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, 49336-49341 [2016-17676]
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49336
Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
Amendment Nos. 1 and 2, is consistent
with Sections 6(b)(4), (5), or (8) 77 or any
other provision of the Act, or the rules
and regulations thereunder. Although
there does not appear to be any issue
relevant to approval or disapproval
which would be facilitated by an oral
presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4 under
the Act,78 any request for an
opportunity to make an oral
presentation.79
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal, as modified by Amendment
Nos. 1 and 2, should be approved or
disapproved by August 17, 2016. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by August 31, 2016. In light
of the concerns raised by the proposed
rule change, as discussed above, the
Commission invites additional comment
on the proposed rule change, as
modified by Amendment Nos. 1 and 2,
as the Commission continues its
analysis of the proposed rule change’s
consistency with Sections 6(b)(4), (5)
and (8),80 or any other provision of the
Act, or the rules and regulations
thereunder. The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposed rule change, as
modified by Amendment Nos. 1 and 2,
in addition to any other comments they
may wish to submit about the proposed
rule change.
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 No. SR–
NYSEArca–2016–19 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
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77 15
U.S.C. 78f(b)(4), (b)(5) and (b)(8).
78 17 CFR 240.19b–4.
79 Section 19(b)(2) of the Act, as amended by the
Securities Act Amendments of 1975, Pub. L. 94–29
(June 4, 1975), grants to the Commission flexibility
to determine what type of proceeding—either oral
or notice and opportunity for written comments—
is appropriate for consideration of a particular
proposal by a self-regulatory organization. See
Securities Act Amendments of 1975, Senate Comm.
on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
80 15 U.S.C. 78f(b)(4), (b)(5) and (b)(8).
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All submissions should refer to File No.
SR–NYSEArca–2016–19. 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 No. SR–NYSEArca–
2016–19, and should be submitted by
August 17, 2016. Rebuttal comments
should be submitted by August 31,
2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.81
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–17674 Filed 7–26–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78390; File No. SR–BOX–
2016–33]
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
July 21, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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81 17
CFR 200.30–3(a)(57).
Frm 00129
Fmt 4703
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‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 13,
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.
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 (Exchange Fees for
Non-Auction Transactions) on the BOX
Market LLC (‘‘BOX’’) options facility.
The text of the proposed rule change is
available from the principal office of the
Exchange, at the Commission’s Public
Reference Room and also on the
Exchange’s Internet Web site at https://
boxexchange.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to make
changes to Section I (Exchange Fees for
Non-Auction Transactions).
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
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Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
Exchange Fees for Non-Auction
Transactions
The Exchange proposes to adjust
certain fees for Non-Auction
Transactions. Currently, for all nonauction 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 NonPenny Pilot Classes.
The current fees for Non-Auction
Transactions are:
Penny pilot classes
Account type
Maker fee
Public Customer .......................
Professional Customer or
Broker Dealer.
Market Maker ...........................
Non-penny pilot classes
Contra party
Taker fee
$0.00
0.00
0.00
0.60
$0.00
0.00
0.00
0.50
$0.00
0.00
0.00
0.95
$0.00
0.00
0.00
1.07
Professional Customer/Broker Dealer ......
Market Maker ............................................
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ............................................
0.25
0.25
0.51
0.00
0.00
0.40
0.44
0.50
0.05
0.29
0.35
0.35
0.85
0.00
0.00
0.40
0.44
1.03
0.10
0.29
Pilot Classes to $0.05 from $0.25. For
Non-Penny Pilot Classes, the Exchange
proposes to reduce the fees assessed for
Professional Customers and Broker
Dealers making liquidity against NonPublic Customers to $0.05 from $0.35.
The Exchange also proposes to decrease
the fees assessed for Professional
Customers and Broker Dealers taking
liquidity from Public Customers to
$0.85 from $1.07. Lastly, with regard to
Professional Customers/Broker Dealers
taking liquidity from Professional
Customers/Broker Dealers and Market
Makers in Non-Penny Pilot Classes, the
Exchange proposes to increase the fees
assessed to $0.60 from $0.40 and $0.44,
respectively.
The Exchange then proposes to adjust
the fees assessed for Market Makers in
Non-Auction Transactions. First, the
Exchange proposes to decrease the fees
assessed on Market Makers making
liquidity against a Public Customer to
$0.27 from $0.51. With regard to Market
Makers taking liquidity against Public
Customers in Penny Pilot Classes, the
Exchange proposes to decrease the fee to
$0.43 from $0.50. Further, the Exchange
proposes to increase the fee for Market
Makers taking liquidity against
Professional Customers and Broker
Dealers in Penny Pilot Classes to $0.29
from $0.05. Lastly, the Exchange
proposes to adjust the fees assessed to
Market Makers in Non-Penny Pilot
Classes. Specifically, the Exchange
proposes to decrease the fee assessed to
a Market Maker when making liquidity
from a Public Customer in Non-Penny
Pilot Classes to $0.65 from $0.85. In
Non-Penny Pilot Classes, the Exchange
proposes to decrease the fee assessed to
Market Makers taking liquidity from a
Public Customer to $0.80 from $1.03.
Lastly, the Exchange proposes to
increase the fees assessed to Market
Makers taking liquidity from
Professional Customers/Broker Dealers
and Market Makers in Non-Penny Pilot
Classes, to $0.40 from $0.10 and $0.29,
respectively.
The fees for Non-Auction
Transactions will be as follows:
Penny pilot classes
Account type
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Market Maker ...........................
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Non-penny pilot classes
Contra party
Maker fee
Professional Customer or
Broker Dealer.
Taker fee
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ............................................
Public Customer .......................................
