Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Detail How Complex Orders Will Execute Through the Solicitation Auction Mechanism, 92919-92923 [2016-30562]
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Federal Register / Vol. 81, No. 244 / Tuesday, December 20, 2016 / Notices
to determine whether the proposed rule
should be approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
Robert W. Errett,
Deputy Secretary.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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 rulecomments@sec.gov. Please include File
Number SR–Phlx–2016–118 on the
subject line.
Paper Comments
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• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–Phlx–2016–118. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml).
Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
rule change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–Phlx–
2016–118 and should be submitted on
or before January 10, 2017.
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[FR Doc. 2016–30551 Filed 12–19–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79557; File No. SR–BOX–
2016–57]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Detail
How Complex Orders Will Execute
Through the Solicitation Auction
Mechanism
December 14, 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 December
7, 2016, BOX Options Exchange LLC
(the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. 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 Substance of
the Proposed Rule Change
The Exchange proposes to detail how
Complex Orders will execute through
the Solicitation Auction mechanism.
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
self-regulatory organization 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 self-regulatory organization has
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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1. Purpose
The purpose of the proposed rule
change is to detail how the Solicitation
Auction mechanism will treat Complex
Orders on the Exchange.3 Pursuant to
BOX Rule 7270, the Exchange has two
block-sized auction mechanisms, the
Solicitation Auction Mechanism and the
Facilitation Auction Mechanism
whereby Order Flow Providers (OFPs)
can provide price improvement
opportunities for a transaction where
the OFP seeks to facilitate an order it
represents as agent, and/or a transaction
where the OFP solicited interest to
execute against an order it represents as
agent. Transactions executed through
the Solicitation or Facilitation auction
mechanisms are comprised of the order
the OFP represents as agent (the
‘‘Agency Order’’) and the contra order
for the full size of the Agency Order
(either the ‘‘Solicitation’’ or ‘‘Solicited’’
Order).4 The contra order may represent
interest for the Participant’s own
account or interest the Participant has
solicited from one or more other parties,
or a combination of both.
This proposal only addresses how the
Solicitation Auction mechanism will
treat Complex Orders on the Exchange.5
Similar to the ISE’s Block-Trade rules,6
Complex Orders 7 executed through the
Solicitation auction mechanism on BOX
function in substantially the same
manner as single-leg orders executed
through this mechanism. To detail how
the Solicitation mechanism treats
3 Complex Orders are not currently traded
through the Solicitation Auction mechanism. Prior
to implementation, BOX will issue an informational
circular to inform Participants of the
implementation date for Complex Orders to trade
through the Solicitation Auction.
4 The Exchange notes that it does not trade stock
option orders.
5 The Exchange recently adopted rules to allow
Complex Orders to execute through the Facilitation
Auction mechanism. See Securities Release No.
78444 (July 29, 2016), 81 FR 51533 (August 4,
2016)(Notice of Filing and Immediate Effectiveness
of file Number SR–BOX–2016–37).
6 See International Securities Exchange Rule 716
and Supplementary Material .08 to Rule 716.
7 Under Rule 7240(a)(5) a ‘‘Complex Order’ is
defined as ‘‘any order involving the simultaneous
purchase and/or sale of two or more different
options series in the same underlying security, for
the same account, in a ratio that is equal to or
greater than one-to-three (.333) and less than or
equal to three-to-one (3.00) and for the purpose of
executing a particular investment strategy.) A
Complex Order that does not meet this definition
will be automatically rejected.
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Complex Orders, the Exchange proposes
to adopt IM–7270–8. IM–7270–8 will
state that Participants may use the
Solicitation Mechanism according to
paragraph (b) of Rule 7270 to execute
block-size Complex Orders at a net
price. The OFP must be willing to
execute the entire size of the Agency
Order through the submission of a
contra order; and block-size Complex
Orders executed through the
Solicitation Mechanism will continue to
be limited to Complex Orders of five
hundred (500) contracts per leg or
more.8 Each Complex Agency Order
entered into the Solicitation Auction
shall be all-or-none.
Upon the entry of a block-sized
Complex Order into the Solicitation
mechanism, a broadcast message will be
sent to Options Participants, giving
them one second to enter responses
with the prices and sizes at which they
would be willing to participate opposite
the Agency Order (‘‘Responses’’).9
Responses to a Complex Order within
the Solicitation Auction mechanism
may be submitted for any size up to the
size of the entire Complex Order,
however, the Responses must be for all
Legs of the unique Complex Order.10
Responses must be priced equal to or
better than the Agency Order and
cannot exceed the size of the Agency
Order.11 At the end of the one second
period for the entry of Responses, the
block-sized Solicitation Complex Order
will be automatically executed in full or
canceled.12
As is also the case for single-leg
orders executed through the Solicitation
mechanism, the Complex Agency Order
will execute against the Complex
Solicited Order at the proposed
execution price if at the time of
execution there is insufficient size to
execute the entire Complex Agency
Order at a better price (or prices) and
(A) the execution price is equal to or
greater than the NBBO and (B) there are
no Book Priority Public Customer
Complex Orders on the Complex Order
Book. A Book Priority Public Customer
Complex Order is a Complex Order (A)
at a price equal to or better than the
proposed execution price; and (B) on
8 See proposed IM 7270–8. Complex Orders
comprised of less than five hundred (500) contracts
on each leg will automatically be rejected.
9 See BOX Rule 7270(b)(1). The Exchange believes
that 1 second is an adequate duration for the
Solicitation Auction. Specifically, the Exchange
believes customers are capable of responding
within this duration and has not received any
complaints regarding the duration of the
Solicitation Auction broadcast since the mechanism
was adopted in 2011.
