Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Price Protections for Complex Orders, 21320-21324 [2018-09806]
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Federal Register / Vol. 83, No. 90 / Wednesday, May 9, 2018 / Notices
transactions.14 Phlx Rule 1079(c)
restricts participation in FLEX cabinet
trades to entities that meet the
requirements set forth in this
subsection,15 and Phlx Rules 1079(d)
and (e) govern position limits and
exercise limits.16
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III. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act 17 and the rules and regulations
thereunder applicable to a national
securities exchange.18 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,19 which requires that
the rules of an exchange be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, 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.
The Commission believes that
allowing the closing of FLEX options
positions through cabinet trading is
designed to promote just and equitable
principles of trade and to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system by
allowing market participants to close
out their FLEX options positions that
have little or no value prior to the
options’ expiration. Currently, market
participants holding Phlx listed nonFLEX standardized options are allowed
to close out positions with little or no
value through an accommodation
transaction known as a cabinet trade.
FLEX option market participants
currently do not have the same
opportunity, despite the fact that there
may be tax advantages to closing out a
FLEX option position at a loss prior to
14 See proposed Phlx Rule 1079(g) and proposed
Commentary .03 to Phlx Rule 1059.
15 See Phlx Rule 1079(c), which sets forth
requirements for ROTs and specialists to be
assigned to FLEX Options as well as financial
requirements for floor brokers to trade FLEX
Options.
16 See Notice, supra note 3, at 12059 n.6. Phlx
Rule 1079(f) relates to the exercise-by-exception
procedure of Rule 805 of the Options Clearing
Corporation.
17 15 U.S.C. 78f.
18 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
19 15 U.S.C. 78f(b)(5).
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the options expiration, and instead must
hold the FLEX options until it expires,
most likely worthless.20 The Exchange
also noted in its proposal that recently
market participants have expressed an
interest in closing FLEX options under
the Phlx’s cabinet rule.21 The proposed
rule change, will therefore, provide
market participants with an opportunity
to liquidate FLEX option positions that
are of minimal or no value prior to the
FLEX options expiration, similar to that
currently permitted by other market
participants holding standardized
options.
The Commission recognizes that the
FLEX options market is unique in that
it allows the customization of certain
options terms between buyer and seller
and that, as result, the FLEX options
market does not typically have the
liquidity and active trading market
offered in the standardized options
market. Despite these unique
characteristics, however, allowing FLEX
market participants to close out their
FLEX options positions with little or no
value in an accommodation transaction
under cabinet trading procedures, and
subject to certain FLEX rules continuing
to apply, would appear to be helpful to
FLEX market participants.
Further, under the proposal, the
existing Phlx rules concerning enhanced
financial requirements and who may
trade FLEX under Phlx Rule 1079 would
continue to apply to any FLEX options
executed under the cabinet trading
rules. Any orders, whether a closing
order or, as permitted, an opening order,
executed against a Phlx FLEX option
cabinet order are still therefore
considered FLEX options orders, as
indicated in the proposed changes to
both Phlx Rules 1079 and 1059.
In addition, the position and exercise
limits for FLEX options will continue to
apply to FLEX options closed in the
cabinet. The Commission notes,
however, that under the FLEX rules
equity options do not have position
limits and positions in FLEX options are
generally not aggregated with
standardized options for position limit
purposes, with some exceptions.22 The
Commission expects Phlx to monitor
FLEX cabinet orders to ensure that the
lack of equity option position limits and
aggregation with standardized positions
do not present risks that would require
the Exchange to impose additional
20 As noted above, currently the FLEX rules do
not permit Flex options to be traded as a cabinet
order. Among other issues under the FLEX rules,
the minimum size increments required under the
FLEX rules essentially prohibit accommodation
transactions in FLEX options.
21 See Notice, supra note 3, at 12059–60.
22 See Phlx Rule 1079(d)(2)–(4).
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margin as permitted under Phlx Rule
1079(d)(2) governing FLEX options. In
addition, we request Phlx to monitor
positions opened to accommodate a
FLEX cabinet closing limit order to
ensure that such open positions do not
create any additional market risk that
would need to be addressed through
Phlx rules, such as requiring the
aggregation of positions in standardized
options with FLEX opening orders to
accommodate a FLEX cabinet order. We
would also expect Phlx to inform us
generally of any other concerns that
have arisen in allowing FLEX options to
be executed under the cabinet trading
rules.
For the reasons above, the
Commission finds that the proposed
rule change is consistent with the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,23 that the
proposed rule change (SR–Phlx–2018–
20) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–09838 Filed 5–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83163; File No. SR–BOX–
2018–13]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Adopt
Price Protections for Complex Orders
May 3, 2018.
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 April 25,
2018, 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 self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
23 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
24 17
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Federal Register / Vol. 83, No. 90 / Wednesday, May 9, 2018 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange proposes to adopt price
protections for Complex Orders. 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 website at https://
boxoptions.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 Exchange is proposing to adopt
price protections for Complex Orders
executed on BOX. The Exchange notes
that the proposed change is similar to
the rules of another exchange.3 The
Exchange is proposing debit/credit
checks and price validation for eligible
Complex Orders.4 The proposed
Complex Order price check parameters
will apply to all Complex Orders,
including auctions (COPIP, Facilitation,
and Solicitation) and Complex Qualified
Open Outcry Orders (‘‘Complex QOO
Orders’’).5
Debit/Credit Checks
The Exchange is proposing a debit/
credit check that will prevent the
execution of certain Complex Orders at
erroneous prices.6 Specifically, the
system will reject a Complex Limit
Order for a credit strategy with a net
debit price or a Complex Limit Order for
a debit strategy with a net credit price.