First, the Exchange proposes to raise
the fees assessed for Public Customers
that make or take liquidity against all
account types in in both Penny and
Non-Penny Classes to $0.05 from $0.00.
Next, the Exchange proposes to adjust
the fees assessed for Professional
Customers and Broker Dealers. In Penny
Pilot Classes, the Exchange proposes to
adjust the fees assessed for Professional
Customers and Broker Dealers that take
liquidity from all other Participants.
Specifically, the Exchange proposes to
lower the fee assessed to Professional
Customers and Broker Dealers that take
liquidity from Public Customers to
$0.45 from $0.50. Further, the Exchange
proposes to increase the fees assessed to
Professional Customers and Broker
Dealers that take liquidity from
Professional Customers/Broker Dealers
and Market Makers to $0.45 from $0.40
and $0.44, respectively. Additionally,
the Exchange proposes to lower the fees
assessed for Professional Customers and
Broker Dealers making liquidity against
Professional Customers and Broker
Dealers and Market Makers in Penny
Public Customer .......................
Maker fee
Taker fee
Maker fee
Taker fee
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ............................................
Public Customer .......................................
$0.05
0.05
0.05
0.60
$0.05
0.05
0.05
0.45
$0.05
0.05
0.05
0.95
$0.05
0.05
0.05
0.85
Professional Customer/Broker Dealer ......
Market Maker ............................................
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ............................................
0.05
0.05
0.27
0.00
0.00
0.45
0.45
0.43
0.29
0.29
0.05
0.05
0.65
0.00
0.00
0.60
0.60
0.80
0.40
0.40
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Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
Tiered Volume Rebate for Non-Auction
Transactions
The Exchange proposes to amend
Section I.A.1. of the BOX Fee Schedule,
Tiered Volume Rebate for Non-Auction
Transactions. Specifically, the Exchange
proposes to specify that transactions in
which a Public Customer is a contra
party will be considered exempt from
the Tiered Volume Rebate for Market
Makers in Non-Auction Transactions.5
Additionally, the Exchange proposes to
adjust certain rebates for Customers and
Market Makers in Non-Auction
Transactions. Specifically, for the
Tiered Volume Rebate for Market
Makers in Non-Auction Transactions,
the Exchange proposes to increase the
maker rebate in Tier 3 to $0.07 from
$0.05, and also increase the maker
rebate in Tier 4 to $0.15 from $0.10.
The Exchange also proposes to adjust
the rebates in the Tiered Volume Rebate
for Public Customers in Non Auction
Transactions. The current Tiered
Volume Rebate for Public Customers in
Non-Auction Transactions is as follows:
Per contact rebate
Percentage thresholds of national customer
volume in multiply-listed options classes
(monthly)
Tier
Penny pilot classes
Maker
1
2
3
4
.....................................
.....................................
.....................................
.....................................
0.000%–0.129% ..................................................
0.130%–0.339% ..................................................
0.340%–0.549% ..................................................
0.550% and Above ..............................................
Specifically, the Exchange proposes to
reduce each of the maker and taker
rebates in Tiers 2 through 4 of the
Tiered Volume Rebate structure for
Taker
$0.00
(0.15)
(0.25)
(0.40)
Public Customers in both Penny Pilot
Classes and Non-Penny Pilot Classes.
The new per contract rebate for Public
Customers in Non-Auction Transactions
Non-penny pilot classes
Maker
$0.00
(0.15)
(0.25)
(0.40)
$0.00
(0.40)
(0.50)
(0.90)
Taker
$0.00
(0.40)
(0.50)
(0.70)
as set forth in Section I.A.1. of the BOX
Fee Schedule will be as follows:
Per contact rebate
Percentage thresholds of national customer
volume in multiply-listed options classes
(monthly)
Tier
Penny pilot classes
Maker
1
2
3
4
.....................................
.....................................
.....................................
.....................................
0.000%–0.129% ..................................................
0.130%–0.339% ..................................................
0.340%–0.549% ..................................................
0.550% and Above ..............................................
sradovich on DSK3GMQ082PROD with NOTICES
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 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
5 As is the case today, Non-Auction Transactions
that are not a result of a Market Maker quote will
continue to be exempt from the Market Maker tiered
volume rebate.
6 15 U.S.C. 78f(b)(4) and (5).
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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 since 2014 and
the Exchange is simply adjusting certain
fees within the structure.7 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
7 See Securities Exchange Release No. 73547
(November 6, 2014), 79 FR 67520 (November 13,
2014)(Notice of Filing and Immediate Effectiveness
SR–BOX–2014–25).
8 The Exchange notes that on a monthly basis,
most Public Customers on the Exchange reach one
of these volume based rebate tiers.
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Taker
$0.00
(0.05)
(0.15)
(0.25)
competing exchange if they determine
fees at a particular exchange to be
excessive.
Non-penny pilot classes
$0.00
(0.05)
(0.15)
(0.25)
Maker
$0.00
(0.20)
(0.30)
(0.50)
Taker
$0.00
(0.20)
(0.30)
(0.50)
lowered depending upon how the order
interacts.
The Exchange believes raising the
non-auction transaction fees for Public
Customers making or taking liquidity in
Penny and Non-Penny Pilot Classes to
$0.05 from $0.00 is reasonable,
equitable and not unfairly
discriminatory. While the Exchange
proposes to slightly raise the fees
assessed to Public Customers for NonAuction Transactions, the Public
Customers may still receive the benefit
of a volume based rebate, which in turn
could offset the proposed $0.05 fee.8
Further, the Exchange notes that a
higher fee of $0.07 was assessed for
Public Customers in Non-Auction
transactions on BOX in the past.9
The Exchange believes that the
proposed fees for Professional
9 See Securities Exchange Release No. 66979 (May
14, 2012), 77 FR 29740 (May 18, 2012) (Notice of
Filing and Immediate Effectiveness SR–BOX–2012–
002).
