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]
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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 (https://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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing 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.
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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 https://
boxexchange.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
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
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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
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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.
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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
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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
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U.S.C. 78f(b)(4) and (5).
Frm 00112
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$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
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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 https://
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.
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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
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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.
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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.
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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.
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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.
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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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BOX–
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 (https://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 https://
boxexchange.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
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
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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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule 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 https://boxexchange.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make a number of changes to 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 https://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.
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\22\ 15 U.S.C. 78s(b)(3)(A)(ii).
\23\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BOX-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 (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BOX-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.
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\24\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-22741 Filed 9-9-15; 8:45 am]
BILLING CODE 8011-01-P
