Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Make Permanent the Pilot Program of Liquidity Fees and Credits for Certain Transactions in the BOX Price Improvement Period, 57191-57195 [2013-22509]
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Federal Register / Vol. 78, No. 180 / Tuesday, September 17, 2013 / Notices
the Exchange, agreed on adding new
LEAPS expiring in January 2016 on
September 16, 2013, for those issues
that are on the January expiration cycle.
The Exchange further represents that
this date was published in 2012 and has
been relied upon across the industry.
Since the Exchange’s Rule 6.1(17)
currently defines ‘‘expiration date’’ as
the ‘‘Saturday immediately following
the third Friday of the expiration
month,’’ the Exchange will not be able
to list monthly option contracts expiring
on any day other than a Saturday until
this proposal becomes effective. As
such, the Exchange represents that it
will be at a significant competitive
disadvantage, and it requests the waiver
to facilitate and coordinate with the
listing of the 2016 LEAPS on September
16, 2013. Additionally, the Exchange
notes that no other provision of the
proposal will have an immediate impact
on market participants because no
monthly options expiring in the next 30
days have a Friday expiration date.
Based on the Exchange representations
above, and since the proposal is based,
in part, on a proposal submitted by the
OCC and approved by the
Commission,19 the Commission waives
the 30-day operative delay requirement
and designates the proposed rule change
as operative upon filing.20
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 21 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
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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–
NYSEARCA–2013–88 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEARCA–2013–88. 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 Section, 100 F Street NE.,
Washington, DC 20549–1090. Copies of
the filing will also be available for
inspection and copying at the NYSE’s
principal office and on its Internet Web
site at www.nyse.com. 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–NYSEARCA–2013–88 and
should be submitted on or before
October 8, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–22512 Filed 9–16–13; 8:45 am]
BILLING CODE 8011–01–P
19 See
supra note 4.
purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
21 15 U.S.C. 78s(b)(2)(B).
20 For
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70369; File No. SR–BOX–
2013–44]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule To Make Permanent
the Pilot Program of Liquidity Fees and
Credits for Certain Transactions in the
BOX Price Improvement Period
September 11, 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 August
30, 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 amend
the Fee Schedule [sic] to make
permanent the pilot program of
Liquidity Fees and Credits for certain
transactions in the BOX Price
Improvement Period (‘‘PIP’’) on the BOX
Market LLC (‘‘BOX’’) options facility.
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
22 17
PO 00000
CFR 200.30–3(a)(12).
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Federal Register / Vol. 78, No. 180 / Tuesday, September 17, 2013 / Notices
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 purpose of the proposed rule
change is to amend the BOX Fee
Schedule to make permanent the pilot
program of Liquidity Fees and Credits
for certain transactions in the BOX PIP
or (the ‘‘Program’’). The Program was
approved on a pilot basis in February
2012 and is scheduled to expire on
August 31, 2013.5 The Exchange
believes the data collected on PIP
transactions over the past two years
demonstrates that the Program does not
place an undue burden on competition
and proposes to make the applicable
fees and credits free from any pilot
restrictions.
Under the Program, transactions in
the BOX PIP are assessed either a fee for
adding liquidity or provided a credit for
removing liquidity regardless of account
type. PIP Orders (i.e., the agency orders
opposite the Primary Improvement
Order 6) receive the ‘‘removal’’ credit
and Improvement Orders 7 are charged
the ‘‘add’’ fee. In particular, the Program
permits a fee for adding liquidity or a
credit for removing liquidity of $0.75,
regardless of account type, for PIP
transactions where the minimum price
variation is greater than $0.01 (i.e., all
non-Penny Pilot Classes, and Penny
Pilot Classes where the trade price is
equal to or greater than $3.00, excluding
QQQ, SPY, and IWM).8 The liquidity
tkelley on DSK3SPTVN1PROD with NOTICES
5 See
Securities Exchange Act Release Nos. 66278
(January 30, 2012), 77 FR 5590 (February 3, 2012)
Commission Order Granting Accelerated Approval
of the BOX Credits and Fees for PIP Transactions
on a pilot basis (SR–BX–2011–046), 66979 (May 14,
2012), 77 FR 29740 (May 18, 2012) (Notice of Filing
and Immediate Effectiveness to adopt the Fee
Schedule for trading on BOX which included the
Program) (SR–BOX–2012–002), and 69054 (March
7, 2013), 78 FR 16025(March 13, 2013) (Notice of
Filing and Immediate Effectiveness of Proposed
Rule Change To Amend the Fee Schedule for
Trading on BOX) (SR–BOX–2013–09).
6 A Primary Improvement Order is the matching
contra order submitted to the PIP on the opposite
side of an agency order.
7 An Improvement Order is a response to a PIP
auction. An Unrelated Order that is not
immediately marketable will be charged as an
Improvement Order when it executes against a PIP
Order.
8 The Exchange notes that the Program also
includes a fee for adding liquidity or a credit for
removing liquidity of $0.30, regardless of account
type, for PIP transactions where the minimum price
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fees and credits are in addition to any
applicable Exchange Fees as described
in Section I of the Fee Schedule.
