Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market LLC (“BOX”) Options Facility, 22151-22154 [2016-08555]
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Federal Register / Vol. 81, No. 72 / Thursday, April 14, 2016 / Notices
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 15b1–1 (17 CFR 240.15b1–1) and
Form BD (17 CFR 249.501) under the
Securities Exchange Act of 1934 (17
U.S.C. 78a et seq.).
Form BD is the application form used
by firms to apply to the Commission for
registration as a broker-dealer, as
required by Rule 15b1–1. Form BD also
is used by firms other than banks and
registered broker-dealers to apply to the
Commission for registration as a
municipal securities dealer or a
government securities broker-dealer. In
addition, Form BD is used to change
information contained in a previous
Form BD filing that becomes inaccurate.
The total industry-wide annual time
burden imposed by Form BD is
approximately 4,999 hours, based on
approximately 13,732 responses (193
initial filings + 13,539 amendments).
Each application filed on Form BD
requires approximately 2.75 hours to
complete and each amended Form BD
requires approximately 20 minutes to
complete. (193 × 2.75 hours = 531
hours; 13,539 × 0.33 hours = 4,468
hours; 531 hours + 4,468 hours = 4,999
hours.) The staff believes that a brokerdealer would have a Compliance
Manager complete and file both
applications and amendments on Form
BD at a cost of $279/hour.
Consequently, the staff estimates that
the total internal cost of compliance
associated with the annual time burden
is approximately $1,394,721 per year
($279 × 4999). There is no external cost
burden associated with Rule 15b1–1 and
Form BD.
The Commission uses the information
disclosed by applicants in Form BD:
(1) To determine whether the applicant
meets the standards for registration set
forth in the provisions of the Exchange
Act; (2) to develop a central information
resource where members of the public
may obtain relevant, up-to-date
information about broker-dealers,
municipal securities dealers, and
government securities broker-dealers,
and where the Commission, other
regulators, and SROs may obtain
information for investigatory purposes
in connection with securities litigation;
and (3) to develop statistical
information about broker-dealers,
municipal securities dealers, and
government securities broker-dealers.
Without the information disclosed in
Form BD, the Commission could not
effectively implement policy objectives
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of the Exchange Act with respect to its
investor protection function.
Completing and filing Form BD is
mandatory in order to engage in brokerdealer activity. Compliance with Rule
15b1–1 does not involve the collection
of confidential information.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following Web site:
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE., Washington, DC
20549, or by sending an email to: PRA_
Mailbox@sec.gov. Comments must be
submitted to OMB within 30 days of
this notice.
Dated: April 8, 2016.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08551 Filed 4–13–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77568; File No. SR–BOX–
2016–15]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule on the BOX Market
LLC (‘‘BOX’’) Options Facility
April 8, 2016.
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 March 31,
2016, 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
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00104
Fmt 4703
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 revise the
Complex Order pricing structure and
make a clerical correction to Section III
of the BOX 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 April 1, 2016. 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 amend the
Fee Schedule for trading on BOX to
adopt a new pricing structure for
Complex Orders.
Currently, Complex Orders executed
on BOX are assessed differing fees and
credits depending on where the
Complex Order executes. Complex
Orders that executed against orders on
the BOX Book are assessed a flat fee
depending on the account type of the
Participant submitting the order; while
Complex Orders that execute against
other Complex Orders on the Complex
Order Book are assessed a fee or credit
3 15
4 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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depending upon (i) the account type of
the Participant submitting the order;
and (ii) the account type of the contra
party in the transaction.
First, the Exchange proposes to revise
the Complex Order pricing structure to
remove the execution distinction.
Specifically, Complex Orders will now
be assessed the same fee or credit
regardless of whether the Complex
Order executes against an Order on the
BOX Book or against another Complex
Order. To effect this change, the
Exchange proposes to remove Section
III.A. (Complex Orders Executed
Against Orders on the BOX Book) and
Section III.B. (Complex Orders Executed
Against Other Complex Orders) and
create a new Section III.A. entitled (All
Complex Orders).
