Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market LLC (“BOX”) Options Facility, 67520-67526 [2014-26811]
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Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices
Two comments on the proposals have
been received.4 On September 15, 2014,
the Commission extended the time to
act on the proposals until October 30,
2014.5 On October 29, 2014, the
Exchanges withdrew the proposals (SR–
BATS–2014–028; SR–BYX–2014–011;
SR–EDGA–2014–16; SR–EDGX–2014–
19).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–26812 Filed 11–12–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73547; File No. SR–BOX–
2014–25]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule on the BOX Market
LLC (‘‘BOX’’) Options Facility
November 6, 2014.
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 October
31, 2014, 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 the 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] 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 November 1, 2014.
The text of the proposed rule change is
available from the principal office of the
Exchange, at the Commission’s Public
Reference Room and also on the
Exchange’s Internet Web site at https://
boxexchange.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to make a
number of changes to the BOX Fee
Schedule.
Exchange Fees
Non-Auction Transactions
First, the Exchange proposes to
amend Section I (Exchange Fees) to
establish a subsection entitled ‘‘Non-
Auction Transactions.’’ 5 The Exchange
then proposes to adopt the current fee
structure for Non-Auction Transactions
in Select Symbols for all Non-Auction
transactions on BOX. With this change
the Select Symbols fee structure
outlined in Section I.C. of the BOX Fee
Schedule will be removed.
Currently, Non-Auction Transactions
in non-Select Symbols are subject to the
fee structure outlined in Section I of the
BOX Fee Schedule. For every NonAuction Transaction, Public Customers
are assessed a $0.07 fee per contract and
Professional Customers and Broker
Dealers $0.42 per contract. Market
Makers are assessed a per contract fee
based upon the Market Maker’s Monthly
ADV in all transactions executed on
BOX, as calculated at the end of each
month. All Non-Auction Transactions
for that month are charged the same per
contract fee according to the ADV
achieved by the Market Maker, which
ranges from $0.13 to $0.35.
In proposed Section I.A. (NonAuction Transactions), the Exchange
proposes to adopt a pricing model
where the Exchange will assess
transaction fees and credits dependent
upon three factors: (i) The account type
of the Participant submitting the order;
(ii) whether the Participant is a liquidity
provider or liquidity taker; and (iii) the
account type of the contra party. NonAuction Transactions in Penny Pilot
Classes will also be assessed different
fees or credits than Non-Auction
Transactions in Non-Penny Pilot
Classes.
The Exchange also proposes to specify
that these transactions will now be
exempt from the Liquidity Fees and
Credits outlined in Section II of the BOX
Fee Schedule. The proposed fee
structure for all Non-Auction
Transactions is as follows:
Penny pilot classes
Contra party
Public Customer ................................
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Account type
Public Customer ...............................
Professional Customer/Broker Dealer.
Market Maker ...................................
011); 72689 (July 28, 2014), 79 FR 44917 (SR–
EDGA–2014–16); and 72691 (July 28, 2014), 79 FR
44892 (SR–EDGX–2014–19).
4 See Letter from Sal Arnuk and Joe Saluzzi,
Themis Trading LLC, to Elizabeth M. Murphy,
Secretary, Commission, dated August 21, 2014; and
Letter from Ira D. Hammerman, General Counsel,
SIFMA, to Kevin M. O’Neill, Deputy Secretary,
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Maker
fee/credit
Frm 00109
Fmt 4703
Sfmt 4703
Taker
fee/credit
Maker
fee/credit
Taker
fee/credit
$0.00
(0.22)
$0.00
(0.22)
$0.00
(0.57)
$0.00
(0.57)
(0.22)
(0.22)
(0.57)
(0.57)
Commission, dated August 22, 2014 (letters
commenting on SR–BATS–2014–18).
5 See Securities Exchange Act Release Nos. 73101,
79 FR 56418 (Sept. 19, 2014) (SR–BATS–2014–028);
73102, 79 FR 56419 (Sept. 19, 2014) (SR–BYX–
2014–011); 73098, 79 FR 56415 (Sept. 19, 2014)
(EDGA–2014–16); and 73099, 79 FR 56418 (Sept.
19, 2014) (SR–EDGX–2014–19).
PO 00000
Non-penny pilot classes
6 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 Non-Auction Transactions are those transactions
executed on the BOX Book.
1 15
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Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices
Penny pilot classes
Non-penny pilot classes
Account type
Contra party
Professional Customer or Broker
Dealer.
Public Customer ...............................
0.55
0.59
0.90
0.94
0.20
0.35
0.30
0.35
Market Maker ....................................
Professional Customer/Broker Dealer.
Market Maker ...................................
Public Customer ...............................
Professional Customer/Broker Dealer.
Market Maker ...................................
0.20
0.51
0.00
0.39
0.55
0.05
0.30
0.85
0.00
0.39
0.90
0.10
0.10
0.29
0.10
0.29
For example, if a Public Customer
submitted an order to the BOX Book in
a Penny Pilot Class (making liquidity),
the Public Customer would be credited
$0.22 if the order interacted with a
Market Maker’s order and the Market
Maker (taking liquidity) would be
charged $0.55. To expand on this
example, if the Market Maker instead
submitted an order to the BOX Book in
a Penny Pilot Class (making liquidity),
the Market Maker would be charged
$0.51 if the order interacted with a
Public Customer’s order and the Public
Customer (taking liquidity) would again
be credited $0.22.
Maker
fee/credit
Tiered Volume Rebate for Non-Auction
Transactions
Accordingly, the Exchange proposes
to adopt the same tiered volume-based
rebate for Market Makers and Public
Customers in Non-Auction Transactions
that was previously applied to NonAuction Transactions in Select Symbols.
Specifically, Market Makers and Public
Customers will receive a per contract
rebate based on ADV considering all
transactions executed on BOX by the
Market Maker or Public Customer,
respectively, as calculated at the end of
each month. All Non-Auction
Transactions for that month will receive
Taker
fee/credit
Maker
fee/credit
Taker
fee/credit
the same per contract rebate according
to the ADV achieved by the Market
Maker or Public Customer. However, the
Exchange proposes to specify that NonAuction Transactions where a Public
Customer order interacts with another
Public Customer order will be exempt
from the per contract rebate listed
below. These transactions will still
count toward the Public Customer’s
monthly ADV.
The new per contract rebate for
Market Makers and Public Customers in
Non-Auction Transactions as set forth in
Section I.A.1. of the BOX Fee Schedule
will be as follows:
Per contract
rebate
Market Maker Monthly ADV:
100,001 contracts and greater ...............................................................................................................................................
60,001 contracts to 100,000 contracts ...................................................................................................................................
35,001 contracts to 60,000 contracts .....................................................................................................................................
10,001 contracts to 35,000 contracts .....................................................................................................................................
1 contract to 10,000 contracts ................................................................................................................................................
Public Customer Monthly ADV:
35,001 contracts and greater .................................................................................................................................................
15,001 contracts to 35,000 contracts .....................................................................................................................................
5,001 contracts to 15,000 contracts .......................................................................................................................................
1 contract to 5,000 contracts ..................................................................................................................................................
($0.15)
(0.10)
(0.07)
(0.03)
0.00
(0.10)
(0.06)
(0.03)
0.00
The Exchange then proposes to
amend Section I (Exchange Fees) to
establish a subsection entitled ‘‘Auction
Transactions.’’ 6 The Auction
Transactions fees for Public Customers,
Professional Customers and Broker
Dealers will remain unchanged. For
Market Makers, the Exchange proposes
to adopt a fee of $0.20 for PIP Orders,
COPIP Orders and Agency Orders.7
Currently Market Makers are assessed a
per contract fee based upon the Market
Maker’s Monthly ADV in all
transactions executed on BOX, as
calculated at the end of each month. All
PIP, COPIP and Agency Orders for that
month are charged the same per contract
fee according to the ADV achieved by
the Market Maker, which ranges from
$0.13 to $0.35. The Exchange then
proposes to remove the Tiered Fee
Schedule for Market Makers based upon
Monthly Average Daily Volume in
current Section I.B.
The new Auction Transactions as set
forth in Section I.B. of the BOX Fee
Schedule will be as follows:
6 Auction Transactions are those transactions
executed through the Price Improvement Period
(‘‘PIP’’), the Complex Order Price Improvement
Period (‘‘COPIP’’), the Solicitation Auction
mechanism, and the Facilitation Auction
mechanism. All COPIP transactions will be charged
per contract per leg.
7 A PIP Order or COPIP Order is a Customer
Order (an agency order for the account of either a
customer or a broker-dealer) designated for the PIP
or COPIP, respectively. An Agency Order is a blocksize order that an Order Flow Provider seeks to
facilitate as agent through the Facilitation Auction
or Solicitation Auction mechanism.