The system determines whether an
order is a debit or credit based on
general options volatility and pricing
principles, which the Exchange
understands are used by market
participants in their option pricing
models. With respect to options with
the same underlying:
• If two calls have the same
expiration date, the price of the call
with the lower exercise price is more
than the price of the call with the higher
exercise price;
• if two puts have the same
expiration date, the price of the put with
the higher exercise price is more than
the price of the put with the lower
exercise price; and
• if two calls (puts) have the same
exercise price, the price of the call (put)
with the near expiration is less than the
price of the call (put) with the farther
expiration.
In other words, a call (put) with a
lower (higher) exercise price is more
expensive than a call (put) with a higher
(lower) exercise price, because the
ability to buy stock at a lower price is
more valuable than the ability to buy
stock at a higher price, and the ability
to sell stock at a higher price is more
valuable than the ability to sell stock at
a lower price. A call (put) with a farther
expiration is more expensive than the
price of a call (put) with a nearer
expiration, because locking in a price
further in the future involves more risk
for the buyer and seller and thus is more
valuable, making an option (call or put)
with a farther expiration more
expensive than an option with a nearer
expiration.
Pursuant to the aforementioned
principles, the Exchange will reject an
eligible Complex Order that is a Limit
Complex Order for a credit strategy with
a net debit price, or a Limit Complex
Order for a debit strategy with a net
credit price. The system will identify
the strategy as a debit or credit based on
the potential profit or loss of the
Complex Order. The system
accomplishes this by first grouping the
legs of the Complex Order by expiration
date. The system then calculates the
potential profit or loss of each group for
a range of price levels of the underlying
security. The specific price levels are
equal to the strike price of each leg in
the group.
If, at all price levels, the profit or loss
for the group is break-even or profit,
then the group is a debit.7 If, at all price
levels, the profit or loss for the group is
break-even or loss, then the group is a
credit.8 If all the groups of a Complex
Order are a debit(credit), then the
Complex Order is a debit(credit).9
For example, assume a Complex
Order to buy 50 Jan $1 XYZ calls, sell
50 Jan $2 XYZ calls, sell 50 Jan $3 XYZ
calls, and buy 50 Jan $4 XYZ calls is
entered at a net credit price (i.e., the net
sale proceeds from the Jan $2 and $3
calls are larger than the net purchase
cost from the Jan $1 and $4 calls). Since
all legs have the same expiration, they
will be grouped together and the
potential profit or loss will be calculated
for the group. If, at all price levels, the
profit or loss for the group is break-even
or profit, then the Complex Order is a
debit. If, at all price levels, the profit or
loss for the group is break-even or loss,
then the Complex Order is a credit.
Upon evaluating the group, the system
will determine that the Complex Order
appears to be erroneously priced as a
net credit; it should instead be a net
debit because the profit or loss for the
group is break-even or profit for each
price level. Specifically, as shown in the
table below, the net purchase cost of the
Jan $1 and $4 XYZ calls is larger than
or equal to the net sale proceeds from
the Jan $2 and $3 calls at each strike
price level.
Profit or Loss
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Strike Price Level ($) .......................................................................................
Buy $1 Call ......................................................................................................
3 See Chicago Board Options Exchange,
Incorporated (‘‘Cboe’’) Interpretations and Polices
.08(c) and (g) to Rule 6.53C. The Exchange notes
that the proposed rules determine whether a
Complex Order is debit or credit by using a slightly
different process than that employed by Cboe.
Specifically, CBOE will group the legs of a Complex
Order into pairs and compare multiple pairs to
determine whether the Complex Order is a credit
or debit while the Exchange is proposing to create
groups (which may include more than two legs)
based on expiration date. However, the ultimate
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0
determination of whether a Complex Order is a
debit or credit is the same under the different
processes. Therefore, the Exchange believes the
proposed rule change is substantially similar to the
rules of Cboe. The proposed Maximum Price
protection is based on Cboe Rule 6.53C.08(g).
4 See proposed IM–7240–1.
5 Under Exchange rules, a Complex QOO Order
is not executed until it is processed by the system.
See Rule 7600(a). The system applies the proposed
price check parameters upon receipt of a Complex
QOO Order. Therefore, the proposed protections
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2
1
3
2
apply to Complex QOO Orders in the same way as
any other Complex Order received by the system.
6 See proposed IM–7240–1(a).
7 See proposed IM–7240–1(a)(1)(i). The reason
that the group is a debit is because an investor
would expect to pay for a strategy that produced a
profit.
8 See proposed IM–7240–1(a)(1)(ii). The reason
that the group is a credit is because an investor
would expect to be compensated for a strategy that
produced a loss.
9 See proposed IM–7240–1(a)(2).
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Federal Register / Vol. 83, No. 90 / Wednesday, May 9, 2018 / Notices
Sell $2 Call ......................................................................................................
