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, 62132-62136 [2015-26148]
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Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices
including by attracting additional
liquidity to the Exchange, which will
make the Exchange a more competitive
venue for, among other things, order
execution and price discovery. The
Exchange notes that it operates in a
highly competitive market in which
market participants can readily favor
competing venues. 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 promotes a competitive
environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 10 of the Act and
subparagraph (f)(2) of Rule 19b–4 11
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 12 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
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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:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2015–89 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–NYSEArca–2015–89. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2015–89 and should be
submitted on or before November 5,
2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26149 Filed 10–14–15; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76115; File No. SR–BOX–
2015–32]
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
October 8, 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 30, 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 to make
changes to Section I.A., Exchange Fees
for Non-Auction Transactions and
Section II.B., Liquidity Fees and Credits
for Facilitation and Solicitation
transactions 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
October 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
1 15
10 15
U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(2).
12 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
17:19 Oct 14, 2015
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
13 17
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CFR 200.30–3(a)(12).
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Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices
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
changes to Section I.A., Exchange Fees
for Non-Auction Transactions and
Section II.B., Liquidity Fees and Credits
for Facilitation and Solicitation
transactions.
Non-Auction Transactions
First, the Exchange proposes to raise
certain fees for non-auction transactions
in Non-Penny Pilot Classes which take
liquidity from Public Customers. For all
non-auction transactions, fees and
credits are assessed depending upon
three factors: (i) The account type of the
Participant submitting the order; (ii)
whether the Participant is a liquidity
provider or liquidity taker; and (iii) the
account type of the contra party. NonAuction Transactions in Penny Pilot
Classes are assessed different fees or
credits than Non-Auction Transactions
in Non-Penny Pilot Classes. The
Exchange proposes to raise the fee
assessed for Professional Customers and
Broker Dealers taking liquidity from a
Public Customer in a Non-Penny Pilot
Class to $1.07 from $0.99. For Market
Makers taking liquidity from a Public
Customer in a Non-Penny Pilot Class,
the Exchange proposes to raise the fee
assessed to $1.03 from $0.90.
The fees for Non-Auction
Transactions will be as follows:
Penny pilot classes
Account type
Contra party
Public Customer ........................................
Public Customer .......................................
Professional Customer/Broker Dealer .....
Market Maker ...........................................
Public Customer .......................................
Professional Customer/Broker Dealer .....
Market Maker ...........................................
Public Customer .......................................
Professional Customer/Broker Dealer .....
Market Maker ...........................................
Professional Customer or Broker Dealer ..
Market Maker ............................................
The Exchange then proposes to
amend the structure of the Tiered
Volume Rebates for Public Customers in
Non-Auction Transactions (Section
I.A.1.) and distinguish between whether
the Public Customer is a liquidity
provider or liquidity taker within the
transaction. While a majority of the
Maker fee/
credit
$0.00
0.00
0.00
0.60
0.25
0.25
0.51
0.00
0.00
rebate levels will remain unchanged, at
the highest volume tier (65,001
contracts or greater) in Non-Penny Pilot
Classes the Exchange proposes to award
transactions where the Public Customer
is a liquidity maker a per contract rebate
of $0.90. Transactions where the Public
Non-Penny pilot classes
Taker fee/
credit
$0.00
0.00
0.00
0.64
0.40
0.44
0.55
0.05
0.29
Maker fee/
credit
$0.00
0.00
0.00
0.95
0.35
0.35
0.85
0.00
0.00
Taker fee/
credit
$0.00
0.00
0.00
1.07
0.40
0.44
1.03
0.10
0.29
Customer is a liquidity taker will
continue to be awarded a $0.70 rebate.
The new per contract rebates for
Public Customers in Non-Auction
Transactions as set forth in Section
I.A.1. of the BOX Fee Schedule will now
be as follows:
Per contract rebate
Public customer monthly ADV
Penny pilot classes
Maker
65,001 contracts and greater ..........................................................................................
40,001 contracts to 65,000 contracts ..............................................................................
15,001 contracts to 40,000 contracts ..............................................................................
1 contract to 15,000 contracts .........................................................................................
Liquidity Fees and Credits
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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
Taker
($0.40)
(0.25)
(0.15)
0.00
proposes to establish higher liquidity
credits for both Facilitation and
Solicitation transactions in Penny Pilot
and Non-Penny Pilot Classes. The
Exchange proposes to raise the credit for
removing liquidity in Facilitation and
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($0.90)
(0.50)
(0.40)
0.00
Taker
($0.70)
(0.50)
(0.40)
0.00
Solicitation transactions to $1.00 from
$0.95 in Non-Penny Pilot Classes, and to
$0.45 from $0.40 in Penny Pilot Classes.