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Customers and Broker Dealers in NonAuction Transactions are reasonable.
Under the proposed fee structure, a
Professional Customer or Broker Dealer
making liquidity and interacting with a
Professional Customer, Broker Dealer or
Market Marker will now be charged a
fee of $0.05 in both Penny and NonPenny Pilot Classes. If the Professional
Customer or Broker Dealer is instead
taking liquidity in the Penny Pilot, it
will be charged $0.45 against any other
Participant. If the Professional Customer
or Broker Dealer is taking liquidity in
the Non-Penny Pilot, it will be charged
$0.85 if it interacts with a Public
Customer or $0.60 if it interacts with a
Professional Customer, Broker Dealer or
a Market Maker. The Exchange believes
that reducing the fee for making
liquidity will promote liquidity on the
Exchange, ultimately benefitting all
Participants trading on BOX. Further,
the Exchange believes the proposed fees
are reasonable as they are in line with
the current fees assessed by another
competing exchange.10
The Exchange believes that charging
Professional Customers and Broker
Dealers higher fees than Public
Customers for most of their 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. The
Exchange believes that the higher level
of trading activity from these
Participants will draw a greater amount
of BOX system resources, which the
Exchange aims to recover its costs by
assessing Professional Customers and
Broker Dealers higher fees for
transactions.
The Exchange notes that Professional
Customers or Broker Dealers will now
be charged the same rate as Public
Customers when making liquidity
against Professional Customers, Broker
Dealers, and Market Makers in both
Penny and Non-Penny Pilot Classes.
The Exchange believes it is equitable
and not unfairly discriminatory to
assess the same low rate for these
transactions on both Public Customers
and Professional Customers/Broker
Dealers to promote liquidity on the
Exchange, ultimately benefitting all
10 See International Securities Exchange (‘‘ISE’’)
Schedule of Fees, Section I. On ISE, Professional
Customer and Broker Dealers in Penny Pilot Classes
are charged a fee of $0.10 when making liquidity
and a $0.45 fee when taking liquidity. See also
NYSE Arca Options (‘‘Arca’’) Fees and Charges page
4. On Arca a Firm or Broker Dealer is charged $0.50
when making liquidity and $1.08 when taking
liquidity in Non-Penny Pilot Issues, and $0.50 for
taking liquidity in Penny Pilot Issues.
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Participants trading on BOX. Further,
the Exchange notes that Public
Customers have the ability to achieve a
rebate for their Non-Auction
transactions, and Professional Customer
or Broker Dealers do not.
The Exchange believes that the
proposed fees for Market Makers in
Non-Auction Transactions are
reasonable. With the proposed fee
changes, a Market Maker making
liquidity will now be charged a lower
fee of $0.27 (Penny Pilot) and $0.65
(Non-Penny Pilot) for interacting with a
Public Customer. Further, a Market
Maker taking liquidity against a Public
Customer will now be charged a lower
fee of $0.43 in Penny Pilot Classes and
a lower fee of $0.80 in Non-Penny Pilot
Classes. If a Market Maker is taking
liquidity in Penny and Non-Penny Pilot
Classes and interacts with a Professional
Customer, Broker Dealer or a Market
Maker, they will now be charged a fee
of $0.29 in Penny Pilot Classes and
$0.40 in Non-Penny Pilot Classes. The
Exchange believes the fees listed above
are reasonable and appropriate as they
are in line with what is currently
charged by the industry.11
Further, the Exchange believes it is
equitable and not unfairly
discriminatory to charge the Market
Maker less for making or taking
liquidity than Professional Customers or
Broker Dealers. Specifically, Market
Makers have certain obligations that
other Participants do not and can
ultimately provide more value by
directing liquidity to the Exchange,
which the Exchange believes will
benefit all Participants trading on BOX.
Additionally, the Exchange believes
that charging Market Makers who
interact with Professional Customers/
Broker Dealers and Market Makers in
Penny and Non-Penny Pilot Classes less
than Public Customers is reasonable. As
discussed above, Market Makers have
certain obligations that Public
Customers do not and can provide value
by directing more liquidity to the
Exchange. The Exchange believes that
charging Market Makers no fee for
adding liquidity against Professional
Customers, Broker Dealers and Market
Makers will promote liquidity on the
Exchange, ultimately benefitting all
market participants. Further, the
Exchange believes that charging Market
Makers less than Public Customers
when adding liquidity is reasonable, as
other exchanges in the industry also
treat Market Makers more favorably than
a Public Customer for adding
11 Id. On ISE and Arca, the general range for
Market Maker fees is between $0.10 and $1.08.
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49339
liquidity.12 Finally, the Exchange notes
that Public Customers have the ability to
obtain a higher per contract rebate than
Market Makers under the Tiered
Volume Rebates for Non-Auction
Transactions.13
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory for Professional
Customers, Broker Dealers and Market
Makers to be charged higher fees when
interacting with Public Customers than
interacting with other Participants on
BOX. The Exchange believes they are
reasonable as they are in a similar range
with the fees in the options industry.14
Further, as stated above, the Exchange
believes charging a higher fee for
interactions with a Public Customer
when compared to interactions with
other Participants is equitable and not
unfairly discriminatory because it
allows the Exchange to incentivize
Public Customer order flow by offering
low fees and rebate potential to Public
Customers in Non-Auction
Transactions. The Exchange believes
that providing these incentives for NonAuction Transactions by Public
Customers will benefit all Participants
trading on the Exchange by attracting
this Public Customer order flow.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory that Professional
Customers, Broker Dealers and Market
Makers be charged a higher fee for
certain orders removing liquidity, when
compared to the fee they receive for
orders that add liquidity. Charging a
lower fee for 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.