10 See proposed IM–7270–8.
11 See proposed IM–7270–8.
12 See BOX Rule 7270(b)(2).
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the BOX Complex Order Book within a
depth of the BOX Complex Book so that
it would otherwise trade with Agency
Order if the Agency Order had been
submitted to the BOX Complex Book.13
Both the Solicited Complex Order and
the Agency Complex Order will be
canceled if an execution would take
place at a price that is inferior to the
BOX BBO or the NBBO, or if there is a
Book Priority Public Customer order on
the BOX Book and there is insufficient
size to execute the Agency Order, except
as provided in BOX Rule
7270(b)(2)(iv).14
If at the time of execution there is
sufficient size to execute the entire
Agency Complex Order at an improved
price (or prices), the Agency Complex
Order will be executed at the improved
price(s) and the Solicited Order will be
canceled.15 The aggregate size of all bids
(offers) on the BOX Book and the
Complex Order Book and all Responses
at each price will be used to determine
whether the entire Agency Order can be
executed at an improved price (or
prices.) 16 For example, an OFP submits
a Complex Order through the
Solicitation Auction to buy 1000 A+B at
$2.10. During the one second auction,
BOX receives the following bids (offers)
in time priority:
(1) Market Maker Complex Order
Response to sell 400 of A+B at $2.08.
(2) Market Maker offer on the
Complex Order Book to sell 300 A+B at
$2.08.
(3) Public Customer Response to sell
200 A+B at $2.08.
(4) Public Customer Complex Order
on the Complex Order Book to sell 300
A+B at $2.08.
Since there is sufficient size to
execute the entire Agency Order at an
improved price, the Agency Order will
execute in time priority 17 against each
of the bids (offers) and Responses at
$2.08, and the Solicited Order will be
canceled.18 The Agency Order would
execute 400 contracts against the Market
Maker Response; 300 contracts against
the Market Maker offer on the Complex
Order Book; 200 contracts against the
Public Customer Response and 100
contracts against the Public Customer
Complex Order on the Complex Book.
13 See BOX Rule 7270(b)(2)(i). If the execution
price is inferior to the best bid or offer on BOX, the
NBBO or if there is a Book Priority Public Customer
Order on the BOX Complex Book the Solicited
Complex Order and Agency Order will be
cancelled.
14 See BOX Rule 7270(b)(2)(i).
15 See BOX Rule 7270(b)(2)(iii).
16 See BOX Rule 7270 (b)(2)(iii) and proposed
IM–7270–8.
17 See BOX Rule 7270(b)(2)(v).
18 See BOX Rule 7270(b)(2)(iii).
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The remaining 200 contracts of the
Public Customer Complex Order will
remain unexecuted.
However, notwithstanding the
execution provisions of Rule 7270(b)(2),
the execution rules for Complex Orders
detailed in BOX Rule 7240(b)(2) and (3)
continue to apply for Complex Orders
executed through the Solicitation
Auction Mechanism.19 For example, if
there is sufficient interest on the BOX
Book for the individual legs to be
executed at a permissible ratio, this
‘‘Implied Order’’20 will have priority
over Responses and Complex Orders on
the Complex Order Book. Although an
Implied Order will be able to execute
against an Agency Order in the
Solicitation Auction mechanism, the
Implied Order will not be considered a
Book Priority Public Customer Order for
purposes of Rule 7270(b).
Using the same scenario above, an
OFP submits a Complex Order through
the Solicitation Auction to buy 1000
A+B at $2.10 and during the one second
auction, BOX receives the following
bids (offers) in time priority:
(1) Market Maker Complex Order
Response to sell 400 of A+B at $2.08.
(2) Market Maker offer on the
Complex Order Book to sell 300 A+B at
$2.08.
(3) Public Customer Response to sell
200 A+B at $2.08.
(4) Public Customer Complex Order
on the Complex Order Book to sell 300
A+B at $2.08.
(5) Interest on the BOX Book (Implied
Order):
• Market Maker Option A—Order to
sell 300 at $1.04.
• Market Maker Option B—Order to
sell 300 at $1.04.
There is sufficient size to execute the
entire Agency Order at an improved
price so the Solicited Order will be
canceled. However, the Agency Order
would execute first against the 300
Implied Order contracts and then in
time priority against the remaining
Complex Order bids (offers) and
Responses. After the Implied Order
contracts the Agency Order will execute
400 contracts against the Market Maker
Response; and 300 contracts against the
Market Maker offer on the Complex
Order Book. Both the Public Customer
Response and Complex Order will
receive no trade allocation because the
buy order has been exhausted.
19 See proposed IM–7270–8. The Exchange notes
that this includes the Complex Order Filter outlined
in BOX Rule 7240(b)(3)(iii).
20 An ‘‘Implied Order’ is a Complex Order that is
derived from the orders on the BOX Book for each
component leg of a strategy. Each of the Implied
Order component Legs must be equal to or better
than its respective NBBO.
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If at the time of execution, there are
one or more Book Priority Public
Customer Orders on the Complex Order
Book, the Agency Order will execute
against the Complex Order Book if there
is sufficient size available to execute the
entire Agency Order, and the Solicited
Order will be cancelled.21 In this
instance, the aggregate size of all bids
(offers) on the Complex Order Book at
or better than the proposed execution
price will be used to determine whether
there is sufficient size available to
execute the entire Agency Order.22 BOX
Book Interest and Responses 23 are
excluded when determining whether
sufficient size exists to execute the
Agency Order at its proposed price
under BOX Rule 7270(b)(2)(ii).
However, if there is sufficient interest
on the Complex Order Book, the
execution rules for Complex Orders will
continue to apply and any Implied
Orders will have priority.24 For
example, if an OFP submits a Complex
Order through the Solicitation Auction
to buy1000 A+B at $2.10 and during the
one second auction, BOX receives the
following bids (offers) in time priority:
(1) Market Maker offer on the
Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order
on the Complex Order Book to sell 500
A+B at $2.10.