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Auction Transactions
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Account type
Public customer
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PIP Order, COPIP Order,
or Agency Order.
Improvement Order in PIP
or COPIP 8.
Responses in the Solicitation or Facilitation Auction Mechanisms.
Primary Improvement
Order,9 Facilitation
Order, or Solicitation
Order.
Professional customer
Broker dealer
$0.00 .................................
$0.37 .................................
$0.37 .................................
$0.20
0.15 ...................................
0.37 ...................................
0.37 ...................................
0.30
0.15 ...................................
0.37 ...................................
0.37 ...................................
0.30
Based on ADV, see Section I. B.1.
Based on ADV, see Section I. B.1.
Based on ADV, see Section I. B.1.
Based on ADV, see Section I. B.1.
Liquidity Fees and Credits
Since all Non-Auction Transactions
will now fall under Section I [sic] the
new fee structure and be exempt from
Section II Liquidity Fees and Credits,
BOX proposes to remove subsection C
(Non-Auction Transactions) from
Section II. With the removal of
subsection C, the Exchange proposes to
move the bullet regarding nonimmediately marketable orders to
Section II.A (PIP and COPIP
Transactions). A non-immediately
marketable order that executes against a
PIP Order or a COPIP Order, therefore
becoming an Unrelated Order, will
continue to be charged as an
Improvement Order for purposes of the
BOX Fee Schedule.
The Exchange then proposes to edit
the language in proposed Section II.C,
formerly Section II.D. (Exempt
Transactions) and add the following fees
for transactions which occur on the
opening or re-opening of trading. For
these transactions, which are deemed
neither to ‘‘add’’ nor ‘‘remove’’
liquidity, the Exchange proposes to
assess a flat fee per contract of $0.00 for
Public Customers, $0.20 for Professional
Customers and Broker Dealers and $0.12
for Market Makers. The Exchange also
proposes to clarify that outbound
Eligible Orders routed to an Away
Exchange, as defined in Rule 15000
Series, remain subject to the fees
outlined in Section IV. Eligible Orders
Routed to an Away Exchange.
Finally, the Exchange proposes to
remove the ‘‘Select Symbols’’ language
in Section II.C. (Exempt Transactions)
that states that Non-Auction
Transactions in Select Symbols will be
considered exempt from all liquidity
fees and credits. With the proposed
changes, all Non-Auction Transactions
will be considered exempt.
8 An Improvement Order is a response to a PIP
or COPIP auction.
9 A Primary Improvement Order is the matching
contra order submitted to the PIP or COPIP on the
opposite side of an agency order.
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MNX
The Exchange also proposes to amend
the Fee Schedule to remove the
reference to the Mini Nasdaq 100 Index
(NDX) [sic].
Because the Exchange has delisted the
Mini-NDX® Index (MNX), the Exchange
proposes to remove the reference to
MNX from the BOX Fee Schedule.
Currently, Section I (Exchange Fees) of
the BOX Fee Schedule provides for a
surcharge to be applied to options on
any index traded on BOX; which
includes a $0.22 per contract surcharge
for options on MNX. The Exchange has
since delisted options on MNX and they
are no longer traded on BOX. As such,
no related surcharge will apply and the
Exchange is proposing to remove the
reference from the BOX Fee Schedule.
Other
Finally, the Exchange is proposing to
make additional non-substantive
changes to the Fee Schedule.
Specifically, the Exchange is
renumbering certain footnotes, headings
and internal references to accommodate
the above proposed changes to the Fee
Schedule. The Exchange also proposes
to move the BOX Volume Rebate from
current Section I.E of the Fee Schedule
to proposed Section I.B (Auction
Transactions).
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the Act,
in general, and Section 6(b)(4) and
6(b)(5) of the Act,10 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 discriminate between
customers, issuers, brokers or dealers.
The proposed changes will allow the
Exchange to be competitive with other
exchanges and to apply fees and credits
in a manner that is equitable among all
10 15
PO 00000
U.S.C. 78f(b)(4) and (5).
Frm 00111
Fmt 4703
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Market maker
BOX Participants. Further, the Exchange
operates within a highly competitive
market in which market participants can
readily direct order flow to any other
competing exchange if they determine
fees at a particular exchange to be
excessive.
Exchange Fees
Non-Auction Transactions
The Exchange believes adopting the
current fee structure for Non-Auction
Transactions in Select Symbols for all
Non-Auction Transactions, regardless of
symbol, is reasonable, equitable and not
unfairly discriminatory. Even though
the Select Symbol fee structure for NonAuction Transactions was only adopted
last month, it was well received by
Participants and the industry and the
Exchange believes it is appropriate to
now apply it to all Non-Auction
Transactions. The proposed fee
structure is intended to attract order
flow to the Exchange by offering all
market participants incentives to submit
their Non-Auction orders to the
Exchange. The practice of providing
additional incentives to increase order
flow is, and has been, a common
practice in the options markets.11
Further, the Exchange believes it is
appropriate to provide incentives for
market participants which will result in
greater liquidity and ultimately benefit
all Participants trading on the Exchange.
The Exchange also believes it is
equitable, reasonable and not unfairly
discriminatory to assess fees and credits
according to the account type of the
Participant originating the order and the
contra party. This proposed fee
structure was recently adopted by the
Exchange for Non-Auction Transactions
11 See International Securities Exchange LLC
(‘‘ISE’’) Schedule of Fees, Section I. Regular Order
Fees and Rebates for Standard Options, Non-Select
Symbols (page 6); NASDAQ OMX PHLX, (‘‘PHLX’’),
Pricing Schedule Section B, ‘‘Customer Rebate
Program’’; and NYSE Arca, Inc (‘‘Arca’’) Options
Fees and Charges, ‘‘Customer Monthly Posting
Credit Tiers and Qualifications for Executions in
Penny Pilot Issues’’ (page 4).
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in Select Symbols 12 and is similar to the
model adopted by the Exchange for
Complex Orders Fees 13 and has been
accepted by both the Commission and
the industry.14 The result of this
structure is that a Participant does not
know the fee it will be charged when
submitting certain orders. Therefore, the
Participant must recognize that it could
be charged the highest applicable fee on
the Exchange’s schedule, which may,
instead, be lowered or changed to a
credit depending upon how the order
interacts. This structure has been
favorably received by the industry and
BOX Participants; therefore the
Exchange is proposing to apply the
same structure to all Non-Auction
Transactions. After adopting this type of
structure for Non-Auction Transactions,
a Public Customer submitting an order
on the BOX Book will recognize that it
will not pay a fee for these transactions
and that depending upon with whom
the order executes, the Public Customer
may receive an additional benefit for
submitting the order. Likewise, a
Professional Customer or Broker Dealer
submitting an order will recognize that
it will not be charged more than $0.59
in Penny Pilot issues and $0.94 in NonPenny Pilot issues. The same is true for
Market Makers, who will recognize that
their maximum charge when submitting
a Non-Auction order will be $0.55 in
Penny Pilot issues and $0.90 in NonPenny Pilot issues.
The Exchange believes that the
proposed fees and credits for Public
Customers in Non-Auction Transactions
are reasonable. Under the proposed fee
structure Public Customers will either
pay a Maker fee of $0.00 or receive a
Maker/Taker credit of $0.22 for Penny
Pilot classes and $0.57 for Non-Penny
Pilot classes. These potential fees and
credits are reasonable and will at all
times be less than the current $0.07
Exchange Fee that Public Customers pay
in Non-Auction Transactions.
The Exchange believes providing a
credit or charging no fee to Public
Customers for all Non-Auction
Transactions is equitable and not
unfairly discriminatory. The securities
12 See Securities Exchange Act Release No. 73397
(October 21, 2014), 79 FR 63982 (October 27, 2014)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change to Amend the Fee Schedule
on the BOX Market LLC Options Facility).
13 See Securities Exchange Act Release No. 71312
(January 15, 2014), 79 FR 3649 (January 22, 2014)
(Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend the Fee Schedule
To Establish Fees for Complex Order Price
Improvement Period (‘‘COPIP’’) Transactions).
14 This type of structure was also adopted by
NYSE Arca in 2012. See Securities Release No.
68405 (December 11, 2012), 77 FR 74719 (December
17, 2012) (SR–NYSEArca–2012–137).
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markets generally, and BOX in
particular, have historically aimed to
improve markets for investors and
develop various features within the
market structure for Public Customer
benefit. Accordingly, the Exchange
believes that charging no fee or
providing a credit for Public Customers
is appropriate and not unfairly
discriminatory. Public Customers are
less sophisticated than other
Participants and the credit will help to
attract a high level of Public Customer
order flow to the BOX Book and create
liquidity, which the Exchange believes
will ultimately benefit all Participants
trading on BOX.