Finally, the Exchange also believes it
is reasonable to charge Professional
Customers and Broker Dealers and
Market Makers less for certain
12 See Arca Fees and Charges page 4. On Arca, a
Market Maker making liquidity in Penny Pilot
Classes receives a rebate of $0.28 where a Public
Customer making liquidity in Penny Pilot Classes
receives a lower rebate of $0.25. See also C2
Options Exchange. Incorporated (‘‘C2’’) Fee
Schedule Section 1. Similar to Arca, Market Makers
on C2 who are making liquidity in Penny Pilot
Classes receive a rebate of $0.40 where Public
Customers making liquidity in Penny Pilot Classes
receive a lower rebate of $0.37.
13 Under the proposed Tiered Volume Rebates in
Section I.A.1 Public Customers can receive a
maximum per contract rebate of up to $0.25 for
Penny Pilot Classes and $0.50 in Non-Penny Pilot
Classes. Market Makers can only receive a
maximum rebate of $0.15, regardless of class.
14 See supra note 6 [sic].
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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.
Tiered Volume Rebate for Non-Auction
Transactions
sradovich on DSK3GMQ082PROD with NOTICES
BOX believes it is reasonable,
equitable and not unfairly
discriminatory to adjust certain rebates
in the volume based thresholds for
Market Makers and Public Customers in
all Non-Auction Transactions. The
volume thresholds and applicable
rebates are meant to incentivize Public
Customers and Market Makers 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 programs; 15 and the Exchange
believes that the proposed changes to
the volume thresholds and rebates are
reasonable and competitive when
compared to incentive structures at
other exchanges.
With regard to the Public Customer
Tiered Volume Rebate for Non-Auction
Transactions, 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.
The Exchange believes it is reasonable
to increase the rebates in Tiers 3 and 4
of the Tiered Volume Rebate for Market
Makers making liquidity in NonAuction Transactions. The rebates are
meant to incentivize Market Makers 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.
The Exchange continues to believe it
is equitable and not unfairly
discriminatory to only have these rebate
structures for Public Customers and
15 See Section B of the PHLX Pricing Schedule
entitled ‘‘Customer Rebate Program;’’ ISE Gemini’s
Qualifying Tier Thresholds (page 6 of the ISE
Gemini Fee Schedule); and CBOE’s 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.
VerDate Sep<11>2014
17:01 Jul 26, 2016
Jkt 238001
Market Makers in Non-Auction
transactions. The practice of
incentivizing increased Public Customer
and Market Maker order flow is
common in the options markets. While
the Exchange proposes to decrease the
Public Customer rebates in Penny and
Non-Penny Pilot Classes, the Exchange
believes that Public Customers will still
benefit from the opportunity to obtain a
rebate. As discussed above, most Public
Customers currently achieve a volume
based rebate in their Non-Auction
transactions, which will offset any
exchange fees they are assessed in
Section I.A of the BOX Fee Schedule.
Additionally, the Exchange believes that
Market Makers can provide high
volumes of liquidity and lowering
certain Market Maker Non-Auction
Transaction fees and raising certain
maker rebates in the Tiered Volume
Rebates for Market Makers in NonAuction Transactions will potentially
help attract a higher level of Market
Maker order flow and create liquidity,
which the Exchange believes will
ultimately benefit all Participants
trading on BOX.
Lastly, the Exchange believes that
exempting transactions where a Public
Customer is a contra party from the
Market Maker Tiered Volume Rebate is
reasonable, equitable and not unfairly
discriminatory. BOX provides these
volume based rebates to incentivize
Market Makers 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. The
Exchange believes by providing a rebate
to transactions that do not have a Public
Customer as the contra party will
further encourage Market Makers to
quote. Further, the Exchange believes
that Public Customer interaction does
not need further encouragement within
the BOX fee schedule.
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 in the
Non-Auction Transactions fee structure
will not impose a burden on
competition among various Exchange
Participants. Rather, BOX believes that
the changes will result in the
Participants being charged appropriately
for these transactions and are designed
to enhance competition in Non-Auction
transactions on BOX. Submitting an
order is entirely voluntary and
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
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 believes that amending
the proposed rebate structure for
Customer and Market Maker NonAuction Transactions will not impose a
burden on competition among various
Exchange Participants. The Exchange
believes that the proposed changes will
result in Customers and Market Makers
being rebated appropriately for these
transactions. 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.
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 16
and Rule 19b–4(f)(2) thereunder,17
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.
16 15
17 17
E:\FR\FM\27JYN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
27JYN1
Federal Register / Vol. 81, No. 144 / Wednesday, July 27, 2016 / Notices
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:
[FR Doc. 2016–17676 Filed 7–26–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2016–33 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.
sradovich on DSK3GMQ082PROD with NOTICES
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Robert W. Errett,
Deputy Secretary.
All submissions should refer to File
Number SR–BOX–2016–33. 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–
2016–33, and should be submitted on or
before August 17,2016.
[Release No. 34–78385; File No. SR–
NASDAQ–2016–103]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing of Proposed Rule Change, as
Modified by Amendment No. 1 Thereto,
to List and Trade Exchange-Traded
Managed Funds
July 21, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 13,
2016, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
prepared by the Exchange. On July 14,
2016, the Exchange filed Amendment
No. 1 to the proposed rule change,
which amended and replaced the
original filing in its entirety. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as modified by Amendment No.
