee is
designed to help the Exchange recover
some of the costs it incurs by routing
orders to other exchanges, discourage
potentially abusive and predatory order
routing practices, and incentivize
Participants to seek price improvement
for their Public Customers.
The costs that BOX incurs for routing
orders to an away exchange include
clearance charges imposed by the OCC,
charges from third-party broker dealers
for each order routed to an away market,
and the transaction fees charged by
other exchanges. Unlike some
exchanges that pass these costs directly
on to the broker acting as the agent for
the order which was executed, BOX
only offsets its routing costs by charging
a flat per contract fee. While some
exchanges have proposed lower
transaction fees for Mini Options, the
charges imposed by the OCC and the
third-party broker dealers will remain
fixed regardless of the exercise and
assignment value of the contract. Given
the Exchange’s need to cover the costs
of Participants trading Mini Options, the
Exchange believes it is reasonable to
charge the same fee for routing Mini
Options. Doing so will allow the
Exchange to continue to offset a portion
of its costs attendant with offering
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18645
routing services and avoid sharing those
costs with other Participants who are
not trading Mini Options.
The Exchange notes that Participants
can avoid the Routing Surcharge in
several ways. First, they can manage
their own routing to different options
exchanges, or choose to utilize a myriad
of other routing solutions that are
available to market participants. Lastly,
they can instruct BOX not to route their
orders to away exchanges by designating
them as Fill and Kill (‘‘FAK’’). Given
this ability to avoid the routing fee,
coupled with the fixed third party costs
associated with routing, the Exchange
feels it is reasonable and equitable to
charge the same routing fee for Mini
Options that is charged for standard
option contracts.
Further, the Exchange believes it is
equitable and non-discriminatory to
continue to offer certain Public
Customer Directed Orders an exemption
from the routing fee, in orders for Mini
Options or standard contracts. By
assessing a fee for routing certain orders,
BOX aims to recover its costs in
providing this optional service and
prevent Participants from submitting
orders on BOX to evade other
exchanges’ fees. However, BOX also
wishes to provide incentives to
Participants to seek price improvement
for their Public Customer orders by
entering them into the PIP. The
Exchange believes that providing nonProfessional, Public Customer Directed
Orders an exemption from certain
routing fees is consistent with the long
history in the options markets of such
customers being given preferred
treatment. BOX has already established
the exemption thresholds for Public
Customer Directed Orders and believes
it is appropriate to count Mini Options
transactions toward a Participant’s
monthly executions when determining
if the Participant has met these
thresholds at the end of the month.
Regulatory Fees
Finally, as discussed above, the
Exchange believes that charging the
same ORF for transactions in Mini
Options, is reasonable, equitable and
not unfairly discriminatory since the
costs to the Exchange to process quotes,
orders, trades and the necessary
regulatory surveillance programs and
procedures in Mini Options are the
same as for standard contracts. The ORF
is in place to help the Exchange offset
regulatory expenses and the Exchange’s
cost of supervising and regulating
Participants, including performing
routine surveillances, and policy,
rulemaking, interpretive, and
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enforcement activities remains the same
for Mini Options.
mstockstill on DSK4VPTVN1PROD with NOTICES
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
proposed change is designed to provide
greater specificity and precision within
the Fee Schedule with respect to the
fees that will be applicable to Mini
Options when they begin trading on the
Exchange on March 18, 2013.
The Exchange believes that adopting
fees for Mini Options that are in some
cases the same, in some cases
proportionally lower, and in other cases
exempt from the fees for standard
contracts, strikes the appropriate
balance between fees applicable to
standard contracts versus fees
applicable to Mini Options, and will not
impose a burden on competition among
various market participants on the
Exchange, or between the Exchange and
other exchanges in the listed options
marketplace, not necessary or
appropriate in furtherance of the
purposes of the Act. BOX currently
assesses distinct standard contract
Exchange Fees for different account and
transaction types. The Exchange
believes that applying this segmented
fee structure to Mini Options will result
in these participants being charged
proportionally for their transactions in
Mini Options. In this regard, as Mini
Options are a new product being
introduced into the listed options
marketplace, the Exchange is unable at
this time to absolutely determine the
impact that the fees and rebates
proposed herein will have on trading in
Mini Options. That said, however, the
Exchange believes that the rates
proposed for Mini Options would not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues. In such
an environment, the Exchange must
continually review, and consider
adjusting, its fees and credits to remain
competitive with other exchanges. For
the reasons described above, the
Exchange believes that the proposed
rule change reflects this competitive
environment.