The liquidity fees and credits for
Facilitation and Solicitation
transactions will be as follows:
Fee for adding
liquidity
(all account
types)
Non-Penny Pilot Classes .........................................................................................................................................
17:19 Oct 14, 2015
Maker
($0.40)
(0.25)
(0.15)
0.00
Facilitation and solicitation transactions
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Non-Penny pilot classes
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$0.95
Credit for
removing
liquidity
(all account
types)
($1.00)
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Fee for adding
liquidity
(all account
types)
Facilitation and solicitation transactions
Penny Pilot Classes .................................................................................................................................................
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,5 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.
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Non-Auction Transactions
The Exchange believes it is equitable,
reasonable and not unfairly
discriminatory to assess fees according
to the account type of the Participant
originating the order and the contra
party. This fee structure has been in
place on the Exchange for the past year
and the Exchange is simply adjusting
certain fees within the structure. The
result of this structure is that a
Participant does not know the fee it will
be charged when submitting certain
orders. Therefore, the Participant must
recognize that it could be charged the
highest applicable fee on the Exchange’s
schedule, which may, instead, be
lowered or changed to a credit
depending upon how the order
interacts.
The Exchange believes raising the
non-auction transaction fees for
Professionals, Broker Dealers and
Market Makers when taking liquidity
from a Public Customer in a Non-Penny
Pilot Class is reasonable, equitable and
not unfairly discriminatory. The
Exchange believes that participants
taking liquidity from the BOX Book are
willing to pay a higher fee for liquidity
discovery in these less liquid names.
Further, the Exchange believes the fees
5 15
U.S.C. 78f(b)(4) and (5).
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17:19 Oct 14, 2015
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proposed are reasonable and in line
with similar fees at a competing venue.6
Raising these fees is intended to
partially offset the higher Public
Customer liquidity maker rebate also
proposed within this filing. The
Exchange believes it is reasonable,
equitable and not unfairly
discriminatory to give Public Customers
a rebate and, accordingly, charge nonPublic Customers a higher fee when
their orders execute against a Public
Customer. 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. Similar to the
payment for order flow and other
pricing models that have been adopted
by the Exchange and other exchanges to
attract Public Customer order flow, the
Exchange increases fees to non-Public
Customers in order to provide
incentives for Public Customers. The
Exchange believes that providing
additional incentives for Public
Customers to make liquidity is
reasonable and, ultimately, will benefit
all Participants trading on the Exchange
by attracting Public Customer order
flow.
The Exchange believes that charging
Professional Customers and Broker
Dealers $1.07 for taking liquidity against
Public Customers in Non-Penny Pilot
Classes is reasonable and comparable to
similar fees at competing venues.7
Further, the Exchange notes that
Participants are only charged these
higher fees when the Participant takes
liquidity from a Public Customer in a
Non-Penny Pilot Class. The Exchange
also believes that charging Professional
Customers and Broker Dealers higher
fees than Public Customers for all nonauction transactions is equitable and not
unfairly discriminatory. Professional
Customers, while Public Customers by
virtue of not being Broker Dealers,
generally engage in trading activity
more similar to Broker Dealer
proprietary trading accounts (submitting
6 See the NASDAQ Stock Market LLC (‘‘NOM’’),
NYSE Arca, Inc (‘‘Arca’’) and International
Securities Exchange (‘‘ISE’’) Fee Schedules.
7 Under the NOM and Arca Fee Schedules Broker
Dealers and Professional Customers are charged
$0.94 for removing liquidity in Non-Penny Pilot
Classes.
PO 00000
Frm 00123
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0.40
Credit for
removing
liquidity
(all account
types)
(0.45)
more than 390 standard orders per day
on average). The Exchange believes the
higher level of trading activity from
these Participants will draw a greater
amount of BOX system resources than
that of non-professional, Public
Customers. Because this higher level of
trading activity will result in greater
ongoing operational costs, the Exchange
aims to recover its costs by assessing
Professional Customers and Broker
Dealers higher fees for transactions.
