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 Options Facility, 54621-54625 [2015-22741]

Download as PDF Federal Register / Vol. 80, No. 175 / Thursday, September 10, 2015 / Notices be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File No. SR– EDGX–2015–41 on the subject line. [Release No. 34–75826; File No. SR–BOX– 2015–29] 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 No. SR–EDGX–2015–41. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File No. SR–EDGX– 2015–41 and should be submitted on or before October 1, 2015. mstockstill on DSK4VPTVN1PROD with NOTICES For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–22746 Filed 9–9–15; 8:45 am] BILLING CODE 8011–01–P 24 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). 17:28 Sep 09, 2015 September 3, 2015. 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 September 1, 2015, 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 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 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 September 1, 2015. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s Internet Web site at http:// boxexchange.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the 5 Transactions executed through the Solicitation Auction mechanism and Facilitation Auction mechanism. 6 An Agency Order is the block-size order that an Order Flow Provider ‘‘OFP’’ seeks to facilitate as 1 15 VerDate Sep<11>2014 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 Options Facility Jkt 235001 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 54621 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 Facilitation and Solicitation fees and credits within the BOX Fee Schedule. First, the Exchange proposes to amend Section I (Exchange Fees) to establish a subsection entitled ‘‘Facilitation and Solicitation Transactions.’’ The Exchange proposes to move all the fees associated with Facilitation and Solicitation Transactions 5 from Section I.B. (Auction Transactions) to this new section. The Exchange then proposes to adjust exchange fees for Facilitation and Solicitation Transactions. For Agency Orders 6 Professional Customers and Brokers Dealers are currently charged $0.37 and Market Makers are charged $0.20. Broker Dealers, Professional Customers, and Market Makers are charged $0.25 for Facilitation and Solicitation Orders.7 The Exchange proposes to remove the Agency Order and Facilitation and Solicitation Order exchange fees for all Participants, as well as the $25,000 fee cap for these transactions. Additionally, the Exchange proposes to reduce the exchange fees for Responses to the Facilitation and Solicitation mechanisms. For Responses in these mechanisms, Public Customers are currently charged $0.15, Professional Customer and Broker Dealers are charged $0.37, and Market Makers are charged $0.30. The revised fee structure for Facilitation and Solicitation Transactions will be as follows: agent through the Facilitation Auction or Solicitation Auction mechanism, 7 Facilitation and Solicitation Orders are the matching contra orders submitted on the opposite side of the Agency Order. E:\FR\FM\10SEN1.SGM 10SEN1 54622 Federal Register / Vol. 80, No. 175 / Thursday, September 10, 2015 / Notices Account type Public customer Agency Order ................................................................................................... Facilitation Order or Solicitation Order ............................................................ Responses in the Solicitation or Facilitation Auction Mechanisms ................. For example, if a Market Maker submitted an Agency Order through the Facilitation mechanism, the Market Maker would no longer be charged for the Agency Order or matching contra order. To expand on this example, if the Market Maker instead was responding to the Facilitation Order, then the Market Maker would be charged $0.20. Consequently, the Exchange proposes to rename Section 1.B. from ‘‘Auction Transactions’’ to ‘‘PIP and COPIP Transactions’’ as this section will now Professional customer $0.00 N/A 0.15 only reflect the Exchange fees for PIP and COPIP transactions. The Exchange is also proposing to amend the footnotes in the PIP and COPIP transactions subsection to remove any references to the Facilitation and Solicitation auction mechanisms. The Exchange then proposes to amend Section II.B of the BOX Fee Schedule, liquidity fees and credits for Facilitation and Solicitation transactions. Specifically, the Exchange proposes to establish different liquidity $0.00 0.00 0.27 mstockstill on DSK4VPTVN1PROD with NOTICES VerDate Sep<11>2014 17:28 Sep 09, 2015 Jkt 235001 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,9 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 8 See 9 15 PO 00000 International Securities Exchange Rule 716. U.S.C. 78f(b)(4) and (5). Frm 00112 Fmt 4703 Sfmt 4703 $0.00 0.00 0.20 fees and credits for Facilitation and Solicitation transactions in Penny Pilot Classes than for Facilitation and Solicitation transactions in Non-Penny Pilot Classes. Currently all Facilitation and Solicitation transactions are assessed a $0.30 fee for adding liquidity and credited $0.30 for removing liquidity. The Exchange now proposes to adopt the following liquidity fees and credits: Non-Penny Pilot Classes ............................................................................................................. Penny Pilot Classes ..................................................................................................................... and to remain competitive with other options exchanges that have similar mechanisms for large block orders.8 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. Market maker $0.00 0.00 0.27 Fee for adding liquidity (all account types) Facilitation and solicitation transactions The Exchange also proposes to amend the Liquidity Fees and Credits for Facilitation and Solicitation transactions to specify that Agency Orders submitted to the Facilitation and Solicitation mechanisms are assessed the ‘‘removal’’ credit only if the Agency Order does not trade with their contra order. The Exchange also proposes to specify that only Responses to Facilitation and Solicitation Orders executed in these mechanisms shall be charged the ‘‘add’’ fee. For example, if an OFP