The Exchange then proposes to adopt
a contra party pricing structure in this
new section that will assess transaction
fees and credits dependent upon three
factors: (i) The account type of the
Participant submitting the order; (ii)
whether the Participant is a liquidity
provider or liquidity taker; and (iii) the
account type of the contra party.5 The
Exchange notes that Complex Orders in
Penny Pilot Classes and Non-Penny
Pilot Classes will continue to be
assessed differently, a distinction that
occurs across the entirety of the BOX
Fee Schedule.
The Exchange proposed fee structure
for all Complex Orders will be as
follows:
Penny pilot classes
Non-penny pilot classes
Account type
Contra party
Public Customer .................
Public Customer .............................................................
Professional Customer/Broker Dealer ............................
Market Maker ..................................................................
Public Customer .............................................................
$0.00
(0.35)
(0.35)
(0.10)
$0.00
(0.35)
(0.35)
0.45
$0.00
(0.70)
(0.70)
(0.10)
$0.00
(0.70)
(0.70)
0.80
Professional Customer/Broker Dealer ............................
Market Maker ..................................................................
Public Customer .............................................................
Professional Customer/Broker Dealer ............................
Market Maker ..................................................................
(0.10)
(0.10)
(0.10)
(0.10)
(0.10)
0.30
0.30
0.40
0.30
0.30
(0.10)
(0.10)
(0.10)
(0.10)
(0.10)
0.45
0.45
0.75
0.45
0.45
Professional Customer or
Broker Dealer.
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Market Maker .....................
For example, if a Public Customer
submitted a Complex Order in a Penny
Pilot Class (making liquidity), the Public
Customer would be credited $0.35 if the
Complex Order interacted with a Market
Maker’s Complex Order and the Market
Maker (taking liquidity) would be
charged $0.40. To expand on this
example, if the Market Maker instead
submitted a Complex Order in a Penny
Pilot Class (making liquidity), the
Market Maker would be credited $0.10
if the order interacted with a Public
Customer’s order and the Public
Customer (taking liquidity) would be
credited $0.35.
The Exchange also proposes to make
a clerical correction to Section III of the
BOX Fee Schedule. Specifically, the
third paragraph in the introduction to
this section references a Market Maker’s
ADV (Average Daily Volume). The
Exchange no longer uses a Participant’s
ADV to determine volume based tiers
for rebates and fees. Instead, the
qualification thresholds are based on a
percentage of the Participant’s volume
relative to the account type’s overall
total industry equity and ETF option
volume. Therefore, the Exchange
proposes to remove the reference in this
sentence to ADV and replace it with
‘‘executed volume on BOX.’’
5 This pricing model is similar to the NonAuction Transactions fee structure in Section I of
the BOX Fee Schedule.
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Maker fee/
credit
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,6 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 Exchange believes that the
proposed Complex Order Fees are
reasonable, equitable and not unfairly
discriminatory. In particular, the
proposed Complex Order Fees 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. 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. The proposed
Complex Order Fees are intended to
attract Complex Orders to the Exchange
by offering market participants
incentives to submit their Complex
Orders to the Exchange. The Exchange
believes it is appropriate to provide
incentives for market participants to
submit Complex Orders, resulting in
6 15
Taker fee/
credit
U.S.C. 78f(b)(4) and (5).
supra note 5.
Frm 00105
Fmt 4703
Sfmt 4703
Taker fee/
credit
greater liquidity and ultimately
benefiting all Participants trading on the
Exchange.
The Exchange believes revising the
Complex Order pricing structure to
assess the same fee or credit regardless
of whether the Complex Order executes
against an Order on the BOX Book or
against another Complex Order is
reasonable, equitable and not unfairly
discriminatory. With the adoption of the
proposed Complex Order pricing
structure, the Exchange believes it is no
longer necessary to differentiate these
transaction fees by where the Complex
Order executes, and doing so will
reduce investor confusion with respect
to the applicable Complex Order fees
and credits.
The Exchange believes the proposed
Complex Order fee structure is
reasonable, equitable and not unfairly
discriminatory. The proposed fee
structure is similar to the structure
already in place for Complex Orders
that execute against other Complex
Orders, and simply adds a Make/Take
factor. Further, a similar fee structure is
already in place for Non-Auction
Transactions on the Exchange and has
been accepted by both the Commission
and the industry.7 The result of this
structure is that a Participant does not
know the fee it will be charged when
submitting the Complex Order.