Sell $3 Call ......................................................................................................
Buy $4 Call ......................................................................................................
0
0
0
0
0
0
¥1
0
0
¥2
¥1
0
Total Profit & Loss ....................................................................................
0
1
1
0
If not all groups of a Complex Order
are a debit or credit, the system, for
American-style options only, will
determine if the Complex Order is a
debit or a credit by comparing legs
across expiration dates.10 The system
will first convert all legs to the same
expiration and then compare the profit
or loss, as provided in proposed IM–
7240–1(a)(i), while taking into account
the conversion of the expiration date of
the leg(s). The system will evaluate the
converted leg(s) based on the fact that
an option with a farther expiration has
a higher value when compared to an
option with the same exercise price but
a closer expiration. For example, if a sell
leg is converted to a farther expiration
and the strategy still yields a profit
when the system evaluates the potential
profit or loss of the strategy, the strategy
is a debit because even by increasing the
value of a sell leg the strategy still yields
a profit.
For example, assume a Complex
Order to buy 50 Feb $1 XYZ calls, sell
50 Jan $2 XYZ calls, sell 50 Jan $3 XYZ
calls, and buy 50 Feb $4 XYZ calls, is
entered at a net credit price (i.e., the net
sale proceeds from the Jan $2 and $3
calls is larger than the net purchase cost
from the Feb $1 and $4 calls). Since not
all legs have the same expiration, they
will be grouped by expiration date first.
The Feb $1 and $4 calls would be one
group and the Jan $2 and $3 calls would
be the other group. This would yield
one group as a debit (Feb $1 and $4
calls) and one as a credit (Jan $2 and $3
calls). Therefore, the system would not
be able to determine if the Complex
Order is a debit or credit based on the
groups since not all of the groups are a
debit or credit. Instead, the system will
determine if the Complex Order is a
debit or credit by comparing all the legs
of the Complex Order together. The first
step is to convert the Jan $2 and $3 calls
to Feb $2 and $3 calls so all legs have
the same expiration and therefore the
potential profit or loss can be calculated
pursuant to proposed IM–7240–1(a)(1).
Upon evaluating all legs collectively,
the system will determine that the
Complex Order appears to be
erroneously priced as a net credit; it
should instead be a net debit because
the profit or loss for all the legs is breakeven or profit for each price level.
Specifically, as shown in the table
below, the net purchase cost of the Feb
$1 and $4 XYZ calls are larger than or
equal to the net sale proceeds from the
converted Feb $2 and$3 calls at each
underlying price level. After calculating
the profit or loss, the system will
determine if the outcome would change
based on the converted leg (i.e., the Jan
$2 and $3 calls being converted to Feb
$2 and $3 calls). The system will
determine that the outcome is correct
because the conversion of the Jan $2 and
$3 calls to more expensive Feb $2 and
$3 calls still yielded a break-even or
profit for each price level even though
the converted Feb $2 and $3 calls are
more expensive than the actual Jan $2
and $3 calls. Therefore, since selling
more expensive call options (i.e., Feb $2
and $3 calls) still yielded a break-even
or profit at all price levels, it can easily
be deduced that selling the actual, less
expensive, Jan $2 and $3 calls would
yield the same result.
Profit or Loss
Strike Price Level ($) .......................................................................................
Buy $1 Call ......................................................................................................
Sell $2 Call ......................................................................................................
Sell $3 Call ......................................................................................................
Buy $4 Call ......................................................................................................
1
0
0
0
0
2
1
0
0
0
3
2
¥1
0
0
4
3
¥2
¥1
0
Total Profit & Loss ....................................................................................
0
1
1
0
If the system cannot identify whether
the Complex Order is a credit or debit
pursuant to proposed IM–7240–1(a)(2)
or (3), the system will not apply the
check in proposed IM–7240–1(a).11
amozie on DSK3GDR082PROD with NOTICES
Maximum Price
After a Complex Order passes the
debit/credit check, the system will then
calculate a maximum price for certain
Complex Orders.12 Specifically, the
system will calculate a maximum price
for true butterfly spreads, vertical
spreads, and box spreads. After
calculating the maximum price, the
system will reject a Complex Limit
Order that is a true butterfly spread,
vertical spread, or a box spread if the
absolute value of the Complex Order’s
10 See
11 See
proposed IM–7240–1(a)(3).
proposed IM–7240–1(a)(4).
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17:39 May 08, 2018
limit price is greater than the maximum
price. For a Complex Market Order that
is a true butterfly spread, vertical
spread, or a box spread, the system will
reject the Complex Market Order if the
absolute value of the execution price is
greater than the maximum price. As
described in greater detail below, the
maximum price value is calculated by
adding a price buffer to the absolute
value of a true butterfly spread, vertical
spread, or box spread.
The price buffer is calculated by
taking a specified percentage of the
absolute value of the strategy.13 The
system will provide a minimum and
maximum value for the price buffer. If
the price buffer is below the minimum
value, then the minimum is used by the
12 See
13 See
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proposed IM–7240–1(b)(1).