During the pilot period the Exchange
has submitted to the Commission, and
made publicly available on the
Exchange Web site, monthly reports
containing statistics on percent and
amount of price improvement, the
number of responders to a PIP auction,
and the retention rates of Initiating
Participants and those market makers
who received PIP directed orders.
Specifically, each report contains the
following PIP transaction data in series
traded in penny increments compared
to series traded in nickel increments,
subdivided by when BOX is at the
NBBO and when BOX is not at the
NBBO, including: (1) Volume by
number of contracts traded; (2) number
of contracts executed by the Initiating
Participant as compared to others
(‘‘retention rate’’); (3) percentage of
contracts receiving price improvement
when the Initiating Participant is the
contra party and when others are the
contra party; (4) average number of
responders in the PIP; (5) average price
improvement amount when the
Initiating Participant is the contra party;
(6) average price improvement amount
when others are the contra party; and (7)
percentage of contracts receiving price
improvement greater than $0.01, $0.02
and $0.03 when the Initiating
Participant is the contra party and when
others are the contra party.9
BOX provided these reports so the
Commission could assess the impact of
the Program on the competitiveness of
the PIP and the extent of price
improvement obtained for customers.
Exhibit 3 to the Form 19b–4 contains
PIP transaction data sets from June 2011
through July 2013.10 The Exchange has
variation is $0.01 (Penny Pilot classes where trade
price is less than $3.00, and all series in QQQ, SPY
& IWM).
9 In June 2013 the Exchange posted revised
reports for November 2011 through April 2013.
10 The Exchange believes the data gathered over
this time period adequately represents the impact
of the Program. While fees and credits applicable
under the Program first went into effect on August
1, 2011, the Program was suspended by the
Commission on September 13, 2011. The Exchange
then filed a notice of intention to petition for review
on September 20, 2011, which triggered an
automatic stay of the suspension and the previous
fee schedule was reinstated. On October 19, 2011,
the Commission denied the Exchange’s petition and
the applicable fees and credits were once again
suspended. The Commission approved the
proposed fee change on a pilot basis on January 30,
2012 and the Program has been in effect on the
Exchange since February 1, 2012. See Securities
Exchange Commission Release Nos. 65330
(September 13, 2011), 76 FR 58065, 58066
(September 19, 2011) (SR–BX–2011–046)
(Suspension of and Order Instituting Proceedings
To Determine Whether To Approve or Disapprove
a Proposed Rule Change To Amend the BOX Fee
PO 00000
Frm 00066
Fmt 4703
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evaluated these reports to determine the
impact of the Program on competition
and price improvement, and believes
the data confirms that the Program has
not placed an undue burden on
competition or lessened the amount of
price improvement in the aggregate for
customers in the PIP.11
Overall, the Exchange believes that in
the aggregate, the long term data trends
demonstrate there has not been a
decline in market quality. BOX’s PIP
auction continues to provide significant
opportunities for price improvement
and the data provided by BOX does not
suggest any significant adverse impact
of the Program on the competitiveness
of the PIP auction or the extent of price
improvement for orders executed in the
PIP. Instead, the Exchange believes the
Program has been successful at
encouraging Participants to submit their
customer orders to the PIP and allowing
those orders the opportunity to benefit
from its potential price improvement.
Before discussing the general trends
below, the Exchange acknowledges that
certain data points have seen significant
fluctuation during the course of the
Program. These variations are a result of
conditions which the Exchange has no
control over, such as Participant
behavior changes, competitor pricing
changes and overall market volatility.
For example, market volatility creates
wider spreads and can lead to
significant growth in price
improvement. Similarly, a change in
Participant behavior can also have a
considerable impact on specific data
points in these reports.
Since the Program went into effect in
February 2012, 12 the Exchange has
focused its analysis on the average data
from two three-month periods; one
before the Program began (November
2011 through January 2012) and one
that reflects the most recent impact of
the Program (May 2013 through July
2013). The Exchange believes that using
these two periods offers the best
comparison of the PIP data because the
first period reveals PIP data trends from
when the Program was not yet in place,
compared directly with the most recent
PIP data trends. Additionally, averaging
the data over a three-month period
Schedule With Respect to Credits and Fees for
Transactions in the BOX Price Improvement
Period); and 66278 (January 30, 2012), 77 FR 5590
(February 3, 2012) (SR–BX–2011–46) (‘‘Approval
Order’’).
11 The Commission released a memorandum with
graphical representations of the BOX PIP data,
which match the reports provided by the Exchange
and referenced in this filing. See Memorandum on
File No. SR–BOX–2013–09 from August, 16, 2013;
https://www.sec.gov/rules/sro/box/2012/box-2013–
09–2012–002-pipmemo.pdf.
12 See supra, note 10 [sic].
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tkelley on DSK3SPTVN1PROD with NOTICES
helps to negate any of the significant
fluctuations discussed in the preceding
paragraph.
A key indicator of competition is the
average number of responders to the PIP
auction. One of the central concerns
expressed by commenters at the outset
of the Program was that the increased
fees and credits would burden
competition by effectively barring
certain participants from competing
with initiators.13 Instead of declining, as
predicted in the comment letters, the
average number of responders has risen
throughout the length of the Program.