7 See
PO 00000
Maker fee/
credit
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Therefore, the Participant must
recognize that it could be charged the
highest applicable fee on the Exchange’s
Complex Order schedule, which may,
instead, be lowered or changed to a
rebate depending upon how the
Complex Order interacts.
The Exchange believes that the
proposed credits for Public Customers
in Complex Orders are reasonable.
Under the proposed fee structure, Public
Customers will never pay a fee for a
Complex Order, but may receive a credit
of $0.35 in Penny Pilot Classes and
$0.70 in Non-Penny Pilot Classes. The
Exchange believes providing a credit or
charging no fee to Public Customers for
Complex Orders is equitable and not
unfairly discriminatory. The securities
markets generally, and BOX in
particular, have historically aimed to
improve markets for investors and
develop various features within the
market structure for Public Customer
benefit. Accordingly, the Exchange
believes that charging no fee or
providing a credit for Public Customers
is appropriate and not unfairly
discriminatory. Public Customers are
less sophisticated than other
Participants and the credit will help to
attract a high level of Public Customer
order flow to the BOX Book and create
liquidity, which the Exchange believes
will ultimately benefit all Participants
trading on BOX.
The Exchange also believes it is
reasonable, equitable and not unfairly
discriminatory to give Public Customers
a credit when their Complex Order
executes against a non-Public Customer
and, accordingly, charge non-Public
Customers a higher fee when their
Complex Order executes against a
Public Customer compared to the fee or
rebate they would be assessed if their
Complex Order interacts with a nonPublic Customer. As stated above, the
Exchange aims to improve markets by
developing features for the benefit of its
Public Customers. Similar to the
payment for order flow and other
pricing models that have been adopted
by the Exchange and other exchanges to
attract Public Customer order flow, the
Exchange increases fees to non-Public
Customers to provide incentives for
Public Customers. The Exchange
believes that providing incentives for
Complex Orders by Public Customers is
reasonable and, ultimately, will benefit
all Participants trading on the Exchange
by attracting Public Customer order
flow.
The Exchange believes that the
proposed fees for Professional
Customers and Broker Dealers in
Complex Orders are reasonable. Under
the proposed fee structure, a
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Professional Customer or Broker Dealer
making liquidity and interacting with a
Public Customer, Professional
Customer, Broker Dealer or Market
Marker will be credited $0.10 for
Complex Orders in both Penny Pilot
Classes and Non-Penny Pilot Classes. If
the Professional Customer or Broker
Dealer is instead taking liquidity, for
Complex Orders in Penny Pilot Classes
it will be charged either $0.45 if the
Complex Order interacts with a Public
Customer’s Complex Order or $0.30 if
the Complex Order interacts with a
Professional Customer or Broker Dealer
or a Market Maker. For Complex Orders
in Non-Penny Pilot Classes, the
Professional Customer or Broker Dealer
will be charged either $0.80 if the
Complex Order interacts with a Public
Customer’s Complex Order or $0.45 if
the Complex Order interacts with a
Professional Customer or Broker Dealer
or a Market Maker.
The Exchange believes that charging
Professional Customers and Broker
Dealers higher fees than Public
Customers for Complex Orders is
equitable and not unfairly
discriminatory. Professional Customers,
while Public Customers by virtue of not
being Broker Dealers, generally engage
in trading activity more similar to
Broker Dealer proprietary trading
accounts (submitting more than 390
standard orders per day on average).
The Exchange believes that the higher
level of trading activity from these
Participants will draw a greater amount
of BOX system resources than that of
non-professional, Public Customers.
Because this higher level of trading
activity will result in greater ongoing
operational costs, the Exchange aims to
recover its costs by assessing
Professional Customers and Broker
Dealers higher fees for transactions.
Finally, the Exchange believes that
the proposed fees for Market Makers in
Complex Orders are reasonable. Under
the proposed fee structure, a Market
Maker making liquidity and interacting
with a Public Customer, Professional
Customer, Broker Dealer or Market
Marker will be credited $0.10 for
Complex Orders in both Penny Pilot
Classes and Non-Penny Pilot Classes. If
the Market Maker is instead taking
liquidity, for Complex Orders in Penny
Pilot Classes it will be charged either
$0.40 if the Complex Order interacts
with a Public Customer’s Complex
Order or $0.30 if the Complex Order
interacts with a Professional Customer
or Broker Dealer or a Market Maker. For
Complex Orders taking liquidity in NonPenny Pilot Classes, the Market Maker
will be charged either $0.75 if the
Complex Order interacts with a Public
PO 00000
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Fmt 4703
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22153
Customer’s Complex Order or $0.45 if
the Complex Order interacts with a
Professional Customer or Broker Dealer
or a Market Maker.