Finally, the Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to give Public Customers
a credit when their orders execute
against a non-Public Customer and,
accordingly, charge non-Public
Customers a higher fee when their
orders execute against a Public
Customer. As stated above, the
Exchange aims to improve markets by
developing features for the benefit of its
Public Customers. Similar to the
payment for order flow and other
pricing models that have been adopted
by the Exchange and other exchanges to
attract Public Customer order flow, the
Exchange increases fees to non-Public
Customers in order to provide
incentives for Public Customers. The
Exchange believes that providing
incentives for Non-Auction
Transactions by Public Customers is
reasonable and, ultimately, will benefit
all Participants trading on the Exchange
by attracting Public Customer order
flow.
The Exchange believes that charging
Professional Customers and Broker
Dealers higher fees than Public
Customers for Non-Auction
Transactions is equitable and not
unfairly discriminatory. Professional
Customers, while Public Customers by
virtue of not being Broker Dealers,
generally engage in trading activity
more similar to Broker Dealer
proprietary trading accounts (submitting
more than 390 standard orders per day
on average). The Exchange believes that
the higher level of trading activity from
these Participants will draw a greater
amount of BOX system resources than
that of non-professional, Public
Customers. Because this higher level of
trading activity will result in greater
ongoing operational costs, the Exchange
aims to recover its costs by assessing
Professional Customers and Broker
Dealers higher fees for transactions.
The Exchange also believes it is
equitable and not unfairly
discriminatory for BOX Market Makers
PO 00000
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67523
to be assessed lower fees than
Professional Customers and Broker
Dealers for Non-Auction Transactions
because of the significant contributions
to overall market quality that Market
Makers provide. Specifically, Market
Makers can provide higher volumes of
liquidity and lowering their fees will
help attract a higher level of Market
Maker order flow to the BOX Book and
create liquidity, which the Exchange
believes will ultimately benefit all
Participants trading on BOX. As such,
the Exchange believes it is appropriate
that Market Makers be charged lower
transaction fees than Professional
Customers and Broker Dealers for NonAuction Transactions.
The Exchange believes that the
proposed fees and credits for all other
Participants in Non-Auction
Transactions are reasonable. Under the
proposed fee structure, a Professional
Customer or Broker Dealer making
liquidity and interacting with a
Professional Customer, Broker Dealer or
Market Marker will either be charged a
fee of $0.20 for Penny Pilot Classes or
$0.30 for Non-Penny Pilot Classes. If the
Professional Customer or Broker Dealer
is instead taking liquidity in either
Penny Pilot or Non-Penny Pilot Classes,
it will be charged $0.35 if it interacts
with a Professional Customer or Broker
Dealer and $0.39 if it interacts with a
Market Maker. The Exchange believes
the fees listed above are reasonable as
they are lower than the current $0.42
Exchange Fee charged to Broker Dealers
and Professional Customers in NonAuction Transactions.
Similarly, in the proposed fee
structure a Market Maker making
liquidity in both Penny Pilot and NonPenny Pilot Classes will either be
charged a fee of $0.00 for interacting
with a Professional Customer or Broker
Dealer or $0.10 for interacting with
another Market Maker. If the Market
Maker is instead taking liquidity, it will
be charged $0.05 (for Penny Pilot
Classes) and $0.10 (for Non-Penny Pilot
Classes) if it interacts with a
Professional Customer or Broker Dealer.
If a Market Maker is taking liquidity and
interacts with another Market Maker
they will be charged $0.29 in all
situations. The Exchange believes the
fees listed above are reasonable as they
are, in most situations, lower than the
current $0.13 to $0.35 Exchange Fee
range for Market Makers under the BOX
Fee Schedule and are in line with what
is currently charged by the industry.15
15 Many U.S. Options Exchanges do not
differentiate their fees between auction and nonauction transactions. However, the general range for
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The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory for Professional
Customers, Broker Dealers and Market
Makers to be charged higher fees for
both making and taking liquidity when
interacting with Public Customers. In
the proposed fee structure, a
Professional Customer or Broker Dealer
interacting with a Public Customer will
be charged a $0.55 Maker fee or $0.59
Taker fee for Penny Pilot Classes and a
$0.90 Maker fee or $0.94 Taker fee for
Non-Penny Pilot Classes. Similarly a
Market Marker interacting with a Public
Customer will be charged a $0.51 Maker
fee or $0.55 Taker fee for Penny Pilot
Classes and a $0.85 Maker fee or $0.90
Taker fee for Non-Penny Pilot Classes.
While these fees are higher than what
these Participants are currently charged
for Non-Auction Transactions in NonSelect Symbols, the Exchange believes
they are reasonable as they are in line
when compared to similar fees in the
options industry.16 Further, as stated
above, the Exchange believes charging a
higher fee for interactions with a Public
Customer is equitable and not unfairly
discriminatory because it allows the
Exchange to incentivize Public
Customer order flow by offering credits
to Public Customers in Non-Auction
Transactions. The Exchange believes
that providing incentives for NonAuction Transactions by Public
Customers will benefit all Participants
trading on the Exchange by attracting
this Public Customer order flow.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory for Professional
Customers, Broker Dealers and Market
Makers to be charged a higher fee for
orders removing liquidity when
compared to the fee they receive for
Market Maker fees is between $0.10 and $0.89. See
NASDAQ OMX BX (‘‘BX’’) Options Pricing, Chapter
XV, Sec. 2; BX charges both BX Options Market
Makers and Non-Customer/Non-BX Options Market
Makers a fee of $0.46 to remove liquidity in Penny
Pilot Options and a fee of $0.89 to remove liquidity
in Non-Penny Pilot Options, a fee to add liquidity
in Penny Pilot Options of $0.40 to BX Options
Market Makers and $0.45 to Non-Customer/Non-BX
Options Market Makers, and a fee to add liquidity
in Non-Penny Pilot Options of $0.50 to BX Options
Market Makers (or $0.85 when interacting with
Customer) and $0.88 for Non-Customer/Non-BX
Options Market Makers. See NYSE Arca Options
(‘‘Arca’’) Fees and Charges page 3; Arca charges
NYSE Arca Market Makers $0.16 for manual
executions, $0.49 to take liquidity in Penny Pilot
Issues, and $0.87 to take liquidity in Non Penny
Pilot Issues. See International Securities Exchange
(‘‘ISE’’) Schedule of Fees, Section I; ISE charges
Market Makers $0.10 for making liquidity in select
symbols and $0.42 for taking liquidity in select
symbols.
16 Id. Professional Customer and Broker Dealers
are also charged anywhere from $0.10 to $0.89
within the option exchange fee schedules
referenced above.
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orders that add liquidity. Charging a
lower fee for orders that add liquidity
will promote liquidity on the Exchange
and ultimately benefit all participants
on BOX. Further, the concept of
incentivizing orders that add liquidity
over orders that remove liquidity is
commonly accepted within the industry
as part of the ‘‘Make/Take’’ liquidity
model.17
Further, the Exchange believes it is
equitable and not unfairly
discriminatory to charge the
Professional Customer or Broker Dealer
more for taking liquidity against a
Market Maker than they are charged for
taking liquidity against other
Professional Customers or Broker
Dealers. As stated above, the Exchange
proposes to provide certain incentives
to Market Makers because of the high
volumes of liquidity they can provide
and increasing fees for Professional
Customers and Broker Dealers taking
liquidity will allow the Exchange to
offer these incentives, ultimately
benefiting all Participants trading on
BOX.
Finally, the Exchange also believes it
is reasonable to charge Professional
Customers, Broker Dealers, and Market
Makers less for certain executions in
Penny Pilot issues compared to NonPenny Pilot issues because these classes
are typically more actively traded;
assessing lower fees will further
incentivize order flow in Penny Pilot
issues on the Exchange, ultimately
benefiting all Participants trading on
BOX. Additionally, the Exchange
believes it is reasonable to give a greater
credit to Public Customers for NonAuction Transactions in Non-Penny
Pilot issues as compared to Penny Pilot
issues. Since these classes have wider
spreads and are less actively traded,
giving a larger credit will further
incentivize Public Customers to trade in
these classes, ultimately benefitting all
Participants trading on BOX.
The Exchange believes that the
proposed Non-Auction Transactions fee
structure will keep the Exchange
competitive with other exchanges and
will be applied in an equitable manner
among all BOX Participants. The
Exchange believes the proposed fee
structure is reasonable and competitive
with fee structures in place on other
exchanges. Further, the Exchange
believes that the competitive
marketplace impacts the fees proposed
for BOX.