VerDate Mar<15>2010
18:10 Mar 26, 2013
Jkt 229001
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 10
and Rule 19b–4(f)(2) thereunder,11
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BOX–2013–15 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.
All submissions should refer to File
Number SR–BOX–2013–15. 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 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
available publicly. All submissions
should refer to File Number SR–BOX–
2013–15 and should be submitted on or
before April 17, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–07009 Filed 3–26–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69201; File No. SR–ICC–
2013–03]
Self-Regulatory Organizations; ICE
Clear Credit LLC; Notice of Filing of
Proposed Rule Change To Amend
Rules Relating to Recovery and
Resolution Arrangements
March 21, 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 March 7,
2013, ICE Clear Credit LLC (‘‘ICC’’) 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 primarily by ICC.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
12 17
10 15
U.S.C. 78s(b)(3)(A)(ii).
11 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\27MRN1.SGM
27MRN1
]]>Agencies
[Federal Register Volume 78, Number 59 (Wednesday, March 27, 2013)]
[Notices]
[Pages 18642-18646]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-07009]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule To Establish Fees for Mini Options on BOX
March 21, 2013.
Pursuant to Section 19(b)(1) under the Securities Exchange Act of
1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby
given that on March 15, 2013, 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.
---------------------------------------------------------------------------
\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
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule to
establish fees for Mini Options on the BOX Market LLC (``BOX'') options
facility. While changes to the fee schedule pursuant to this proposal
will be effective upon filing, the changes will become operative on
March 18, 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 https://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, Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule for trading on BOX
to establish fees for option contracts overlying 10 shares of a
security (``Mini Options'').
The Exchange represented in its filing with the Securities and
Exchange Commission (``SEC'' or the ``Commission'') to establish Mini
Options that, ``the current Fee Schedule will not apply to the trading
of mini-options contracts. The Exchange will not commence trading of
mini-options contracts until specific fees for mini-options contracts
trading have been filed with the Commission.'' \5\ As the Exchange
intends to begin trading Mini Options on March 18, 2013 it is
submitting this filing to describe the transaction fees that will be
applicable to the trading of Mini Options.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 68771 (January 30,
2013), 79 [sic] FR 8208 (February 5, 2013) (SR-BOX-2013-07).
---------------------------------------------------------------------------
Mini Options have a smaller exercise and assignment value due to
the reduced number of shares they deliver as compared to standard
option contracts. Despite the smaller exercise and assignment value of
Mini Options, the cost to the Exchange to process quotes and orders in
Mini Options, perform regulatory surveillance and retain quotes and
orders for archival purposes is the same as for a standard contract.
This leaves the Exchange in a position of trying to strike the right
balance of fees applicable to Mini Options. The Exchange, therefore,
believes that adopting fees for Mini Options that are in some cases the
same, in some cases proportionally lower, and in other cases exempt
from the fees for standard contracts, is appropriate, reasonable, not
unfairly discriminatory
[[Page 18643]]
and not burdensome on competition between participants, or between the
Exchange and other exchanges in the listed options market place. The
Exchange proposes to implement these changes on March 18, 2013.
The following is a discussion of the existing Fee Schedule as it
relates to the treatment of Mini Options as compared to standard option
contracts.
Section I. Exchange Fees
The Exchange proposes to assess Mini Options transactions 1/10th of
the applicable standard contract Exchange Fee. Currently the Exchange
assesses Exchange Fees based on transaction types and account types.
Specifically, the Exchange has distinct 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 Customer, Broker-Dealer, and
Market Maker (see BOX Rule 100 Series for definitions of each).
