Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of Proposed Rule Change To Adopt New Rule 7300 To Allow the Exchange To Trade Preferenced Orders, 77579-77583 [2014-30121]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 247 (Wednesday, December 24, 2014)]
[Notices]
[Pages 77579-77583]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30121]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73878; File No. SR-BOX-2014-28]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing of Proposed Rule Change To Adopt New Rule 7300 To Allow the 
Exchange To Trade Preferenced Orders

December 18, 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 December 8, 2014, BOX Options Exchange LLC (the ``Exchange'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the self-regulatory organization. The 
Commission is publishing this notice to solicit comments on the 
proposed rule from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt new Rule 7300 to allow the Exchange 
to trade Preferenced Orders. 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 self-regulatory organization 
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 self-regulatory organization 
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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt new Rule 7300 (Preferenced Orders) 
to allow BOX Options Participants (``Participants'') to submit orders 
for which a Market Maker is designated to receive an allocation 
preference on the Exchange (``Preferenced Orders''). This proposal 
provides an enhanced allocation to a Preferred Market Maker when it is 
quoting at NBBO.
    This is a competitive filing based on the rules of a number of 
competing options exchanges.\3\ This proposal will allow the Exchange 
to be competitive with other options exchanges that provide similar 
enhanced allocation opportunities to Market Makers to reward them for 
attracting order flow to the Exchange.
---------------------------------------------------------------------------

    \3\ See, e.g. Phlx Rule 1080(l), CBOE Rule 8.13, ISE 
Supplementary Material .03 to Rule 713, MIAX Rule 514.
---------------------------------------------------------------------------

Preferenced Orders
    A Preferenced Order, as proposed, is any order submitted by a 
Participant to the Exchange for which a Market Maker is designated (a 
``Preferred Market Maker'') to receive execution priority, with respect 
to a portion of the Preferenced Order, upon meeting certain 
qualifications described below. Preferenced Orders are submitted by a 
Participant by designating an order as such and identifying a Preferred 
Market Maker when entering the order.
    Preferenced Orders may be submitted by any Participant on the 
Exchange. All existing order types and designations may be entered as 
Preferenced Orders, with the exception of Customer Cross Orders (which 
do not involve Market Makers) and Directed Orders (which relate to the 
PIP and COPIP matching algorithms). If a Market-on-Opening Order or a 
Complex Order is submitted as a Preferenced Order, the designation as a 
Preferenced Order will be disregarded and such order will be treated on 
the Exchange the same as if it were not a Preferenced Order. 
Preferenced Orders may interact with auctions and other functionality 
of the Exchange.
    Participants may designate an order as a Preferenced Order and 
identify the applicable Preferred Market Maker across all forms of 
connectivity to the Exchange. Preferenced Orders will be displayed on 
the Exchange's High Speed Vendor Feed (``HSVF'') the same as orders 
that are not designated as Preferenced Orders.
    A Preferred Market Maker must maintain a continuous two-sided 
market, pursuant to Rule 8050(c)(1), throughout the trading day, in 
option classes for which it accepts Preferenced Orders, for 99% of the 
time the Exchange is open for trading in each such option class; 
provided, however, that for purposes of this requirement, a Preferred 
Market Maker is not required to quote in intra-day add-on series or 
series that have a time to expiration of nine months or more in classes 
for which it receives Preferenced Orders and a Market Maker may still 
be a Preferred Market Maker in any such series if the Market Maker 
otherwise complies with the Preferred Market Maker requirements. 
Compliance with this requirement will be determined on a monthly basis; 
however, determining compliance with this requirement on a monthly 
basis does not relieve a Preferred Market Maker from meeting this 
quoting requirement on a daily basis, nor does it prohibit the Exchange 
from taking disciplinary action against a Preferred Market Maker for 
failing to meet this requirement each trading day. If a technical 
failure or limitation of a system of the Exchange prevents a Market 
Maker from maintaining, or prevents a Market Maker from communicating 
to the Exchange, timely and accurate electronic quotes in an option 
class, the duration of such failure will be disregarded in determining 
whether the Market Maker has satisfied this requirement. The Exchange 
may consider other exceptions to this obligation based on a 
demonstrated legal or regulatory requirement or other mitigating 
circumstances.
    Except as described below, orders submitted to the Exchange as 
Preferenced Orders will be treated the same as other orders submitted 
to the Exchange, including being executed in price/time priority 
according to the existing matching algorithm on the Exchange.