The Exchange believes that charging
Market Makers $1.03 for taking liquidity
against Public Customers in Non-Penny
Pilot Classes is reasonable and
comparable to similar fees at competing
venues.8 Further, the Exchange notes
that most Market Makers currently
qualify for the Tiered Volume Rebate in
Non-Auction transactions in Section
I.A.1., which will result in a lower per
contract fee for all the Participant’s nonauction transactions. The Exchange also
believes it is equitable and not unfairly
discriminatory for BOX Market Makers
to be assessed lower fees than
Professional Customers and Broker
Dealers for non-auction transactions
because of the significant contributions
to overall market quality that Market
Makers provide. Specifically, Market
Makers can provide higher volumes of
liquidity, and lowering their fees will
help attract a higher level of Market
Maker order flow to the BOX Book and
create liquidity, which the Exchange
believes will ultimately benefit all
Participants trading on BOX.
The Exchange believes amending the
structure of the Tiered Volume Rebates
for Public Customers in Non-Auction
Transactions (Section I.A.1.) to
distinguish whether the Public
Customer is a liquidity provider or
liquidity taker is reasonable, equitable
and not unfairly discriminatory. The
volume thresholds and applicable
rebates are meant to incentivize Public
Customers to direct order flow to the
Exchange to obtain the benefit of the
rebate, which will in turn benefit all
market participants by increasing
liquidity on the Exchange. Other
exchanges employ similar incentive
8 Under the ISE Fee Schedule Market Makers are
charged $0.95 ($0.25 exchange fee combined with
a $0.70 Payment for Order Flow Fee) and under the
NOM Fee Schedule they are charged $0.94.
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programs 9 and the Exchange believes
that the proposed change to the rebate
structure is reasonable and competitive
when compared to incentive structures
at other exchanges.
The proposed structure is intended to
attract Public Customer order flow to
the Exchange by offering these
Participants incentives to submit their
Non-Auction orders to the Exchange.
The practice of providing additional
incentives to increase order flow is, and
has been, a common practice in the
options markets.10 Further, the
Exchange believes it is appropriate to
provide incentives for market
participants which will result in greater
liquidity and ultimately benefit all
Participants trading on the Exchange.
The Exchange believes awarding a
$0.90 rebate to those Public Customers
who make liquidity in Non-Penny Pilot
classes and achieve the highest volume
tier during a month (65,001 contracts or
greater) is reasonable, equitable and not
unfairly discriminatory. As stated
above, other exchanges employ similar
incentive programs,11 and the Exchange
believes that the $0.90 maker rebate for
Non-Penny Pilot Classes is reasonable
and competitive when compared to
credits and rebates at other exchanges.
The Exchange also believes it is
equitable and not unfairly
discriminatory to only offer the higher
rebate to Public Customers that have an
average daily volume of 65,001
9 See Section B of the NASDAQ OMX
PHLX,(‘‘PHLX’’) Pricing Schedule entitled
‘‘Customer Rebate Program;’’ ISE Gemini, LLC
(‘‘Gemini’’) Qualifying Tier Thresholds (page 6 of
the ISE Gemini Fee Schedule); and Chicago Board
Options Exchange, Inc. (‘‘CBOE’’) Volume Incentive
Program (VIP). CBOE’s Volume Incentive Program
(‘‘VIP’’) pays certain tiered rebates to Trading
Permit Holders for electronically executed
multiply-listed option orders which include AIM
orders. Note that some of these exchanges base
these rebate programs on the percentage of total
national Public Customer volume traded on their
respective exchanges, which the Exchange is not
proposing to do.
10 See BATS Exchange, Inc. (‘‘BATS’’) BATS
Options Exchange Fee Schedule ‘‘Standard Rates’’;
CBOE Fee Schedule ‘‘Volume Incentive Program’’
(page 4); Gemini Schedule of Fees, Section I.
Regular Order Fees and Rebates ‘‘Penny Symbols
and SPY, and Non-Penny Symbols’’ (page 4); Miami
International Securities Exchange, LLC (‘‘MIAX’’)
Fee Schedule Section I(a)(i) ‘‘Market Maker
Transaction Fees’’ and ‘‘Market Maker Sliding
Scale’’, and Section I(a)(iii) ‘‘Priority Customer
Rebate Program’’; NASDAQ OMX BX, Inc. (‘‘BX
Options’’) Chapter XV, Section 2 BX Options
Market—Fees and Rebates; NASDAQ OMX
PHLX,(‘‘PHLX’’), Pricing Schedule Section B,
‘‘Customer Rebate Program’’; NOM Chapter XV,
Section 2 NASDAQ Options Market—Fees and
Rebates; NYSE Amex, Inc. (‘‘AMEX’’) Fee Schedule
Section I.C. NYSE Amex Options Market Maker
Sliding Scale—Electronic; and Arca Options Fees
and Charges, ‘‘Customer and Professional Customer
Monthly Posting Credit Tiers and Qualifications for
Executions in Penny Pilot Issues’’ (page 4).