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 certain Complex Order
executions because of the significant
contributions to overall market quality
that Market Makers provide.
Specifically, Market Makers can provide
higher volumes of liquidity and
lowering their fees will help attract a
higher level of Market Maker order flow
to the BOX Book and create liquidity,
which the Exchange believes will
ultimately benefit all Participants
trading on BOX. As such, the Exchange
believes it is appropriate that Market
Makers be charged lower transaction
fees than Professional Customers and
Broker Dealers for certain Complex
Order executions.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory for Professional
Customers, Broker Dealers and Market
Makers to be charged a higher fee for
orders removing liquidity when
compared to the credit they receive for
orders that add liquidity. Giving a credit
to Complex Orders that add liquidity
will promote liquidity on the Exchange
and ultimately benefit all participants
on BOX. Further, the concept of
incentivizing orders that add liquidity
over orders that remove liquidity is
commonly accepted within the industry
as part of the ‘‘Make/Take’’ liquidity
model.8
Finally, the Exchange also believes it
is reasonable to charge Professional
Customers, Broker Dealers, and Market
Makers less for certain executions in
Penny Pilot issues compared to NonPenny Pilot issues because these classes
are typically more actively traded;
assessing lower fees will further
incentivize order flow in Penny Pilot
issues on the Exchange, ultimately
benefiting all Participants trading on
BOX. Additionally, the Exchange
believes it is reasonable to give a greater
credit to Public Customers for Complex
Orders in Non-Penny Pilot issues as
compared to Penny Pilot issues. Since
these classes have wider spreads and are
less actively traded, giving a larger
credit will further incentivize Public
Customers to trade in these classes,
ultimately benefitting all Participants
trading on BOX.
8 The ‘‘Make/Take’’ model is currently used by
the International Securities Exchange LLC (‘‘ISE’)
and NASDAQ OMX PHLX LLC (‘‘PHLX’’).
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The Exchange believes that the
proposed Complex Order fee structure
will keep the Exchange competitive
with other exchanges and will be
applied in an equitable manner among
all BOX Participants. The Exchange
believes the proposed fee structure is
reasonable and competitive with fee
structures in place on other exchanges.
Further, the Exchange believes that the
competitive marketplace impacts the
fees proposed for BOX.
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 applying a fee
structure that is determined according
to whether the Complex Order removes
or adds liquidity, the account type of
the Participant submitting the Complex
Order, and the contra party will result
in Participants being charged
appropriately for these transactions.
Submitting a Complex 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
Complex Order flow.
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing exchanges. In
such an environment, the Exchange
must continually review, and consider
adjusting, its fees and credits to remain
competitive with other exchanges. For
the reasons described above, the
Exchange believes that the proposed
rule change reflects this competitive
environment.
mstockstill on DSK4VPTVN1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act 9 and
Rule 19b–4(f)(2) thereunder,10 because
it establishes or changes a due, or fee.
9 15
U.S.C. 78s(b)(3)(A)(ii).
10 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–2016–15 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–2016–15. 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
PO 00000
Frm 00107
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submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BOX–
2016–15, and should be submitted on or
before May 5, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08555 Filed 4–13–16; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #14688 and #14689]
Florida Disaster #FL–00112
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative declaration of a disaster
for the State of Florida dated 04/07/
2016.
Incident: Severe Storms and
Tornadoes.
Incident Period: 02/15/2016.
Effective Date: 04/07/2016.
Physical Loan Application Deadline
Date: 06/06/2016.
Economic Injury (EIDL) Loan
Application Deadline Date: 01/09/2017.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
filed at the address listed above or other
locally announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Escambia.
Contiguous Counties:
Florida: Santa Rosa.
Alabama: Baldwin, Escambia.
The Interest Rates are:
SUMMARY:
Percent
For Physical Damage:
Homeowners With Credit Available Elsewhere ......................