(3) Interest on the BOX Book (Implied
Order):
• Market Maker Option A—Order to
sell 300 at $1.05.
• Market Maker Option B—Order to
sell 300 at $1.05.
(4) Broker Dealer offer on the
Complex Order Book to sell 300 A+B at
$2.10.
There is a Book Priority Public
Customer Order on the Complex Order
Book (i.e., the Public Customer Complex
Order to sell 500 at $2.10) and there is
sufficient size on the Complex Order
Book to execute the entire Agency
Order. As such, the Agency Order will
be executed against the Implied Order
and the orders on the Complex Order
Book, and the Solicited Complex Order
will be canceled. In this example, the
Agency Order will execute 300 contracts
against the Implied Order, then 300
contracts against the Market Maker and
400 contracts against the Book Priority
Public Customer Complex Order. The
remaining 100 contracts of the Book
Priority Public Customer Complex
21 See
22 See
BOX Rule 7270(b)(2).
Rule 7270(b)(2)(ii) and proposed IM–7270–
8.
23 Responses
are sent by Options Participants in
response to a Facilitation or Solicitation Auction
broadcast message.
24 See BOX Rule 7240(b)(2) and (3).
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Order and the Broker Dealer 300
contracts will remain unexecuted, based
on price/time priority.
If however, there is a Book Priority
Public Customer Order on the Complex
Order Book, but there is insufficient size
to execute the entire Agency Order at
the proposed execution price, both the
Agency and Solicited Orders will be
canceled, except as provided in BOX
Rule 7270(b)(2)(iv).25 For example, if an
OFP submits a Complex Order through
the Solicitation Auction to buy1000
A+B at $2.10 and during the one second
auction, BOX receives the following
bids (offers) in time priority:
(1) Market Maker offer on the
Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order
on the Complex Order Book to sell 300
A+B at $2.10.
(3) Interest on the BOX Book (Implied
Order):
• Market Maker Option A—Order to
sell 300 at $1.05.
• Market Maker Option B—Order to
sell 300 at $1.05.
In this example, there is a Book
Priority Public Customer Order on the
Complex Order Book (i.e. the Public
Customer Complex Order to sell 300 at
$2.10) but there is insufficient size on
the Complex Order Book to execute the
entire Agency Order. As such, both the
Solicited Order and the Agency Order
will be cancelled 26, unless the OFP has
designated a Surrender Quantity.27
When starting a Solicitation Auction
the OFP may designate, for the Solicited
Order, the quantity of contracts of the
Agency Order that it is willing to
surrender interest to on the Complex
Order Book.28 The Surrender Quantity
only applies if at the time of execution
there are (1) Book Priority Public
Customer Orders on the Complex Order
Book or (2) any bids (offers) on the
Complex Order Book at any price better
than the proposed execution price, but
there is insufficient size to execute the
entire Agency Complex Order at an
improved price.29
If there is a Book Priority Public
Customer Order on the Complex Order
Book, and the aggregate size of the Book
Priority Public Customer Order and all
bids (offers) on the Complex Order Book
at prices better than the proposed
execution price, excluding Responses
and BOX Book Interest, are equal to or
less than the Surrender Quantity, the
Agency Complex Order will first
25 See
BOX Rule 7270(b)(2)(iv).
BOX Rule 7270(b)(2)(i).
27 See BOX Rule 7270(b)(2)(iv).
28 See BOX Rule 7270(b)(2)(iv).
29 See BOX Rule 7270(b)(2)(iv).
26 See
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92921
execute against all such Book Priority
Public Customer Orders and such bids
(offers) and then against the Solicited
Order. For example, an OFP submits a
Complex Order through the Solicitation
Auction to buy1000 A+B at $2.10 and
designates 200 contracts as the
Surrender Quantity. During the one
second auction, BOX receives the
following bids (offers) in time priority:
(1) Public Customer Complex Order
on the Complex Order Book to sell 200
A+B at $2.10.
(2) Market Maker offer on the
Complex Order Book to sell 800 A+B at
$2.10.
Without the Surrender Quantity, the
Agency Order would execute against the
Public Customer Order on the Complex
Order Book for 200 Contracts and
against the Market Maker on the
Complex Order Book for 800 contracts.
Using the Surrender Quantity, however,
the Agency Order would still execute
against the Public Customer Order on
the Complex Order Book, but would
then execute against the Solicited Order
for 800 contracts.
As stated above, the Surrender
Quantity can also be used to allow
Solicitation auction trades which would
otherwise be canceled. For example, if
an OFP submits a Complex Order
through the Solicitation Auction to buy
1000 A+B at $2.10 and designates 200
contracts as the Surrender Quantity.
During the one second auction, BOX
receives the following bids (offers) in
time priority:
(1) Market Maker offer on the
Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order
on the Complex Order Book to sell 100
A+B at $2.10.
There is a Book Priority Public
Customer, but there is insufficient size
to execute the entire Agency Order with
interest on the Complex Order Book,
and this auction would normally be
canceled. However, since the OFP
designated a Surrender Quantity of 200
that is greater than the total size of the
Book Priority Public Customer Order,
the Agency Order will execute 100
contracts against the Book Priority
Public Customer Order and the
remaining 900 contracts against the
Solicited Order.
However, if the aggregate size of the
Book Priority Public Customer Order
and all bids (offers), excluding
Responses and BOX Book Interest, on
the Complex Order Book at prices better
than the proposed execution price
exceeds the Surrender Quantity, and
there is insufficient size to execute the
entire Agency Complex Order, then both
the Solicited Complex Order and the
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Agency Complex Order will be
canceled.30 For example, the OFP
submits a Complex Order through the
Solicitation Auction to buy1000 A+B at
$2.10 and designates 200 contracts as
the Surrender Quantity. During the one
second auction, BOX receives the
following bids (offers) in time priority:
(1) Market Maker offer on the
Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order
on the Complex Order Book to sell 300
A+B at $2.10.