11 See supra, note 9.
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contracts or greater during the month.
The Exchange believes offering a $0.90
rebate at the highest volume tier will
incentivize all Public Customers to
increase their non-auction order flow in
these classes to the Exchange to achieve
the higher rebate, which will in turn
benefit all participants trading on BOX.
The Exchange continues to believe it
is equitable and not unfairly
discriminatory to offer these rebate
structures to Public Customers in NonAuction transactions. The practice of
incentivizing increased Public Customer
order flow is common in the options
markets. The Exchange believes the
proposed changes to the structure and
per contract rebate for Public Customers
who achieve the highest volume tier is
equitable and not unfairly
discriminatory as all Public Customers
will benefit from the opportunity to
obtain a greater rebate.
The Exchange believes it is reasonable
to offer a higher per contract rebate for
transactions in Non-Penny Pilot Classes
compared to Penny Pilot Classes
because Non-Penny Pilot Classes are
typically less actively traded and have
wider spreads. The Exchange believes
that offering a higher rebate will
incentivize Public Customer order flow
in Non-Penny Pilot issues on the
Exchange, ultimately benefitting all
Participants trading on BOX.
Liquidity Fees and Credits
BOX believes that the changes to
Facilitation and Solicitation transaction
liquidity credits are equitable and not
unfairly discriminatory in that they
apply to all categories of participants
and across all account types. The
Exchange notes that liquidity fees and
credits on BOX are meant to offset one
another in any particular transaction.
The liquidity fees and credits do not
directly result in revenue to BOX, but
will simply allow BOX to provide the
credit incentive to Participants to attract
order flow. Raising the credits for
removing liquidity will result in BOX
crediting a Participant a higher amount
for removing liquidity than it received
from collecting the corresponding
liquidity fee. 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 also believes the
liquidity fees and credits are reasonable
and competitive when compared to
similar fees at competing venues.12
Under the proposed changes, Initiators
12 See
PO 00000
ISE Schedules of Fees.
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62135
to the Facilitation and Solicitation
auctions will never pay a fee and will
only receive a credit of $0.45 in Penny
Pilot Classes and $1.00 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 NonPenny Pilot Classes.13
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. Specifically, the
difference is in line with the credits and
fees at the ISE.14 While Initiators on the
ISE are assessed a fee, the ISE then uses
volume based incentives that can greatly
reduce the fees these Participants are
charged. All Facilitation and
Solicitation fees 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 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
13 The ISE uses the term ‘‘Crossing Order’’ for
orders executed on the Exchange’s Facilitation and
Solicitation mechanisms.
14 While it is difficult to exactly equate these two
fee structures at the ISE, depending on volume
Initiators 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)
.14 [sic] 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 be $0.45 (Penny Pilot Classes) or
$1.00 (Non-Penny Pilot Classes).
15 See Section IV.H of the ISE Fee Schedule.
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.
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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
be $0.40 [sic] (Penny Pilot Classes) or
$0.95 [sic] (Non-Penny Pilot Classes).
Finally, the Exchange 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.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange believes that the
proposed adjustments to fees and
rebates in the Non-Auction Transactions
fee structure will not impose a burden
on competition among various Exchange
Participants. The Exchange believes that
a fee structure that is determined
according to whether the order removes
or adds liquidity, the account type of
the Participant submitting the order,
and the contra party will result in
Participants being charged appropriately
for these transactions is designed to
enhance competition in Non-Auction
transactions on BOX. Submitting an
order is entirely voluntary and
Participants can determine which type
of order they wish to submit, if any, to
the Exchange. Further, the Exchange
believes that this proposal will enhance
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.
VerDate Sep<11>2014
17:19 Oct 14, 2015
Jkt 238001
competition between exchanges because
it is designed to allow the Exchange to
better compete with other exchanges for
order flow.
The Exchange does not believe that
the proposed liquidity 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.
The Exchange also 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 19
and Rule 19b–4(f)(2) thereunder,20
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:
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–2015–32 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–2015–32. 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–
2015–32, and should be submitted on or
before November 5, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–26148 Filed 10–14–15; 8:45 am]
BILLING CODE 8011–01–P
19 15
U.S.C. 78s(b)(3)(A)(ii).