17 The ‘‘Make/Take’’ model is currently used by
the International Securities Exchange LLC (‘‘ISE’)
and NASDAQ OMX PHLX LLC (‘‘PHLX’’).
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Tiered Volume Rebate for Non-Auction
Transactions
BOX believes it is reasonable,
equitable and not unfairly
discriminatory to introduce tiered
volume based rebates for Market Makers
and Public Customers in all NonAuction Transactions. Other exchanges
employ similar incentive programs,18
and the Exchange believes that its
proposed volume thresholds and rebates
are reasonable and competitive when
compared to incentive structures at
other exchanges.
Additionally, the Exchange believes
that the proposed volume thresholds are
reasonable because they will incentivize
Public Customers and Market Makers to
direct order flow to the Exchange to
obtain the benefit of the rebate, which
will in turn benefit all market
participants by increasing liquidity on
the Exchange. The Exchange believes
that its proposed volume threshold and
rebate is competitive when compared to
rebate structures at other exchanges.
Finally, the Exchange believes it is
reasonable to exempt Non-Auction
Transactions where a Public Customer
order interacts with another Public
Customer order from the per contract
rebate. The Exchange does not believe a
rebate in this situation is appropriate, as
neither Public Customer will be paying
a fee for the transaction. Further, these
transactions will still count toward the
Public Customer’s monthly ADV.
The Exchange also believes it is
equitable and not unfairly
discriminatory to only adopt these
structures for Public Customers and
Market Makers. The proposed volume
credits are intended to further
encourage Public Customer and Market
Maker Non-Auction order flow to the
Exchange. Increased Public Customer
and Market Maker volume will provide
greater liquidity, which benefits all
market participants on the Exchange.
The practice of incentivizing increased
Public Customer order flow is common
in the options markets. Further, Market
Makers also provide significant
contributions to overall market quality.
Specifically, Market Makers can provide
high volumes of liquidity and lowering
their Non-Auction Transaction fees will
potentially help attract a higher level of
18 See Section B of the PHLX Pricing Schedule
entitled ‘‘Customer Rebate Program’’ and CBOE’s
Volume Incentive Program (VIP). CBOE’s Volume
Incentive Program (‘‘VIP’’) pays certain tiered
rebates to Trading Permit Holders for electronically
executed multiply-listed option orders which
include AIM orders. Note that these exchanges base
these rebate programs on the percentage of total
national Public Customer volume traded on their
respective exchanges, which the Exchange is not
proposing to do.
E:\FR\FM\13NON1.SGM
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Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices
Market Maker order flow and create
liquidity, which the Exchange believes
will ultimately benefit all Participants
trading on BOX.
tkelley on DSK3SPTVN1PROD with NOTICES
Auction Transactions
The Exchange believes it reasonable
to remove the tiered fee structure for
Market Makers based upon ADV. The
tiered fee structure was adopted to
incentivize Market Makers to direct
order flow to the Exchange, which the
Exchange believes is now unnecessary
with the adoption of the new NonAuction Transactions fee structure as
well as the Tiered Volume Rebates for
Market Makers in Non-Auction
Transactions. Additionally, in Auction
Transactions Market Makers remain
eligible for the BOX Volume Rebate for
all PIP and COPIP Orders of 250 and
under contracts. The Exchange believes
it is reasonable to adopt a flat $0.20 per
contract fee for Market Makers in PIP
Orders, COPIP Orders, and Agency
Orders. Specifically, the Exchange
believes the fee strikes the appropriate
balance between the $0.13 to $0.35 fees
that Market Makers are currently
charged for these orders and is
reasonable when compared to similar
fees among the industry.19 Finally, the
Exchange believes it is equitable and not
unfairly discriminatory to charge a
Market Maker less for PIP Orders,
COPIP Orders, and Agency Orders than
what is charged to Professional
Customers and Broker Dealers.
Generally, Market Makers have
obligations on BOX that other
Participants do not. They must maintain
active two-sided markets in the classes
in which they are appointed and must
meet certain minimum quoting
requirements. Market Makers can also
provide high volumes of liquidity and
assessing lower transaction fee [sic] may
help attract a higher level of Market
Maker order flow and create liquidity,
which the Exchange believes will
ultimately benefit all Participants
trading on BOX.
Liquidity Fees and Credits
The Exchange believes that exempting
all Non-Auction Transactions from
Section II (Liquidity Fees and Credits) is
reasonable, equitable and not unfairly
discriminatory. The Exchange’s
Liquidity Fees and Credits are intended
to attract order flow to the Exchange by
offering incentives to all market
participants to submit orders to the
Exchange and the Exchange believes
that the proposed fee structure will
provide appropriate incentives to
encourage Participants to submit Non19 See
supra, note 15.
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17:16 Nov 12, 2014
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Auction Transactions to the Exchange.
The Exchange believes that exempting
Non-Auction Transactions from
liquidity fees and credits is reasonable
compared to the similar fees and credits
offered by the other exchanges. The
Exchange believes exempting NonAuction Transactions from liquidity fees
and credits is not unfairly
discriminatory as the exemption from
the liquidity fees and credits applies
equally to all Participants on the
Exchange.
The Exchange believes it is reasonable
edit [sic] the Exempt Transactions
subsection and to assess a flat fee for
transactions which occur on the
opening or re-opening of trading and are
deemed neither to ‘‘add’’ nor ‘‘remove’’
liquidity. With the proposed fee
structure for Non-Auction Transactions,
which assess fees and credits dependent
upon whether the Participant is a
liquidity provider or liquidity taker,
transactions on the opening or reopening will not being [sic] charged an
Exchange fee. For example, under the
proposed Non-Auction fee structure a
transaction on the opening would not be
charged an Exchange Fee under Section
I of the BOX Fee Schedule. Instead the
Exchange is proposing to ensure that
these transactions are assessed a fee.
The Exchange has previously had this
type of fee within the BOX Fee
Schedule 20 and other exchanges with
liquidity fees and credits also spell out
how these transactions are treated
within their respective fee schedules.21
The Exchange believes assessing a flat
fee of $0.00 for Public Customers, $0.20
for Professional Customers and Broker
Dealers and $0.12 for Market Makers is
in line with the Non-Auction
Transactions fees outlined in the new
fee structure. The Exchange believes it
is equitable and not unfairly
discriminatory for Public Customers to
be charged no fee for transactions which
occur on the opening or re-opening of
trading. As stated above, the Exchange
aims to improve markets by developing
features for the benefit of its Public
Customers. The Exchange also believes
it is equitable and not unfairly
discriminatory to charge a Market Maker
less for these transactions than what is
charged to Professional Customers and
20 See Securities Exchange Act Release No. 61342
(January 13, 2010), 75 FR 3503 (January 21, 2014
[sic]) (Notice of Filing and Immediate Effectiveness
of a [sic] Proposed Rule Change to Amend [sic] the
Fee Schedule of the Boston Options Exchange
Facility).
21 See ISE Gemini, LLC (‘‘ISE Gemini’’) Schedule
of Fees Section I. Footnote 4 and Section II.
Footnote 4. See NASDAQ OMX BX, Inc. (‘‘BX’’)
Chapter XV Options Pricing Sec. 2(2). See NASDAQ
Options Market LLC (‘‘NOM’’) Chapter XV Options
Pricing Sec. 2(2).
PO 00000
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67525
Broker Dealers; as stated above, Market
Makers have obligations that other
Participants do not and can also provide
high volumes of liquidity that will
ultimately benefit all Participants on the
Exchange.
MNX
The Exchange believes it is reasonable
to remove from the BOX Fee Schedule
a reference to a fee that is no longer
applicable as options on MNX have
been delisted and are no longer traded
on BOX. The Exchange also believes it
is equitable and not unfairly
discriminatory to remove all references
to MNX as this applies equally to all
Participants on the Exchange.
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 Exchange believes that adopting
the proposed fee structure for all NonAuction Transactions will not impose a
burden on competition among various
Exchange Participants. BOX currently
assesses distinct standard contract
Exchange Fees for different account and
transaction types. The Exchange
believes that applying a fee structure
that is determined according to whether
the order removes or adds liquidity, the
account type of the Participant
submitting the order, and the contra
party will result in Participants being
charged appropriately for these
transactions. Submitting an order is
entirely voluntary and Participants can
determine which type of order they
wish to submit, if any, to the Exchange.
Further, the Exchange believes that
this proposal will enhance competition
between exchanges because it is
designed to allow the Exchange to better
compete with other exchanges for order
flow.
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing exchanges. 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.