Even though the OFP has designated
a Surrender Quantity of 200 contracts,
the total size of the Book Priority Public
Customer Order (300 contracts) is
greater than the Surrender Quantity and
there is insufficient size on the Complex
Order Book to execute the entire Agency
Complex Order. Therefore both the
Solicited Complex Order and Agency
Complex Order will be canceled.
The Surrender Quantity can also be
used to allow Solicitation Auction
trades when there are bids (offers) on
the Complex Book on the opposite side
of the Agency Complex Order at a price
better than the proposed execution
price, but there is insufficient size to
execute the entire Agency Order at an
improved price.31 For example, an OFP
submits a Complex Order through the
Solicitation Auction to buy 1000 A+B at
$2.10 and designates 200 contracts as
the Surrender Quantity. During the one
second auction, BOX receives the
following bids (offers) in time priority:
(1) Market Maker offer on the
Complex Order Book to sell 100 A+B at
$2.09.
(2) Public Customer Complex Order
on the Complex Order Book to sell 100
A+B at $2.08.
Since there is insufficient size to
execute the entire Agency Complex
Order at a better price, this auction
would normally be canceled. However,
since the OFP designated a Surrender
Quantity of 200 that is equal to the
aggregate size of these better priced
orders, the Agency Order will execute
100 contracts against the Public
Customer Order at $2.10, 100 contracts
against the Market Maker Order at $2.09
and the remaining 800 contracts against
the Solicited Order. Note that even
though the Public Customer Order on
the Complex Order Book was priced
lower than the proposed execution price
at $2.08, it is executed at the proposed
execution price of $2.10. Public
Customer bids (offers) on the Complex
Order Book at the time of the Surrender
Quantity execution that are priced
30 See
31 See
BOX Rule 7270(b)(2)(iv)(A)(1).
BOX Rule 7270(b)(2)(iv)(A)(2).
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higher (lower) that the proposed
execution price will be executed at the
proposed execution price.32 Non-Public
Customer and Market Maker bids
(offers) that are priced lower (higher)
than the proposed execution price will
execute at their stated price.33
The Exchange intends to implement
the proposed change no later than
January 30, 2017. The Exchange will
provide Participants with notice, via
Information Circular, of the exact
implementation date.
Participants and all OFPs may submit
orders through the mechanism.
2. Statutory Basis
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 37 and Rule 19b–4(f)(6)
thereunder.38
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Act,34 in general, and Section 6(b)(5) of
the Act,35 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to, and
perfect the mechanism of, a free and
open market and a national market
system, and, in general, to protect
investors and the public interest. In
particular, the Exchange believes that
the proposed rule change to amend BOX
Rule 7270 to provide for the execution
of Complex Orders through the
Solicitation Auction mechanism on
BOX is designed to help BOX remain
competitive among options exchanges
and provide market participants
additional opportunities to execute
block-size crossing transactions in
Complex Orders.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed change provides for the
execution of Complex Orders through
the Solicitation auction mechanism. As
such, 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 does not believe the proposal
will impose any burden on intermarket
competition, as the proposed rule will
allow BOX to compete with other
options exchanges in the industry.
Specifically, ISE has a similar
mechanism in place.36 Additionally, the
Exchange does not believe the proposal
will impose any burden on intramarket
competition, as the Solicitation Auction
mechanism is available to all
32 See
BOX Rule 7270(b)(2)(iv)(B).
BOX Rule 7270(b)(2)(iv)(B).
34 15 U.S.C. 78f(b).
35 15 U.S.C. 78f(b)(5).
36 See supra note 6.
33 See
PO 00000
Frm 00153
Fmt 4703
Sfmt 4703
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
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 rulecomments@sec.gov. Please include File
Number SR–BOX–2016–57 on the
subject line.
37 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
38 17
E:\FR\FM\20DEN1.SGM
20DEN1
92923
Federal Register / Vol. 81, No. 244 / Tuesday, December 20, 2016 / Notices
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BOX–2016–57. 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–
2016–57, and should be submitted on or
before January 10, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–30562 Filed 12–19–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79559; File No. SR–
NYSEMKT–2016–115]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change Modifying the NYSE Amex
Options Fee Schedule
December 14, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on December
1, 2016, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. 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 Substance of
the Proposed Rule Change
The Exchange proposes to modify the
NYSE Amex Options Fee Schedule
(‘‘Fee Schedule’’). The Exchange
proposes to implement the fee change
effective December 1, 2016. The
proposed change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
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
self-regulatory organization 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 those statements may be examined at
E-SPECIALIST,
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 parts 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 purpose of this filing is to amend
Section III. C. of the Fee Schedule to
adjust the monthly Rights Fees assessed
on Specialists, e-Specialists, Directed
Order Market Markers (each a ‘‘DOMM),
and to provide alternative means to
qualify for a discount on the Rights
Fees. The Exchange proposes to
implement these changes effective on
December 1, 2016.
Currently, the Exchange charges a
Rights Fee on each issue in the
allocation of an e-Specialist, DOMM,
and Specialist.4 The monthly Rights Fee
ranges from $75 to $1,500 and is based
on the Average National Daily Customer
Contracts (‘‘CADV’’) per issue. With one
exception, the more active an issue, the
higher the Rights Fee assessed. The
exception is that the Exchange currently
charges a higher rate for the lowestvolume issues (i.e., less than 201 CADV)
to offset the Exchange’s revenue with
the cost of listing and maintaining these
low-volume issues.