11 17
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CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 81, Number 72 (Thursday, April 14, 2016)]
[Notices]
[Pages 22151-22154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08555]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77568; File No. SR-BOX-2016-15]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule on the BOX Market LLC (``BOX'') Options Facility
April 8, 2016.
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 March 31, 2016, BOX Options Exchange LLC (the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Exchange filed the
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\
and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule to
revise the Complex Order pricing structure and make a clerical
correction to Section III of the BOX 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 April 1, 2016. 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 amend the Fee Schedule for trading on BOX
to adopt a new pricing structure for Complex Orders.
Currently, Complex Orders executed on BOX are assessed differing
fees and credits depending on where the Complex Order executes. Complex
Orders that executed against orders on the BOX Book are assessed a flat
fee depending on the account type of the Participant submitting the
order; while Complex Orders that execute against other Complex Orders
on the Complex Order Book are assessed a fee or credit
[[Page 22152]]
depending upon (i) the account type of the Participant submitting the
order; and (ii) the account type of the contra party in the
transaction.
First, the Exchange proposes to revise the Complex Order pricing
structure to remove the execution distinction. Specifically, Complex
Orders will now be assessed the same fee or credit regardless of
whether the Complex Order executes against an Order on the BOX Book or
against another Complex Order. To effect this change, the Exchange
proposes to remove Section III.A. (Complex Orders Executed Against
Orders on the BOX Book) and Section III.B. (Complex Orders Executed
Against Other Complex Orders) and create a new Section III.A. entitled
(All Complex Orders).
The Exchange then proposes to adopt a contra party pricing
structure in this new section that will assess transaction fees and
credits dependent upon three factors: (i) The account type of the
Participant submitting the order; (ii) whether the Participant is a
liquidity provider or liquidity taker; and (iii) the account type of
the contra party.\5\ The Exchange notes that Complex Orders in Penny
Pilot Classes and Non-Penny Pilot Classes will continue to be assessed
differently, a distinction that occurs across the entirety of the BOX
Fee Schedule.
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\5\ This pricing model is similar to the Non-Auction
Transactions fee structure in Section I of the BOX Fee Schedule.
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The Exchange proposed fee structure for all Complex Orders 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/ (0.35) (0.35) (0.70) (0.70)
Broker Dealer.
Market Maker.......... (0.35) (0.35) (0.70) (0.70)
Professional Customer or Broker Public Customer....... (0.10) 0.45 (0.10) 0.80
Dealer.
Professional Customer/ (0.10) 0.30 (0.10) 0.45
Broker Dealer.
Market Maker.......... (0.10) 0.30 (0.10) 0.45
Market Maker........................ Public Customer....... (0.10) 0.40 (0.10) 0.75
Professional Customer/ (0.10) 0.30 (0.10) 0.45
Broker Dealer.
Market Maker.......... (0.10) 0.30 (0.10) 0.45
----------------------------------------------------------------------------------------------------------------
For example, if a Public Customer submitted a Complex Order in a
Penny Pilot Class (making liquidity), the Public Customer would be
credited $0.35 if the Complex Order interacted with a Market Maker's
Complex Order and the Market Maker (taking liquidity) would be charged
$0.40. To expand on this example, if the Market Maker instead submitted
a Complex Order in a Penny Pilot Class (making liquidity), the Market
Maker would be credited $0.10 if the order interacted with a Public
Customer's order and the Public Customer (taking liquidity) would be
credited $0.35.
The Exchange also proposes to make a clerical correction to Section
III of the BOX Fee Schedule. Specifically, the third paragraph in the
introduction to this section references a Market Maker's ADV (Average
Daily Volume). The Exchange no longer uses a Participant's ADV to
determine volume based tiers for rebates and fees. Instead, the
qualification thresholds are based on a percentage of the Participant's
volume relative to the account type's overall total industry equity and
ETF option volume. Therefore, the Exchange proposes to remove the
reference in this sentence to ADV and replace it with ``executed volume
on BOX.''
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,\6\ 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.
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\6\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange believes that the proposed Complex Order Fees are
reasonable, equitable and not unfairly discriminatory. In particular,
the proposed Complex Order Fees 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. 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. The proposed Complex Order Fees are intended to attract
Complex Orders to the Exchange by offering market participants
incentives to submit their Complex Orders to the Exchange. The Exchange
believes it is appropriate to provide incentives for market
participants to submit Complex Orders, resulting in greater liquidity
and ultimately benefiting all Participants trading on the Exchange.