submits an Agency Order to buy 200 contracts in the facilitation auction and there are no responders, the Agency Order would execute against the matching Facilitation Order to sell 200 contracts and neither Order would be assessed a liquidity fee or credit. If, instead, the same Agency Order receives a Market Maker Response to sell 150 contracts, at the end of the auction the Agency Order would now execute against the Market Maker Response for 150 contracts and the Facilitation Order for 50 contracts, and liquidity fees and credits would be assessed on the 150 contracts which executed against the Market Maker Response. The proposed reduction in exchange fees and increase in liquidity fees and credits in Facilitation and Solicitation transactions is designed to provide BOX Participants additional incentives to submit block orders to these auctions Broker dealer $0.95 0.40 Credit for removing liquidity (all account types) ($0.95) (0.40) fees at a particular exchange to be excessive. The Exchange believes creating a separate subsection for the Facilitation and Solicitation transactions is reasonable, equitable and not unfairly discriminatory as the proposed subsection is meant to provide clarity about the applicable exchange fees for each of BOX’s auction mechanisms. The Exchange also believes that the proposed exchange fees for Facilitation and Solicitation transactions are reasonable, equitable and not unfairly discriminatory. The Exchange believes that it is reasonable to remove the fees for Agency, Facilitation and Solicitation Orders, and lower the Facilitation and Solicitation Order Response fees from $0.37 to $0.27 for Professional Customers and Broker Dealers, and from $0.30 to $0.20 for Market Makers. Further, the Exchange believes that it is reasonable to eliminate the $25,000 fee cap for Facilitation and Solicitation transactions, as most the exchange fees for these transactions are being removed. The Exchange believes eliminating and reducing these fees will attract order flow to these mechanisms which will result in greater liquidity and ultimately benefit all Participants trading on the Exchange. The Exchange believes it is reasonable, equitable and not-unfairly discriminatory to charge higher exchange fees for responders in the E:\FR\FM\10SEN1.SGM 10SEN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 80, No. 175 / Thursday, September 10, 2015 / Notices Facilitation and Solicitation auctions than for initiators of these orders and the contra orders. The Exchange believes it is reasonable when compared to a similar practice for Facilitation and Solicitation fees at a competing venue.10 For example, at the ISE the fee for both the initiating order and contra order in a Crossing Order 11 is $0.20 for Market Makers, Broker Dealers and Professional Customers, and $0.00 for Public Customers. Responses to these orders are charged $0.47 regardless of Participant type. The Exchange also believes that charging Professional Customers and Broker Dealers higher fees than Public Customers for Responses in the Facilitation and Solicitation auction mechanisms 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. The Exchange believes that the higher level of trading activity from these Participants will draw a greater amount of BOX system resources, and the Exchange aims to recover its costs by assessing Professional Customers and Broker Dealers higher fees for these orders. The Exchange believes it is equitable and not unfairly discriminatory to charge Public Customers less than Market Makers, Broker Dealers and Professional Customers for their Responses to the Facilitation and Solicitation Auction mechanisms. 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. The Exchange believes that charging lower fees to Public Customers is reasonable and, ultimately, will benefit all Participants trading on the Exchange by attracting Public Customer order flow. Finally, the Exchange believes it is equitable and not unfairly discriminatory for BOX Market Makers to be assessed lower fees than Professional Customers and Broker Dealers for Responses in the Facilitation and Solicitation auction mechanisms because of the significant contributions to overall market quality that Market Makers provide. Market Makers 10 See ISE Schedules of Fees at http:// www.ise.com/assets/documents/OptionsExchange/ legal/fee/ISE_fee_schedule.pdf. 11 Under the ISE Fee Schedule Crossing Orders are any orders executed in the Exchange’s auction mechanisms, including the Facilitation and Solicitation mechanisms. VerDate Sep<11>2014 17:28 Sep 09, 2015 Jkt 235001 generally provide higher volumes of liquidity and assessing overall lower fees for these Participants within the BOX Fee Schedule 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. Additionally, Market Makers are the Participants most likely to use the Facilitation and Solicitation auction mechanisms, and the Exchange believes that assessing lower fees for these Participants will help drive liquidity to these block trade mechanisms. BOX believes that the changes to Facilitation and Solicitation transaction liquidity fees and credits are equitable and not unfairly-discriminatory in that they apply to all categories of participants and across all account types. The Exchange also believes the fees and credits are reasonable and competitive when compared to similar fees at competing venues.12 Under the ISE Fee Schedule a Responder to a Facilitation or Solicitation Order will pay $0.47. While a Responder on BOX will pay $0.55 to $0.67 in Penny Pilot Classes (exchange fee of $0.15 to $0.27 and an liquidity ‘‘add’’ fee of $0.40). However, for the equivalent of NonPenny Pilot Classes 13 on ISE the Responder will most likely also be assessed a Payment for Order Flow (‘‘PFOF’’) Fee of $0.70. The Exchange notes that while PFOF at the ISE only applies when an Initiator is a Public Customer and a Responder is a Market Maker, this Exchange believes that this type of interaction amounts to a majority of the ISE’s Facilitation and Solicitation transactions. Therefore, in Non-Penny Classes the Exchange believes the Responder to a Facilitation or Solicitation auction is paying $1.17 at the ISE, while BOX proposes to charge Responders between $1.10 and $1.22 (exchange fee of $0.15 to $0.27 and a liquidity ‘‘add’’ fee of $0.95). The Exchange notes that while Broker Dealers will be assessed $1.22 in total; a majority of the Responders to these auctions will be Market Makers and these Participants will be assessed $1.15 in total. With the proposed fee changes for Facilitation and Solicitation transactions, Initiators will never pay a fee and will only receive a credit of $0.40 in Penny Pilot Classes and $0.95 in Non-Penny Pilot Classes for the portion of the order that interacts with a Responder. In comparison, under the 12 See supra, note 10. ISE Fee Schedule uses the term ‘‘Select Symbols’’ to denote Penny Pilot Classes. 