Proposed Modification to the Rights
Fees
The Exchange proposes to align the
Rights Fees with the economic benefit of
being the e-Specialist, DOMM, or
Specialist in a given issue, based on
trading activity in an issue. The
Exchange therefore proposes that some
rates would decrease (for lower-volume
issues) and others would increase (for
higher-volume issues). Using the same
CADV levels currently in place, the
Exchange proposes to amend the Rights
Fees as follows:
DOMM, AND SPECIALIST RIGHTS FEE
mstockstill on DSK3G9T082PROD with NOTICES
Average national daily customer contracts per issue
Current fee
0 to 200 ....................................................................................................................................................................
201 to 2,000 .............................................................................................................................................................
2,001 to 5,000 ..........................................................................................................................................................
5,001 to 15,000 ........................................................................................................................................................
15,001 to 100,000 ....................................................................................................................................................
Over 100,000 ...........................................................................................................................................................
39 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17
CFR 240.19b–4.
Fee Schedule, Section III. C. (e-Specialist,
DOMM and Specialist Monthly Rights Fees)
(describing how the Rights Fee is assessed and
4 See
1 15
VerDate Sep<11>2014
19:36 Dec 19, 2016
Jkt 241001
PO 00000
Frm 00154
Fmt 4703
Sfmt 4703
$250
75
200
375
750
1,500
Proposed fee
$50
60
150
375
1,250
2,000
setting forth the current rates), available here,
https://www.nyse.com/publicdocs/nyse/markets/
amex-options/NYSE_Amex_Options_Fee_
Schedule.pdf.
E:\FR\FM\20DEN1.SGM
20DEN1
]]>Agencies
[Federal Register Volume 81, Number 244 (Tuesday, December 20, 2016)]
[Notices]
[Pages 92919-92923]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-30562]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79557; File No. SR-BOX-2016-57]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Detail How Complex Orders Will Execute Through the Solicitation Auction
Mechanism
December 14, 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 December 7, 2016, BOX Options Exchange LLC (the ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to detail how Complex Orders will execute
through the Solicitation Auction mechanism. 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 self-regulatory organization
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 self-regulatory organization
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 purpose of the proposed rule change is to detail how the
Solicitation Auction mechanism will treat Complex Orders on the
Exchange.\3\ Pursuant to BOX Rule 7270, the Exchange has two block-
sized auction mechanisms, the Solicitation Auction Mechanism and the
Facilitation Auction Mechanism whereby Order Flow Providers (OFPs) can
provide price improvement opportunities for a transaction where the OFP
seeks to facilitate an order it represents as agent, and/or a
transaction where the OFP solicited interest to execute against an
order it represents as agent. Transactions executed through the
Solicitation or Facilitation auction mechanisms are comprised of the
order the OFP represents as agent (the ``Agency Order'') and the contra
order for the full size of the Agency Order (either the
``Solicitation'' or ``Solicited'' Order).\4\ The contra order may
represent interest for the Participant's own account or interest the
Participant has solicited from one or more other parties, or a
combination of both.
---------------------------------------------------------------------------
\3\ Complex Orders are not currently traded through the
Solicitation Auction mechanism. Prior to implementation, BOX will
issue an informational circular to inform Participants of the
implementation date for Complex Orders to trade through the
Solicitation Auction.
\4\ The Exchange notes that it does not trade stock option
orders.
---------------------------------------------------------------------------
This proposal only addresses how the Solicitation Auction mechanism
will treat Complex Orders on the Exchange.\5\ Similar to the ISE's
Block-Trade rules,\6\ Complex Orders \7\ executed through the
Solicitation auction mechanism on BOX function in substantially the
same manner as single-leg orders executed through this mechanism. To
detail how the Solicitation mechanism treats
[[Page 92920]]
Complex Orders, the Exchange proposes to adopt IM-7270-8. IM-7270-8
will state that Participants may use the Solicitation Mechanism
according to paragraph (b) of Rule 7270 to execute block-size Complex
Orders at a net price. The OFP must be willing to execute the entire
size of the Agency Order through the submission of a contra order; and
block-size Complex Orders executed through the Solicitation Mechanism
will continue to be limited to Complex Orders of five hundred (500)
contracts per leg or more.\8\ Each Complex Agency Order entered into
the Solicitation Auction shall be all-or-none.
---------------------------------------------------------------------------
\5\ The Exchange recently adopted rules to allow Complex Orders
to execute through the Facilitation Auction mechanism. See
Securities Release No. 78444 (July 29, 2016), 81 FR 51533 (August 4,
2016)(Notice of Filing and Immediate Effectiveness of file Number
SR-BOX-2016-37).
\6\ See International Securities Exchange Rule 716 and
Supplementary Material .08 to Rule 716.
\7\ Under Rule 7240(a)(5) a ``Complex Order' is defined as ``any
order involving the simultaneous purchase and/or sale of two or more
different options series in the same underlying security, for the
same account, in a ratio that is equal to or greater than one-to-
three (.333) and less than or equal to three-to-one (3.00) and for
the purpose of executing a particular investment strategy.) A
Complex Order that does not meet this definition will be
automatically rejected.
\8\ See proposed IM 7270-8. Complex Orders comprised of less
than five hundred (500) contracts on each leg will automatically be
rejected.
---------------------------------------------------------------------------
Upon the entry of a block-sized Complex Order into the Solicitation
mechanism, a broadcast message will be sent to Options Participants,
giving them one second to enter responses with the prices and sizes at
which they would be willing to participate opposite the Agency Order
(``Responses'').\9\ Responses to a Complex Order within the
Solicitation Auction mechanism may be submitted for any size up to the
size of the entire Complex Order, however, the Responses must be for
all Legs of the unique Complex Order.\10\ Responses must be priced
equal to or better than the Agency Order and cannot exceed the size of
the Agency Order.\11\ At the end of the one second period for the entry
of Responses, the block-sized Solicitation Complex Order will be
automatically executed in full or canceled.\12\
---------------------------------------------------------------------------
\9\ See BOX Rule 7270(b)(1). The Exchange believes that 1 second
is an adequate duration for the Solicitation Auction. Specifically,
the Exchange believes customers are capable of responding within
this duration and has not received any complaints regarding the
duration of the Solicitation Auction broadcast since the mechanism
was adopted in 2011.