From November 2011 through January
2012 the average number of responders
for PIP transactions when BOX was at
the NBBO was 1.63 for penny classes
and 2.41 for non-penny classes, and
when BOX was not at the NBBO the
average number of responders was 1.53
for penny classes and 2.21 for nonpenny classes. From May 2013 through
July 2013, the same data points rose to
3.14 and 4.05 when BOX was at the
NBBO and 2.24 and 2.86 when BOX was
not at the NBBO. This growth is also
clear in the graphical representations
created by the Commission based on the
BOX PIP data.14 The Exchange believes
this growth proves that the fees and
credits assessed under the Program are
not prohibitively high and therefore do
not prevent responders from competing
in the auction with the firm that
submitted the original PIP order.
Similarly, the number of PIP
transactions in non-penny classes, the
class affected by the Program, has
continued to grow. From November
2011 through January 2012, the monthly
volume averaged approximately 650,000
contracts when BOX was at the NBBO
and 550,000 when BOX was not at the
NBBO. From May 2013 through July
2013, the same data points averaged
850,000 contracts when BOX was at the
NBBO and 900,000 contracts when BOX
was not at the NBBO.
The reports also showed growth in the
average percentage of orders receiving
price improvement when BOX was at
the NBBO when compared to the total
monthly trade volume on BOX.15 In fact,
in the last three months of the Program
13 See Letters to Elizabeth Murphy, Secretary,
Commission, from John C. Nagel, Managing Director
and General Counsel, Citadel Securities LLC, dated
August 12, 2011 (‘‘Citadel Letter’’); Andrew
Stevens, Legal Counsel, IMC Financial Markets
dated August 15, 2011 (‘‘IMC Letter’’); Michael J.
Simon, Secretary, ISE, dated August 22, 2011 (‘‘ISE
Letter), and Christopher Nagy, Managing Director
Order Strategy, TD Ameritrade Inc., dated
September 12, 2011 (‘‘TD Ameritrade Letter’’).
14 See supra, note 10 at page 9.
15 BOX trade volume can be found on the BOX
Web site: https://boxexchange.com/box-tradevolumes/.
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17:05 Sep 16, 2013
Jkt 229001
(May 2013 through July 2013) more than
75% of all orders on non-penny series
have received at least some
improvement. From November 2011
through January 2012, this number
never rose above 56% and averaged
53%. Clearly the Program did not make
it more challenging for market
participants to offer price improvement
in the PIP auctions, as some critics
argued in their comment letters.16
Finally, while the overall average
price improvement, when improved, in
non-penny classes fell slightly
throughout the Program, most of this
decline came from orders that were
improved by the Initiator. From
November 2011 through January 2012,
the average price improvement of nonpenny PIP transactions was $0.037 for
those orders receiving improvement. In
comparable data from May 2013 through
July 2013, the average price
improvement for those orders receiving
improvement fell to $0.029. However,
this same data indicator increased for
orders improved by Directed NonAffiliate responders, both when BOX
was at the NBBO and not at the NBBO.
This number also rose for ‘‘Other’’
responders when BOX was not at the
NBBO. The Exchange believes this data
demonstrates that the Program did not
have an adverse impact on the extent of
price improvement by making it
‘‘economically prohibitive for anyone
other than the initiator to respond’’ to
the PIP Auction.17
Another key indicator of competition,
the average retention rate, measures the
retention of the PIP order by the PIP
initiator. While this data point has
increased over the life of the Program,
the average retention rate in non-penny
classes was 38% from November 2011
through January 2012, and 51% from
May 2013 through July 2013; the growth
has centered in non-penny transactions
where BOX was at the NBBO and
retention rates where BOX was not at
the NBBO have remained relatively
inline. The Exchange believes this
uptick was a result of the reduced
penny transaction volume in the PIP,
where lower volume signals fewer
participants in the PIP process, and does
not indicate that the Program gives
Initiators a competitive edge to retain a
greater percentage of their orders.
For the reasons cited above, the
Exchange believes the data confirms
that competition did not decrease as a
result of the additional fees and credits
placed on non-penny PIP transactions.
In fact, the reports show that in the
aggregate, competition has remained
16 See
17 See
PO 00000
supra, note 13.
Citadel Letter, supra note 13 at page 2.
Frm 00067
Fmt 4703
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57193
inline and even grown throughout the
length of the Program and there has
been no adverse impact on price
improvement.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Act,18 in general, and Section 6(b)(4) of
the Act,19 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees, and other charges
among BOX Options Participants and
other persons using its facilities. The
Exchange also believes that the proposal
is consistent with Section 6(b)(5) of the
Act,20 which, among other things,
requires that rules of a national
securities exchange be designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, to protect investors and the
public interest, and to not permit unfair
discrimination between customers,
issuers, brokers, or dealers, and Section
6(b)(8) of the Act,21 which requires that
the rules of a national securities
exchange not impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. In particular, the
proposed change will result in
permanent fees and credits for PIP
transactions, which will in turn give
BOX Participants greater certainty with
regard to the potential fees and credits
they will be assessed when participating
in the PIP.