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system when calculating the maximum
price value. If the price buffer is above
the maximum value, then the maximum
is used by the system when calculating
the maximum price value. The specified
percentage, minimum value, and
maximum value shall be the same for all
classes. Unless determined otherwise by
the Exchange and announced to
Participants via Circular, the specified
percentage is 5%, the minimum value is
$0.10, and the maximum value is $1.00.
An absolute value will be calculated
for those strategies to which the
Maximum Price protection applies. The
absolute value for a vertical spread is
the absolute difference between the
exercise prices of the two legs.14 The
absolute value for a true butterfly spread
14 See
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Federal Register / Vol. 83, No. 90 / Wednesday, May 9, 2018 / Notices
is the absolute difference between the
middle leg exercise price and the
exercise price of the leg on either side.15
The absolute value for a box spread is
the absolute difference between the
exercise prices of each pair of legs.16
Vertical Spread Example
Assume a Complex Limit Order to
buy 10 Dec $30 XYZ puts and sell 10
Dec $20 XYZ puts at $10.60. The
absolute value for the vertical spread is
$10 (the absolute value of 30–20). The
specified percentage is set to 5%, the
minimum value is set to $0.10, and the
maximum value is set to $1.00. The
price buffer for the vertical spread
would be $0.50 ($10.00 * .05). Therefore
the system will reject any Complex
Limit Order because the price ($10.60)
is greater than the Maximum Price of
$10.50 for the strategy.
amozie on DSK3GDR082PROD with NOTICES
True Butterfly Spread Example
Assume a Complex Limit Order to
buy 10 Dec $10 XYZ calls, sell 20 Dec
$40 XYZ calls, and buy 10 Dec $70 XYZ
calls at $30.50. The absolute value for
the butterfly spread is $30 (the absolute
value of 10–40 or 40–70). The specified
percentage is set to 5%, the minimum
value is set to $0.10, and the maximum
value is set to $1.00. The price buffer for
the butterfly spread would be $1.50
($30.00 * .05); however, since that
amount is above the maximum value,
the system would use the maximum
value ($1.00) as the price buffer instead.
Therefore the system would accept the
Complex Limit Order because the price
($30.50) is less than the Maximum Price
of $31.00 for the strategy.
Box Spread Example
Assume a Complex Limit Order to
buy 10 Dec $4 XYZ calls, sell 10 Dec $5
XYZ calls, buy 10 Dec $5 XYZ puts, and
sell 10 Dec $4 puts at $1.09. The
absolute value for the box spread is
$1.00 (the absolute value of 5–4). The
specified percentage is set to 5%, the
minimum value is set to $0.10, and the
maximum value is set to $1.00. The
price buffer for the box spread would be
$0.05 ($1.00 * .05); however, since that
amount is below the minimum value,
the system would use the minimum
value ($0.10) as the price buffer instead.
Therefore the system would accept the
Complex Limit Order because the price
($1.09) is less than the Maximum Price
of $1.10 for the strategy.
The Exchange will provide notice of
the exact implementation date of the
proposed protections, via Circular, at
least two weeks prior to implementing
15 See
16 See
proposed IM–7240–1(b)(3).
proposed IM–7240–1(b)(4).
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17:39 May 08, 2018
the proposed change. The Exchange
anticipates implementing the proposed
protections during Q2 of 2018.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),17 in general, and Section 6(b)(5)
of the Act,18 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, 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 proposed rule
change to implement a debit/credit
check for Complex Orders for which the
Exchange can determine whether a
Complex Order is a debit or credit is
consistent with the Act. With the use of
debit/credit checks, the Exchange can
further assist with the maintenance of a
fair and orderly market by mitigating the
potential risks associated with Complex
Orders trading at prices that are
inconsistent with their strategies (which
may result in executions at prices that
are extreme and potentially erroneous),
which ultimately protects investors.
This proposed implementation of the
debit/credit check promotes just and
equitable principles of trade, as it is
based on the same general option and
volatility pricing principles which the
Exchange understands are used by
market participants in their option
pricing models.
Additionally, the Exchange also
believes that calculating a maximum
price for true butterfly spreads, vertical
spreads, and box spreads will assist
with the maintenance of fair and orderly
markets by helping to mitigate the
potential risks associated with Complex
Orders trading at extreme and
potentially erroneous prices that are
inconsistent with particular Complex
Order strategies. Further, the Exchange
notes that the maximum price is
designed to mitigate the potential risks
of executions at prices that are not
within an acceptable price range, as a
means to help mitigate the potential
risks associated with Complex Orders
trading at prices that are inconsistent
with their strategies, in addition to the
debit/credit check. As such, the
17 15
18 15
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U.S.C. 78f(b)(5).
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proposed rule change is designed to
protect investors and the public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed Complex Order
protections will impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. In this regard and
as indicated above, the Exchange notes
that the rule change is being proposed
as a competitive response to the rules of
another exchange.19 Additionally, the
Exchange believes the proposed rule
change is beneficial to Participants as it
will provide increased protections that
will prevent the execution of certain
Complex Orders that were entered in
error. The Exchange believes the
proposal is pro-competitive and should
serve to attract additional Complex
Orders to the Exchange. Further, the
Exchange does not believe the proposed
change will not impose a burden on
intramarket competition because it is
available to all Participants.