\10\ See proposed IM-7270-8.
\11\ See proposed IM-7270-8.
\12\ See BOX Rule 7270(b)(2).
---------------------------------------------------------------------------
As is also the case for single-leg orders executed through the
Solicitation mechanism, the Complex Agency Order will execute against
the Complex Solicited Order at the proposed execution price if at the
time of execution there is insufficient size to execute the entire
Complex Agency Order at a better price (or prices) and (A) the
execution price is equal to or greater than the NBBO and (B) there are
no Book Priority Public Customer Complex Orders on the Complex Order
Book. A Book Priority Public Customer Complex Order is a Complex Order
(A) at a price equal to or better than the proposed execution price;
and (B) on the BOX Complex Order Book within a depth of the BOX Complex
Book so that it would otherwise trade with Agency Order if the Agency
Order had been submitted to the BOX Complex Book.\13\ Both the
Solicited Complex Order and the Agency Complex Order will be canceled
if an execution would take place at a price that is inferior to the BOX
BBO or the NBBO, or if there is a Book Priority Public Customer order
on the BOX Book and there is insufficient size to execute the Agency
Order, except as provided in BOX Rule 7270(b)(2)(iv).\14\
---------------------------------------------------------------------------
\13\ See BOX Rule 7270(b)(2)(i). If the execution price is
inferior to the best bid or offer on BOX, the NBBO or if there is a
Book Priority Public Customer Order on the BOX Complex Book the
Solicited Complex Order and Agency Order will be cancelled.
\14\ See BOX Rule 7270(b)(2)(i).
---------------------------------------------------------------------------
If at the time of execution there is sufficient size to execute the
entire Agency Complex Order at an improved price (or prices), the
Agency Complex Order will be executed at the improved price(s) and the
Solicited Order will be canceled.\15\ The aggregate size of all bids
(offers) on the BOX Book and the Complex Order Book and all Responses
at each price will be used to determine whether the entire Agency Order
can be executed at an improved price (or prices.) \16\ For example, an
OFP submits a Complex Order through the Solicitation Auction to buy
1000 A+B at $2.10. During the one second auction, BOX receives the
following bids (offers) in time priority:
---------------------------------------------------------------------------
\15\ See BOX Rule 7270(b)(2)(iii).
\16\ See BOX Rule 7270 (b)(2)(iii) and proposed IM-7270-8.
---------------------------------------------------------------------------
(1) Market Maker Complex Order Response to sell 400 of A+B at
$2.08.
(2) Market Maker offer on the Complex Order Book to sell 300 A+B at
$2.08.
(3) Public Customer Response to sell 200 A+B at $2.08.
(4) Public Customer Complex Order on the Complex Order Book to sell
300 A+B at $2.08.
Since there is sufficient size to execute the entire Agency Order
at an improved price, the Agency Order will execute in time priority
\17\ against each of the bids (offers) and Responses at $2.08, and the
Solicited Order will be canceled.\18\ The Agency Order would execute
400 contracts against the Market Maker Response; 300 contracts against
the Market Maker offer on the Complex Order Book; 200 contracts against
the Public Customer Response and 100 contracts against the Public
Customer Complex Order on the Complex Book. The remaining 200 contracts
of the Public Customer Complex Order will remain unexecuted.
---------------------------------------------------------------------------
\17\ See BOX Rule 7270(b)(2)(v).
\18\ See BOX Rule 7270(b)(2)(iii).
---------------------------------------------------------------------------
However, notwithstanding the execution provisions of Rule
7270(b)(2), the execution rules for Complex Orders detailed in BOX Rule
7240(b)(2) and (3) continue to apply for Complex Orders executed
through the Solicitation Auction Mechanism.\19\ For example, if there
is sufficient interest on the BOX Book for the individual legs to be
executed at a permissible ratio, this ``Implied Order''\20\ will have
priority over Responses and Complex Orders on the Complex Order Book.
Although an Implied Order will be able to execute against an Agency
Order in the Solicitation Auction mechanism, the Implied Order will not
be considered a Book Priority Public Customer Order for purposes of
Rule 7270(b).
---------------------------------------------------------------------------
\19\ See proposed IM-7270-8. The Exchange notes that this
includes the Complex Order Filter outlined in BOX Rule
7240(b)(3)(iii).
\20\ An ``Implied Order' is a Complex Order that is derived from
the orders on the BOX Book for each component leg of a strategy.
Each of the Implied Order component Legs must be equal to or better
than its respective NBBO.
---------------------------------------------------------------------------
Using the same scenario above, an OFP submits a Complex Order
through the Solicitation Auction to buy 1000 A+B at $2.10 and during
the one second auction, BOX receives the following bids (offers) in
time priority:
(1) Market Maker Complex Order Response to sell 400 of A+B at
$2.08.
(2) Market Maker offer on the Complex Order Book to sell 300 A+B at
$2.08.
(3) Public Customer Response to sell 200 A+B at $2.08.
(4) Public Customer Complex Order on the Complex Order Book to sell
300 A+B at $2.08.
(5) Interest on the BOX Book (Implied Order):
Market Maker Option A--Order to sell 300 at $1.04.
Market Maker Option B--Order to sell 300 at $1.04.