20 17 CFR 240.19b–4(f)(2).
PO 00000
Frm 00125
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21 17
E:\FR\FM\15OCN1.SGM
CFR 200.30–3(a)(12).
15OCN1
]]>Agencies
[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)]
[Notices]
[Pages 62132-62136]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-26148]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76115; File No. SR-BOX-2015-32]
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
October 8, 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 30, 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 to
make changes to Section I.A., Exchange Fees for Non-Auction
Transactions and Section II.B., Liquidity Fees and Credits for
Facilitation and Solicitation transactions 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 October 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
[[Page 62133]]
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 changes to Section I.A., Exchange
Fees for Non-Auction Transactions and Section II.B., Liquidity Fees and
Credits for Facilitation and Solicitation transactions.
Non-Auction Transactions
First, the Exchange proposes to raise certain fees for non-auction
transactions in Non-Penny Pilot Classes which take liquidity from
Public Customers. For all non-auction transactions, fees and credits
are assessed depending upon three factors: (i) The account type of the
Participant submitting the order; (ii) whether the Participant is a
liquidity provider or liquidity taker; and (iii) the account type of
the contra party. Non-Auction Transactions in Penny Pilot Classes are
assessed different fees or credits than Non-Auction Transactions in
Non-Penny Pilot Classes. The Exchange proposes to raise the fee
assessed for Professional Customers and Broker Dealers taking liquidity
from a Public Customer in a Non-Penny Pilot Class to $1.07 from $0.99.
For Market Makers taking liquidity from a Public Customer in a Non-
Penny Pilot Class, the Exchange proposes to raise the fee assessed to
$1.03 from $0.90.
The fees for Non-Auction Transactions will be as follows:
----------------------------------------------------------------------------------------------------------------
Penny pilot classes Non-Penny pilot classes
---------------------------------------------------
Account type Contra party Maker fee/ Taker fee/ Maker fee/ Taker fee/
credit credit credit credit
----------------------------------------------------------------------------------------------------------------
Public Customer..................... Public Customer....... $0.00 $0.00 $0.00 $0.00
Professional Customer/ 0.00 0.00 0.00 0.00
Broker Dealer.
Market Maker.......... 0.00 0.00 0.00 0.00
Professional Customer or Broker Public Customer....... 0.60 0.64 0.95 1.07
Dealer.
Professional Customer/ 0.25 0.40 0.35 0.40
Broker Dealer.
Market Maker.......... 0.25 0.44 0.35 0.44
Market Maker........................ Public Customer....... 0.51 0.55 0.85 1.03
Professional Customer/ 0.00 0.05 0.00 0.10
Broker Dealer.
Market Maker.......... 0.00 0.29 0.00 0.29
----------------------------------------------------------------------------------------------------------------
The Exchange then proposes to amend the structure of the Tiered
Volume Rebates for Public Customers in Non-Auction Transactions
(Section I.A.1.) and distinguish between whether the Public Customer is
a liquidity provider or liquidity taker within the transaction. While a
majority of the rebate levels will remain unchanged, at the highest
volume tier (65,001 contracts or greater) in Non-Penny Pilot Classes
the Exchange proposes to award transactions where the Public Customer
is a liquidity maker a per contract rebate of $0.90. Transactions where
the Public Customer is a liquidity taker will continue to be awarded a
$0.70 rebate.
The new per contract rebates for Public Customers in Non-Auction
Transactions as set forth in Section I.A.1. of the BOX Fee Schedule
will now be as follows:
----------------------------------------------------------------------------------------------------------------
Per contract rebate
---------------------------------------------------
Public customer monthly ADV Penny pilot classes Non-Penny pilot classes
---------------------------------------------------
Maker Taker Maker Taker
----------------------------------------------------------------------------------------------------------------
65,001 contracts and greater................................ ($0.40) ($0.40) ($0.90) ($0.70)
40,001 contracts to 65,000 contracts........................ (0.25) (0.25) (0.50) (0.50)
15,001 contracts to 40,000 contracts........................ (0.15) (0.15) (0.40) (0.40)
1 contract to 15,000 contracts.............................. 0.00 0.00 0.00 0.00
----------------------------------------------------------------------------------------------------------------
Liquidity Fees and Credits
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 higher
liquidity credits for both Facilitation and Solicitation transactions
in Penny Pilot and Non-Penny Pilot Classes. The Exchange proposes to
raise the credit for removing liquidity in Facilitation and
Solicitation transactions to $1.00 from $0.95 in Non-Penny Pilot
Classes, and to $0.45 from $0.40 in Penny Pilot Classes.