For the reasons stated, the Exchange
does not believe that the proposed rule
changes will impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act, and the Exchange
believes the proposed change will, in
fact, enhance competition.
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, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 20 and Rule 19b–
4(f)(6) thereunder.21
19 See
supra, note 3.
U.S.C. 78s(b)(3)(A).
21 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.
20 15
E:\FR\FM\09MYN1.SGM
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21324
Federal Register / Vol. 83, No. 90 / Wednesday, May 9, 2018 / Notices
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 22 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 23
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that the proposed
rule change may become operative upon
filing. The Exchange states that waiver
of the operative delay would be
consistent with the protection of
investors and the public interest
because it will allow the Exchange to
immediately provide Participants with
additional protections for Complex
Orders submitted and executed on the
Exchange. The Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest.
Therefore, the Commission hereby
waives the operative delay and
designates the proposal as operative
upon filing.24
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:
amozie on DSK3GDR082PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2018–13 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
CFR 240.19b–4(f)(6).
CFR 240.19b–4(f)(6)(iii).
24 For purposes only of waiving the 30-day
operative delay, the Commission has also
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BOX–2018–13. 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 website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BOX–2018–13, and should
be submitted on or before May 30, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–09806 Filed 5–8–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83166; File No. SR–CBOE–
2018–036]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Extend the Operation
of the SPXPM Pilot Program
22 17
23 17
VerDate Sep<11>2014
17:39 May 08, 2018
Jkt 244001
May 3, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
25 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00068
Fmt 4703
Sfmt 4703
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 2,
2018, Cboe Exchange, Inc. (the
‘‘Exchange’’ or ‘‘Cboe Options’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the Exchange. The
Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of
the Act 3 and Rule 19b–4(f)(6)
thereunder.4 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 extend the
operation of its SPXPM pilot program.
The text of the proposed rule change is
provided below.
(additions are italicized; deletions are
[bracketed])
*
*
*
*
*
Cboe Exchange, Inc. Rules
*
*
*
*
*
Rule 24.9. Terms of Index Option
Contracts
(No change).
. . . Interpretations and Policies:
.01–.13 (No change).
.14 In addition to A.M.-settled
Standard & Poor’s 500 Stock Index
options approved for trading on the
Exchange pursuant to Rule 24.9, the
Exchange may also list options on the
S&P 500 Index whose exercise
settlement value is derived from closing
prices on the last trading day prior to
expiration (P.M.-settled third Friday-ofthe-month SPX options series). The
Exchange may also list options on the
Mini-SPX Index (‘‘XSP’’) whose exercise
settlement value is derived from closing
prices on the last trading day prior to
expiration (‘‘P.M.-settled’’). P.M.-settled
third Friday-of-the-month SPX options
series and P.M.-settled XSP options will
be listed for trading for a pilot period
ending [May 3]November 5, 2018.
*
*
*
*
*
The text of the proposed rule change
is also available on the Exchange’s
website (https://www.cboe.com/
AboutCBOE/
CBOELegalRegulatoryHome.aspx), at
the Exchange’s Office of the Secretary,
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
E:\FR\FM\09MYN1.SGM
09MYN1
]]>Agencies
[Federal Register Volume 83, Number 90 (Wednesday, May 9, 2018)]
[Notices]
[Pages 21320-21324]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09806]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83163; File No. SR-BOX-2018-13]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Adopt Price Protections for Complex Orders
May 3, 2018.
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 April 25, 2018, 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 self-regulatory organization. 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.
---------------------------------------------------------------------------
[[Page 21321]]
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to adopt price protections for Complex
Orders. 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 website at https://boxoptions.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 Exchange is proposing to adopt price protections for Complex
Orders executed on BOX. The Exchange notes that the proposed change is
similar to the rules of another exchange.\3\ The Exchange is proposing
debit/credit checks and price validation for eligible Complex
Orders.\4\ The proposed Complex Order price check parameters will apply
to all Complex Orders, including auctions (COPIP, Facilitation, and
Solicitation) and Complex Qualified Open Outcry Orders (``Complex QOO
Orders'').\5\
---------------------------------------------------------------------------
\3\ See Chicago Board Options Exchange, Incorporated (``Cboe'')
Interpretations and Polices .08(c) and (g) to Rule 6.53C. The
Exchange notes that the proposed rules determine whether a Complex
Order is debit or credit by using a slightly different process than
that employed by Cboe. Specifically, CBOE will group the legs of a
Complex Order into pairs and compare multiple pairs to determine
whether the Complex Order is a credit or debit while the Exchange is
proposing to create groups (which may include more than two legs)
based on expiration date. However, the ultimate determination of
whether a Complex Order is a debit or credit is the same under the
different processes. Therefore, the Exchange believes the proposed
rule change is substantially similar to the rules of Cboe. The
proposed Maximum Price protection is based on Cboe Rule 6.53C.08(g).
\4\ See proposed IM-7240-1.
\5\ Under Exchange rules, a Complex QOO Order is not executed
until it is processed by the system. See Rule 7600(a). The system
applies the proposed price check parameters upon receipt of a
Complex QOO Order. Therefore, the proposed protections apply to
Complex QOO Orders in the same way as any other Complex Order
received by the system.