There is sufficient size to execute the entire Agency Order at an
improved price so the Solicited Order will be canceled. However, the
Agency Order would execute first against the 300 Implied Order
contracts and then in time priority against the remaining Complex Order
bids (offers) and Responses. After the Implied Order contracts the
Agency Order will execute 400 contracts against the Market Maker
Response; and 300 contracts against the Market Maker offer on the
Complex Order Book. Both the Public Customer Response and Complex Order
will receive no trade allocation because the buy order has been
exhausted.
[[Page 92921]]
If at the time of execution, there are one or more Book Priority
Public Customer Orders on the Complex Order Book, the Agency Order will
execute against the Complex Order Book if there is sufficient size
available to execute the entire Agency Order, and the Solicited Order
will be cancelled.\21\ In this instance, the aggregate size of all bids
(offers) on the Complex Order Book at or better than the proposed
execution price will be used to determine whether there is sufficient
size available to execute the entire Agency Order.\22\ BOX Book
Interest and Responses \23\ are excluded when determining whether
sufficient size exists to execute the Agency Order at its proposed
price under BOX Rule 7270(b)(2)(ii). However, if there is sufficient
interest on the Complex Order Book, the execution rules for Complex
Orders will continue to apply and any Implied Orders will have
priority.\24\ For example, if an OFP submits a Complex Order through
the Solicitation Auction to buy1000 A+B at $2.10 and during the one
second auction, BOX receives the following bids (offers) in time
priority:
---------------------------------------------------------------------------
\21\ See BOX Rule 7270(b)(2).
\22\ See Rule 7270(b)(2)(ii) and proposed IM-7270-8.
\23\ Responses are sent by Options Participants in response to a
Facilitation or Solicitation Auction broadcast message.
\24\ See BOX Rule 7240(b)(2) and (3).
---------------------------------------------------------------------------
(1) Market Maker offer on the Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order on the Complex Order Book to sell
500 A+B at $2.10.
(3) Interest on the BOX Book (Implied Order):
Market Maker Option A--Order to sell 300 at $1.05.
Market Maker Option B--Order to sell 300 at $1.05.
(4) Broker Dealer offer on the Complex Order Book to sell 300 A+B
at $2.10.
There is a Book Priority Public Customer Order on the Complex Order
Book (i.e., the Public Customer Complex Order to sell 500 at $2.10) and
there is sufficient size on the Complex Order Book to execute the
entire Agency Order. As such, the Agency Order will be executed against
the Implied Order and the orders on the Complex Order Book, and the
Solicited Complex Order will be canceled. In this example, the Agency
Order will execute 300 contracts against the Implied Order, then 300
contracts against the Market Maker and 400 contracts against the Book
Priority Public Customer Complex Order. The remaining 100 contracts of
the Book Priority Public Customer Complex Order and the Broker Dealer
300 contracts will remain unexecuted, based on price/time priority.
If however, there is a Book Priority Public Customer Order on the
Complex Order Book, but there is insufficient size to execute the
entire Agency Order at the proposed execution price, both the Agency
and Solicited Orders will be canceled, except as provided in BOX Rule
7270(b)(2)(iv).\25\ For example, if an OFP submits a Complex Order
through the Solicitation Auction to buy1000 A+B at $2.10 and during the
one second auction, BOX receives the following bids (offers) in time
priority:
---------------------------------------------------------------------------
\25\ See BOX Rule 7270(b)(2)(iv).
---------------------------------------------------------------------------
(1) Market Maker offer on the Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order on the Complex Order Book to sell
300 A+B at $2.10.
(3) Interest on the BOX Book (Implied Order):
Market Maker Option A--Order to sell 300 at $1.05.
Market Maker Option B--Order to sell 300 at $1.05.
In this example, there is a Book Priority Public Customer Order on
the Complex Order Book (i.e. the Public Customer Complex Order to sell
300 at $2.10) but there is insufficient size on the Complex Order Book
to execute the entire Agency Order. As such, both the Solicited Order
and the Agency Order will be cancelled \26\, unless the OFP has
designated a Surrender Quantity.\27\
---------------------------------------------------------------------------
\26\ See BOX Rule 7270(b)(2)(i).
\27\ See BOX Rule 7270(b)(2)(iv).
---------------------------------------------------------------------------
When starting a Solicitation Auction the OFP may designate, for the
Solicited Order, the quantity of contracts of the Agency Order that it
is willing to surrender interest to on the Complex Order Book.\28\ The
Surrender Quantity only applies if at the time of execution there are
(1) Book Priority Public Customer Orders on the Complex Order Book or
(2) any bids (offers) on the Complex Order Book at any price better
than the proposed execution price, but there is insufficient size to
execute the entire Agency Complex Order at an improved price.\29\
---------------------------------------------------------------------------
\28\ See BOX Rule 7270(b)(2)(iv).
\29\ See BOX Rule 7270(b)(2)(iv).
---------------------------------------------------------------------------
If there is a Book Priority Public Customer Order on the Complex
Order Book, and the aggregate size of the Book Priority Public Customer
Order and all bids (offers) on the Complex Order Book at prices better
than the proposed execution price, excluding Responses and BOX Book
Interest, are equal to or less than the Surrender Quantity, the Agency
Complex Order will first execute against all such Book Priority Public
Customer Orders and such bids (offers) and then against the Solicited
Order. For example, an OFP submits a Complex Order through the
Solicitation Auction to buy1000 A+B at $2.10 and designates 200
contracts as the Surrender Quantity. During the one second auction, BOX
receives the following bids (offers) in time priority:
(1) Public Customer Complex Order on the Complex Order Book to sell
200 A+B at $2.10.
(2) Market Maker offer on the Complex Order Book to sell 800 A+B at
$2.10.