The liquidity fees and credits for Facilitation and Solicitation
transactions will be as follows:
------------------------------------------------------------------------
Credit for
Fee for adding removing
Facilitation and solicitation liquidity liquidity
transactions (all account (all account
types) types)
------------------------------------------------------------------------
Non-Penny Pilot Classes................. $0.95 ($1.00)
[[Page 62134]]
Penny Pilot Classes..................... 0.40 (0.45)
------------------------------------------------------------------------
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,\5\ 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.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
Non-Auction Transactions
The Exchange believes it is equitable, reasonable and not unfairly
discriminatory to assess fees according to the account type of the
Participant originating the order and the contra party. This fee
structure has been in place on the Exchange for the past year and the
Exchange is simply adjusting certain fees within the structure. The
result of this structure is that a Participant does not know the fee it
will be charged when submitting certain orders. Therefore, the
Participant must recognize that it could be charged the highest
applicable fee on the Exchange's schedule, which may, instead, be
lowered or changed to a credit depending upon how the order interacts.
The Exchange believes raising the non-auction transaction fees for
Professionals, Broker Dealers and Market Makers when taking liquidity
from a Public Customer in a Non-Penny Pilot Class is reasonable,
equitable and not unfairly discriminatory. The Exchange believes that
participants taking liquidity from the BOX Book are willing to pay a
higher fee for liquidity discovery in these less liquid names. Further,
the Exchange believes the fees proposed are reasonable and in line with
similar fees at a competing venue.\6\
---------------------------------------------------------------------------
\6\ See the NASDAQ Stock Market LLC (``NOM''), NYSE Arca, Inc
(``Arca'') and International Securities Exchange (``ISE'') Fee
Schedules.
---------------------------------------------------------------------------
Raising these fees is intended to partially offset the higher
Public Customer liquidity maker rebate also proposed within this
filing. The Exchange believes it is reasonable, equitable and not
unfairly discriminatory to give Public Customers a rebate and,
accordingly, charge non-Public Customers a higher fee when their orders
execute against a Public Customer. 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. Similar to the payment for order flow and
other pricing models that have been adopted by the Exchange and other
exchanges to attract Public Customer order flow, the Exchange increases
fees to non-Public Customers in order to provide incentives for Public
Customers. The Exchange believes that providing additional incentives
for Public Customers to make liquidity is reasonable and, ultimately,
will benefit all Participants trading on the Exchange by attracting
Public Customer order flow.
The Exchange believes that charging Professional Customers and
Broker Dealers $1.07 for taking liquidity against Public Customers in
Non-Penny Pilot Classes is reasonable and comparable to similar fees at
competing venues.\7\ Further, the Exchange notes that Participants are
only charged these higher fees when the Participant takes liquidity
from a Public Customer in a Non-Penny Pilot Class. The Exchange also
believes that charging Professional Customers and Broker Dealers higher
fees than Public Customers for all non-auction transactions is
equitable and not unfairly discriminatory. Professional Customers,
while Public Customers by virtue of not being Broker Dealers, generally
engage in trading activity more similar to Broker Dealer proprietary
trading accounts (submitting more than 390 standard orders per day on
average). The Exchange believes the higher level of trading activity
from these Participants will draw a greater amount of BOX system
resources than that of non-professional, Public Customers. Because this
higher level of trading activity will result in greater ongoing
operational costs, the Exchange aims to recover its costs by assessing
Professional Customers and Broker Dealers higher fees for transactions.
---------------------------------------------------------------------------
\7\ Under the NOM and Arca Fee Schedules Broker Dealers and
Professional Customers are charged $0.94 for removing liquidity in
Non-Penny Pilot Classes.
---------------------------------------------------------------------------
The Exchange believes that charging Market Makers $1.03 for taking
liquidity against Public Customers in Non-Penny Pilot Classes is
reasonable and comparable to similar fees at competing venues.\8\
Further, the Exchange notes that most Market Makers currently qualify
for the Tiered Volume Rebate in Non-Auction transactions in Section
I.A.1., which will result in a lower per contract fee for all the
Participant's non-auction transactions. The Exchange also believes it
is equitable and not unfairly discriminatory for BOX Market Makers to
be assessed lower fees than Professional Customers and Broker Dealers
for non-auction transactions because of the significant contributions
to overall market quality that Market Makers provide. Specifically,
Market Makers can provide higher volumes of liquidity, and lowering
their fees will help attract a higher level of Market Maker order flow
to the BOX Book and create liquidity, which the Exchange believes will
ultimately benefit all Participants trading on BOX.