[[Page 77580]]

    For each price level at which all order quantities on the BOX Book 
are fully executable against a Preferenced Order on a single options 
series, all such orders at that price will be filled and the balance of 
the Preferenced Order, if any, will be executed, to the extent 
possible, against orders at the next best price level. However, at the 
final price level, where the remaining quantity of the Preferenced 
Order is insufficient to match the total quantity of orders on the BOX 
Book, the allocation algorithm for orders executable against the 
remaining quantity of the Preferenced Order will differ from the 
regular price/time priority algorithm by allocating executions as 
described below, in the following order: (1) To Public Customers, (2) a 
preferred percentage to the Preferred Market Maker, (3) to all 
remaining quotes and orders on single option series and (4) to any 
Legging Order.
(Step 1) Public Customer Allocation
    First, all orders for the account of Public Customers, if any, will 
be allocated for execution against the Preferenced Order. If multiple 
orders on the Exchange for the account of Public Customers are 
available for execution at the same price, the respective trade 
allocations will be by time priority. If, at the end of the Public 
Customer allocation, any unallocated quantity of the Preferenced Order 
remains, the balance of the Preferenced Order will next be allocated as 
described in paragraph (2) below.
(Step 2) Preferred Market Maker Allocation
    After the Public Customer allocation, if (i) the price level being 
processed is at NBBO, (ii) the Preferred Market Maker has an existing 
quote on the opposite side of the Preferenced Order that is also at 
NBBO at the time the Preferenced Order is received and (iii) the 
Preferred Market Maker would not receive a greater allocation if 
allocated according to time priority in the next step, then a preferred 
trade allocation shall be provided to the Preferred Market Maker equal 
to forty percent (40%) of the remaining quantity of the Preferenced 
Order, notwithstanding any time priority of other executable orders at 
the same price level. However, if only one other executable, non-Public 
Customer order (in addition to the quote of the Preferred Market Maker) 
matches the Preferenced Order at the final price level, then the 
Preferred allocation to the Preferred Market Maker shall be equal to 
fifty percent (50%) of the remaining quantity of the Preferenced Order.
    The quantity of the allocation to the Preferred Market Maker will 
be limited by the total quantity of the Preferred Market Maker quote. 
Executions are allocated in numbers of whole contracts and, to ensure 
the allocation priority afforded to Preferred Market Makers does not 
exceed the applicable 40% or 50% specified in proposed Rule 7300(c)(2), 
allocations of fractional contracts to the Preferred Market Maker in 
the Preferred allocation step are rounded down to the nearest whole 
number, which will not be less than one (1) contract. Legging Orders 
will not be considered when determining whether the Preferred Market 
Maker is allocated 40% or 50% in this step. As a result, in no case 
will a Preferred Market Maker receive an allocation preference (above 
what it would otherwise receive if executed in normal price-time 
priority) in excess of forty percent (40%) of the remaining quantity of 
the Preferenced Order after Public Customer orders are filled (or fifty 
percent (50%) if only one other non-Public Customer matches) at the 
final price level.
    At the end of the Preferred allocation or if no Preferred 
allocation is made, the balance of the Preferenced Order will next be 
allocated as described in paragraph (3) below.
(Step 3) Remaining Orders Allocation
    After the Preferred allocation or if no Preferred allocation is 
made, any remaining unallocated quantity of the Preferenced Order will 
be allocated to all remaining orders and quotes not receiving 
allocation in paragraphs (1) or (2) above, including any quote by the 
Preferred Market Maker if no Preferred allocation is made, but not 
including any Legging Order, each in order of time priority. At the end 
of the Remaining Orders allocation, the balance of the Preferenced 
Order will next be allocated as described in paragraph (4) below.
(Step 4) Legging Orders
    If, after the allocation of all orders and quotes in paragraphs (1) 
through (3) above, there remains any unallocated quantity of the 
Preferenced Order, allocation of such remaining quantity of the 
Preferenced Order will be made to the Legging Order at the same price.
Example 1: Preferenced Order Allocation
    Suppose that the BOX Book on options instrument A is as follows in 
order of time priority:
NBBO: Buy at 2.00/Sell at 2.03
Legging Order to buy 30 contracts at 2.00
Market Maker 1 Order to buy 8 contracts at 2.00
Preferred Market Maker 2 Quote \4\ to buy 30 contracts at 2.00
---------------------------------------------------------------------------