E:\FR\FM\13NON1.SGM
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Federal Register / Vol. 79, No. 219 / Thursday, November 13, 2014 / Notices
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 22
and Rule 19b–4(f)(2) thereunder,23
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
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:
tkelley on DSK3SPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–BOX–2014–25 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BOX–2014–25. 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–
2014–25, and should be submitted on or
before December 4, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–26811 Filed 11–12–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73541; File No. SR–BX–
2014–055]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Cancel-Replacement Orders and
Routing
November 6, 2014.
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 October
28, 2014, NASDAQ OMX BX, Inc. (‘‘BX’’
or ‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘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.
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
22 15
U.S.C. 78s(b)(3)(A)(ii).
23 17 CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
17:16 Nov 12, 2014
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to add
specificity to the Exchange’s options
trading rules. The Exchange proposes to
define cancel-replacement orders and
also describe a route timer at in Chapter
VI, entitled ‘‘Trading Systems.’’
The text of the proposed rule change
is available on the Exchange’s Web site
at https://
nasdaqomxbx.cchwallstreet.com, at the
principal office of the Exchange, 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 is proposing to amend
Chapter VI to add additional specificity
to its rules. The Exchange proposes to
amend Section 1, Definitions, to define
a cancel-replacement order. The
Exchange proposes to amend Section
11, Order Routing, to add greater
specificity to the Rulebook concerning a
route timer.
Cancel-Replacement Orders
A market participant today has the
option of either sending in a cancel
order and then separately sending in a
new order which serves as a
replacement of the original order (two
separate messages) or sending a single
cancel-replacement order in one
message.
If an order is submitted to the System
and then subsequently a cancel order is
sent to the System cancelling the
original order, the original order will be
cancelled by the System provided the
original order was not already filled
partially or in its entirety. A subsequent
replacement order would be treated as
a new order by the System and will not
E:\FR\FM\13NON1.SGM
13NON1
]]>Agencies
[Federal Register Volume 79, Number 219 (Thursday, November 13, 2014)]
[Notices]
[Pages 67520-67526]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-26811]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73547; File No. SR-BOX-2014-25]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule on the BOX Market LLC (``BOX'') Options Facility
November 6, 2014.
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 October 31, 2014, 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 the
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] 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
November 1, 2014. The text of the proposed rule change is available
from the principal office of the Exchange, at the Commission's Public
Reference Room and also on the Exchange's Internet Web site at https://boxexchange.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make a number of changes to the BOX Fee
Schedule.
Exchange Fees
Non-Auction Transactions
First, the Exchange proposes to amend Section I (Exchange Fees) to
establish a subsection entitled ``Non-Auction Transactions.'' \5\ The
Exchange then proposes to adopt the current fee structure for Non-
Auction Transactions in Select Symbols for all Non-Auction transactions
on BOX. With this change the Select Symbols fee structure outlined in
Section I.C. of the BOX Fee Schedule will be removed.
---------------------------------------------------------------------------
\5\ Non-Auction Transactions are those transactions executed on
the BOX Book.
---------------------------------------------------------------------------
Currently, Non-Auction Transactions in non-Select Symbols are
subject to the fee structure outlined in Section I of the BOX Fee
Schedule. For every Non-Auction Transaction, Public Customers are
assessed a $0.07 fee per contract and Professional Customers and Broker
Dealers $0.42 per contract. Market Makers are assessed a per contract
fee based upon the Market Maker's Monthly ADV in all transactions
executed on BOX, as calculated at the end of each month. All Non-
Auction Transactions for that month are charged the same per contract
fee according to the ADV achieved by the Market Maker, which ranges
from $0.13 to $0.35.
In proposed Section I.A. (Non-Auction Transactions), the Exchange
proposes to adopt a pricing model where the Exchange will assess
transaction fees and credits dependent upon three factors: (i) The
account type of the Participant submitting the order; (ii) whether the
Participant is a liquidity provider or liquidity taker; and (iii) the
account type of the contra party. Non-Auction Transactions in Penny
Pilot Classes will also be assessed different fees or credits than Non-
Auction Transactions in Non-Penny Pilot Classes.
The Exchange also proposes to specify that these transactions will
now be exempt from the Liquidity Fees and Credits outlined in Section
II of the BOX Fee Schedule. The proposed fee structure for all Non-
Auction Transactions is as follows:
----------------------------------------------------------------------------------------------------------------
Penny pilot classes Non-penny pilot classes
---------------------------------------------------------------
Account type Contra party Maker fee/ Taker fee/ Maker fee/ Taker fee/
credit credit credit credit
----------------------------------------------------------------------------------------------------------------
Public Customer............... Public Customer. $0.00 $0.00 $0.00 $0.00
Professional (0.22) (0.22) (0.57) (0.57)
Customer/Broker
Dealer.
Market Maker.... (0.22) (0.22) (0.57) (0.57)
[[Page 67521]]
Professional Customer or Public Customer. 0.55 0.59 0.90 0.94
Broker Dealer.
Professional 0.20 0.35 0.30 0.35
Customer/Broker
Dealer.
Market Maker.... 0.20 0.39 0.30 0.39
Market Maker.................. Public Customer. 0.51 0.55 0.85 0.90
Professional 0.00 0.05 0.00 0.10
Customer/Broker
Dealer.
Market Maker.... 0.10 0.29 0.10 0.29
----------------------------------------------------------------------------------------------------------------
For example, if a Public Customer submitted an order to the BOX
Book in a Penny Pilot Class (making liquidity), the Public Customer
would be credited $0.22 if the order interacted with a Market Maker's
order and the Market Maker (taking liquidity) would be charged $0.55.
To expand on this example, if the Market Maker instead submitted an
order to the BOX Book in a Penny Pilot Class (making liquidity), the
Market Maker would be charged $0.51 if the order interacted with a
Public Customer's order and the Public Customer (taking liquidity)
would again be credited $0.22.
Tiered Volume Rebate for Non-Auction Transactions
Accordingly, the Exchange proposes to adopt the same tiered volume-
based rebate for Market Makers and Public Customers in Non-Auction
Transactions that was previously applied to Non-Auction Transactions in
Select Symbols. Specifically, Market Makers and Public Customers will
receive a per contract rebate based on ADV considering all transactions
executed on BOX by the Market Maker or Public Customer, respectively,
as calculated at the end of each month. All Non-Auction Transactions
for that month will receive the same per contract rebate according to
the ADV achieved by the Market Maker or Public Customer. However, the
Exchange proposes to specify that Non-Auction Transactions where a
Public Customer order interacts with another Public Customer order will
be exempt from the per contract rebate listed below. These transactions
will still count toward the Public Customer's monthly ADV.
The new per contract rebate for Market Makers and Public Customers
in Non-Auction Transactions as set forth in Section I.A.1. of the BOX
Fee Schedule will be as follows:
------------------------------------------------------------------------
Per contract
rebate
------------------------------------------------------------------------
Market Maker Monthly ADV:
100,001 contracts and greater.................... ($0.15)
60,001 contracts to 100,000 contracts............ (0.10)
35,001 contracts to 60,000 contracts............. (0.07)
10,001 contracts to 35,000 contracts............. (0.03)
1 contract to 10,000 contracts................... 0.00
Public Customer Monthly ADV:
35,001 contracts and greater..................... (0.10)
15,001 contracts to 35,000 contracts............. (0.06)
5,001 contracts to 15,000 contracts.............. (0.03)
1 contract to 5,000 contracts.................... 0.00
------------------------------------------------------------------------
Auction Transactions
The Exchange then proposes to amend Section I (Exchange Fees) to
establish a subsection entitled ``Auction Transactions.'' \6\ The
Auction Transactions fees for Public Customers, Professional Customers
and Broker Dealers will remain unchanged. For Market Makers, the
Exchange proposes to adopt a fee of $0.20 for PIP Orders, COPIP Orders
and Agency Orders.\7\ Currently Market Makers are assessed a per
contract fee based upon the Market Maker's Monthly ADV in all
transactions executed on BOX, as calculated at the end of each month.
All PIP, COPIP and Agency Orders for that month are charged the same
per contract fee according to the ADV achieved by the Market Maker,
which ranges from $0.13 to $0.35. The Exchange then proposes to remove
the Tiered Fee Schedule for Market Makers based upon Monthly Average
Daily Volume in current Section I.B.
---------------------------------------------------------------------------
\6\ Auction Transactions are those transactions executed through
the Price Improvement Period (``PIP''), the Complex Order Price
Improvement Period (``COPIP''), the Solicitation Auction mechanism,
and the Facilitation Auction mechanism. All COPIP transactions will
be charged per contract per leg.
\7\ A PIP Order or COPIP Order is a Customer Order (an agency
order for the account of either a customer or a broker-dealer)
designated for the PIP or COPIP, respectively. An Agency Order is a
block-size order that an Order Flow Provider seeks to facilitate as
agent through the Facilitation Auction or Solicitation Auction
mechanism.