13 The PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 54623 ISE Fee Schedule all Initiators except Public Customers are charged a $.20 fee for Penny Pilot Classes and $0.20 to $0.25 fee for Non-Penny Pilot Classes.14 However, the ISE then uses volume based incentives that can greatly reduce the fees these participants are charged. Certain Facilitation and Solicitation fees on ISE are subject to a fee cap of $75,000,15 allowing Participants who use these auctions to potentially reduce their per contract fee to a much lower rate. In addition, depending on their overall monthly volume, Initiators can receive a rebate of $0.05 to $0.11 per contract for their orders.16 Finally, if the order executes against a responder within one of these mechanisms the Initiator will receive an additional rebate of $0.15 for Penny Pilot Classes. For Non-Penny Pilot Classes, the Initiator will typically receive a proportional PFOF credit to their pool which they can allocate as they so choose.17 In conclusion, the Exchange believes the proposed Facilitation and Solicitation fees and credits are reasonable when compared to fees and credits for similar mechanisms at the ISE. While it is difficult to exactly equate these two fee structures, most Responders on ISE (Market Makers interacting with Customer Orders) will pay $0.47 (Penny Pilot Classes) and $1.17 (Non-Penny Pilot Classes) while most Responders on BOX (Market Makers interacting with Customer Orders) will pay $0.60 (Penny Pilot Classes) and $1.15 (Non-Penny Pilot Classes). At the ISE, depending on volume, Initiators in this scenario could receive a credit per contract for all Facilitation and Solicitation orders, and an additional $0.15 break up credit (Penny Pilot Classes) or PFOF credit (Non-Penny Pilot Classes).18 In comparison, under the BOX proposal, Initiators would only receive a credit for the portion of the order that interacted with a Response, and the credit would 14 The ISE uses the term ‘‘Crossing Order’’ for orders executed on the Exchange’s Facilitation and Solicitation mechanisms. 15 See Section IV.H of the ISE Fee Schedule. All Firm Proprietary and Non-ISE Market Maker transactions that are part of the originating or contra side of a Crossing Order are capped. 16 See Section IV.A of the ISE Fee Schedule. 17 Under Section IV.D of the ISE Fee Schedule the fee for PFOF is $0.70 and the fee will be rebated proportionally to the members that paid the fee on a monthly basis. 18 The Exchange notes that the language used in the ISE Fee Schedule states that there will be a proportional credit put into the monthly pool that the Initiator can then allocate. With this discretion the PFOF credit for these orders could be higher than $0.70. E:\FR\FM\10SEN1.SGM 10SEN1 mstockstill on DSK4VPTVN1PROD with NOTICES 54624 Federal Register / Vol. 80, No. 175 / Thursday, September 10, 2015 / Notices be $0.40 (Penny Pilot Classes) or $0.95 (Non-Penny Pilot Classes). Further, the Exchange believes that the proposed difference between what an Initiator will pay compared to what a Responder will pay is reasonable, equitable and not unfairly discriminatory. As stated above, this difference is in-line with the credits and fees at the ISE. Further, the Exchange believes that this differential is reasonable because Responders are willing to pay a higher fee for liquidity discovery. Further, the Exchange notes that with the proposed reduction in Responder exchange fees, all Responders except for Public Customers are only paying an overall higher fee for their Responses to Non-Penny Class transactions. For example, a Responder under the current schedule would be assessed an exchange fee of $0.37 (for Professional Customers and Broker Dealers) and $0.30 (for Market Makers) along with a fee for ‘‘adding’’ liquidity of $0.30. In total, Professional Customers and Broker Dealers are currently assessed $0.67 and Market Makers $0.60. Under the proposed change to both the Exchange fees and Liquidity Fees and Credits, Professional Customers and Broker Dealers Responders would still be assessed $0.67 in total for Penny Pilot Classes ($0.27 exchange fee and $0.40 liquidity fee) and Market Makers would be assessed $0.60 ($0.20 exchange and $0.40 liquidity fee). While Participants would be assessed overall higher fees for responding to Non-Penny Pilot Issues, as stated above, the Exchange believes that these liquidity fees are reasonable as they are within the range assessed for Facilitation and Solicitation responses at a competing exchange.19 The Exchange also believes it is reasonable to establish different fees and credits for Facilitation and Solicitation transactions in Penny Pilot Classes compared to transactions in Non-Penny Pilot Classes. The Exchange makes this distinction throughout the BOX Fee Schedule, including the liquidity fees and credits for PIP and COPIP Transactions. The Exchange believes it is reasonable to establish higher fees and credits for Non-Penny Pilot Classes because these Classes are typically less actively traded and have wider spreads. The Exchange believes that offering a higher rebate will incentivize order flow in Non-Penny Pilot issues on the Exchange, ultimately benefitting all Participants trading on BOX. Further, the Exchange notes that the proposed fees and credits for transactions on BOX offset one another 19 See supra, note 10. VerDate Sep<11>2014 17:28 Sep 09, 2015 Jkt 235001 in any particular transaction. The result is that BOX will collect a fee from Participants that add liquidity on BOX and credit another Participant an equal amount for removing liquidity. Stated otherwise, the collection of these liquidity fees will not directly result in revenue to BOX, but will simply allow BOX to provide the credit incentive to Participants to attract order flow. The Exchange believes it is appropriate to provide incentives to market participants to use the Facilitation and Solicitation auction mechanisms, because doing so may result in greater liquidity on BOX which would benefit all market participants. The Exchange believes it is reasonable, equitable and not-unfairly discriminatory for responders to Facilitation and Solicitation auctions to be assessed higher fees than initiators. The Agency Order is a block sized order typically composed of Public Customer orders and represented by an OFP who then guarantees the execution by submitting a matching Facilitation or Solicitation Order. Responders in the Facilitation and Solicitation mechanisms are always non-Public Customers and more typically are Market Makers. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to give these Agency Orders a credit when their orders execute against a non-Public Customer and, accordingly, charge nonPublic Customers a fee when their orders execute against a Public Customer. The Exchange notes that increasing fees to non-Public Customers in order to provide incentives for Public Customers is similar to the payment for order flow and other pricing models that have been adopted by competing exchanges 20 to attract Public Customer order flow. As stated above, the Exchange aims to improve markets by developing features for the benefit of its Public Customers. The Exchange believes that providing incentives for Public Customers is reasonable and will benefit all Participants trading on the Exchange by attracting Public Customer order flow. Further, the Exchange believes it is reasonable, equitable and not unfairly discriminatory to only assess liquidity fees and credits on Agency Orders that do not trade with their contra order, and the Responses to these Orders. As stated above, liquidity fees and credits are meant to incentivize order flow, and the 20 See supra, note 10. Under the ISE Fee Schedule, if the initiator is a Public Customer and the responder is a Market Maker in Non-Penny Pilot Classes, the Market Maker is assessed a $.70 PFOF fee which will be rebated proportionally to the members that paid the fee on a monthly basis. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 Exchange believes incentives are not necessary for internalized orders in these mechanisms that only trade against their contra order. Additionally, other Exchanges also make this distinction in their Facilitation and Solicitation auction mechanisms.21 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. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change modifies the exchange fees and raises the liquidity fees and credits for Facilitation and Solicitation transactions. BOX notes that its market model and fees are generally intended to benefit retail customers by providing incentives for Participants to submit their customer order flow to BOX. The Exchange does not believe that the proposed liquidity fees and credits will burden competition by creating such a disparity between the fees an Initiating Participant in the Facilitation and Solicitation auction pays and the fees a competitive responder pays that would result in certain Participants being unable to compete with initiators. In fact, the Exchange believes that these changes will not impair these Participants from adding liquidity and competing in Facilitation and Solicitation auction transactions and will help promote competition by providing incentives for market participants to submit customer order flow to BOX and thus, create a greater opportunity for customers to receive additional price improvement. Specifically, BOX is removing and lowering the exchange fees for Facilitation and Solicitation transactions to encourage all market participants to participate in these auctions. While the liquidity fees and 21 See supra, note 10. Under the ISE Fee Schedule in the equivalent of Penny Pilot Classes the initiator receives a ‘‘break-up’’ rebate only for contracts that are submitted to the Facilitation and Solicitation mechanisms that do not trade with their contra order. The responder fee for these Orders is only applied to any contracts for which the rebate is provided. E:\FR\FM\10SEN1.SGM 10SEN1 Federal Register / Vol. 80, No. 175 / Thursday, September 10, 2015 / Notices credits for these transactions will be higher, they will only be assessed against the portion of the order that executes against a response in the auctions. The Exchange believes that participants submitting responses in these auctions are willing to pay a higher fee for liquidity discovery in less liquid names. Further, as stated above the fees and credits proposed are in line with the facilitation and solicitation fees and credits on at least one other options exchange. BOX believes that this proposal will enhance competition between exchanges because it is designed to allow the Exchange to better compete with other exchanges for Facilitation and Solicitation auction order flow. 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: 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–2015–29. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BOX– 2015–29, and should be submitted on or before October 1, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–22741 Filed 9–9–15; 8:45 am] BILLING CODE 8011–01–P mstockstill on DSK4VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BOX–2015–29 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75828; File No. SR–BOX– 2015–30] 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 Options Facility September 3, 2015. 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 September 1, 2015, 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 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 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 September 1, 2015. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s Internet Web site at http:// boxexchange.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 2 17 22 15 23 17 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). VerDate Sep<11>2014 17:28 Sep 09, 2015 24 17 Jkt 235001 PO 00000 CFR 200.30–3(a)(12). Frm 00115 Fmt 4703 Sfmt 4703 54625 E:\FR\FM\10SEN1.SGM 10SEN1