    \4\ For purposes of Example 1(a), in which the order submitted 
is not a Preferenced Order, Market Maker 2 is treated as any other 
Market Maker and does not have any preference as a Preferred Market 
Maker.
---------------------------------------------------------------------------

Public Customer 1 Order to buy 10 contracts at 2.00
Market Maker 3 Order to buy 7 contracts at 2.00
Public Customer 2 Order to buy 5 contracts at 2.00
Total Orders to buy 90 contracts at 2.00
Example 1(a): Allocation of Non-preferenced Order
    Suppose a Market Order that is not a Preferenced Order \5\ to sell 
50 contracts of options instrument A is submitted. The trade allocation 
at the best available price (at 2.00) is in time priority as follows:
---------------------------------------------------------------------------

    \5\ Example 1(a) illustrates the price/time priority matching 
algorithm that currently exists on the Exchange.
---------------------------------------------------------------------------

Market Maker 1: 8 contracts
Market Maker 2: 30 contracts
Public Customer 1: 10 contracts
Market Maker 3: 2 contracts

Total allocation: 50 contracts
Example 1(b) Preferenced Order Allocation (40% to Preferred Market 
Maker)
    Suppose a Preferenced Order that is a Market Order to sell 25 
contracts of options instrument A is submitted. The trade allocation at 
the best available price (at 2.00) is as follows:
Step 1
Public Customer 1: 10 contracts
(Public Customers allocated in time priority)
Public Customer 2: 5 contracts
(Public Customers allocated in time priority)
Step 2
Preferred Market Maker 2: 4 contracts
(Preferred allocation = 40% of 10 contracts remaining = 4 contracts)
Step 3
Market Maker 1: 6 contracts
(Remaining orders allocated in time priority; Preferenced Order is 
filled)

Total allocation: 25 contracts
Example 1(c): Allocation of Preferenced Order to Preferred Market Maker 
When Time Priority Is Better Than Preferred Allocation
    Suppose a Preferenced Order that is a Market Order to sell 85 
contracts of options instrument A is submitted. The

[[Page 77581]]

trade allocation at the best available price (at 2.00) is as follows:
Step 1
Public Customer 1: 10 contracts
(Public Customers allocated in time priority)
Public Customer 2: 5 contracts
(Public Customers allocated in time priority)
Step 2
Preferred Market Maker 2: 0 contracts
(Preferred allocation = 40% of 70 contracts remaining = 28 contracts to 
be allocated in Step 2; however, if executed in time priority with all 
remaining quotes/orders in Step 3, the full 30 contracts of the 
Preferred Market Maker's quote would be allocated at that step; 
accordingly, no preference is allocated in this Step 2 and the 
Preferred Market Maker is allocated with all other orders in time 
priority in Step 3)
Step 3
Market Maker 1: 8 contracts
(Remaining orders allocated in time priority)
Preferred Market Maker 2: 30 contracts
(Remaining orders allocated in time priority, which results in a 
greater allocation than it would have received under Step 2; 
accordingly, no preference is allocated in Step 2 and the Preferred 
Market Maker is allocated with other orders in time priority in this 
Step 3)
Market Maker 3: 7 contracts
(Remaining orders allocated in time priority)
Step 4
Legging Order: 25 contracts
(Legging Order allocated last; Preferenced Order is filled)