---------------------------------------------------------------------------
The new Auction Transactions as set forth in Section I.B. of the
BOX Fee Schedule will be as follows:
[[Page 67522]]
----------------------------------------------------------------------------------------------------------------
Account type
-------------------------------------------------------------------------------
Professional
Public customer customer Broker dealer Market maker
----------------------------------------------------------------------------------------------------------------
PIP Order, COPIP Order, or $0.00............. $0.37............. $0.37............. $0.20
Agency Order.
Improvement Order in PIP or 0.15.............. 0.37.............. 0.37.............. 0.30
COPIP \8\.
Responses in the Solicitation or 0.15.............. 0.37.............. 0.37.............. 0.30
Facilitation Auction Mechanisms.
Primary Improvement Order,\9\ Based on ADV, see Based on ADV, see Based on ADV, see Based on ADV, see
Facilitation Order, or Section I. B.1. Section I. B.1. Section I. B.1. Section I. B.1.
Solicitation Order.
----------------------------------------------------------------------------------------------------------------
Liquidity Fees and Credits
Since all Non-Auction Transactions will now fall under Section I
[sic] the new fee structure and be exempt from Section II Liquidity
Fees and Credits, BOX proposes to remove subsection C (Non-Auction
Transactions) from Section II. With the removal of subsection C, the
Exchange proposes to move the bullet regarding non-immediately
marketable orders to Section II.A (PIP and COPIP Transactions). A non-
immediately marketable order that executes against a PIP Order or a
COPIP Order, therefore becoming an Unrelated Order, will continue to be
charged as an Improvement Order for purposes of the BOX Fee Schedule.
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\8\ An Improvement Order is a response to a PIP or COPIP
auction.
\9\ A Primary Improvement Order is the matching contra order
submitted to the PIP or COPIP on the opposite side of an agency
order.
---------------------------------------------------------------------------
The Exchange then proposes to edit the language in proposed Section
II.C, formerly Section II.D. (Exempt Transactions) and add the
following fees for transactions which occur on the opening or re-
opening of trading. For these transactions, which are deemed neither to
``add'' nor ``remove'' liquidity, the Exchange proposes to assess a
flat fee per contract of $0.00 for Public Customers, $0.20 for
Professional Customers and Broker Dealers and $0.12 for Market Makers.
The Exchange also proposes to clarify that outbound Eligible Orders
routed to an Away Exchange, as defined in Rule 15000 Series, remain
subject to the fees outlined in Section IV. Eligible Orders Routed to
an Away Exchange.
Finally, the Exchange proposes to remove the ``Select Symbols''
language in Section II.C. (Exempt Transactions) that states that Non-
Auction Transactions in Select Symbols will be considered exempt from
all liquidity fees and credits. With the proposed changes, all Non-
Auction Transactions will be considered exempt.
MNX
The Exchange also proposes to amend the Fee Schedule to remove the
reference to the Mini Nasdaq 100 Index (NDX) [sic].
Because the Exchange has delisted the Mini-NDX[supreg] Index (MNX),
the Exchange proposes to remove the reference to MNX from the BOX Fee
Schedule. Currently, Section I (Exchange Fees) of the BOX Fee Schedule
provides for a surcharge to be applied to options on any index traded
on BOX; which includes a $0.22 per contract surcharge for options on
MNX. The Exchange has since delisted options on MNX and they are no
longer traded on BOX. As such, no related surcharge will apply and the
Exchange is proposing to remove the reference from the BOX Fee
Schedule.
Other
Finally, the Exchange is proposing to make additional non-
substantive changes to the Fee Schedule. Specifically, the Exchange is
renumbering certain footnotes, headings and internal references to
accommodate the above proposed changes to the Fee Schedule. The
Exchange also proposes to move the BOX Volume Rebate from current
Section I.E of the Fee Schedule to proposed Section I.B (Auction
Transactions).
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act, in general, and Section
6(b)(4) and 6(b)(5) of the Act,\10\ 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 discriminate between customers, issuers, brokers
or dealers. The proposed changes will allow the Exchange to be
competitive with other exchanges and to apply fees and credits in a
manner that is equitable among all BOX Participants. Further, the
Exchange operates within a highly competitive market in which market
participants can readily direct order flow to any other competing
exchange if they determine fees at a particular exchange to be
excessive.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
Exchange Fees
Non-Auction Transactions
The Exchange believes adopting the current fee structure for Non-
Auction Transactions in Select Symbols for all Non-Auction
Transactions, regardless of symbol, is reasonable, equitable and not
unfairly discriminatory. Even though the Select Symbol fee structure
for Non-Auction Transactions was only adopted last month, it was well
received by Participants and the industry and the Exchange believes it
is appropriate to now apply it to all Non-Auction Transactions. The
proposed fee structure is intended to attract order flow to the
Exchange by offering all market participants incentives to submit their
Non-Auction orders to the Exchange. The practice of providing
additional incentives to increase order flow is, and has been, a common
practice in the options markets.\11\ Further, the Exchange believes it
is appropriate to provide incentives for market participants which will
result in greater liquidity and ultimately benefit all Participants
trading on the Exchange.
---------------------------------------------------------------------------
\11\ See International Securities Exchange LLC (``ISE'')
Schedule of Fees, Section I. Regular Order Fees and Rebates for
Standard Options, Non-Select Symbols (page 6); NASDAQ OMX PHLX,
(``PHLX''), Pricing Schedule Section B, ``Customer Rebate Program'';
and NYSE Arca, Inc (``Arca'') Options Fees and Charges, ``Customer
Monthly Posting Credit Tiers and Qualifications for Executions in
Penny Pilot Issues'' (page 4).
---------------------------------------------------------------------------
The Exchange also believes it is equitable, reasonable and not
unfairly discriminatory to assess fees and credits according to the
account type of the Participant originating the order and the contra
party. This proposed fee structure was recently adopted by the Exchange
for Non-Auction Transactions
[[Page 67523]]
in Select Symbols \12\ and is similar to the model adopted by the
Exchange for Complex Orders Fees \13\ and has been accepted by both the
Commission and the industry.\14\ The result of this structure is that a
Participant does not know the fee it will be charged when submitting
certain orders. Therefore, the Participant must recognize that it could
be charged the highest applicable fee on the Exchange's schedule, which
may, instead, be lowered or changed to a credit depending upon how the
order interacts. This structure has been favorably received by the
industry and BOX Participants; therefore the Exchange is proposing to
apply the same structure to all Non-Auction Transactions. After
adopting this type of structure for Non-Auction Transactions, a Public
Customer submitting an order on the BOX Book will recognize that it
will not pay a fee for these transactions and that depending upon with
whom the order executes, the Public Customer may receive an additional
benefit for submitting the order. Likewise, a Professional Customer or
Broker Dealer submitting an order will recognize that it will not be
charged more than $0.59 in Penny Pilot issues and $0.94 in Non-Penny
Pilot issues. The same is true for Market Makers, who will recognize
that their maximum charge when submitting a Non-Auction order will be
$0.55 in Penny Pilot issues and $0.90 in Non-Penny Pilot issues.
---------------------------------------------------------------------------
\12\ See Securities Exchange Act Release No. 73397 (October 21,
2014), 79 FR 63982 (October 27, 2014) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change to Amend the Fee
Schedule on the BOX Market LLC Options Facility).
\13\ See Securities Exchange Act Release No. 71312 (January 15,
2014), 79 FR 3649 (January 22, 2014) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To
Establish Fees for Complex Order Price Improvement Period
(``COPIP'') Transactions).
\14\ This type of structure was also adopted by NYSE Arca in
2012. See Securities Release No. 68405 (December 11, 2012), 77 FR
74719 (December 17, 2012) (SR-NYSEArca-2012-137).
---------------------------------------------------------------------------
The Exchange believes that the proposed fees and credits for Public
Customers in Non-Auction Transactions are reasonable. Under the
proposed fee structure Public Customers will either pay a Maker fee of
$0.00 or receive a Maker/Taker credit of $0.22 for Penny Pilot classes
and $0.57 for Non-Penny Pilot classes. These potential fees and credits
are reasonable and will at all times be less than the current $0.07
Exchange Fee that Public Customers pay in Non-Auction Transactions.
The Exchange believes providing a credit or charging no fee to
Public Customers for all Non-Auction Transactions is equitable and not
unfairly discriminatory. 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 Public
Customer benefit. Accordingly, the Exchange believes that charging no
fee or providing a credit for Public Customers is appropriate and not
unfairly discriminatory. Public Customers are less sophisticated than
other Participants and the credit will help to attract a high level of
Public Customer order flow to the BOX Book and create liquidity, which
the Exchange believes will ultimately benefit all Participants trading
on BOX.