For Auction Transactions in Mini Options, the Exchange proposes to
assess $0.015 per contract fee for Public Customer Improvement Orders
in the PIP and Responses in the Solicitation and Facilitation
mechanisms. For Non-Auction Transactions in Mini Options, the Exchange
proposes to assess a $0.007 fee for Public Customers. For Professional
Customers and Broker Dealers, the Exchange proposes to assess a $0.035
fee for Mini Options Auction Transactions in PIP Orders or Agency
Orders, Improvement Orders in the PIP, and Responses in the
Solicitation or Facilitation Auction Mechanisms. For Non-Auction
Transactions in Mini Options, the Exchange proposes to assess a $0.040
fee for Professional Customers and Broker Dealers.
For the remaining types of Exchange Fees that are based upon a
Participant's monthly average daily volume (``ADV'') in Auction
Transactions and Non-Auction Transactions, the Exchange proposes to
count Mini Options the same as a standard contact (i.e., one contract
in a Mini Options will equal one standard option contract). At each ADV
threshold, the Exchange proposes to charge Participants a per contract
fee in Mini Options that is 1/10th the amount charged for standard
contracts.
For example, Mini Options Exchange Fees for Initiating Participants
in Auction Transactions set forth in Section I.A. of the BOX Fee
Schedule will be as follows:
------------------------------------------------------------------------
Per contract
Initiating participant monthly ADV in auction fee in mini
transactions options (all
account types)
------------------------------------------------------------------------
150,001 contracts and greater........................... $0.010
100,001 contracts to 150,000 contracts.................. 0.012
50,001 contracts to 100,000 contracts................... 0.015
20,001 contracts to 50,000 contracts.................... 0.017
1 contract to 20,000 contracts [sic].................... 0.025 [sic]
------------------------------------------------------------------------
The tiered, per contract fee for Market Makers set forth in Section
I.B. of the BOX Fee Schedule will also be adjusted for Mini Options as
follows:
------------------------------------------------------------------------
Per contract
Market Maker monthly ADV in non-auction transactions fee in mini
options
------------------------------------------------------------------------
150,001 contracts and greater........................... $0.013
100,001 contracts to 150,000 contracts.................. 0.016
50,001 contracts to 100,000 contracts................... 0.018
10,001 contracts to 50,000 contracts.................... 0.020 [sic]
1 contract to 10,000 contracts [sic].................... 0.025 [sic]
------------------------------------------------------------------------
Section II. Liquidity Fees and Credits
The Exchange currently assesses liquidity fees and credits for all
options classes traded on BOX (unless explicitly stated otherwise) that
are applied in addition to any applicable Exchange Fees described
above. The Exchange proposes to amend Section II.D (Exempt
Transactions) to state that Mini Options will also be considered exempt
from all liquidity fees and credits.
Section III. Eligible Orders Routed to an Away Exchange
All fees on eligible orders routed to an away exchange will
continue to apply to Mini Options. The Exchange currently charges
customer accounts \6\ $0.50 per contract executed on away exchanges and
exempts Public Customer accounts from the routing fee for orders
received by BOX via the Directed Order provided that: (A) 33% or more
of a Participant's Public Customer Directed Orders received during the
month are executed through the BOX PIP, and (B) less than 45% of a
Participant's Directed Orders received are routed to and executed on an
away exchange during the month. The purpose of this structure is to
provide an incentive to Participants to submit their customer orders
for execution on BOX, help the Exchange recover some of the costs
incurred in providing routing services to Participants, and discourages
potentially abusive and predatory order routing practices to evade fees
on other exchanges. The Exchange 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. Equally applying these
fees to Mini Options will allow the Exchange to continue to offset the
costs it incurs by routing orders to an away exchange. Participants can
still ensure that these fees are not incurred by choosing to instruct
BOX not to route their customer orders.
---------------------------------------------------------------------------
\6\ The term Customer accounts includes both Professional
Customers and Public Customers.
---------------------------------------------------------------------------
Furthermore, for purposes of determining if Non-Professional,
Public Customer Directed Orders can qualify for the Public Customer
Directed Order exemption, the Exchange proposes to count [sic] the same
as standard contracts when calculating the percentage of contracts the
Public Customer has executed on BOX compared to the percentage routed
and executed away.