Agencies

[Federal Register Volume 80, Number 175 (Thursday, September 10, 2015)]
[Notices]
[Pages 54621-54625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-22741]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75826; File No. SR-BOX-2015-29]


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 Options Facility

September 3, 2015.
    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 September 1, 2015, 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 Exchange. The Exchange filed the 
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ 
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal 
effective upon filing with the Commission. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of 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 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 September 1, 2015. The text of the 
proposed rule change is available from the principal office of the 
Exchange, at the Commission's Public Reference Room and also on the 
Exchange's Internet Web site at http://boxexchange.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make a number of changes to Facilitation 
and Solicitation fees and credits within the BOX Fee Schedule.
    First, the Exchange proposes to amend Section I (Exchange Fees) to 
establish a subsection entitled ``Facilitation and Solicitation 
Transactions.'' The Exchange proposes to move all the fees associated 
with Facilitation and Solicitation Transactions \5\ from Section I.B. 
(Auction Transactions) to this new section.
---------------------------------------------------------------------------

    \5\ Transactions executed through the Solicitation Auction 
mechanism and Facilitation Auction mechanism.
---------------------------------------------------------------------------

    The Exchange then proposes to adjust exchange fees for Facilitation 
and Solicitation Transactions. For Agency Orders \6\ Professional 
Customers and Brokers Dealers are currently charged $0.37 and Market 
Makers are charged $0.20. Broker Dealers, Professional Customers, and 
Market Makers are charged $0.25 for Facilitation and Solicitation 
Orders.\7\ The Exchange proposes to remove the Agency Order and 
Facilitation and Solicitation Order exchange fees for all Participants, 
as well as the $25,000 fee cap for these transactions. Additionally, 
the Exchange proposes to reduce the exchange fees for Responses to the 
Facilitation and Solicitation mechanisms. For Responses in these 
mechanisms, Public Customers are currently charged $0.15, Professional 
Customer and Broker Dealers are charged $0.37, and Market Makers are 
charged $0.30. The revised fee structure for Facilitation and 
Solicitation Transactions will be as follows:
---------------------------------------------------------------------------

    \6\ An Agency Order is the block-size order that an Order Flow 
Provider ``OFP'' seeks to facilitate as agent through the 
Facilitation Auction or Solicitation Auction mechanism,
    \7\ Facilitation and Solicitation Orders are the matching contra 
orders submitted on the opposite side of the Agency Order.

[[Page 54622]]



----------------------------------------------------------------------------------------------------------------
                                                                           Account type
                                                 ---------------------------------------------------------------
                                                      Public       Professional
                                                     customer        customer     Broker  dealer   Market  maker
----------------------------------------------------------------------------------------------------------------
Agency Order....................................           $0.00           $0.00           $0.00           $0.00
Facilitation Order or Solicitation Order........             N/A            0.00            0.00            0.00
Responses in the Solicitation or Facilitation               0.15            0.27            0.27            0.20
 Auction Mechanisms.............................
----------------------------------------------------------------------------------------------------------------

    For example, if a Market Maker submitted an Agency Order through 
the Facilitation mechanism, the Market Maker would no longer be charged 
for the Agency Order or matching contra order. To expand on this 
example, if the Market Maker instead was responding to the Facilitation 
Order, then the Market Maker would be charged $0.20.
    Consequently, the Exchange proposes to rename Section 1.B. from 
``Auction Transactions'' to ``PIP and COPIP Transactions'' as this 
section will now only reflect the Exchange fees for PIP and COPIP 
transactions. The Exchange is also proposing to amend the footnotes in 
the PIP and COPIP transactions subsection to remove any references to 
the Facilitation and Solicitation auction mechanisms.
    The Exchange then proposes to amend Section II.B of the BOX Fee 
Schedule, liquidity fees and credits for Facilitation and Solicitation 
transactions. Specifically, the Exchange proposes to establish 
different liquidity fees and credits for Facilitation and Solicitation 
transactions in Penny Pilot Classes than for Facilitation and 
Solicitation transactions in Non-Penny Pilot Classes. Currently all 
Facilitation and Solicitation transactions are assessed a $0.30 fee for 
adding liquidity and credited $0.30 for removing liquidity. The 
Exchange now proposes to adopt the following liquidity fees and 
credits:

----------------------------------------------------------------------------------------------------------------
                                                                       Fee for  adding      Credit for  removing
            Facilitation and solicitation transactions                 liquidity  (all        liquidity  (all
                                                                        account types)         account types)
----------------------------------------------------------------------------------------------------------------
Non-Penny Pilot Classes...........................................                  $0.95                ($0.95)
Penny Pilot Classes...............................................                   0.40                 (0.40)
----------------------------------------------------------------------------------------------------------------

    The Exchange also proposes to amend the Liquidity Fees and Credits 
for Facilitation and Solicitation transactions to specify that Agency 
Orders submitted to the Facilitation and Solicitation mechanisms are 
assessed the ``removal'' credit only if the Agency Order does not trade 
with their contra order. The Exchange also proposes to specify that 
only Responses to Facilitation and Solicitation Orders executed in 
these mechanisms shall be charged the ``add'' fee.
    For example, if an OFP submits an Agency Order to buy 200 contracts 
in the facilitation auction and there are no responders, the Agency 
Order would execute against the matching Facilitation Order to sell 200 
contracts and neither Order would be assessed a liquidity fee or 
credit. If, instead, the same Agency Order receives a Market Maker 
Response to sell 150 contracts, at the end of the auction the Agency 
Order would now execute against the Market Maker Response for 150 
contracts and the Facilitation Order for 50 contracts, and liquidity 
fees and credits would be assessed on the 150 contracts which executed 
against the Market Maker Response.
    The proposed reduction in exchange fees and increase in liquidity 
fees and credits in Facilitation and Solicitation transactions is 
designed to provide BOX Participants additional incentives to submit 
block orders to these auctions and to remain competitive with other 
options exchanges that have similar mechanisms for large block 
orders.\8\
---------------------------------------------------------------------------