Finally, the Exchange believes it is reasonable, equitable and not
unfairly discriminatory to give Public Customers a credit when their
orders execute against a non-Public Customer and, accordingly, charge
non-Public Customers a higher fee when their orders execute against a
Public Customer. As stated above, the Exchange aims to improve markets
by developing features for the benefit of its Public Customers. Similar
to the payment for order flow and other pricing models that have been
adopted by the Exchange and other exchanges to attract Public Customer
order flow, the Exchange increases fees to non-Public Customers in
order to provide incentives for Public Customers. The Exchange believes
that providing incentives for Non-Auction Transactions by Public
Customers is reasonable and, ultimately, will benefit all Participants
trading on the Exchange by attracting Public Customer order flow.
The Exchange believes that charging Professional Customers and
Broker Dealers higher fees than Public Customers for Non-Auction
Transactions is equitable and not unfairly discriminatory. Professional
Customers, while Public Customers by virtue of not being Broker
Dealers, generally engage in trading activity more similar to Broker
Dealer proprietary trading accounts (submitting more than 390 standard
orders per day on average). The Exchange believes that the higher level
of trading activity from these Participants will draw a greater amount
of BOX system resources than that of non-professional, Public
Customers. Because this higher level of trading activity will result in
greater ongoing operational costs, the Exchange aims to recover its
costs by assessing Professional Customers and Broker Dealers higher
fees for transactions.
The Exchange also believes it is equitable and not unfairly
discriminatory for BOX Market Makers to be assessed lower fees than
Professional Customers and Broker Dealers for Non-Auction Transactions
because of the significant contributions to overall market quality that
Market Makers provide. Specifically, Market Makers can provide higher
volumes of liquidity and lowering their fees will help attract a higher
level of Market Maker order flow to the BOX Book and create liquidity,
which the Exchange believes will ultimately benefit all Participants
trading on BOX. As such, the Exchange believes it is appropriate that
Market Makers be charged lower transaction fees than Professional
Customers and Broker Dealers for Non-Auction Transactions.
The Exchange believes that the proposed fees and credits for all
other Participants in Non-Auction Transactions are reasonable. Under
the proposed fee structure, a Professional Customer or Broker Dealer
making liquidity and interacting with a Professional Customer, Broker
Dealer or Market Marker will either be charged a fee of $0.20 for Penny
Pilot Classes or $0.30 for Non-Penny Pilot Classes. If the Professional
Customer or Broker Dealer is instead taking liquidity in either Penny
Pilot or Non-Penny Pilot Classes, it will be charged $0.35 if it
interacts with a Professional Customer or Broker Dealer and $0.39 if it
interacts with a Market Maker. The Exchange believes the fees listed
above are reasonable as they are lower than the current $0.42 Exchange
Fee charged to Broker Dealers and Professional Customers in Non-Auction
Transactions.
Similarly, in the proposed fee structure a Market Maker making
liquidity in both Penny Pilot and Non-Penny Pilot Classes will either
be charged a fee of $0.00 for interacting with a Professional Customer
or Broker Dealer or $0.10 for interacting with another Market Maker. If
the Market Maker is instead taking liquidity, it will be charged $0.05
(for Penny Pilot Classes) and $0.10 (for Non-Penny Pilot Classes) if it
interacts with a Professional Customer or Broker Dealer. If a Market
Maker is taking liquidity and interacts with another Market Maker they
will be charged $0.29 in all situations. The Exchange believes the fees
listed above are reasonable as they are, in most situations, lower than
the current $0.13 to $0.35 Exchange Fee range for Market Makers under
the BOX Fee Schedule and are in line with what is currently charged by
the industry.\15\
---------------------------------------------------------------------------
\15\ Many U.S. Options Exchanges do not differentiate their fees
between auction and non-auction transactions. However, the general
range for Market Maker fees is between $0.10 and $0.89. See NASDAQ
OMX BX (``BX'') Options Pricing, Chapter XV, Sec. 2; BX charges both
BX Options Market Makers and Non-Customer/Non-BX Options Market
Makers a fee of $0.46 to remove liquidity in Penny Pilot Options and
a fee of $0.89 to remove liquidity in Non-Penny Pilot Options, a fee
to add liquidity in Penny Pilot Options of $0.40 to BX Options
Market Makers and $0.45 to Non-Customer/Non-BX Options Market
Makers, and a fee to add liquidity in Non-Penny Pilot Options of
$0.50 to BX Options Market Makers (or $0.85 when interacting with
Customer) and $0.88 for Non-Customer/Non-BX Options Market Makers.
See NYSE Arca Options (``Arca'') Fees and Charges page 3; Arca
charges NYSE Arca Market Makers $0.16 for manual executions, $0.49
to take liquidity in Penny Pilot Issues, and $0.87 to take liquidity
in Non Penny Pilot Issues. See International Securities Exchange
(``ISE'') Schedule of Fees, Section I; ISE charges Market Makers
$0.10 for making liquidity in select symbols and $0.42 for taking
liquidity in select symbols.
---------------------------------------------------------------------------
[[Page 67524]]
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory for Professional Customers, Broker Dealers and Market
Makers to be charged higher fees for both making and taking liquidity
when interacting with Public Customers. In the proposed fee structure,
a Professional Customer or Broker Dealer interacting with a Public
Customer will be charged a $0.55 Maker fee or $0.59 Taker fee for Penny
Pilot Classes and a $0.90 Maker fee or $0.94 Taker fee for Non-Penny
Pilot Classes. Similarly a Market Marker interacting with a Public
Customer will be charged a $0.51 Maker fee or $0.55 Taker fee for Penny
Pilot Classes and a $0.85 Maker fee or $0.90 Taker fee for Non-Penny
Pilot Classes. While these fees are higher than what these Participants
are currently charged for Non-Auction Transactions in Non-Select
Symbols, the Exchange believes they are reasonable as they are in line
when compared to similar fees in the options industry.\16\ Further, as
stated above, the Exchange believes charging a higher fee for
interactions with a Public Customer is equitable and not unfairly
discriminatory because it allows the Exchange to incentivize Public
Customer order flow by offering credits to Public Customers in Non-
Auction Transactions. The Exchange believes that providing incentives
for Non-Auction Transactions by Public Customers will benefit all
Participants trading on the Exchange by attracting this Public Customer
order flow.
---------------------------------------------------------------------------
\16\ Id. Professional Customer and Broker Dealers are also
charged anywhere from $0.10 to $0.89 within the option exchange fee
schedules referenced above.
---------------------------------------------------------------------------
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory for Professional Customers, Broker Dealers and Market
Makers to be charged a higher fee for orders removing liquidity when
compared to the fee they receive for orders that add liquidity.
Charging a lower fee for orders that add liquidity will promote
liquidity on the Exchange and ultimately benefit all participants on
BOX. Further, the concept of incentivizing orders that add liquidity
over orders that remove liquidity is commonly accepted within the
industry as part of the ``Make/Take'' liquidity model.\17\
---------------------------------------------------------------------------
\17\ The ``Make/Take'' model is currently used by the
International Securities Exchange LLC (``ISE') and NASDAQ OMX PHLX
LLC (``PHLX'').
---------------------------------------------------------------------------
Further, the Exchange believes it is equitable and not unfairly
discriminatory to charge the Professional Customer or Broker Dealer
more for taking liquidity against a Market Maker than they are charged
for taking liquidity against other Professional Customers or Broker
Dealers. As stated above, the Exchange proposes to provide certain
incentives to Market Makers because of the high volumes of liquidity
they can provide and increasing fees for Professional Customers and
Broker Dealers taking liquidity will allow the Exchange to offer these
incentives, ultimately benefiting all Participants trading on BOX.
Finally, the Exchange also believes it is reasonable to charge
Professional Customers, Broker Dealers, and Market Makers less for
certain executions in Penny Pilot issues compared to Non-Penny Pilot
issues because these classes are typically more actively traded;
assessing lower fees will further incentivize order flow in Penny Pilot
issues on the Exchange, ultimately benefiting all Participants trading
on BOX. Additionally, the Exchange believes it is reasonable to give a
greater credit to Public Customers for Non-Auction Transactions in Non-
Penny Pilot issues as compared to Penny Pilot issues. Since these
classes have wider spreads and are less actively traded, giving a
larger credit will further incentivize Public Customers to trade in
these classes, ultimately benefitting all Participants trading on BOX.
The Exchange believes that the proposed Non-Auction Transactions
fee structure will keep the Exchange competitive with other exchanges
and will be applied in an equitable manner among all BOX Participants.