1 thereto, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade under Nasdaq Rule 5745
(Exchange-Traded Managed Fund
Shares (‘‘NextShares’’)) the common
shares (‘‘Shares’’) of the exchangetraded managed funds described herein
(each, a ‘‘Fund,’’ and collectively, the
‘‘Funds’’).
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
1 15
18 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:01 Jul 26, 2016
2 17
Jkt 238001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00134
Fmt 4703
49341
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade the Shares of each Fund under
Nasdaq Rule 5745, which governs the
listing and trading of exchange-traded
managed fund shares, as defined in
Nasdaq Rule 5745(c)(1), on the
Exchange.3 Each Fund listed below will
be advised by an investment adviser
registered under the Investment
Advisers Act of 1940 (‘‘Adviser’’), as
described below. Each Fund will be
actively managed and will pursue
various principal investment strategies,
as noted below.4
Ivy NextSharesTM
Ivy NextSharesTM (the ‘‘Trust’’) is
registered with the Commission as an
open-end investment company and has
filed a registration statement on Form
N–1A (‘‘Registration Statement’’) with
the Commission.5 Each of the following
Funds is a series of the Trust.6
Ivy Investment Management Company
(‘‘IICO’’ or the ‘‘Adviser’’) will be the
adviser to the Funds. IICO is not a
registered broker-dealer, although it is
affiliated with a broker-dealer. IICO has
implemented a fire wall with respect to
its affiliated broker-dealer regarding
access to information concerning the
composition and/or changes to each
Fund’s portfolio.7 In the future event
3 The Commission approved Nasdaq Rule 5745 in
Securities Exchange Act Release No. 34–73562
(Nov. 7, 2014), 79 FR 68309 (Nov. 14, 2014) (SR–
NASDAQ–2014–020).
4 Additional information regarding the Funds will
be available on one of two free public Web sites
(www.ivyinvestments.com or www.nextshares.com,
as indicated more fully below), as well as in the
Registration Statement for the Funds.
5 See Registration Statement on Form N–1A for
the Trust dated April 18, 2016 (File Nos. 333–
210814 and 811–23155).
6 The Commission has issued an order granting
the Trust and certain affiliates exemptive relief
under the Investment Company Act. See Investment
Company Act Release No. 31816 (Sept. 9, 2015)
(File No. 812–14526).
7 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser and its related personnel are
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
Continued
Sfmt 4703
E:\FR\FM\27JYN1.SGM
27JYN1
]]>Agencies
[Federal Register Volume 81, Number 144 (Wednesday, July 27, 2016)]
[Notices]
[Pages 49336-49341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-17676]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78390; File No. SR-BOX-2016-33]
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
July 21, 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 July 13, 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.
---------------------------------------------------------------------------
\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 (Exchange Fees for Non-Auction Transactions)
on the BOX Market LLC (``BOX'') options facility. The text of the
proposed rule change is available from the principal office of the
Exchange, at the Commission's Public Reference Room and also on the
Exchange's Internet Web site at https://boxexchange.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make changes to Section I (Exchange Fees
for Non-Auction Transactions).
[[Page 49337]]
Exchange Fees for Non-Auction Transactions
The Exchange proposes to adjust certain fees for Non-Auction
Transactions. Currently, 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 current fees for Non-Auction Transactions are:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Penny pilot classes Non-penny pilot classes
Account type Contra party ---------------------------------------------------------------
Maker fee Taker fee Maker fee Taker fee
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public Customer................................ Public Customer........................ $0.00 $0.00 $0.00 $0.00
Professional Customer/Broker Dealer.... 0.00 0.00 0.00 0.00
Market Maker........................... 0.00 0.00 0.00 0.00
Professional Customer or Broker Dealer......... Public Customer........................ 0.60 0.50 0.95 1.07
Professional Customer/Broker Dealer.... 0.25 0.40 0.35 0.40
Market Maker........................... 0.25 0.44 0.35 0.44
Market Maker................................... Public Customer........................ 0.51 0.50 0.85 1.03
Professional Customer/Broker Dealer.... 0.00 0.05 0.00 0.10
Market Maker........................... 0.00 0.29 0.00 0.29
--------------------------------------------------------------------------------------------------------------------------------------------------------
First, the Exchange proposes to raise the fees assessed for Public
Customers that make or take liquidity against all account types in in
both Penny and Non-Penny Classes to $0.05 from $0.00.
Next, the Exchange proposes to adjust the fees assessed for
Professional Customers and Broker Dealers. In Penny Pilot Classes, the
Exchange proposes to adjust the fees assessed for Professional
Customers and Broker Dealers that take liquidity from all other
Participants. Specifically, the Exchange proposes to lower the fee
assessed to Professional Customers and Broker Dealers that take
liquidity from Public Customers to $0.45 from $0.50. Further, the
Exchange proposes to increase the fees assessed to Professional
Customers and Broker Dealers that take liquidity from Professional
Customers/Broker Dealers and Market Makers to $0.45 from $0.40 and
$0.44, respectively. Additionally, the Exchange proposes to lower the
fees assessed for Professional Customers and Broker Dealers making
liquidity against Professional Customers and Broker Dealers and Market
Makers in Penny Pilot Classes to $0.05 from $0.25. For Non-Penny Pilot
Classes, the Exchange proposes to reduce the fees assessed for
Professional Customers and Broker Dealers making liquidity against Non-
Public Customers to $0.05 from $0.35. The Exchange also proposes to
decrease the fees assessed for Professional Customers and Broker
Dealers taking liquidity from Public Customers to $0.85 from $1.07.