The Exchange believes revising the Complex Order pricing structure
to assess the same fee or credit regardless of whether the Complex
Order executes against an Order on the BOX Book or against another
Complex Order is reasonable, equitable and not unfairly discriminatory.
With the adoption of the proposed Complex Order pricing structure, the
Exchange believes it is no longer necessary to differentiate these
transaction fees by where the Complex Order executes, and doing so will
reduce investor confusion with respect to the applicable Complex Order
fees and credits.
The Exchange believes the proposed Complex Order fee structure is
reasonable, equitable and not unfairly discriminatory. The proposed fee
structure is similar to the structure already in place for Complex
Orders that execute against other Complex Orders, and simply adds a
Make/Take factor. Further, a similar fee structure is already in place
for Non-Auction Transactions on the Exchange and has been accepted by
both the Commission and the industry.\7\ The result of this structure
is that a Participant does not know the fee it will be charged when
submitting the Complex Order.
[[Page 22153]]
Therefore, the Participant must recognize that it could be charged the
highest applicable fee on the Exchange's Complex Order schedule, which
may, instead, be lowered or changed to a rebate depending upon how the
Complex Order interacts.
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\7\ See supra note 5.
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The Exchange believes that the proposed credits for Public
Customers in Complex Orders are reasonable. Under the proposed fee
structure, Public Customers will never pay a fee for a Complex Order,
but may receive a credit of $0.35 in Penny Pilot Classes and $0.70 in
Non-Penny Pilot Classes. The Exchange believes providing a credit or
charging no fee to Public Customers for Complex Orders is equitable and
not unfairly discriminatory. The securities markets generally, and BOX
in particular, have historically aimed to improve markets for investors
and develop various features within the market structure for Public
Customer benefit. Accordingly, the Exchange believes that charging no
fee or providing a credit for Public Customers is appropriate and not
unfairly discriminatory. Public Customers are less sophisticated than
other Participants and the credit will help to attract a high level of
Public Customer order flow to the BOX Book and create liquidity, which
the Exchange believes will ultimately benefit all Participants trading
on BOX.
The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to give Public Customers a credit when their
Complex Order executes against a non-Public Customer and, accordingly,
charge non-Public Customers a higher fee when their Complex Order
executes against a Public Customer compared to the fee or rebate they
would be assessed if their Complex Order interacts with a non-Public
Customer. As stated above, the Exchange aims to improve markets by
developing features for the benefit of its Public Customers. Similar to
the payment for order flow and other pricing models that have been
adopted by the Exchange and other exchanges to attract Public Customer
order flow, the Exchange increases fees to non-Public Customers to
provide incentives for Public Customers. The Exchange believes that
providing incentives for Complex Orders by Public Customers is
reasonable and, ultimately, will benefit all Participants trading on
the Exchange by attracting Public Customer order flow.
The Exchange believes that the proposed fees for Professional
Customers and Broker Dealers in Complex Orders are reasonable. Under
the proposed fee structure, a Professional Customer or Broker Dealer
making liquidity and interacting with a Public Customer, Professional
Customer, Broker Dealer or Market Marker will be credited $0.10 for
Complex Orders in both Penny Pilot Classes and Non-Penny Pilot Classes.
If the Professional Customer or Broker Dealer is instead taking
liquidity, for Complex Orders in Penny Pilot Classes it will be charged
either $0.45 if the Complex Order interacts with a Public Customer's
Complex Order or $0.30 if the Complex Order interacts with a
Professional Customer or Broker Dealer or a Market Maker. For Complex
Orders in Non-Penny Pilot Classes, the Professional Customer or Broker
Dealer will be charged either $0.80 if the Complex Order interacts with
a Public Customer's Complex Order or $0.45 if the Complex Order
interacts with a Professional Customer or Broker Dealer or a Market
Maker.
The Exchange believes that charging Professional Customers and
Broker Dealers higher fees than Public Customers for Complex Orders is
equitable and not unfairly discriminatory. Professional Customers,
while Public Customers by virtue of not being Broker Dealers, generally
engage in trading activity more similar to Broker Dealer proprietary
trading accounts (submitting more than 390 standard orders per day on
average). The Exchange believes that the higher level of trading
activity from these Participants will draw a greater amount of BOX
system resources than that of non-professional, Public Customers.