As stated in previous filings 22, the
Exchange believes that it is reasonable
and equitable to provide the proposed
credit to any Participant that removes
liquidity from the BOX PIP. The
Exchange further believes these credits
will continue to attract order flow to
BOX, resulting in greater liquidity to the
benefit of all market participants. The
Exchange believes that the proposed
fees for adding liquidity and credits for
removing liquidity are equitable and not
unfairly discriminatory because such
fees and credits apply uniformly to all
categories of Participants, across all
account types.
Further, the Exchange believes the
proposed fees for PIP transactions to be
reasonable. BOX operates within a
highly competitive market in which
market participants can readily direct
order flow to any of several other
18 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
20 15 U.S.C. 78f(b)(5).
21 15 U.S.C. 78f(b)(8).
22 See supra, note 5.
19 15
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tkelley on DSK3SPTVN1PROD with NOTICES
competing venues if they deem fee
levels at a particular venue to be
excessive. The BOX credits and fees for
PIP transactions are intended to attract
order flow to BOX by offering incentives
to all market participants to submit their
orders to the PIP for potential price
improvement. BOX notes that the fees
collected will not necessarily result in
additional revenue to BOX, but will
simply allow BOX to provide the credit
incentive to Participants to attract
additional order flow to the PIP. BOX
believes it is appropriate to provide
incentives to market participants to use
PIP, resulting in benefit to customers
through potential price improvement,
and to all market participants from
greater liquidity on BOX.
In particular, the proposed change
will allow the Exchange to continue the
Program free of any pilot conditions
which the Exchange believes are no
longer necessary. The Program was put
in place to determine the full impact of
the liquidity fees and credits on
competitiveness and price improvement
in the PIP. The applicable fees and
credits have been in place for eighteen
months,23 and there is no evidence to
suggest that the Program has had any of
the negative effects on the PIP that were
predicted in the comment letters.24 As
such, removal of the pilot restrictions is
the logical next step.
In conclusion, the Exchange believes
the data provided over the length of the
Program demonstrates that there has
been no adverse impact on the
competitiveness of the PIP auction or
the extent of price improvement in
series that trade in non-penny
increments. As such, the Exchange
believes the proposed rule change is
consistent with the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
While some have argued that the
Program creates a disparity between the
fees an Initiating Participant pays and
the fees a competitive responder pays in
the PIP that may make the Program
discriminatory and an undue burden on
competition, the Exchange believes the
Program provides incentives for market
participants to submit customer order
flow to BOX and thus, creates a greater
opportunity for retail customers to
receive additional price improvement.
The PIP provides the opportunity for
market participants to compete for
customer orders, and has no limitations
regarding the number of Market Makers,
Options Participants that are not Market
Makers, and customers that can
23 See
24 See
supra, note 5
supra, note 13.
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participate and compete for orders in
the PIP. BOX asserts that Participants
are actively competing for customer
orders, which is clearly supported by
the simple fact that price improvement
has continued to occur in the PIP
through the length of the Program.
BOX notes that its market model and
fees are generally intended to benefit
retail customers by providing incentives
for Participants to submit their customer
order flow to BOX, and to the PIP in
particular. BOX makes a substantial
amount of PIP-related data and statistics
available to the public on its Web site
www.boxexchange.com. Specifically,
daily PIP volumes and average price
improvement are available at: https://
boxexchange.com/box-trade-volumes/;
and BOX execution quality reports at:
https://boxexchange.com/executionquality-report/. The data indisputably
supports that the PIP provides price
improvement for customer orders.
Additionally, the Exchange believes
the Program is more transparent than
payment for order flow (‘‘PFOF’’)
arrangements and notes its belief that
the credit to remove liquidity on BOX
is generally less than what firms receive
through PFOF.
For the reasons stated above, the
Exchange does not believe that the
proposed rule change will impose any
burden on competition either among
BOX Participants, or among the various
options exchanges, which is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act 25
and Rule 19b–4(f)(2) thereunder,26
because it establishes or changes a due,
or fee.
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
25 15
26 17
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PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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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–2013–44 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–BOX–2013–44. 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–
2013–44 and should be submitted on or
before October 8, 2013.
E:\FR\FM\17SEN1.SGM
17SEN1
57195
Federal Register / Vol. 78, No. 180 / Tuesday, September 17, 2013 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–22509 Filed 9–16–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70370; File No. SR–C2–
2013–033]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend the Fees Schedule
September 11, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
30, 2013, C2 Options Exchange,
Incorporated (the ‘‘Exchange’’ or ‘‘C2’’)
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 Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to amend its
Fees Schedule. The text of the proposed
rule change is available on the
Exchange’s Web site (https://
www.c2exchange.com/Legal/), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fees Schedule. Specifically, the
Exchange proposes to adopt a set of fees
for the Russell 2000 Index (‘‘RUT’’),
both for simple and complex orders
(and to specify that the current fees that
apply to multiply-listed index, ETF and
ETN options classes do not apply to
RUT). For simple, non-complex RUT
orders, the Exchange proposes to assess
the following per-contract fees structure
(rebates in parentheses):
Maker
Public Customer ......................................................................................................................................................
C2 Market-Maker .....................................................................................................................................................