Lastly, with regard to Professional Customers/Broker Dealers taking
liquidity from Professional Customers/Broker Dealers and Market Makers
in Non-Penny Pilot Classes, the Exchange proposes to increase the fees
assessed to $0.60 from $0.40 and $0.44, respectively.
The Exchange then proposes to adjust the fees assessed for Market
Makers in Non-Auction Transactions. First, the Exchange proposes to
decrease the fees assessed on Market Makers making liquidity against a
Public Customer to $0.27 from $0.51. With regard to Market Makers
taking liquidity against Public Customers in Penny Pilot Classes, the
Exchange proposes to decrease the fee to $0.43 from $0.50. Further, the
Exchange proposes to increase the fee for Market Makers taking
liquidity against Professional Customers and Broker Dealers in Penny
Pilot Classes to $0.29 from $0.05. Lastly, the Exchange proposes to
adjust the fees assessed to Market Makers in Non-Penny Pilot Classes.
Specifically, the Exchange proposes to decrease the fee assessed to a
Market Maker when making liquidity from a Public Customer in Non-Penny
Pilot Classes to $0.65 from $0.85. In Non-Penny Pilot Classes, the
Exchange proposes to decrease the fee assessed to Market Makers taking
liquidity from a Public Customer to $0.80 from $1.03. Lastly, the
Exchange proposes to increase the fees assessed to Market Makers taking
liquidity from Professional Customers/Broker Dealers and Market Makers
in Non-Penny Pilot Classes, to $0.40 from $0.10 and $0.29,
respectively.
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
--------------------------------------------------------------------------------------------------------------------------------------------------------
Public Customer................................ Public Customer........................ $0.05 $0.05 $0.05 $0.05
Professional Customer/Broker Dealer.... 0.05 0.05 0.05 0.05
Market Maker........................... 0.05 0.05 0.05 0.05
Professional Customer or Broker Dealer......... Public Customer........................ 0.60 0.45 0.95 0.85
Professional Customer/Broker Dealer.... 0.05 0.45 0.05 0.60
Market Maker........................... 0.05 0.45 0.05 0.60
Market Maker................................... Public Customer........................ 0.27 0.43 0.65 0.80
Professional Customer/Broker Dealer.... 0.00 0.29 0.00 0.40
Market Maker........................... 0.00 0.29 0.00 0.40
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 49338]]
Tiered Volume Rebate for Non-Auction Transactions
The Exchange proposes to amend Section I.A.1. of the BOX Fee
Schedule, Tiered Volume Rebate for Non-Auction Transactions.
Specifically, the Exchange proposes to specify that transactions in
which a Public Customer is a contra party will be considered exempt
from the Tiered Volume Rebate for Market Makers in Non-Auction
Transactions.\5\ Additionally, the Exchange proposes to adjust certain
rebates for Customers and Market Makers in Non-Auction Transactions.
Specifically, for the Tiered Volume Rebate for Market Makers in Non-
Auction Transactions, the Exchange proposes to increase the maker
rebate in Tier 3 to $0.07 from $0.05, and also increase the maker
rebate in Tier 4 to $0.15 from $0.10.
---------------------------------------------------------------------------
\5\ As is the case today, Non-Auction Transactions that are not
a result of a Market Maker quote will continue to be exempt from the
Market Maker tiered volume rebate.
---------------------------------------------------------------------------
The Exchange also proposes to adjust the rebates in the Tiered
Volume Rebate for Public Customers in Non Auction Transactions. The
current Tiered Volume Rebate for Public Customers in Non-Auction
Transactions is as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per contact rebate
Percentage thresholds of national ---------------------------------------------------------------
Tier customer volume in multiply-listed Penny pilot classes Non-penny pilot classes
options classes (monthly) ---------------------------------------------------------------
Maker Taker Maker Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.............................................. 0.000%-0.129%.......................... $0.00 $0.00 $0.00 $0.00
2.............................................. 0.130%-0.339%.......................... (0.15) (0.15) (0.40) (0.40)
3.............................................. 0.340%-0.549%.......................... (0.25) (0.25) (0.50) (0.50)
4.............................................. 0.550% and Above....................... (0.40) (0.40) (0.90) (0.70)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Specifically, the Exchange proposes to reduce each of the maker and
taker rebates in Tiers 2 through 4 of the Tiered Volume Rebate
structure for Public Customers in both Penny Pilot Classes and Non-
Penny Pilot Classes. The new per contract rebate for Public Customers
in Non-Auction Transactions as set forth in Section I.A.1. of the BOX
Fee Schedule will be as follows:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Per contact rebate
Percentage thresholds of national ---------------------------------------------------------------
Tier customer volume in multiply-listed Penny pilot classes Non-penny pilot classes
options classes (monthly) ---------------------------------------------------------------
Maker Taker Maker Taker
--------------------------------------------------------------------------------------------------------------------------------------------------------
1.............................................. 0.000%-0.129%.......................... $0.00 $0.00 $0.00 $0.00
2.............................................. 0.130%-0.339%.......................... (0.05) (0.05) (0.20) (0.20)
3.............................................. 0.340%-0.549%.......................... (0.15) (0.15) (0.30) (0.30)
4.............................................. 0.550% and Above....................... (0.25) (0.25) (0.50) (0.50)
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 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.
---------------------------------------------------------------------------
\6\ 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 since 2014 and the Exchange
is simply adjusting certain fees within the structure.\7\ 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 depending upon how
the order interacts.
---------------------------------------------------------------------------
\7\ See Securities Exchange Release No. 73547 (November 6,
2014), 79 FR 67520 (November 13, 2014)(Notice of Filing and
Immediate Effectiveness SR-BOX-2014-25).