Because this higher level of trading activity will result in greater
ongoing operational costs, the Exchange aims to recover its costs by
assessing Professional Customers and Broker Dealers higher fees for
transactions.
Finally, the Exchange believes that the proposed fees for Market
Makers in Complex Orders are reasonable. Under the proposed fee
structure, a Market Maker making liquidity and interacting with a
Public Customer, Professional Customer, Broker Dealer or Market Marker
will be credited $0.10 for Complex Orders in both Penny Pilot Classes
and Non-Penny Pilot Classes. If the Market Maker is instead taking
liquidity, for Complex Orders in Penny Pilot Classes it will be charged
either $0.40 if the Complex Order interacts with a Public Customer's
Complex Order or $0.30 if the Complex Order interacts with a
Professional Customer or Broker Dealer or a Market Maker. For Complex
Orders taking liquidity in Non-Penny Pilot Classes, the Market Maker
will be charged either $0.75 if the Complex Order interacts with a
Public Customer's Complex Order or $0.45 if the Complex Order interacts
with a Professional Customer or Broker Dealer or a Market Maker.
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 certain Complex Order
executions because of the significant contributions to overall market
quality that Market Makers provide. Specifically, Market Makers can
provide higher volumes of liquidity and lowering their fees will help
attract a higher level of Market Maker order flow to the BOX Book and
create liquidity, which the Exchange believes will ultimately benefit
all Participants trading on BOX. As such, the Exchange believes it is
appropriate that Market Makers be charged lower transaction fees than
Professional Customers and Broker Dealers for certain Complex Order
executions.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory for Professional Customers, Broker Dealers and Market
Makers to be charged a higher fee for orders removing liquidity when
compared to the credit they receive for orders that add liquidity.
Giving a credit to Complex Orders that add liquidity will promote
liquidity on the Exchange and ultimately benefit all participants on
BOX. Further, the concept of incentivizing orders that add liquidity
over orders that remove liquidity is commonly accepted within the
industry as part of the ``Make/Take'' liquidity model.\8\
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\8\ The ``Make/Take'' model is currently used by the
International Securities Exchange LLC (``ISE') and NASDAQ OMX PHLX
LLC (``PHLX'').
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Finally, the Exchange also believes it is reasonable to charge
Professional Customers, Broker Dealers, and Market Makers less for
certain executions in Penny Pilot issues compared to Non-Penny Pilot
issues because these classes are typically more actively traded;
assessing lower fees will further incentivize order flow in Penny Pilot
issues on the Exchange, ultimately benefiting all Participants trading
on BOX. Additionally, the Exchange believes it is reasonable to give a
greater credit to Public Customers for Complex Orders in Non-Penny
Pilot issues as compared to Penny Pilot issues. Since these classes
have wider spreads and are less actively traded, giving a larger credit
will further incentivize Public Customers to trade in these classes,
ultimately benefitting all Participants trading on BOX.
[[Page 22154]]
The Exchange believes that the proposed Complex Order fee structure
will keep the Exchange competitive with other exchanges and will be
applied in an equitable manner among all BOX Participants. The Exchange
believes the proposed fee structure is reasonable and competitive with
fee structures in place on other exchanges. Further, the Exchange
believes that the competitive marketplace impacts the fees proposed for
BOX.
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
applying a fee structure that is determined according to whether the
Complex Order removes or adds liquidity, the account type of the
Participant submitting the Complex Order, and the contra party will
result in Participants being charged appropriately for these
transactions. Submitting a Complex 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 Complex Order flow.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing exchanges. In such an environment, the Exchange must
continually review, and consider adjusting, its fees and credits to
remain competitive with other exchanges. For the reasons described
above, the Exchange believes that the proposed rule change reflects
this competitive environment.
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 \9\ and Rule 19b-4(f)(2)
thereunder,\10\ because it establishes or changes a due, or fee.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 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-2016-15 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-2016-15. 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-2016-15, and should be
submitted on or before May 5, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08555 Filed 4-13-16; 8:45 am]
BILLING CODE 8011-01-P