---------------------------------------------------------------------------
Debit/Credit Checks
The Exchange is proposing a debit/credit check that will prevent
the execution of certain Complex Orders at erroneous prices.\6\
Specifically, the system will reject a Complex Limit Order for a credit
strategy with a net debit price or a Complex Limit Order for a debit
strategy with a net credit price.
---------------------------------------------------------------------------
\6\ See proposed IM-7240-1(a).
---------------------------------------------------------------------------
The system determines whether an order is a debit or credit based
on general options volatility and pricing principles, which the
Exchange understands are used by market participants in their option
pricing models. With respect to options with the same underlying:
If two calls have the same expiration date, the price of
the call with the lower exercise price is more than the price of the
call with the higher exercise price;
if two puts have the same expiration date, the price of
the put with the higher exercise price is more than the price of the
put with the lower exercise price; and
if two calls (puts) have the same exercise price, the
price of the call (put) with the near expiration is less than the price
of the call (put) with the farther expiration.
In other words, a call (put) with a lower (higher) exercise price
is more expensive than a call (put) with a higher (lower) exercise
price, because the ability to buy stock at a lower price is more
valuable than the ability to buy stock at a higher price, and the
ability to sell stock at a higher price is more valuable than the
ability to sell stock at a lower price. A call (put) with a farther
expiration is more expensive than the price of a call (put) with a
nearer expiration, because locking in a price further in the future
involves more risk for the buyer and seller and thus is more valuable,
making an option (call or put) with a farther expiration more expensive
than an option with a nearer expiration.
Pursuant to the aforementioned principles, the Exchange will reject
an eligible Complex Order that is a Limit Complex Order for a credit
strategy with a net debit price, or a Limit Complex Order for a debit
strategy with a net credit price. The system will identify the strategy
as a debit or credit based on the potential profit or loss of the
Complex Order. The system accomplishes this by first grouping the legs
of the Complex Order by expiration date. The system then calculates the
potential profit or loss of each group for a range of price levels of
the underlying security. The specific price levels are equal to the
strike price of each leg in the group.
If, at all price levels, the profit or loss for the group is break-
even or profit, then the group is a debit.\7\ If, at all price levels,
the profit or loss for the group is break-even or loss, then the group
is a credit.\8\ If all the groups of a Complex Order are a
debit(credit), then the Complex Order is a debit(credit).\9\
---------------------------------------------------------------------------
\7\ See proposed IM-7240-1(a)(1)(i). The reason that the group
is a debit is because an investor would expect to pay for a strategy
that produced a profit.
\8\ See proposed IM-7240-1(a)(1)(ii). The reason that the group
is a credit is because an investor would expect to be compensated
for a strategy that produced a loss.
\9\ See proposed IM-7240-1(a)(2).
---------------------------------------------------------------------------
For example, assume a Complex Order to buy 50 Jan $1 XYZ calls,
sell 50 Jan $2 XYZ calls, sell 50 Jan $3 XYZ calls, and buy 50 Jan $4
XYZ calls is entered at a net credit price (i.e., the net sale proceeds
from the Jan $2 and $3 calls are larger than the net purchase cost from
the Jan $1 and $4 calls). Since all legs have the same expiration, they
will be grouped together and the potential profit or loss will be
calculated for the group. If, at all price levels, the profit or loss
for the group is break-even or profit, then the Complex Order is a
debit. If, at all price levels, the profit or loss for the group is
break-even or loss, then the Complex Order is a credit. Upon evaluating
the group, the system will determine that the Complex Order appears to
be erroneously priced as a net credit; it should instead be a net debit
because the profit or loss for the group is break-even or profit for
each price level. Specifically, as shown in the table below, the net
purchase cost of the Jan $1 and $4 XYZ calls is larger than or equal to
the net sale proceeds from the Jan $2 and $3 calls at each strike price
level.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Profit or Loss
----------------------------------------------------------------------------------------------------------------
Strike Price Level ($).......................... 1 2 3 4
Buy $1 Call..................................... 0 1 2 3
[[Page 21322]]
Sell $2 Call.................................... 0 0 -1 -2
Sell $3 Call.................................... 0 0 0 -1
Buy $4 Call..................................... 0 0 0 0
---------------------------------------------------------------
Total Profit & Loss......................... 0 1 1 0
----------------------------------------------------------------------------------------------------------------
If not all groups of a Complex Order are a debit or credit, the
system, for American-style options only, will determine if the Complex
Order is a debit or a credit by comparing legs across expiration
dates.\10\ The system will first convert all legs to the same
expiration and then compare the profit or loss, as provided in proposed
IM-7240-1(a)(i), while taking into account the conversion of the
expiration date of the leg(s). The system will evaluate the converted
leg(s) based on the fact that an option with a farther expiration has a
higher value when compared to an option with the same exercise price
but a closer expiration. For example, if a sell leg is converted to a
farther expiration and the strategy still yields a profit when the
system evaluates the potential profit or loss of the strategy, the
strategy is a debit because even by increasing the value of a sell leg
the strategy still yields a profit.
---------------------------------------------------------------------------
\10\ See proposed IM-7240-1(a)(3).