    \8\ See International Securities Exchange Rule 716.
---------------------------------------------------------------------------

    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.
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,\9\ 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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes creating a separate subsection for the 
Facilitation and Solicitation transactions is reasonable, equitable and 
not unfairly discriminatory as the proposed subsection is meant to 
provide clarity about the applicable exchange fees for each of BOX's 
auction mechanisms. The Exchange also believes that the proposed 
exchange fees for Facilitation and Solicitation transactions are 
reasonable, equitable and not unfairly discriminatory. The Exchange 
believes that it is reasonable to remove the fees for Agency, 
Facilitation and Solicitation Orders, and lower the Facilitation and 
Solicitation Order Response fees from $0.37 to $0.27 for Professional 
Customers and Broker Dealers, and from $0.30 to $0.20 for Market 
Makers. Further, the Exchange believes that it is reasonable to 
eliminate the $25,000 fee cap for Facilitation and Solicitation 
transactions, as most the exchange fees for these transactions are 
being removed. The Exchange believes eliminating and reducing these 
fees will attract order flow to these mechanisms which will result in 
greater liquidity and ultimately benefit all Participants trading on 
the Exchange.
    The Exchange believes it is reasonable, equitable and not-unfairly 
discriminatory to charge higher exchange fees for responders in the

[[Page 54623]]

Facilitation and Solicitation auctions than for initiators of these 
orders and the contra orders. The Exchange believes it is reasonable 
when compared to a similar practice for Facilitation and Solicitation 
fees at a competing venue.\10\ For example, at the ISE the fee for both 
the initiating order and contra order in a Crossing Order \11\ is $0.20 
for Market Makers, Broker Dealers and Professional Customers, and $0.00 
for Public Customers. Responses to these orders are charged $0.47 
regardless of Participant type.
---------------------------------------------------------------------------

    \10\ See ISE Schedules of Fees at http://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
    \11\ Under the ISE Fee Schedule Crossing Orders are any orders 
executed in the Exchange's auction mechanisms, including the 
Facilitation and Solicitation mechanisms.
---------------------------------------------------------------------------

    The Exchange also believes that charging Professional Customers and 
Broker Dealers higher fees than Public Customers for Responses in the 
Facilitation and Solicitation auction mechanisms 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. 
The Exchange believes that the higher level of trading activity from 
these Participants will draw a greater amount of BOX system resources, 
and the Exchange aims to recover its costs by assessing Professional 
Customers and Broker Dealers higher fees for these orders.
    The Exchange believes it is equitable and not unfairly 
discriminatory to charge Public Customers less than Market Makers, 
Broker Dealers and Professional Customers for their Responses to the 
Facilitation and Solicitation Auction mechanisms. 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. The Exchange believes 
that charging lower fees to Public Customers is reasonable and, 
ultimately, will benefit all Participants trading on the Exchange by 
attracting Public Customer order flow.
    Finally, the Exchange believes it is equitable and not unfairly 
discriminatory for BOX Market Makers to be assessed lower fees than 
Professional Customers and Broker Dealers for Responses in the 
Facilitation and Solicitation auction mechanisms because of the 
significant contributions to overall market quality that Market Makers 
provide. Market Makers generally provide higher volumes of liquidity 
and assessing overall lower fees for these Participants within the BOX 
Fee Schedule 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. Additionally, 
Market Makers are the Participants most likely to use the Facilitation 
and Solicitation auction mechanisms, and the Exchange believes that 
assessing lower fees for these Participants will help drive liquidity 
to these block trade mechanisms.
    BOX believes that the changes to Facilitation and Solicitation 
transaction liquidity fees and credits are equitable and not unfairly-
discriminatory in that they apply to all categories of participants and 
across all account types. The Exchange also believes the fees and 
credits are reasonable and competitive when compared to similar fees at 
competing venues.\12\ Under the ISE Fee Schedule a Responder to a 
Facilitation or Solicitation Order will pay $0.47. While a Responder on 
BOX will pay $0.55 to $0.67 in Penny Pilot Classes (exchange fee of 
$0.15 to $0.27 and an liquidity ``add'' fee of $0.40).
---------------------------------------------------------------------------

    \12\ See supra, note 10.
---------------------------------------------------------------------------

    However, for the equivalent of Non-Penny Pilot Classes \13\ on ISE 
the Responder will most likely also be assessed a Payment for Order 
Flow (``PFOF'') Fee of $0.70. The Exchange notes that while PFOF at the 
ISE only applies when an Initiator is a Public Customer and a Responder 
is a Market Maker, this Exchange believes that this type of interaction 
amounts to a majority of the ISE's Facilitation and Solicitation 
transactions. Therefore, in Non-Penny Classes the Exchange believes the 
Responder to a Facilitation or Solicitation auction is paying $1.17 at 
the ISE, while BOX proposes to charge Responders between $1.10 and 
$1.22 (exchange fee of $0.15 to $0.27 and a liquidity ``add'' fee of 
$0.95). The Exchange notes that while Broker Dealers will be assessed 
$1.22 in total; a majority of the Responders to these auctions will be 
Market Makers and these Participants will be assessed $1.15 in total.
---------------------------------------------------------------------------