---------------------------------------------------------------------------
The Exchange believes raising the non-auction transaction fees for
Public Customers making or taking liquidity in Penny and Non-Penny
Pilot Classes to $0.05 from $0.00 is reasonable, equitable and not
unfairly discriminatory. While the Exchange proposes to slightly raise
the fees assessed to Public Customers for Non-Auction Transactions, the
Public Customers may still receive the benefit of a volume based
rebate, which in turn could offset the proposed $0.05 fee.\8\ Further,
the Exchange notes that a higher fee of $0.07 was assessed for Public
Customers in Non-Auction transactions on BOX in the past.\9\
---------------------------------------------------------------------------
\8\ The Exchange notes that on a monthly basis, most Public
Customers on the Exchange reach one of these volume based rebate
tiers.
\9\ See Securities Exchange Release No. 66979 (May 14, 2012), 77
FR 29740 (May 18, 2012) (Notice of Filing and Immediate
Effectiveness SR-BOX-2012-002).
---------------------------------------------------------------------------
The Exchange believes that the proposed fees for Professional
[[Page 49339]]
Customers and Broker Dealers in Non-Auction Transactions are
reasonable. Under the proposed fee structure, a Professional Customer
or Broker Dealer making liquidity and interacting with a Professional
Customer, Broker Dealer or Market Marker will now be charged a fee of
$0.05 in both Penny and Non-Penny Pilot Classes. If the Professional
Customer or Broker Dealer is instead taking liquidity in the Penny
Pilot, it will be charged $0.45 against any other Participant. If the
Professional Customer or Broker Dealer is taking liquidity in the Non-
Penny Pilot, it will be charged $0.85 if it interacts with a Public
Customer or $0.60 if it interacts with a Professional Customer, Broker
Dealer or a Market Maker. The Exchange believes that reducing the fee
for making liquidity will promote liquidity on the Exchange, ultimately
benefitting all Participants trading on BOX. Further, the Exchange
believes the proposed fees are reasonable as they are in line with the
current fees assessed by another competing exchange.\10\
---------------------------------------------------------------------------
\10\ See International Securities Exchange (``ISE'') Schedule of
Fees, Section I. On ISE, Professional Customer and Broker Dealers in
Penny Pilot Classes are charged a fee of $0.10 when making liquidity
and a $0.45 fee when taking liquidity. See also NYSE Arca Options
(``Arca'') Fees and Charges page 4. On Arca a Firm or Broker Dealer
is charged $0.50 when making liquidity and $1.08 when taking
liquidity in Non-Penny Pilot Issues, and $0.50 for taking liquidity
in Penny Pilot Issues.
---------------------------------------------------------------------------
The Exchange believes that charging Professional Customers and
Broker Dealers higher fees than Public Customers for most of their 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. The Exchange believes that
the higher level of trading activity from these Participants will draw
a greater amount of BOX system resources, which the Exchange aims to
recover its costs by assessing Professional Customers and Broker
Dealers higher fees for transactions.
The Exchange notes that Professional Customers or Broker Dealers
will now be charged the same rate as Public Customers when making
liquidity against Professional Customers, Broker Dealers, and Market
Makers in both Penny and Non-Penny Pilot Classes. The Exchange believes
it is equitable and not unfairly discriminatory to assess the same low
rate for these transactions on both Public Customers and Professional
Customers/Broker Dealers to promote liquidity on the Exchange,
ultimately benefitting all Participants trading on BOX. Further, the
Exchange notes that Public Customers have the ability to achieve a
rebate for their Non-Auction transactions, and Professional Customer or
Broker Dealers do not.
The Exchange believes that the proposed fees for Market Makers in
Non-Auction Transactions are reasonable. With the proposed fee changes,
a Market Maker making liquidity will now be charged a lower fee of
$0.27 (Penny Pilot) and $0.65 (Non-Penny Pilot) for interacting with a
Public Customer. Further, a Market Maker taking liquidity against a
Public Customer will now be charged a lower fee of $0.43 in Penny Pilot
Classes and a lower fee of $0.80 in Non-Penny Pilot Classes. If a
Market Maker is taking liquidity in Penny and Non-Penny Pilot Classes
and interacts with a Professional Customer, Broker Dealer or a Market
Maker, they will now be charged a fee of $0.29 in Penny Pilot Classes
and $0.40 in Non-Penny Pilot Classes. The Exchange believes the fees
listed above are reasonable and appropriate as they are in line with
what is currently charged by the industry.\11\
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\11\ Id. On ISE and Arca, the general range for Market Maker
fees is between $0.10 and $1.08.
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Further, the Exchange believes it is equitable and not unfairly
discriminatory to charge the Market Maker less for making or taking
liquidity than Professional Customers or Broker Dealers. Specifically,
Market Makers have certain obligations that other Participants do not
and can ultimately provide more value by directing liquidity to the
Exchange, which the Exchange believes will benefit all Participants
trading on BOX.
Additionally, the Exchange believes that charging Market Makers who
interact with Professional Customers/Broker Dealers and Market Makers
in Penny and Non-Penny Pilot Classes less than Public Customers is
reasonable. As discussed above, Market Makers have certain obligations
that Public Customers do not and can provide value by directing more
liquidity to the Exchange. The Exchange believes that charging Market
Makers no fee for adding liquidity against Professional Customers,
Broker Dealers and Market Makers will promote liquidity on the
Exchange, ultimately benefitting all market participants. Further, the
Exchange believes that charging Market Makers less than Public
Customers when adding liquidity is reasonable, as other exchanges in
the industry also treat Market Makers more favorably than a Public
Customer for adding liquidity.\12\ Finally, the Exchange notes that
Public Customers have the ability to obtain a higher per contract
rebate than Market Makers under the Tiered Volume Rebates for Non-
Auction Transactions.\13\
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\12\ See Arca Fees and Charges page 4. On Arca, a Market Maker
making liquidity in Penny Pilot Classes receives a rebate of $0.28
where a Public Customer making liquidity in Penny Pilot Classes
receives a lower rebate of $0.25. See also C2 Options Exchange.