---------------------------------------------------------------------------
For example, assume a Complex Order to buy 50 Feb $1 XYZ calls,
sell 50 Jan $2 XYZ calls, sell 50 Jan $3 XYZ calls, and buy 50 Feb $4
XYZ calls, is entered at a net credit price (i.e., the net sale
proceeds from the Jan $2 and $3 calls is larger than the net purchase
cost from the Feb $1 and $4 calls). Since not all legs have the same
expiration, they will be grouped by expiration date first. The Feb $1
and $4 calls would be one group and the Jan $2 and $3 calls would be
the other group. This would yield one group as a debit (Feb $1 and $4
calls) and one as a credit (Jan $2 and $3 calls). Therefore, the system
would not be able to determine if the Complex Order is a debit or
credit based on the groups since not all of the groups are a debit or
credit. Instead, the system will determine if the Complex Order is a
debit or credit by comparing all the legs of the Complex Order
together. The first step is to convert the Jan $2 and $3 calls to Feb
$2 and $3 calls so all legs have the same expiration and therefore the
potential profit or loss can be calculated pursuant to proposed IM-
7240-1(a)(1). Upon evaluating all legs collectively, the system will
determine that the Complex Order appears to be erroneously priced as a
net credit; it should instead be a net debit because the profit or loss
for all the legs is break-even or profit for each price level.
Specifically, as shown in the table below, the net purchase cost of the
Feb $1 and $4 XYZ calls are larger than or equal to the net sale
proceeds from the converted Feb $2 and$3 calls at each underlying price
level. After calculating the profit or loss, the system will determine
if the outcome would change based on the converted leg (i.e., the Jan
$2 and $3 calls being converted to Feb $2 and $3 calls). The system
will determine that the outcome is correct because the conversion of
the Jan $2 and $3 calls to more expensive Feb $2 and $3 calls still
yielded a break-even or profit for each price level even though the
converted Feb $2 and $3 calls are more expensive than the actual Jan $2
and $3 calls. Therefore, since selling more expensive call options
(i.e., Feb $2 and $3 calls) still yielded a break-even or profit at all
price levels, it can easily be deduced that selling the actual, less
expensive, Jan $2 and $3 calls would yield the same result.
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Profit or Loss
----------------------------------------------------------------------------------------------------------------
Strike Price Level ($).......................... 1 2 3 4
Buy $1 Call..................................... 0 1 2 3
Sell $2 Call.................................... 0 0 -1 -2
Sell $3 Call.................................... 0 0 0 -1
Buy $4 Call..................................... 0 0 0 0
---------------------------------------------------------------
Total Profit & Loss......................... 0 1 1 0
----------------------------------------------------------------------------------------------------------------
If the system cannot identify whether the Complex Order is a credit
or debit pursuant to proposed IM-7240-1(a)(2) or (3), the system will
not apply the check in proposed IM-7240-1(a).\11\
---------------------------------------------------------------------------
\11\ See proposed IM-7240-1(a)(4).
---------------------------------------------------------------------------
Maximum Price
After a Complex Order passes the debit/credit check, the system
will then calculate a maximum price for certain Complex Orders.\12\
Specifically, the system will calculate a maximum price for true
butterfly spreads, vertical spreads, and box spreads. After calculating
the maximum price, the system will reject a Complex Limit Order that is
a true butterfly spread, vertical spread, or a box spread if the
absolute value of the Complex Order's limit price is greater than the
maximum price. For a Complex Market Order that is a true butterfly
spread, vertical spread, or a box spread, the system will reject the
Complex Market Order if the absolute value of the execution price is
greater than the maximum price. As described in greater detail below,
the maximum price value is calculated by adding a price buffer to the
absolute value of a true butterfly spread, vertical spread, or box
spread.
---------------------------------------------------------------------------
\12\ See proposed IM-7240-1(b).
---------------------------------------------------------------------------
The price buffer is calculated by taking a specified percentage of
the absolute value of the strategy.\13\ The system will provide a
minimum and maximum value for the price buffer. If the price buffer is
below the minimum value, then the minimum is used by the system when
calculating the maximum price value. If the price buffer is above the
maximum value, then the maximum is used by the system when calculating
the maximum price value. The specified percentage, minimum value, and
maximum value shall be the same for all classes. Unless determined
otherwise by the Exchange and announced to Participants via Circular,
the specified percentage is 5%, the minimum value is $0.10, and the
maximum value is $1.00.
---------------------------------------------------------------------------
\13\ See proposed IM-7240-1(b)(1).
---------------------------------------------------------------------------
An absolute value will be calculated for those strategies to which
the Maximum Price protection applies. The absolute value for a vertical
spread is the absolute difference between the exercise prices of the
two legs.\14\ The absolute value for a true butterfly spread
[[Page 21323]]
is the absolute difference between the middle leg exercise price and
the exercise price of the leg on either side.\15\ The absolute value
for a box spread is the absolute difference between the exercise prices
of each pair of legs.\16\
---------------------------------------------------------------------------
\14\ See proposed IM-7240-1(b)(2).
\15\ See proposed IM-7240-1(b)(3).
\16\ See proposed IM-7240-1(b)(4).