The Exchange believes the proposed fee structure is reasonable and
competitive with fee structures in place on other exchanges. Further,
the Exchange believes that the competitive marketplace impacts the fees
proposed for BOX.
Tiered Volume Rebate for Non-Auction Transactions
BOX believes it is reasonable, equitable and not unfairly
discriminatory to introduce tiered volume based rebates for Market
Makers and Public Customers in all Non-Auction Transactions. Other
exchanges employ similar incentive programs,\18\ and the Exchange
believes that its proposed volume thresholds and rebates are reasonable
and competitive when compared to incentive structures at other
exchanges.
---------------------------------------------------------------------------
\18\ See Section B of the PHLX Pricing Schedule entitled
``Customer Rebate Program'' and CBOE's Volume Incentive Program
(VIP). CBOE's Volume Incentive Program (``VIP'') pays certain tiered
rebates to Trading Permit Holders for electronically executed
multiply-listed option orders which include AIM orders. Note that
these exchanges base these rebate programs on the percentage of
total national Public Customer volume traded on their respective
exchanges, which the Exchange is not proposing to do.
---------------------------------------------------------------------------
Additionally, the Exchange believes that the proposed volume
thresholds are reasonable because they will incentivize Public
Customers and Market Makers to direct order flow to the Exchange to
obtain the benefit of the rebate, which will in turn benefit all market
participants by increasing liquidity on the Exchange. The Exchange
believes that its proposed volume threshold and rebate is competitive
when compared to rebate structures at other exchanges. Finally, the
Exchange believes it is reasonable to exempt Non-Auction Transactions
where a Public Customer order interacts with another Public Customer
order from the per contract rebate. The Exchange does not believe a
rebate in this situation is appropriate, as neither Public Customer
will be paying a fee for the transaction. Further, these transactions
will still count toward the Public Customer's monthly ADV.
The Exchange also believes it is equitable and not unfairly
discriminatory to only adopt these structures for Public Customers and
Market Makers. The proposed volume credits are intended to further
encourage Public Customer and Market Maker Non-Auction order flow to
the Exchange. Increased Public Customer and Market Maker volume will
provide greater liquidity, which benefits all market participants on
the Exchange. The practice of incentivizing increased Public Customer
order flow is common in the options markets. Further, Market Makers
also provide significant contributions to overall market quality.
Specifically, Market Makers can provide high volumes of liquidity and
lowering their Non-Auction Transaction fees will potentially help
attract a higher level of
[[Page 67525]]
Market Maker order flow and create liquidity, which the Exchange
believes will ultimately benefit all Participants trading on BOX.
Auction Transactions
The Exchange believes it reasonable to remove the tiered fee
structure for Market Makers based upon ADV. The tiered fee structure
was adopted to incentivize Market Makers to direct order flow to the
Exchange, which the Exchange believes is now unnecessary with the
adoption of the new Non-Auction Transactions fee structure as well as
the Tiered Volume Rebates for Market Makers in Non-Auction
Transactions. Additionally, in Auction Transactions Market Makers
remain eligible for the BOX Volume Rebate for all PIP and COPIP Orders
of 250 and under contracts. The Exchange believes it is reasonable to
adopt a flat $0.20 per contract fee for Market Makers in PIP Orders,
COPIP Orders, and Agency Orders. Specifically, the Exchange believes
the fee strikes the appropriate balance between the $0.13 to $0.35 fees
that Market Makers are currently charged for these orders and is
reasonable when compared to similar fees among the industry.\19\
Finally, the Exchange believes it is equitable and not unfairly
discriminatory to charge a Market Maker less for PIP Orders, COPIP
Orders, and Agency Orders than what is charged to Professional
Customers and Broker Dealers. Generally, Market Makers have obligations
on BOX that other Participants do not. They must maintain active two-
sided markets in the classes in which they are appointed and must meet
certain minimum quoting requirements. Market Makers can also provide
high volumes of liquidity and assessing lower transaction fee [sic] may
help attract a higher level of Market Maker order flow and create
liquidity, which the Exchange believes will ultimately benefit all
Participants trading on BOX.
---------------------------------------------------------------------------
\19\ See supra, note 15.
---------------------------------------------------------------------------
Liquidity Fees and Credits
The Exchange believes that exempting all Non-Auction Transactions
from Section II (Liquidity Fees and Credits) is reasonable, equitable
and not unfairly discriminatory. The Exchange's Liquidity Fees and
Credits are intended to attract order flow to the Exchange by offering
incentives to all market participants to submit orders to the Exchange
and the Exchange believes that the proposed fee structure will provide
appropriate incentives to encourage Participants to submit Non-Auction
Transactions to the Exchange. The Exchange believes that exempting Non-
Auction Transactions from liquidity fees and credits is reasonable
compared to the similar fees and credits offered by the other
exchanges. The Exchange believes exempting Non-Auction Transactions
from liquidity fees and credits is not unfairly discriminatory as the
exemption from the liquidity fees and credits applies equally to all
Participants on the Exchange.
The Exchange believes it is reasonable edit [sic] the Exempt
Transactions subsection and to assess a flat fee for transactions which
occur on the opening or re-opening of trading and are deemed neither to
``add'' nor ``remove'' liquidity. With the proposed fee structure for
Non-Auction Transactions, which assess fees and credits dependent upon
whether the Participant is a liquidity provider or liquidity taker,
transactions on the opening or re-opening will not being [sic] charged
an Exchange fee. For example, under the proposed Non-Auction fee
structure a transaction on the opening would not be charged an Exchange
Fee under Section I of the BOX Fee Schedule. Instead the Exchange is
proposing to ensure that these transactions are assessed a fee. The
Exchange has previously had this type of fee within the BOX Fee
Schedule \20\ and other exchanges with liquidity fees and credits also
spell out how these transactions are treated within their respective
fee schedules.\21\ The Exchange believes assessing a flat fee of $0.00
for Public Customers, $0.20 for Professional Customers and Broker
Dealers and $0.12 for Market Makers is in line with the Non-Auction
Transactions fees outlined in the new fee structure. The Exchange
believes it is equitable and not unfairly discriminatory for Public
Customers to be charged no fee for transactions which occur on the
opening or re-opening of trading. As stated above, the Exchange aims to
improve markets by developing features for the benefit of its Public
Customers. The Exchange also believes it is equitable and not unfairly
discriminatory to charge a Market Maker less for these transactions
than what is charged to Professional Customers and Broker Dealers; as
stated above, Market Makers have obligations that other Participants do
not and can also provide high volumes of liquidity that will ultimately
benefit all Participants on the Exchange.
---------------------------------------------------------------------------
\20\ See Securities Exchange Act Release No. 61342 (January 13,
2010), 75 FR 3503 (January 21, 2014 [sic]) (Notice of Filing and
Immediate Effectiveness of a [sic] Proposed Rule Change to Amend
[sic] the Fee Schedule of the Boston Options Exchange Facility).
\21\ See ISE Gemini, LLC (``ISE Gemini'') Schedule of Fees
Section I. Footnote 4 and Section II. Footnote 4. See NASDAQ OMX BX,
Inc. (``BX'') Chapter XV Options Pricing Sec. 2(2). See NASDAQ
Options Market LLC (``NOM'') Chapter XV Options Pricing Sec. 2(2).
---------------------------------------------------------------------------
MNX
The Exchange believes it is reasonable to remove from the BOX Fee
Schedule a reference to a fee that is no longer applicable as options
on MNX have been delisted and are no longer traded on BOX. The Exchange
also believes it is equitable and not unfairly discriminatory to remove
all references to MNX as this applies equally to all Participants on
the Exchange.
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 Exchange believes that adopting the proposed fee structure for
all Non-Auction Transactions will not impose a burden on competition
among various Exchange Participants. BOX currently assesses distinct
standard contract Exchange Fees for different account and transaction
types. The Exchange believes that applying a fee structure that is
determined according to whether the order removes or adds liquidity,
the account type of the Participant submitting the order, and the
contra party will result in Participants being charged appropriately
for these transactions. Submitting an order is entirely voluntary and
Participants can determine which type of order they wish to submit, if
any, to the Exchange.
Further, the Exchange believes that this proposal will enhance
competition between exchanges because it is designed to allow the
Exchange to better compete with other exchanges for order flow.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing exchanges. 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.
[[Page 67526]]
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 \22\ and Rule 19b-4(f)(2)
thereunder,\23\ because it establishes or changes a due, or fee.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 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-2014-25 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BOX-2014-25. 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-2014-25, and should be
submitted on or before December 4, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26811 Filed 11-12-14; 8:45 am]
BILLING CODE 8011-01-P