Section IV. Regulatory Fees
Presently the Exchange charges an Options Regulatory Fee (``ORF'')
of $0.0030 per contract. The Options Regulatory Fee is assessed on each
BOX Options Participant for all options transactions executed or
cleared by the BOX Options Participant that are cleared by The Options
Clearing Corporation (OCC) in the customer range regardless of the
exchange on which the transaction occurs. The Exchange is proposing to
charge the same rate for transactions in Mini Options, since the costs
to the Exchange to process quotes, orders, trades and the necessary
regulatory surveillance programs and procedures in Mini Options are the
same as for standard contracts. As such, the Exchange feels that it is
appropriate to charge the ORF at the same rate as the standard
contract.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\7\ in general, and Section
6(b)(4) of the Act,\8\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees, and other charges among
BOX Participants and other persons using its facilities and does not
unfairly
[[Page 18644]]
discriminate between customers, issuers, brokers or dealers.
---------------------------------------------------------------------------
\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Exchange Fees
The Exchange has determined to charge fees for orders in Mini
Options at a rate that is 1/10th the rate of fees the Exchange
currently charges for trading in standard options. The Exchange
believes the proposed fees and rebates are reasonable and equitable in
light of the fact that while Mini Options do have a smaller exercise
and assignment value, specifically 1/10th that of a standard option
contract, the cost to the Exchange to process quotes and orders in Mini
Options is the same as for a standard contract. Furthermore, Mini
Options have been approved [sic] for trading at several other competing
exchanges and market participants can readily direct order flow to any
these venues if they deem the Mini Options fees to be excessive.\9\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release Nos. 67948 (September
28, 2012), 77 FR 60735 (October 4, 2012) (SR-NYSE-Arca-2012-64) (SR-
ISE-2012-58); No. 68132 (November 1, 2012), 77 FR 66904 (November 7,
2012) (SR-Phlx-2012-126); No. 68656 (January 15, 2013), 78 FR 4526
(January 22, 2013) (SR-CBOE-2013-001); No. 69018 (March 1, 2013), 78
FR 15090 (March 8, 2013) (SR-BATS-2013-013); No. 68720 (January 24,
2013), 78 FR 6382 (January 30, 2013) (SR-NASDAQ-2013-011); No. 68719
(January 24, 2013), 78 FR 6391 (January 30, 2013) (SR-BX-2013-006).
---------------------------------------------------------------------------
The Exchange believes it is equitable and not unfairly
discriminatory that Public Customers be charged lower fees in both
Auction Transactions in Mini Options and non-Auction Transactions in
Mini Options 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 in Mini
Options 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 reduction in
Mini Options fees will attract Public Customer order flow to BOX.
Moreover, the Exchange believes that assessing the same per
executed contract fee for Professionals and Broker-Dealers in both
Auction Transactions in Mini Options and non-Auction Transactions in
Mini Options are reasonable, equitable and not unfairly discriminatory
because these types of Participants are more sophisticated and have
higher levels of order flow activity and system usage. This level of
trading activity draws on a greater amount of BOX system resources than
that of Public Customers, and thus, greater ongoing BOX operational
costs. 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 Professionals and Broker-Dealers a market competitive fee.
As stated above, BOX operates within a highly competitive business. The
proposed fees charged to Professionals and Broker-Dealers in Mini
Options have been designed to be comparable to the fees that such
accounts would be charged at competing venues. Further, the Exchange
believes that charging Professionals and Broker-Dealers the same fee
for all transactions in Mini Options [sic] not unfairly discriminatory
as the fees will apply to all Professionals and Broker-Dealers equally.
Professionals and Broker-Dealers remain free to change the manner in
which they access BOX.
The Exchange believes its proposal to include Mini Options volume
in the ADV tiers for Initiating Participants in Auction Transactions is
reasonable, equitable and not unfairly discriminatory. The Exchange
believes that providing a volume discount to Options Participants that
initiate auctions on Customer orders incentivizes these 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 allows 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 allow BOX to share its savings with its
Participants in the form of lower tier rates.
Further, the Exchange believes it is equitable and non-
discriminatory to provide Initiating Participants a tiered fee
structure related to their participation in Auction Transactions. As
stated above, the Exchange believes assessing 1/10th of the standard
contract fee is reasonable and equitable in light of the fact that Mini
Options do have a smaller exercise and assignment value, specifically
1/10th that of a standard option contract. The proposed fee structure
for Mini Options is related to trading activity in BOX Auction
Transactions and is available to all BOX Options Participants; 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 Mini Options
fees for the BOX auction mechanisms are 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 in the BOX auction mechanisms aims to attract order flow
to BOX, providing greater potential liquidity within the overall BOX
market and its auction mechanisms, to the benefit of all BOX market
participants.
