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]

Download as PDF 18642 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 (http://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. mstockstill on DSK4VPTVN1PROD with NOTICES Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. 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 (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, 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, VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 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 http:// 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). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 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). E:\FR\FM\27MRN1.SGM 27MRN1 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices 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. mstockstill on DSK4VPTVN1PROD with NOTICES 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: VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 18643 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. PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 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 E:\FR\FM\27MRN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(4). 27MRN1 18644 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices discriminate between customers, issuers, brokers or dealers. mstockstill on DSK4VPTVN1PROD with NOTICES 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). VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 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 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 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 E:\FR\FM\27MRN1.SGM 27MRN1 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES 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 VerDate Mar<15>2010 18:10 Mar 26, 2013 Jkt 229001 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 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 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 E:\FR\FM\27MRN1.SGM 27MRN1 18646 Federal Register / Vol. 78, No. 59 / Wednesday, March 27, 2013 / Notices 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 (http://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 (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 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]


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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.
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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 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 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, 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.
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    \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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \11\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend 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-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 (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 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\
---------------------------------------------------------------------------

    \12\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-07009 Filed 3-26-13; 8:45 am]
BILLING CODE 8011-01-P