---------------------------------------------------------------------------
\8\ Under the ISE Fee Schedule Market Makers are charged $0.95
($0.25 exchange fee combined with a $0.70 Payment for Order Flow
Fee) and under the NOM Fee Schedule they are charged $0.94.
---------------------------------------------------------------------------
The Exchange believes amending the structure of the Tiered Volume
Rebates for Public Customers in Non-Auction Transactions (Section
I.A.1.) to distinguish whether the Public Customer is a liquidity
provider or liquidity taker is reasonable, equitable and not unfairly
discriminatory. The volume thresholds and applicable rebates are meant
to incentivize Public Customers to direct order flow to the Exchange to
obtain the benefit of the rebate, which will in turn benefit all market
participants by increasing liquidity on the Exchange. Other exchanges
employ similar incentive
[[Page 62135]]
programs \9\ and the Exchange believes that the proposed change to the
rebate structure is reasonable and competitive when compared to
incentive structures at other exchanges.
---------------------------------------------------------------------------
\9\ See Section B of the NASDAQ OMX PHLX,(``PHLX'') Pricing
Schedule entitled ``Customer Rebate Program;'' ISE Gemini, LLC
(``Gemini'') Qualifying Tier Thresholds (page 6 of the ISE Gemini
Fee Schedule); and Chicago Board Options Exchange, Inc. (``CBOE'')
Volume Incentive Program (VIP). CBOE's Volume Incentive Program
(``VIP'') pays certain tiered rebates to Trading Permit Holders for
electronically executed multiply-listed option orders which include
AIM orders. Note that some of these exchanges base these rebate
programs on the percentage of total national Public Customer volume
traded on their respective exchanges, which the Exchange is not
proposing to do.
---------------------------------------------------------------------------
The proposed structure is intended to attract Public Customer order
flow to the Exchange by offering these Participants incentives to
submit their Non-Auction orders to the Exchange. The practice of
providing additional incentives to increase order flow is, and has
been, a common practice in the options markets.\10\ Further, the
Exchange believes it is appropriate to provide incentives for market
participants which will result in greater liquidity and ultimately
benefit all Participants trading on the Exchange.
---------------------------------------------------------------------------
\10\ See BATS Exchange, Inc. (``BATS'') BATS Options Exchange
Fee Schedule ``Standard Rates''; CBOE Fee Schedule ``Volume
Incentive Program'' (page 4); Gemini Schedule of Fees, Section I.
Regular Order Fees and Rebates ``Penny Symbols and SPY, and Non-
Penny Symbols'' (page 4); Miami International Securities Exchange,
LLC (``MIAX'') Fee Schedule Section I(a)(i) ``Market Maker
Transaction Fees'' and ``Market Maker Sliding Scale'', and Section
I(a)(iii) ``Priority Customer Rebate Program''; NASDAQ OMX BX, Inc.
(``BX Options'') Chapter XV, Section 2 BX Options Market--Fees and
Rebates; NASDAQ OMX PHLX,(``PHLX''), Pricing Schedule Section B,
``Customer Rebate Program''; NOM Chapter XV, Section 2 NASDAQ
Options Market--Fees and Rebates; NYSE Amex, Inc. (``AMEX'') Fee
Schedule Section I.C. NYSE Amex Options Market Maker Sliding Scale--
Electronic; and Arca Options Fees and Charges, ``Customer and
Professional Customer Monthly Posting Credit Tiers and
Qualifications for Executions in Penny Pilot Issues'' (page 4).
---------------------------------------------------------------------------
The Exchange believes awarding a $0.90 rebate to those Public
Customers who make liquidity in Non-Penny Pilot classes and achieve the
highest volume tier during a month (65,001 contracts or greater) is
reasonable, equitable and not unfairly discriminatory. As stated above,
other exchanges employ similar incentive programs,\11\ and the Exchange
believes that the $0.90 maker rebate for Non-Penny Pilot Classes is
reasonable and competitive when compared to credits and rebates at
other exchanges. The Exchange also believes it is equitable and not
unfairly discriminatory to only offer the higher rebate to Public
Customers that have an average daily volume of 65,001 contracts or
greater during the month. The Exchange believes offering a $0.90 rebate
at the highest volume tier will incentivize all Public Customers to
increase their non-auction order flow in these classes to the Exchange
to achieve the higher rebate, which will in turn benefit all
participants trading on BOX.