Finally, with regard to Mini Options 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 other
Participants. Market Makers have obligations that other Participants do
not. In particular, they must maintain active two-sided markets in the
Mini Options 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 Mini Options
transaction fees on BOX.
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 5,000
contracts or more [sic] on BOX represent a fair and equitable
allocation of reasonable dues, fees, and other charges as they are
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 allow BOX to share its savings with
its Participants in the form of lower tier rates.
The Exchange believes that the proposed Market Maker tiered
execution fee for Mini Options is equitable because it is available to
all Market Makers on an equal basis and provides discounts that are
reasonably related to the size of the contract (1/10th that of a
standard contract), and the value to an
[[Page 18645]]
exchange's market quality associated with higher levels of market
activity. For the reasons listed above, the Exchange believes it is
appropriate that Market Makers be charged potentially lower transaction
fees for Mini Options on BOX when they provide greater volumes of
liquidity to the market.
The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to combine volume in standard options and Mini
Options to calculate the tier a Market Maker has reached because doing
so will provide the Market Maker with an opportunity to qualify for
increased rebates and, therefore, incentivize Participants to trade
more of such order flow on the Exchange.
The Exchange believes that the proposed Mini Options Exchange Fees
will keep BOX competitive with other exchanges as well as be applied in
such a manner so as to be equitable among all 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
BOX believes that it is reasonable, equitable and not unfairly
discriminatory to exempt Mini Options from Liquidity Fees and Credits.
Liquidity fees and credits are intended to attract order flow to BOX by
offering incentives to all market participants to submit their orders
to BOX, and while the Exchange believes that Mini Options fill a need
in the Marketplace by making options overlying highly priced securities
more readily available as an investing tool and at more affordable and
realistic prices, due to the unique and novel nature of Mini Options
the Exchange believes it is reasonable to not provide an incentive to
market participants to submit orders in these products.
Further, since the five issues that Mini Options will trade on are
among the most actively traded issues, the Exchange does not believe
that an added incentive to increase volume in these issues is needed.
In standard contract transactions BOX collects a fee from Participants
that add liquidity on BOX and credits another Participant an equal
amount for removing liquidity. Stated otherwise, the collection of
these liquidity fees does not directly result in revenue to BOX, but
simply allows BOX to provide the credit incentive to Participants to
attract order flow. The Exchange believes that it is reasonable and
equitable to exempt Mini Options from liquidity fees and credits since
these fees and credits for transactions offset one another in any
particular transaction.
Further, it is not unfairly discriminatory as the exemption of Mini
Options from liquidity fees and credits applies equally to all
Participants and across all account types on the Exchange. As stated
above, BOX operates within a highly competitive market in which market
participants can readily direct order flow to any of eight [sic] other
competing venues if they deem fees at a particular venue to be
excessive. The Exchange believes that exempting Mini Options from
liquidity fees and credits is reasonable compared to the similar fees
and credits offered by the other exchanges since liquidity fees and
credits do not directly result in revenue to BOX.
Routing Fees
BOX believes that applying the current routing fee structure for
routing customer orders in Mini Options to other market venues is
reasonable, equitable and not unfairly discriminatory for the following
reasons. Presently, the Exchange charges customer accounts $0.50 per
contract executed on away exchanges and exempts Public Customer
accounts from the routing fee for orders received by BOX via Directed
Order when certain execution thresholds are met. This fee is designed
to help the Exchange recover some of the costs it incurs by routing
orders to other exchanges, discourage potentially abusive and predatory
order routing practices, and incentivize Participants to seek price
improvement for their Public Customers.