    \13\ The ISE Fee Schedule uses the term ``Select Symbols'' to 
denote Penny Pilot Classes.
---------------------------------------------------------------------------

    With the proposed fee changes for Facilitation and Solicitation 
transactions, Initiators will never pay a fee and will only receive a 
credit of $0.40 in Penny Pilot Classes and $0.95 in Non-Penny Pilot 
Classes for the portion of the order that interacts with a Responder. 
In comparison, under the ISE Fee Schedule all Initiators except Public 
Customers are charged a $.20 fee for Penny Pilot Classes and $0.20 to 
$0.25 fee for Non-Penny Pilot Classes.\14\ However, the ISE then uses 
volume based incentives that can greatly reduce the fees these 
participants are charged. Certain Facilitation and Solicitation fees on 
ISE are subject to a fee cap of $75,000,\15\ allowing Participants who 
use these auctions to potentially reduce their per contract fee to a 
much lower rate. In addition, depending on their overall monthly 
volume, Initiators can receive a rebate of $0.05 to $0.11 per contract 
for their orders.\16\
---------------------------------------------------------------------------

    \14\ The ISE uses the term ``Crossing Order'' for orders 
executed on the Exchange's Facilitation and Solicitation mechanisms.
    \15\ See Section IV.H of the ISE Fee Schedule. All Firm 
Proprietary and Non-ISE Market Maker transactions that are part of 
the originating or contra side of a Crossing Order are capped.
    \16\ See Section IV.A of the ISE Fee Schedule.
---------------------------------------------------------------------------

    Finally, if the order executes against a responder within one of 
these mechanisms the Initiator will receive an additional rebate of 
$0.15 for Penny Pilot Classes. For Non-Penny Pilot Classes, the 
Initiator will typically receive a proportional PFOF credit to their 
pool which they can allocate as they so choose.\17\
---------------------------------------------------------------------------

    \17\ Under Section IV.D of the ISE Fee Schedule the fee for PFOF 
is $0.70 and the fee will be rebated proportionally to the members 
that paid the fee on a monthly basis.
---------------------------------------------------------------------------

    In conclusion, the Exchange believes the proposed Facilitation and 
Solicitation fees and credits are reasonable when compared to fees and 
credits for similar mechanisms at the ISE. While it is difficult to 
exactly equate these two fee structures, most Responders on ISE (Market 
Makers interacting with Customer Orders) will pay $0.47 (Penny Pilot 
Classes) and $1.17 (Non-Penny Pilot Classes) while most Responders on 
BOX (Market Makers interacting with Customer Orders) will pay $0.60 
(Penny Pilot Classes) and $1.15 (Non-Penny Pilot Classes). At the ISE, 
depending on volume, Initiators in this scenario could receive a credit 
per contract for all Facilitation and Solicitation orders, and an 
additional $0.15 break up credit (Penny Pilot Classes) or PFOF credit 
(Non-Penny Pilot Classes).\18\ In comparison, under the BOX proposal, 
Initiators would only receive a credit for the portion of the order 
that interacted with a Response, and the credit would

[[Page 54624]]

be $0.40 (Penny Pilot Classes) or $0.95 (Non-Penny Pilot Classes).
---------------------------------------------------------------------------

    \18\ The Exchange notes that the language used in the ISE Fee 
Schedule states that there will be a proportional credit put into 
the monthly pool that the Initiator can then allocate. With this 
discretion the PFOF credit for these orders could be higher than 
$0.70.
---------------------------------------------------------------------------

    Further, the Exchange believes that the proposed difference between 
what an Initiator will pay compared to what a Responder will pay is 
reasonable, equitable and not unfairly discriminatory. As stated above, 
this difference is in-line with the credits and fees at the ISE. 
Further, the Exchange believes that this differential is reasonable 
because Responders are willing to pay a higher fee for liquidity 
discovery.
    Further, the Exchange notes that with the proposed reduction in 
Responder exchange fees, all Responders except for Public Customers are 
only paying an overall higher fee for their Responses to Non-Penny 
Class transactions. For example, a Responder under the current schedule 
would be assessed an exchange fee of $0.37 (for Professional Customers 
and Broker Dealers) and $0.30 (for Market Makers) along with a fee for 
``adding'' liquidity of $0.30. In total, Professional Customers and 
Broker Dealers are currently assessed $0.67 and Market Makers $0.60. 
Under the proposed change to both the Exchange fees and Liquidity Fees 
and Credits, Professional Customers and Broker Dealers Responders would 
still be assessed $0.67 in total for Penny Pilot Classes ($0.27 
exchange fee and $0.40 liquidity fee) and Market Makers would be 
assessed $0.60 ($0.20 exchange and $0.40 liquidity fee). While 
Participants would be assessed overall higher fees for responding to 
Non-Penny Pilot Issues, as stated above, the Exchange believes that 
these liquidity fees are reasonable as they are within the range 
assessed for Facilitation and Solicitation responses at a competing 
exchange.\19\
---------------------------------------------------------------------------

    \19\ See supra, note 10.
---------------------------------------------------------------------------