Total allocation: 85 contracts
Example 2: Preferenced Order Allocation (50% to Preferred Market Maker)
    Suppose that the BOX Book on options instrument A is as follows in 
order of time priority:
NBBO: Buy at 2.00/Sell at 2.03
Market Maker 1 Order to buy 20 contracts at 2.00
Preferred Market Maker 2 Quote to buy 30 contracts at 2.00
Public Customer 1 Order to buy 10 contracts at 2.00
Public Customer 2 Order to buy 5 contracts at 2.00
Legging Order to buy 30 contracts at 2.00

Total Orders to buy 95 contracts at 2.00

    Suppose a Preferenced Order that is a Market Order to sell 50 
contracts of options instrument A is submitted. The trade allocation at 
the best available price (at 2.00) is as follows:
Step 1
Public Customer 1: 10 contracts
(Public Customers allocated in time priority)
Public Customer 2: 5 contracts
(Public Customers allocated in time priority)
Step 2
Preferred Market Maker 2: 17 contracts
(Preferred allocation = 50% of 35 contracts remaining = 17 contracts 
(rounded down))
Step 3
Market Maker 1: 18 contracts
(Remaining orders allocated in time priority; Preferenced Order is 
filled)

Total allocation: 50 contracts
Example 3: Multiple Price Levels
    The following examples illustrate trade allocation of Preferenced 
Orders at multiple price levels.
Example 3(a): Exposed Order
    Suppose that the BOX Book on options instrument A is as follows in 
order of time priority:
NBBO: Buy at 2.00/Sell at 2.10
Broker Dealer Order to sell 10 contracts at 2.10
Public Customer Order to sell 10 contracts at 2.10
Preferred Market Maker Quote to sell 10 contracts at 2.10
(No buy orders on instrument A exist on the BOX Book)

    Suppose an Order to sell 10 contracts at $2.00 (within the NBBO 
spread) is received and exposed.
    Suppose next that, while the foregoing sell Order is exposed, NBBO 
moves to:
Buy at 1.95/Sell at 2.10

    Suppose finally that, while the foregoing sell Order is exposed, a 
Preferenced Order to buy 30 contracts at $2.10 is received.
    The trade allocation is as follows:
First Price Level ($2.00)
Exposed Order: 10 contracts
Second Price Level ($2.10)
Step 1
Public Customer: 10 contracts
Step 2
Preferred Market Maker: 5 contracts
(Preferred allocation = 50% of 10 contracts remaining = 5 contracts)
Step 3
Broker Dealer: 5 contracts

Total allocation: 30 contracts
Example 3(b): PIP Order
    Suppose that the BOX Book on options instrument A is as follows in 
order of time priority:
NBBO: Buy at 2.00/Sell at 2.10
Broker Dealer Order to sell 10 contracts at 2.10
Public Customer Order to sell 10 contracts at 2.10
Preferred Market Maker Quote to sell 10 contracts at 2.10
(No buy orders on instrument A exist on the BOX Book)
    Suppose a PIP Order to sell 10 contracts is received with a Primary 
Improvement Order to buy 10 contracts at $2.00.
    Suppose further that, during the PIP, a Preferenced Order to buy 30 
contracts at $2.10 is received.
    The trade allocation is as follows:
First Price Level ($2.09)
PIP Order: 10 contracts \6\
---------------------------------------------------------------------------

    \6\ As provided in the Exchange's Rule 7150(a)(1), the 
Preferenced Order is an Unrelated Order to the PIP and, pursuant to 
Rule 7150(j), executes at a penny better than NBBO because the best 
BOX price on the opposite side of the market from the Preferenced 
Order is at NBBO ($2.10).
---------------------------------------------------------------------------

Second Price Level ($2.10)
Step 1
Public Customer: 10 contracts
Step 2
Preferred Market Maker: 5 contracts

(Preferred allocation = 50% of 10 contracts remaining = 5 contracts)
Step 3
Broker Dealer: 5 contracts

Total allocation: 30 contracts
    As described above, only orders on single option series designated 
as Preferenced Orders will be treated differently from orders entered 
on the Exchange that are not Preferenced Orders. Complex Orders may 
also be submitted as Preferenced Orders. However, any Preferenced Order 
designation will be disregarded for Complex Orders for purposes of 
dissemination, matching and execution and Complex Orders submitted as 
Preferenced Orders will be treated the same as Complex Orders submitted 
without such designation. As a result, no special allocation will be 
made to any Preferred Market Maker, and no alternate allocation 
algorithm will be applied, when executing a Complex Order designated as 
a Preferenced Order.
    It will be a violation of proposed Rule 7300 for a Market Maker to 
be informed of a pending Preferenced Order, with