All Other Origins (Professional Customer, Firm, Broker/Dealer, non-C2 Market-Maker, JBO, etc.) ......................
Trades on the Open ................................................................................................................................................
As with simple, non-complex orders
in other multiply-listed index, ETF and
ETN options classes, rebates do not
apply to orders that trade with Public
Customer complex orders. In such a
circumstance, there will be no fee or
rebate (since Public Customer complex
orders also receive rebates pursuant to
the proposed changes). The Exchange
believes that providing a rebate for
Public Customer Maker orders, and
assessing no fee for Market-Maker
Maker orders, will incentivize the entry
of such orders (which will provide more
trading opportunities for all market
participants wishing to Take such
orders). Further, market participants
often prefer to trade against Public
Customer orders, and providing a rebate
for Public Customer Maker orders will
encourage Public Customers to enter
such orders, giving other market
participants more opportunities to Take
these preferable orders. The Exchange’s
($.75)*
.00
.50
.00
tkelley on DSK3SPTVN1PROD with NOTICES
Public Customer ......................................................................................................................................................
C2 Market-Maker .....................................................................................................................................................
All Other Origins (Professional Customer, Firm, Broker/Dealer, non-C2 Market-Maker, JBO, etc.) ......................
Trades on the Open ................................................................................................................................................
27 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See NYSE Arca, Inc. (‘‘Arca’’) Fee Schedule,
Section titled ‘‘Trade-Related Charges for Standard
Options’’, Transaction Fee table describing
Electronic Executions in Non Penny Pilot Issues.
1 15
VerDate Mar<15>2010
17:05 Sep 16, 2013
there will be no Maker or Taker fee or
rebate. The Exchange believes that
providing a rebate for Public Customer
orders will incentivize Public
Customers to execute such orders
(which will provide more trading
Jkt 229001
PO 00000
Frm 00069
Fmt 4703
Sfmt 4703
$.80
.80
.80
.00
proposed Taker fee is intended to be
competitive with other exchanges,
which assess higher Taker fees for
RUT,3 and which also assess a higher
RUT License Surcharge fee than the
amount the Exchange proposes to assess
herein.4
For complex orders in RUT, the
Exchange proposes to assess the
following per-contract fees structure
(rebates in parentheses):
Maker fee/
(Rebate)
As with complex orders in other
multiply-listed index, ETF and ETN
options classes, a rebate will only apply
to Public Customer complex orders that
trade with non-Public Customer
complex orders. In other circumstances,
Taker fee
($.75)*
.85
.85
.00
Taker fee/
(Rebate)
($.75)*
.85
.85
.00
opportunities for all market participants
wishing to trade with such orders).
Further, market participants often prefer
to trade against Public Customer orders,
and providing a rebate for Public
Customer orders will encourage Public
4 See
E:\FR\FM\17SEN1.SGM
Arca Fee Schedule, Royalty Fees table.
17SEN1
]]>Agencies
[Federal Register Volume 78, Number 180 (Tuesday, September 17, 2013)]
[Notices]
[Pages 57191-57195]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22509]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70369; File No. SR-BOX-2013-44]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule To Make Permanent the Pilot Program of Liquidity
Fees and Credits for Certain Transactions in the BOX Price Improvement
Period
September 11, 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 August 30, 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
amend the Fee Schedule [sic] to make permanent the pilot program of
Liquidity Fees and Credits for certain transactions in the BOX Price
Improvement Period (``PIP'') on the BOX Market LLC (``BOX'') options
facility. 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
[[Page 57192]]
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 purpose of the proposed rule change is to amend the BOX Fee
Schedule to make permanent the pilot program of Liquidity Fees and
Credits for certain transactions in the BOX PIP or (the ``Program'').
The Program was approved on a pilot basis in February 2012 and is
scheduled to expire on August 31, 2013.\5\ The Exchange believes the
data collected on PIP transactions over the past two years demonstrates
that the Program does not place an undue burden on competition and
proposes to make the applicable fees and credits free from any pilot
restrictions.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release Nos. 66278 (January 30,
2012), 77 FR 5590 (February 3, 2012) Commission Order Granting
Accelerated Approval of the BOX Credits and Fees for PIP
Transactions on a pilot basis (SR-BX-2011-046), 66979 (May 14,
2012), 77 FR 29740 (May 18, 2012) (Notice of Filing and Immediate
Effectiveness to adopt the Fee Schedule for trading on BOX which
included the Program) (SR-BOX-2012-002), and 69054 (March 7, 2013),
78 FR 16025(March 13, 2013) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change To Amend the Fee Schedule for
Trading on BOX) (SR-BOX-2013-09).
---------------------------------------------------------------------------
Under the Program, transactions in the BOX PIP are assessed either
a fee for adding liquidity or provided a credit for removing liquidity
regardless of account type. PIP Orders (i.e., the agency orders
opposite the Primary Improvement Order \6\) receive the ``removal''
credit and Improvement Orders \7\ are charged the ``add'' fee. In
particular, the Program permits a fee for adding liquidity or a credit
for removing liquidity of $0.75, regardless of account type, for PIP
transactions where the minimum price variation is greater than $0.01
(i.e., all non-Penny Pilot Classes, and Penny Pilot Classes where the
trade price is equal to or greater than $3.00, excluding QQQ, SPY, and
IWM).\8\ The liquidity fees and credits are in addition to any
applicable Exchange Fees as described in Section I of the Fee Schedule.