    The Exchange also believes it is reasonable to establish different 
fees and credits for Facilitation and Solicitation transactions in 
Penny Pilot Classes compared to transactions in Non-Penny Pilot 
Classes. The Exchange makes this distinction throughout the BOX Fee 
Schedule, including the liquidity fees and credits for PIP and COPIP 
Transactions. The Exchange believes it is reasonable to establish 
higher fees and credits for Non-Penny Pilot Classes because these 
Classes are typically less actively traded and have wider spreads. The 
Exchange believes that offering a higher rebate will incentivize order 
flow in Non-Penny Pilot issues on the Exchange, ultimately benefitting 
all Participants trading on BOX.
    Further, the Exchange notes that the proposed fees and credits for 
transactions on BOX offset one another in any particular transaction. 
The result is that BOX will collect a fee from Participants that add 
liquidity on BOX and credit another Participant an equal amount for 
removing liquidity. Stated otherwise, the collection of these liquidity 
fees will not directly result in revenue to BOX, but will simply allow 
BOX to provide the credit incentive to Participants to attract order 
flow. The Exchange believes it is appropriate to provide incentives to 
market participants to use the Facilitation and Solicitation auction 
mechanisms, because doing so may result in greater liquidity on BOX 
which would benefit all market participants.
    The Exchange believes it is reasonable, equitable and not-unfairly 
discriminatory for responders to Facilitation and Solicitation auctions 
to be assessed higher fees than initiators. The Agency Order is a block 
sized order typically composed of Public Customer orders and 
represented by an OFP who then guarantees the execution by submitting a 
matching Facilitation or Solicitation Order. Responders in the 
Facilitation and Solicitation mechanisms are always non-Public 
Customers and more typically are Market Makers. The Exchange believes 
it is reasonable, equitable and not unfairly discriminatory to give 
these Agency Orders a credit when their orders execute against a non-
Public Customer and, accordingly, charge non-Public Customers a fee 
when their orders execute against a Public Customer. The Exchange notes 
that increasing fees to non-Public Customers in order to provide 
incentives for Public Customers is similar to the payment for order 
flow and other pricing models that have been adopted by competing 
exchanges \20\ to attract Public Customer order flow. As stated above, 
the Exchange aims to improve markets by developing features for the 
benefit of its Public Customers. The Exchange believes that providing 
incentives for Public Customers is reasonable and will benefit all 
Participants trading on the Exchange by attracting Public Customer 
order flow.
---------------------------------------------------------------------------

    \20\ See supra, note 10. Under the ISE Fee Schedule, if the 
initiator is a Public Customer and the responder is a Market Maker 
in Non-Penny Pilot Classes, the Market Maker is assessed a $.70 PFOF 
fee which will be rebated proportionally to the members that paid 
the fee on a monthly basis.
---------------------------------------------------------------------------

    Further, the Exchange believes it is reasonable, equitable and not 
unfairly discriminatory to only assess liquidity fees and credits on 
Agency Orders that do not trade with their contra order, and the 
Responses to these Orders. As stated above, liquidity fees and credits 
are meant to incentivize order flow, and the Exchange believes 
incentives are not necessary for internalized orders in these 
mechanisms that only trade against their contra order. Additionally, 
other Exchanges also make this distinction in their Facilitation and 
Solicitation auction mechanisms.\21\
---------------------------------------------------------------------------

    \21\ See supra, note 10. Under the ISE Fee Schedule in the 
equivalent of Penny Pilot Classes the initiator receives a ``break-
up'' rebate only for contracts that are submitted to the 
Facilitation and Solicitation mechanisms that do not trade with 
their contra order. The responder fee for these Orders is only 
applied to any contracts for which the rebate is provided.
---------------------------------------------------------------------------

    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.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
    The proposed rule change modifies the exchange fees and raises the 
liquidity fees and credits for Facilitation and Solicitation 
transactions. BOX notes that its market model and fees are generally 
intended to benefit retail customers by providing incentives for 
Participants to submit their customer order flow to BOX. The Exchange 
does not believe that the proposed liquidity fees and credits will 
burden competition by creating such a disparity between the fees an 
Initiating Participant in the Facilitation and Solicitation auction 
pays and the fees a competitive responder pays that would result in 
certain Participants being unable to compete with initiators. In fact, 
the Exchange believes that these changes will not impair these 
Participants from adding liquidity and competing in Facilitation and 
Solicitation auction transactions and will help promote competition by 
providing incentives for market participants to submit customer order 
flow to BOX and thus, create a greater opportunity for customers to 
receive additional price improvement. Specifically, BOX is removing and 
lowering the exchange fees for Facilitation and Solicitation 
transactions to encourage all market participants to participate in 
these auctions. While the liquidity fees and

[[Page 54625]]

credits for these transactions will be higher, they will only be 
assessed against the portion of the order that executes against a 
response in the auctions. The Exchange believes that participants 
submitting responses in these auctions are willing to pay a higher fee 
for liquidity discovery in less liquid names. Further, as stated above 
the fees and credits proposed are in line with the facilitation and 
solicitation fees and credits on at least one other options exchange.
    BOX believes that this proposal will enhance competition between 
exchanges because it is designed to allow the Exchange to better 
compete with other exchanges for Facilitation and Solicitation auction 
order flow.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2015-29 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-2015-29. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2015-29, and should be 
submitted on or before October 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Robert W. Errett,
Deputy Secretary.
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2015-22741 Filed 9-9-15; 8:45 am]
 BILLING CODE 8011-01-P