---------------------------------------------------------------------------
\11\ See supra, note 9.
---------------------------------------------------------------------------
The Exchange continues to believe it is equitable and not unfairly
discriminatory to offer these rebate structures to Public Customers in
Non-Auction transactions. The practice of incentivizing increased
Public Customer order flow is common in the options markets. The
Exchange believes the proposed changes to the structure and per
contract rebate for Public Customers who achieve the highest volume
tier is equitable and not unfairly discriminatory as all Public
Customers will benefit from the opportunity to obtain a greater rebate.
The Exchange believes it is reasonable to offer a higher per
contract rebate for transactions in Non-Penny Pilot Classes compared to
Penny Pilot Classes because Non-Penny Pilot Classes are typically less
actively traded and have wider spreads. The Exchange believes that
offering a higher rebate will incentivize Public Customer order flow in
Non-Penny Pilot issues on the Exchange, ultimately benefitting all
Participants trading on BOX.
Liquidity Fees and Credits
BOX believes that the changes to Facilitation and Solicitation
transaction liquidity credits are equitable and not unfairly
discriminatory in that they apply to all categories of participants and
across all account types. The Exchange notes that liquidity fees and
credits on BOX are meant to offset one another in any particular
transaction. The liquidity fees and credits do not directly result in
revenue to BOX, but will simply allow BOX to provide the credit
incentive to Participants to attract order flow. Raising the credits
for removing liquidity will result in BOX crediting a Participant a
higher amount for removing liquidity than it received from collecting
the corresponding liquidity fee. 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 also believes the liquidity fees and credits are
reasonable and competitive when compared to similar fees at competing
venues.\12\ Under the proposed changes, Initiators to the Facilitation
and Solicitation auctions will never pay a fee and will only receive a
credit of $0.45 in Penny Pilot Classes and $1.00 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.\13\
---------------------------------------------------------------------------
\12\ See ISE Schedules of Fees.
\13\ The ISE uses the term ``Crossing Order'' for orders
executed on the Exchange's Facilitation and Solicitation mechanisms.
---------------------------------------------------------------------------
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. Specifically, the difference
is in line with the credits and fees at the ISE.\14\ While Initiators
on the ISE are assessed a fee, the ISE then uses volume based
incentives that can greatly reduce the fees these Participants are
charged. All Facilitation and Solicitation fees 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\
---------------------------------------------------------------------------
\14\ While it is difficult to exactly equate these two fee
structures at the ISE, depending on volume Initiators 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) .14 [sic] 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 be $0.45 (Penny Pilot Classes) or $1.00 (Non-Penny Pilot
Classes).
\15\ See Section IV.H of the ISE Fee Schedule.
\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.
---------------------------------------------------------------------------
In conclusion, the Exchange believes the proposed Facilitation and
Solicitation 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
[[Page 62136]]
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 be $0.40 [sic]
(Penny Pilot Classes) or $0.95 [sic] (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.
---------------------------------------------------------------------------
Finally, the Exchange 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.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange believes that the proposed adjustments to fees and
rebates in the Non-Auction Transactions fee structure will not impose a
burden on competition among various Exchange Participants. The Exchange
believes that a fee structure that is determined according to whether
the order removes or adds liquidity, the account type of the
Participant submitting the order, and the contra party will result in
Participants being charged appropriately for these transactions is
designed to enhance competition in Non-Auction transactions on BOX.
Submitting an order is entirely voluntary and Participants can
determine which type of order they wish to submit, if any, to the
Exchange. Further, the Exchange believes that this proposal will
enhance competition between exchanges because it is designed to allow
the Exchange to better compete with other exchanges for order flow.
The Exchange does not believe that the proposed liquidity 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.
The Exchange also 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 \19\ and Rule 19b-4(f)(2)
thereunder,\20\ because it establishes or changes a due, or fee.
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\19\ 15 U.S.C. 78s(b)(3)(A)(ii).
\20\ 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-2015-32 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-2015-32. 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-2015-32, and should be
submitted on or before November 5, 2015.
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\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-26148 Filed 10-14-15; 8:45 am]
BILLING CODE 8011-01-P