---------------------------------------------------------------------------
\6\ A Primary Improvement Order is the matching contra order
submitted to the PIP on the opposite side of an agency order.
\7\ An Improvement Order is a response to a PIP auction. An
Unrelated Order that is not immediately marketable will be charged
as an Improvement Order when it executes against a PIP Order.
\8\ The Exchange notes that the Program also includes a fee for
adding liquidity or a credit for removing liquidity of $0.30,
regardless of account type, for PIP transactions where the minimum
price variation is $0.01 (Penny Pilot classes where trade price is
less than $3.00, and all series in QQQ, SPY & IWM).
---------------------------------------------------------------------------
During the pilot period the Exchange has submitted to the
Commission, and made publicly available on the Exchange Web site,
monthly reports containing statistics on percent and amount of price
improvement, the number of responders to a PIP auction, and the
retention rates of Initiating Participants and those market makers who
received PIP directed orders. Specifically, each report contains the
following PIP transaction data in series traded in penny increments
compared to series traded in nickel increments, subdivided by when BOX
is at the NBBO and when BOX is not at the NBBO, including: (1) Volume
by number of contracts traded; (2) number of contracts executed by the
Initiating Participant as compared to others (``retention rate''); (3)
percentage of contracts receiving price improvement when the Initiating
Participant is the contra party and when others are the contra party;
(4) average number of responders in the PIP; (5) average price
improvement amount when the Initiating Participant is the contra party;
(6) average price improvement amount when others are the contra party;
and (7) percentage of contracts receiving price improvement greater
than $0.01, $0.02 and $0.03 when the Initiating Participant is the
contra party and when others are the contra party.\9\
---------------------------------------------------------------------------
\9\ In June 2013 the Exchange posted revised reports for
November 2011 through April 2013.
---------------------------------------------------------------------------
BOX provided these reports so the Commission could assess the
impact of the Program on the competitiveness of the PIP and the extent
of price improvement obtained for customers. Exhibit 3 to the Form 19b-
4 contains PIP transaction data sets from June 2011 through July
2013.\10\ The Exchange has evaluated these reports to determine the
impact of the Program on competition and price improvement, and
believes the data confirms that the Program has not placed an undue
burden on competition or lessened the amount of price improvement in
the aggregate for customers in the PIP.\11\
---------------------------------------------------------------------------
\10\ The Exchange believes the data gathered over this time
period adequately represents the impact of the Program. While fees
and credits applicable under the Program first went into effect on
August 1, 2011, the Program was suspended by the Commission on
September 13, 2011. The Exchange then filed a notice of intention to
petition for review on September 20, 2011, which triggered an
automatic stay of the suspension and the previous fee schedule was
reinstated. On October 19, 2011, the Commission denied the
Exchange's petition and the applicable fees and credits were once
again suspended. The Commission approved the proposed fee change on
a pilot basis on January 30, 2012 and the Program has been in effect
on the Exchange since February 1, 2012. See Securities Exchange
Commission Release Nos. 65330 (September 13, 2011), 76 FR 58065,
58066 (September 19, 2011) (SR-BX-2011-046) (Suspension of and Order
Instituting Proceedings To Determine Whether To Approve or
Disapprove a Proposed Rule Change To Amend the BOX Fee Schedule With
Respect to Credits and Fees for Transactions in the BOX Price
Improvement Period); and 66278 (January 30, 2012), 77 FR 5590
(February 3, 2012) (SR-BX-2011-46) (``Approval Order'').
\11\ The Commission released a memorandum with graphical
representations of the BOX PIP data, which match the reports
provided by the Exchange and referenced in this filing. See
Memorandum on File No. SR-BOX-2013-09 from August, 16, 2013; https://www.sec.gov/rules/sro/box/2012/box-2013-09-2012-002-pipmemo.pdf.
---------------------------------------------------------------------------
Overall, the Exchange believes that in the aggregate, the long term
data trends demonstrate there has not been a decline in market quality.
BOX's PIP auction continues to provide significant opportunities for
price improvement and the data provided by BOX does not suggest any
significant adverse impact of the Program on the competitiveness of the
PIP auction or the extent of price improvement for orders executed in
the PIP. Instead, the Exchange believes the Program has been successful
at encouraging Participants to submit their customer orders to the PIP
and allowing those orders the opportunity to benefit from its potential
price improvement.
Before discussing the general trends below, the Exchange
acknowledges that certain data points have seen significant fluctuation
during the course of the Program. These variations are a result of
conditions which the Exchange has no control over, such as Participant
behavior changes, competitor pricing changes and overall market
volatility. For example, market volatility creates wider spreads and
can lead to significant growth in price improvement. Similarly, a
change in Participant behavior can also have a considerable impact on
specific data points in these reports.