[[Page 77582]]

respect to which such Market Maker is designated as the Preferred 
Market Maker, prior to its entry on the Exchange.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\7\ in general, and section 6(b)(5) of the Act,\8\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes this proposed rule change is a 
reasonable modification designed to provide incentives and enhanced 
allocation to a Preferred Market Maker when it is quoting at NBBO. The 
Exchange also believes that the proposed rule change will increase the 
number of transactions on the Exchange by attracting additional order 
flow to the Exchange, which will ultimately enhance competition and 
provide customers with additional opportunities for execution. The 
Exchange believes these changes are consistent with the goals to remove 
impediments to and to perfect the mechanism for a free and open market 
and a national market system.
    Specifically, the Exchange believes that the proposal will result 
in increased liquidity available at improved prices, with more 
competitive pricing outside the control of any single Participant. The 
proposed rule change should promote and foster competition.
Preferenced Order Allocation
    The Exchange believes the proposed changes to the Preferenced Order 
allocations are an improvement over the current allocation algorithm, 
and will benefit all market participants submitting Preferenced Orders 
on the Exchange. As a result of the proposed changes, the Exchange 
believes that existing and additional Participants will use Preferenced 
Orders to increase the number of orders that are submitted to the 
Exchange. Additionally, the Exchange believes that the proposed 
Preferenced Order allocation algorithm will encourage greater 
participation by Market Makers to provide quotes on the Exchange as 
Preferred Market Makers. These additional responses should encourage 
greater competition on the Exchange, which should, in turn, benefit and 
protect investors and the public interest through the potential for 
greater volume of orders and executions.
    The proposed rule changes provide priority of Public Customer 
orders over Preferred Market Makers at the same price. The Exchange 
believes this priority is consistent with the purposes of the Act. The 
Exchange believes the Preferenced Order allocation proposal is designed 
to promote just and equitable principles of trade and to protect 
investors and the public interest, because it recognizes the unique 
status of Public Customers in the marketplace by ensuring Public 
Customers maintain priority before any allocations afforded to 
Preferred Market Makers.
    The Exchange believes that the proposed Preferenced Order 
allocation is reasonable, equitable and not unfairly discriminatory to 
both customers and Participants. Giving Preferred Market Makers 
allocation priority for 40% or 50% of the remaining quantity of the 
Preferenced Order will provide important incentives for Preferred 
Market Makers to provide liquidity on BOX, which provides greater 
opportunity for executions, tighter spreads and better pricing for all 
Participants. While the Commission has, in the past, been concerned 
about locking up large portions of order flow from intra-market price 
competition, the Exchange believes that the proposed preferred 
allocation percentage adequately balances the aim of rewarding the 
Preferred Market Maker with the aim of leaving a sizeable enough 
portion of the incoming Preferenced Order for the other Market Makers 
quoting at the same price. The Commission has previously taken the 
position that a preference of 40% is not clearly inconsistent with the 
Act and standards of competition and free and open markets.\9\
---------------------------------------------------------------------------

    \9\ See, e.g., Securities Exchange Act Release No. 45936 (May 
15, 2002), 67 FR 36279, 26280 (May 23, 2002); Securities Exchange 
Act Release No. 42835 (May 26, 2000), 65 FR 35683, 35685-66 (June 5, 
2000); Securities Exchange Act Release No. 42455 (February 24, 
2000), 65 FR 11388, 11398 (March 2, 2000); Phlx 80/20 Proposal, 67 
FR at 48787-88.
---------------------------------------------------------------------------