Without the Surrender Quantity, the Agency Order would execute
against the Public Customer Order on the Complex Order Book for 200
Contracts and against the Market Maker on the Complex Order Book for
800 contracts. Using the Surrender Quantity, however, the Agency Order
would still execute against the Public Customer Order on the Complex
Order Book, but would then execute against the Solicited Order for 800
contracts.
As stated above, the Surrender Quantity can also be used to allow
Solicitation auction trades which would otherwise be canceled. For
example, if an OFP submits a Complex Order through the Solicitation
Auction to buy 1000 A+B at $2.10 and designates 200 contracts as the
Surrender Quantity. During the one second auction, BOX receives the
following bids (offers) in time priority:
(1) Market Maker offer on the Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order on the Complex Order Book to sell
100 A+B at $2.10.
There is a Book Priority Public Customer, but there is insufficient
size to execute the entire Agency Order with interest on the Complex
Order Book, and this auction would normally be canceled. However, since
the OFP designated a Surrender Quantity of 200 that is greater than the
total size of the Book Priority Public Customer Order, the Agency Order
will execute 100 contracts against the Book Priority Public Customer
Order and the remaining 900 contracts against the Solicited Order.
However, if the aggregate size of the Book Priority Public Customer
Order and all bids (offers), excluding Responses and BOX Book Interest,
on the Complex Order Book at prices better than the proposed execution
price exceeds the Surrender Quantity, and there is insufficient size to
execute the entire Agency Complex Order, then both the Solicited
Complex Order and the
[[Page 92922]]
Agency Complex Order will be canceled.\30\ For example, the OFP submits
a Complex Order through the Solicitation Auction to buy1000 A+B at
$2.10 and designates 200 contracts as the Surrender Quantity. During
the one second auction, BOX receives the following bids (offers) in
time priority:
---------------------------------------------------------------------------
\30\ See BOX Rule 7270(b)(2)(iv)(A)(1).
---------------------------------------------------------------------------
(1) Market Maker offer on the Complex Order Book to sell 300 A+B at
$2.10.
(2) Public Customer Complex Order on the Complex Order Book to sell
300 A+B at $2.10.
Even though the OFP has designated a Surrender Quantity of 200
contracts, the total size of the Book Priority Public Customer Order
(300 contracts) is greater than the Surrender Quantity and there is
insufficient size on the Complex Order Book to execute the entire
Agency Complex Order. Therefore both the Solicited Complex Order and
Agency Complex Order will be canceled.
The Surrender Quantity can also be used to allow Solicitation
Auction trades when there are bids (offers) on the Complex Book on the
opposite side of the Agency Complex Order at a price better than the
proposed execution price, but there is insufficient size to execute the
entire Agency Order at an improved price.\31\ For example, an OFP
submits a Complex Order through the Solicitation Auction to buy 1000
A+B at $2.10 and designates 200 contracts as the Surrender Quantity.
During the one second auction, BOX receives the following bids (offers)
in time priority:
---------------------------------------------------------------------------
\31\ See BOX Rule 7270(b)(2)(iv)(A)(2).
---------------------------------------------------------------------------
(1) Market Maker offer on the Complex Order Book to sell 100 A+B at
$2.09.
(2) Public Customer Complex Order on the Complex Order Book to sell
100 A+B at $2.08.
Since there is insufficient size to execute the entire Agency
Complex Order at a better price, this auction would normally be
canceled. However, since the OFP designated a Surrender Quantity of 200
that is equal to the aggregate size of these better priced orders, the
Agency Order will execute 100 contracts against the Public Customer
Order at $2.10, 100 contracts against the Market Maker Order at $2.09
and the remaining 800 contracts against the Solicited Order. Note that
even though the Public Customer Order on the Complex Order Book was
priced lower than the proposed execution price at $2.08, it is executed
at the proposed execution price of $2.10. Public Customer bids (offers)
on the Complex Order Book at the time of the Surrender Quantity
execution that are priced higher (lower) that the proposed execution
price will be executed at the proposed execution price.\32\ Non-Public
Customer and Market Maker bids (offers) that are priced lower (higher)
than the proposed execution price will execute at their stated
price.\33\
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\32\ See BOX Rule 7270(b)(2)(iv)(B).
\33\ See BOX Rule 7270(b)(2)(iv)(B).
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The Exchange intends to implement the proposed change no later than
January 30, 2017. The Exchange will provide Participants with notice,
via Information Circular, of the exact implementation date.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\34\ in general, and Section
6(b)(5) of the Act,\35\ in particular, in that it is designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, to remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system, and, in general, to protect investors and the public interest.
In particular, the Exchange believes that the proposed rule change to
amend BOX Rule 7270 to provide for the execution of Complex Orders
through the Solicitation Auction mechanism on BOX is designed to help
BOX remain competitive among options exchanges and provide market
participants additional opportunities to execute block-size crossing
transactions in Complex Orders.
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\34\ 15 U.S.C. 78f(b).
\35\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed change provides for the execution of Complex Orders
through the Solicitation auction mechanism. As such, 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 does not believe the proposal will impose any
burden on intermarket competition, as the proposed rule will allow BOX
to compete with other options exchanges in the industry. Specifically,
ISE has a similar mechanism in place.\36\ Additionally, the Exchange
does not believe the proposal will impose any burden on intramarket
competition, as the Solicitation Auction mechanism is available to all
Participants and all OFPs may submit orders through the mechanism.
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\36\ See supra note 6.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate if consistent with the protection of investors
and the public interest, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \37\ and Rule 19b-4(f)(6)
thereunder.\38\
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\37\ 15 U.S.C. 78s(b)(3)(A).
\38\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings 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-2016-57 on the subject line.
[[Page 92923]]
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BOX-2016-57. 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-2016-57, and should be
submitted on or before January 10, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-30562 Filed 12-19-16; 8:45 am]
BILLING CODE 8011-01-P