Since the Program went into effect in February 2012, \12\ the
Exchange has focused its analysis on the average data from two three-
month periods; one before the Program began (November 2011 through
January 2012) and one that reflects the most recent impact of the
Program (May 2013 through July 2013). The Exchange believes that using
these two periods offers the best comparison of the PIP data because
the first period reveals PIP data trends from when the Program was not
yet in place, compared directly with the most recent PIP data trends.
Additionally, averaging the data over a three-month period
[[Page 57193]]
helps to negate any of the significant fluctuations discussed in the
preceding paragraph.
---------------------------------------------------------------------------
\12\ See supra, note 10 [sic].
---------------------------------------------------------------------------
A key indicator of competition is the average number of responders
to the PIP auction. One of the central concerns expressed by commenters
at the outset of the Program was that the increased fees and credits
would burden competition by effectively barring certain participants
from competing with initiators.\13\ Instead of declining, as predicted
in the comment letters, the average number of responders has risen
throughout the length of the Program. From November 2011 through
January 2012 the average number of responders for PIP transactions when
BOX was at the NBBO was 1.63 for penny classes and 2.41 for non-penny
classes, and when BOX was not at the NBBO the average number of
responders was 1.53 for penny classes and 2.21 for non-penny classes.
From May 2013 through July 2013, the same data points rose to 3.14 and
4.05 when BOX was at the NBBO and 2.24 and 2.86 when BOX was not at the
NBBO. This growth is also clear in the graphical representations
created by the Commission based on the BOX PIP data.\14\ The Exchange
believes this growth proves that the fees and credits assessed under
the Program are not prohibitively high and therefore do not prevent
responders from competing in the auction with the firm that submitted
the original PIP order.
---------------------------------------------------------------------------
\13\ See Letters to Elizabeth Murphy, Secretary, Commission,
from John C. Nagel, Managing Director and General Counsel, Citadel
Securities LLC, dated August 12, 2011 (``Citadel Letter''); Andrew
Stevens, Legal Counsel, IMC Financial Markets dated August 15, 2011
(``IMC Letter''); Michael J. Simon, Secretary, ISE, dated August 22,
2011 (``ISE Letter), and Christopher Nagy, Managing Director Order
Strategy, TD Ameritrade Inc., dated September 12, 2011 (``TD
Ameritrade Letter'').
\14\ See supra, note 10 at page 9.
---------------------------------------------------------------------------
Similarly, the number of PIP transactions in non-penny classes, the
class affected by the Program, has continued to grow. From November
2011 through January 2012, the monthly volume averaged approximately
650,000 contracts when BOX was at the NBBO and 550,000 when BOX was not
at the NBBO. From May 2013 through July 2013, the same data points
averaged 850,000 contracts when BOX was at the NBBO and 900,000
contracts when BOX was not at the NBBO.
The reports also showed growth in the average percentage of orders
receiving price improvement when BOX was at the NBBO when compared to
the total monthly trade volume on BOX.\15\ In fact, in the last three
months of the Program (May 2013 through July 2013) more than 75% of all
orders on non-penny series have received at least some improvement.
From November 2011 through January 2012, this number never rose above
56% and averaged 53%. Clearly the Program did not make it more
challenging for market participants to offer price improvement in the
PIP auctions, as some critics argued in their comment letters.\16\
---------------------------------------------------------------------------
\15\ BOX trade volume can be found on the BOX Web site: https://boxexchange.com/box-trade-volumes/.
\16\ See supra, note 13.
---------------------------------------------------------------------------
Finally, while the overall average price improvement, when
improved, in non-penny classes fell slightly throughout the Program,
most of this decline came from orders that were improved by the
Initiator. From November 2011 through January 2012, the average price
improvement of non-penny PIP transactions was $0.037 for those orders
receiving improvement. In comparable data from May 2013 through July
2013, the average price improvement for those orders receiving
improvement fell to $0.029. However, this same data indicator increased
for orders improved by Directed Non-Affiliate responders, both when BOX
was at the NBBO and not at the NBBO. This number also rose for
``Other'' responders when BOX was not at the NBBO. The Exchange
believes this data demonstrates that the Program did not have an
adverse impact on the extent of price improvement by making it
``economically prohibitive for anyone other than the initiator to
respond'' to the PIP Auction.\17\
---------------------------------------------------------------------------
\17\ See Citadel Letter, supra note 13 at page 2.
---------------------------------------------------------------------------
Another key indicator of competition, the average retention rate,
measures the retention of the PIP order by the PIP initiator. While
this data point has increased over the life of the Program, the average
retention rate in non-penny classes was 38% from November 2011 through
January 2012, and 51% from May 2013 through July 2013; the growth has
centered in non-penny transactions where BOX was at the NBBO and
retention rates where BOX was not at the NBBO have remained relatively
inline. The Exchange believes this uptick was a result of the reduced
penny transaction volume in the PIP, where lower volume signals fewer
participants in the PIP process, and does not indicate that the Program
gives Initiators a competitive edge to retain a greater percentage of
their orders.