Incorporated (``C2'') Fee Schedule Section 1. Similar to Arca,
Market Makers on C2 who are making liquidity in Penny Pilot Classes
receive a rebate of $0.40 where Public Customers making liquidity in
Penny Pilot Classes receive a lower rebate of $0.37.
\13\ Under the proposed Tiered Volume Rebates in Section I.A.1
Public Customers can receive a maximum per contract rebate of up to
$0.25 for Penny Pilot Classes and $0.50 in Non-Penny Pilot Classes.
Market Makers can only receive a maximum rebate of $0.15, regardless
of class.
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The Exchange believes it is reasonable, equitable and not unfairly
discriminatory for Professional Customers, Broker Dealers and Market
Makers to be charged higher fees when interacting with Public Customers
than interacting with other Participants on BOX. The Exchange believes
they are reasonable as they are in a similar range with the fees in the
options industry.\14\ Further, as stated above, the Exchange believes
charging a higher fee for interactions with a Public Customer when
compared to interactions with other Participants is equitable and not
unfairly discriminatory because it allows the Exchange to incentivize
Public Customer order flow by offering low fees and rebate potential to
Public Customers in Non-Auction Transactions. The Exchange believes
that providing these incentives for Non-Auction Transactions by Public
Customers will benefit all Participants trading on the Exchange by
attracting this Public Customer order flow.
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\14\ See supra note 6 [sic].
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The Exchange believes it is reasonable, equitable and not unfairly
discriminatory that Professional Customers, Broker Dealers and Market
Makers be charged a higher fee for certain orders removing liquidity,
when compared to the fee they receive for orders that add liquidity.
Charging a lower fee for 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.
Finally, the Exchange also believes it is reasonable to charge
Professional Customers and Broker Dealers and Market Makers less for
certain
[[Page 49340]]
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.
Tiered Volume Rebate for Non-Auction Transactions
BOX believes it is reasonable, equitable and not unfairly
discriminatory to adjust certain rebates in the volume based thresholds
for Market Makers and Public Customers in all Non-Auction Transactions.
The volume thresholds and applicable rebates are meant to incentivize
Public Customers and Market Makers 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 programs; \15\ and the Exchange
believes that the proposed changes to the volume thresholds and rebates
are reasonable and competitive when compared to incentive structures at
other exchanges.
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\15\ See Section B of the PHLX Pricing Schedule entitled
``Customer Rebate Program;'' ISE Gemini's Qualifying Tier Thresholds
(page 6 of the ISE Gemini Fee Schedule); and CBOE's 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.
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With regard to the Public Customer Tiered Volume Rebate for Non-
Auction Transactions, 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.
The Exchange believes it is reasonable to increase the rebates in
Tiers 3 and 4 of the Tiered Volume Rebate for Market Makers making
liquidity in Non-Auction Transactions. The rebates are meant to
incentivize Market Makers 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.
The Exchange continues to believe it is equitable and not unfairly
discriminatory to only have these rebate structures for Public
Customers and Market Makers in Non-Auction transactions. The practice
of incentivizing increased Public Customer and Market Maker order flow
is common in the options markets. While the Exchange proposes to
decrease the Public Customer rebates in Penny and Non-Penny Pilot
Classes, the Exchange believes that Public Customers will still benefit
from the opportunity to obtain a rebate. As discussed above, most
Public Customers currently achieve a volume based rebate in their Non-
Auction transactions, which will offset any exchange fees they are
assessed in Section I.A of the BOX Fee Schedule. Additionally, the
Exchange believes that Market Makers can provide high volumes of
liquidity and lowering certain Market Maker Non-Auction Transaction
fees and raising certain maker rebates in the Tiered Volume Rebates for
Market Makers in Non-Auction Transactions will potentially help attract
a higher level of Market Maker order flow and create liquidity, which
the Exchange believes will ultimately benefit all Participants trading
on BOX.
Lastly, the Exchange believes that exempting transactions where a
Public Customer is a contra party from the Market Maker Tiered Volume
Rebate is reasonable, equitable and not unfairly discriminatory. BOX
provides these volume based rebates to incentivize Market Makers 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. The Exchange believes by providing a rebate
to transactions that do not have a Public Customer as the contra party
will further encourage Market Makers to quote. Further, the Exchange
believes that Public Customer interaction does not need further
encouragement within the BOX fee schedule.
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 in the
Non-Auction Transactions fee structure will not impose a burden on
competition among various Exchange Participants. Rather, BOX believes
that the changes will result in the Participants being charged
appropriately for these transactions and are 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 believes that amending the proposed rebate structure
for Customer and Market Maker Non-Auction Transactions will not impose
a burden on competition among various Exchange Participants. The
Exchange believes that the proposed changes will result in Customers
and Market Makers being rebated appropriately for these transactions.
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.
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 \16\ and Rule 19b-4(f)(2)
thereunder,\17\ because it establishes or changes a due, or fee.
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\16\ 15 U.S.C. 78s(b)(3)(A)(ii).
\17\ 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.
[[Page 49341]]
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-2016-33 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-2016-33. 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-2016-33, and should be
submitted on or before August 17, 2016.
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\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-17676 Filed 7-26-16; 8:45 am]
BILLING CODE 8011-01-P