The costs that BOX incurs for routing orders to an away exchange
include clearance charges imposed by the OCC, charges from third-party
broker dealers for each order routed to an away market, and the
transaction fees charged by other exchanges. Unlike some exchanges that
pass these costs directly on to the broker acting as the agent for the
order which was executed, BOX only offsets its routing costs by
charging a flat per contract fee. While some exchanges have proposed
lower transaction fees for Mini Options, the charges imposed by the OCC
and the third-party broker dealers will remain fixed regardless of the
exercise and assignment value of the contract. Given the Exchange's
need to cover the costs of Participants trading Mini Options, the
Exchange believes it is reasonable to charge the same fee for routing
Mini Options. Doing so will allow the Exchange to continue to offset a
portion of its costs attendant with offering routing services and avoid
sharing those costs with other Participants who are not trading Mini
Options.
The Exchange notes that Participants can avoid the Routing
Surcharge in several ways. First, they can manage their own routing to
different options exchanges, or choose to utilize a myriad of other
routing solutions that are available to market participants. Lastly,
they can instruct BOX not to route their orders to away exchanges by
designating them as Fill and Kill (``FAK''). Given this ability to
avoid the routing fee, coupled with the fixed third party costs
associated with routing, the Exchange feels it is reasonable and
equitable to charge the same routing fee for Mini Options that is
charged for standard option contracts.
Further, the Exchange believes it is equitable and non-
discriminatory to continue to offer certain Public Customer Directed
Orders an exemption from the routing fee, in orders for Mini Options or
standard contracts. By assessing a fee for routing certain orders, BOX
aims to recover its costs in providing this optional service and
prevent Participants from submitting orders on BOX to evade other
exchanges' fees. However, BOX also wishes to provide incentives to
Participants to seek price improvement for their Public Customer orders
by entering them into the PIP. The Exchange believes that providing
non-Professional, Public Customer Directed Orders an exemption from
certain routing fees is consistent with the long history in the options
markets of such customers being given preferred treatment. BOX has
already established the exemption thresholds for Public Customer
Directed Orders and believes it is appropriate to count Mini Options
transactions toward a Participant's monthly executions when determining
if the Participant has met these thresholds at the end of the month.
Regulatory Fees
Finally, as discussed above, the Exchange believes that charging
the same ORF for transactions in Mini Options, is reasonable, equitable
and not unfairly discriminatory since the costs to the Exchange to
process quotes, orders, trades and the necessary regulatory
surveillance programs and procedures in Mini Options are the same as
for standard contracts. The ORF is in place to help the Exchange offset
regulatory expenses and the Exchange's cost of supervising and
regulating Participants, including performing routine surveillances,
and policy, rulemaking, interpretive, and
[[Page 18646]]
enforcement activities remains the same for Mini Options.
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 proposed change is designed
to provide greater specificity and precision within the Fee Schedule
with respect to the fees that will be applicable to Mini Options when
they begin trading on the Exchange on March 18, 2013.
The Exchange believes that adopting fees for Mini Options that are
in some cases the same, in some cases proportionally lower, and in
other cases exempt from the fees for standard contracts, strikes the
appropriate balance between fees applicable to standard contracts
versus fees applicable to Mini Options, and will not impose a burden on
competition among various market participants on the Exchange, or
between the Exchange and other exchanges in the listed options
marketplace, not necessary or appropriate in furtherance of the
purposes of the Act. BOX currently assesses distinct standard contract
Exchange Fees for different account and transaction types. The Exchange
believes that applying this segmented fee structure to Mini Options
will result in these participants being charged proportionally for
their transactions in Mini Options. In this regard, as Mini Options are
a new product being introduced into the listed options marketplace, the
Exchange is unable at this time to absolutely determine the impact that
the fees and rebates proposed herein will have on trading in Mini
Options. That said, however, the Exchange believes that the rates
proposed for Mini Options would not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must continually
review, and consider adjusting, its fees and credits to remain
competitive with other exchanges. For the reasons described above, the
Exchange believes that the proposed rule change reflects this
competitive environment.
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 \10\ and Rule 19b-4(f)(2)
thereunder,\11\ because it establishes or changes a due, fee, or other
charge applicable only to a member.
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\10\ 15 U.S.C. 78s(b)(3)(A)(ii).
\11\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BOX-2013-15 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.
All submissions should refer to File Number SR-BOX-2013-15. 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 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 available publicly. All
submissions should refer to File Number SR-BOX-2013-15 and should be
submitted on or before April 17, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07009 Filed 3-26-13; 8:45 am]
BILLING CODE 8011-01-P