    The Exchange believes that disregarding Legging Orders when 
determining whether the Preferred Market Maker retains 40% or 50% under 
proposed Rule 7300(c)(2) is reasonable, equitable and not unfairly 
discriminatory to customers and Participants because Legging Order 
allocation will not be affected by the Preferred Market Maker retaining 
the difference between 40% or 50% as discussed above.
    The Exchange believes that the Preferred Market Maker allocation is 
designed to promote just and equitable principles of trade and to 
protect investors and the public interest, because it strikes a 
reasonable balance between encouraging vigorous price competition and 
rewarding Market Makers for their unique duties. In order to receive an 
allocation preference, Preferred Market Makers must meet heightened 
quoting requirements as Market Makers, and also be quoting at the NBBO 
at the time the Preferenced Order is received. Heightened quoting 
requirements mean that Preferred Market Makers must maintain a 
continuous two-sided market throughout the trading day, in option 
classes for which it accepts Preferenced Orders, for 99% of the time 
the Exchange is open for trading in each such option class; provided 
that it is not required to so quote in intra-day add-on series or 
series that have a time to expiration of nine months or more. Overall, 
the proposed Preferred Market Maker allocations represent a careful 
balancing by the Exchange of the rewards and obligations of various 
types of market participants. The Exchange believes these requirements 
of Preferred Market Makers will provide an incentive for Market Makers 
to assume these additional responsibilities beyond those already 
required, which will facilitate improved trading opportunities on BOX 
for all Participants.
    The Exchange believes that the proposal to give Legging Orders last 
priority is reasonable, equitable and not unfairly discriminatory to 
customers and Participants. Giving Legging Orders last priority 
preserves the established priority of Legging Orders since they 
currently have last priority under the existing allocation algorithm. 
The Exchange believes that providing priority for single option orders 
over Legging Orders in the proposed Preferenced Order allocation 
algorithm is reasonable as it preserves the established priority of 
single option orders when executing with Complex Orders. Therefore the 
Exchange believes this aspect of the proposal will avoid investor 
confusion when executing orders on the Exchange.
    In addition, it is consistent with just and equitable principles of 
trade and protects investors and the public interest that each 
Preferred Market Maker be prohibited from being informed of a pending 
Preferenced Order prior to its entry on the Exchange,

[[Page 77583]]

if such Market Maker is designated as the Preferred Market Maker.
    The Exchange notes that this proposal is similar to the rules of 
other exchanges.\10\
---------------------------------------------------------------------------

    \10\ See supra, note 3.
---------------------------------------------------------------------------

    For the foregoing reasons, the Exchange believes this proposal is a 
reasonable modification to its rules, designed to facilitate increased 
interaction of orders on the Exchange, and to do so in a manner that 
ensures a dynamic, real-time trading mechanism that maximizes 
opportunities for trade executions of orders. The Exchange believes it 
is appropriate and consistent with the Act to adopt the proposed rule 
changes.

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

    The Exchange does not believe the proposed rule change represents 
any undue burden on competition or will impose any burden on 
competition among exchanges in the listed options marketplace not 
necessary or appropriate in furtherance of the purposes of the Act. To 
the contrary, the proposal is pro-competitive because it will enable 
the Exchange to better compete with other options exchanges that 
provide similar allocation preferences and algorithms.\11\
---------------------------------------------------------------------------

    \11\ See supra, note 3.
---------------------------------------------------------------------------

    With respect to intra-market competition, Preferenced Orders will 
be available to all Participants. The Exchange believes that the 
proposal should encourage Market Makers that desire to qualify as 
Preferred Market Makers to regularly maintain quotes at competitive 
price levels in order to obtain execution percentages on Preferenced 
Orders. As noted above, the proposed preferred allocation percentage 
for Preferred Market Makers leaves a sizeable enough portion of the 
incoming Preferenced Order for the other Market Makers quoting at the 
same price to encourage intra-market price competition. Submitting a 
Preferenced Order to the Exchange is entirely voluntary and 
Participants will determine whether they wish to submit these orders to 
the Exchange. The Exchange operates in a highly competitive marketplace 
with other competing exchanges and market participants can readily 
direct their order flow to other exchanges if they so choose.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-2014-28 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-2014-28. 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 the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2014-28, and should be 
submitted on or before January 14, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30121 Filed 12-23-14; 8:45 am]
BILLING CODE 8011-01-P