---------------------------------------------------------------------------
Vertical Spread Example
Assume a Complex Limit Order to buy 10 Dec $30 XYZ puts and sell 10
Dec $20 XYZ puts at $10.60. The absolute value for the vertical spread
is $10 (the absolute value of 30-20). The specified percentage is set
to 5%, the minimum value is set to $0.10, and the maximum value is set
to $1.00. The price buffer for the vertical spread would be $0.50
($10.00 * .05). Therefore the system will reject any Complex Limit
Order because the price ($10.60) is greater than the Maximum Price of
$10.50 for the strategy.
True Butterfly Spread Example
Assume a Complex Limit Order to buy 10 Dec $10 XYZ calls, sell 20
Dec $40 XYZ calls, and buy 10 Dec $70 XYZ calls at $30.50. The absolute
value for the butterfly spread is $30 (the absolute value of 10-40 or
40-70). The specified percentage is set to 5%, the minimum value is set
to $0.10, and the maximum value is set to $1.00. The price buffer for
the butterfly spread would be $1.50 ($30.00 * .05); however, since that
amount is above the maximum value, the system would use the maximum
value ($1.00) as the price buffer instead. Therefore the system would
accept the Complex Limit Order because the price ($30.50) is less than
the Maximum Price of $31.00 for the strategy.
Box Spread Example
Assume a Complex Limit Order to buy 10 Dec $4 XYZ calls, sell 10
Dec $5 XYZ calls, buy 10 Dec $5 XYZ puts, and sell 10 Dec $4 puts at
$1.09. The absolute value for the box spread is $1.00 (the absolute
value of 5-4). The specified percentage is set to 5%, the minimum value
is set to $0.10, and the maximum value is set to $1.00. The price
buffer for the box spread would be $0.05 ($1.00 * .05); however, since
that amount is below the minimum value, the system would use the
minimum value ($0.10) as the price buffer instead. Therefore the system
would accept the Complex Limit Order because the price ($1.09) is less
than the Maximum Price of $1.10 for the strategy.
The Exchange will provide notice of the exact implementation date
of the proposed protections, via Circular, at least two weeks prior to
implementing the proposed change. The Exchange anticipates implementing
the proposed protections during Q2 of 2018.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\17\ in general, and Section 6(b)(5) of the Act,\18\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, 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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the proposed rule change to implement a debit/credit
check for Complex Orders for which the Exchange can determine whether a
Complex Order is a debit or credit is consistent with the Act. With the
use of debit/credit checks, the Exchange can further assist with the
maintenance of a fair and orderly market by mitigating the potential
risks associated with Complex Orders trading at prices that are
inconsistent with their strategies (which may result in executions at
prices that are extreme and potentially erroneous), which ultimately
protects investors. This proposed implementation of the debit/credit
check promotes just and equitable principles of trade, as it is based
on the same general option and volatility pricing principles which the
Exchange understands are used by market participants in their option
pricing models.
Additionally, the Exchange also believes that calculating a maximum
price for true butterfly spreads, vertical spreads, and box spreads
will assist with the maintenance of fair and orderly markets by helping
to mitigate the potential risks associated with Complex Orders trading
at extreme and potentially erroneous prices that are inconsistent with
particular Complex Order strategies. Further, the Exchange notes that
the maximum price is designed to mitigate the potential risks of
executions at prices that are not within an acceptable price range, as
a means to help mitigate the potential risks associated with Complex
Orders trading at prices that are inconsistent with their strategies,
in addition to the debit/credit check. As such, the proposed rule
change is designed to protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed Complex Order
protections will impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act. In this regard
and as indicated above, the Exchange notes that the rule change is
being proposed as a competitive response to the rules of another
exchange.\19\ Additionally, the Exchange believes the proposed rule
change is beneficial to Participants as it will provide increased
protections that will prevent the execution of certain Complex Orders
that were entered in error. The Exchange believes the proposal is pro-
competitive and should serve to attract additional Complex Orders to
the Exchange. Further, the Exchange does not believe the proposed
change will not impose a burden on intramarket competition because it
is available to all Participants.
---------------------------------------------------------------------------
\19\ See supra, note 3.
---------------------------------------------------------------------------
For the reasons stated, the Exchange does not believe that the
proposed rule changes will impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the Act, and
the Exchange believes the proposed change will, in fact, enhance
competition.
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, it has become effective pursuant to Section
19(b)(3)(A) of the Act \20\ and Rule 19b-4(f)(6) thereunder.\21\
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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.
---------------------------------------------------------------------------
[[Page 21324]]
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \22\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \23\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the proposed rule change may become operative upon filing. The Exchange
states that waiver of the operative delay would be consistent with the
protection of investors and the public interest because it will allow
the Exchange to immediately provide Participants with additional
protections for Complex Orders submitted and executed on the Exchange.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Therefore, the Commission hereby waives the operative delay and
designates the proposal as operative upon filing.\24\
---------------------------------------------------------------------------
\22\ 17 CFR 240.19b-4(f)(6).
\23\ 17 CFR 240.19b-4(f)(6)(iii).
\24\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 [email protected]. Please include
File Number SR-BOX-2018-13 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-2018-13. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2018-13, and should be submitted on
or before May 30, 2018.
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\25\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-09806 Filed 5-8-18; 8:45 am]
BILLING CODE 8011-01-P