For the reasons cited above, the Exchange believes the data
confirms that competition did not decrease as a result of the
additional fees and credits placed on non-penny PIP transactions. In
fact, the reports show that in the aggregate, competition has remained
inline and even grown throughout the length of the Program and there
has been no adverse impact on price improvement.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\18\ in general, and Section
6(b)(4) of the Act,\19\ in particular, in that it provides for the
equitable allocation of reasonable dues, fees, and other charges among
BOX Options Participants and other persons using its facilities. The
Exchange also believes that the proposal is consistent with Section
6(b)(5) of the Act,\20\ which, among other things, requires that rules
of a national securities exchange be designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, to
protect investors and the public interest, and to not permit unfair
discrimination between customers, issuers, brokers, or dealers, and
Section 6(b)(8) of the Act,\21\ which requires that the rules of a
national securities exchange not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act. In
particular, the proposed change will result in permanent fees and
credits for PIP transactions, which will in turn give BOX Participants
greater certainty with regard to the potential fees and credits they
will be assessed when participating in the PIP.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f(b).
\19\ 15 U.S.C. 78f(b)(4).
\20\ 15 U.S.C. 78f(b)(5).
\21\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As stated in previous filings \22\, the Exchange believes that it
is reasonable and equitable to provide the proposed credit to any
Participant that removes liquidity from the BOX PIP. The Exchange
further believes these credits will continue to attract order flow to
BOX, resulting in greater liquidity to the benefit of all market
participants. The Exchange believes that the proposed fees for adding
liquidity and credits for removing liquidity are equitable and not
unfairly discriminatory because such fees and credits apply uniformly
to all categories of Participants, across all account types.
---------------------------------------------------------------------------
\22\ See supra, note 5.
---------------------------------------------------------------------------
Further, the Exchange believes the proposed fees for PIP
transactions to be reasonable. BOX operates within a highly competitive
market in which market participants can readily direct order flow to
any of several other
[[Page 57194]]
competing venues if they deem fee levels at a particular venue to be
excessive. The BOX credits and fees for PIP transactions are intended
to attract order flow to BOX by offering incentives to all market
participants to submit their orders to the PIP for potential price
improvement. BOX notes that the fees collected will not necessarily
result in additional revenue to BOX, but will simply allow BOX to
provide the credit incentive to Participants to attract additional
order flow to the PIP. BOX believes it is appropriate to provide
incentives to market participants to use PIP, resulting in benefit to
customers through potential price improvement, and to all market
participants from greater liquidity on BOX.
In particular, the proposed change will allow the Exchange to
continue the Program free of any pilot conditions which the Exchange
believes are no longer necessary. The Program was put in place to
determine the full impact of the liquidity fees and credits on
competitiveness and price improvement in the PIP. The applicable fees
and credits have been in place for eighteen months,\23\ and there is no
evidence to suggest that the Program has had any of the negative
effects on the PIP that were predicted in the comment letters.\24\ As
such, removal of the pilot restrictions is the logical next step.
---------------------------------------------------------------------------
\23\ See supra, note 5
\24\ See supra, note 13.
---------------------------------------------------------------------------
In conclusion, the Exchange believes the data provided over the
length of the Program demonstrates that there has been no adverse
impact on the competitiveness of the PIP auction or the extent of price
improvement in series that trade in non-penny increments. As such, the
Exchange believes the proposed rule change is consistent with the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
While some have argued that the Program creates a disparity between
the fees an Initiating Participant pays and the fees a competitive
responder pays in the PIP that may make the Program discriminatory and
an undue burden on competition, the Exchange believes the Program
provides incentives for market participants to submit customer order
flow to BOX and thus, creates a greater opportunity for retail
customers to receive additional price improvement. The PIP provides the
opportunity for market participants to compete for customer orders, and
has no limitations regarding the number of Market Makers, Options
Participants that are not Market Makers, and customers that can
participate and compete for orders in the PIP. BOX asserts that
Participants are actively competing for customer orders, which is
clearly supported by the simple fact that price improvement has
continued to occur in the PIP through the length of the Program.
BOX notes that its market model and fees are generally intended to
benefit retail customers by providing incentives for Participants to
submit their customer order flow to BOX, and to the PIP in particular.
BOX makes a substantial amount of PIP-related data and statistics
available to the public on its Web site www.boxexchange.com.
Specifically, daily PIP volumes and average price improvement are
available at: https://boxexchange.com/box-trade-volumes/; and BOX
execution quality reports at: https://boxexchange.com/execution-quality-report/. The data indisputably supports that the PIP provides price
improvement for customer orders.
Additionally, the Exchange believes the Program is more transparent
than payment for order flow (``PFOF'') arrangements and notes its
belief that the credit to remove liquidity on BOX is generally less
than what firms receive through PFOF.
For the reasons stated above, the Exchange does not believe that
the proposed rule change will impose any burden on competition either
among BOX Participants, or among the various options exchanges, which
is not necessary or appropriate in furtherance of the purposes of the
Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act \25\ and Rule 19b-4(f)(2)
thereunder,\26\ because it establishes or changes a due, or fee.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78s(b)(3)(A)(ii).
\26\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BOX-2013-44 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BOX-2013-44. 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-2013-44 and should be
submitted on or before October 8, 2013.
[[Page 57195]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22509 Filed 9-16-13; 8:45 am]
BILLING CODE 8011-01-P
