Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market LLC (“BOX”) Options Facility To Amend Fees and Rebates for Non-Auction Transactions, 27807-27812 [2018-12751]
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Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices
Commission of any written comments
that it receives.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 12 and paragraph (f) of Rule
19b–4 thereunder.13 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.
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:
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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–
NSCC–2018–002 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–NSCC–2018–002. 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
12 15
U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
16:38 Jun 13, 2018
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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 NSCC and on NSCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–NSCC–
2018–002 and should be submitted on
or before July 5, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–12752 Filed 6–13–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83398; File No. SR–FINRA–
2018–013]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Designation
of Longer Period for Commission
Action on a Proposed Rule Change To
Establish a Second Trade Reporting
Facility in Conjunction With Nasdaq,
Inc.
June 8, 2018.
On April 19, 2018, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to establish a
second Trade Reporting Facility to be
operated in conjunction with Nasdaq,
Inc. The proposed rule change was
published for comment in the Federal
Register on April 26, 2018.3 The
Commission received no comment
letters on the proposal.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of the notice of the filing of a proposed
rule change, or within such longer
period up to 90 days as the Commission
may designate if it finds such longer
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 83082
(April 20, 2018), 83 FR 18379 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
period to be appropriate and publishes
its reasons for so finding or as to which
the self-regulatory organization
consents, the Commission shall either
approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether the proposed rule change
should be disapproved. The 45th day for
this filing is June 10, 2018. The
Commission is extending this 45-day
time period.
The Commission has determined that
it is appropriate to designate a longer
period within which to take action on
the proposed rule change so that it has
sufficient time to consider the issues
raised by the proposed rule change.
Accordingly, pursuant to Section
19(b)(2) of the Act,5 the Commission
designates July 25, 2018, as the date by
which the Commission shall either
approve, disapprove, or institute
proceedings to determine whether to
disapprove the proposed rule change
(File No. SR FINRA–2018–013).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–12753 Filed 6–13–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83396; File No. SR–BOX–
2018–21]
Self-Regulatory Organizations; BOX
Options Exchange LLC; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule on the BOX Market
LLC (‘‘BOX’’) Options Facility To
Amend Fees and Rebates for NonAuction Transactions
June 8, 2018.
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 May 31,
2018, BOX Options Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange filed the proposed rule change
pursuant to Section 19(b)(3)(A)(ii) of the
1 15
PO 00000
Frm 00059
Fmt 4703
Sfmt 4703
27807
5 Id.
6 17
CFR 200.30–3(a)(31).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Act,3 and Rule 19b–4(f)(2) thereunder,4
which renders the proposal effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend the Fee Schedule on the BOX
Market LLC (‘‘BOX’’) options facility.
While changes to the fee schedule
pursuant to this proposal will be
effective upon filing, the changes will
become operative on June 1, 2018. 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://
boxexchange.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Exchange Fees for Non-Auction
Transactions
The Exchange proposes to adjust
certain fees for Non-Auction
Transactions. Currently, for all nonauction transactions, fees and credits are
assessed depending upon three factors:
(i) The account type of the Participant
submitting the order; (ii) whether the
Participant is a liquidity provider or
liquidity taker; and (iii) the account type
of the contra party. Non-Auction
Transactions in Penny Pilot Classes are
assessed different fees or credits than
Non-Auction Transactions in NonPenny Pilot Classes.
The current fees for Non-Auction
Transactions are:
1. Purpose
The Exchange proposes to make
changes to Section I. (Electronic
Transaction Fees).
Penny Pilot Classes
Account type
Maker fee
Public Customer ........................................
Professional Customer or Broker Dealer ..
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Market Maker ............................................
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ...........................................
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ...........................................
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ...........................................
First, the Exchange proposes to
remove the fees assessed for Public
Customers that make or take liquidity
against Public Customers in Penny Pilot
and Non-Penny Pilot Classes. Next, the
Exchange proposes to eliminate the fees
assessed to Public Customers that make
liquidity against Professional
Customers/Broker Dealers and Market
Makers in Penny Pilot and Non-Penny
Pilot Classes. Lastly, the Exchange
proposes to assess a $0.20 credit for
Public Customers that take liquidity
from Professional Customers/Broker
Dealers and Market Makers in Penny
Pilot Classes and a $0.50 credit for
Public Customers that take liquidity
from Professional Customers/Broker
Dealers and Market Makers in NonPenny Pilot Classes.
The Exchange proposes to adjust the
fees assessed for Professional Customers
and Broker Dealers. In Penny Pilot
Classes, the Exchange proposes to adjust
the fees assessed for Professional
Customers and Broker Dealers that that
3 15
U.S.C. 78s(b)(3)(A)(ii).
VerDate Sep<11>2014
16:38 Jun 13, 2018
Non-Penny Pilot Classes
Contra party
take liquidity from all other
Participants. Specifically, the Exchange
proposes to increase the fee assessed to
Professional Customers and Broker
Dealers that take liquidity from Public
Customers, Professional Customers/
Broker Dealers and Market Makers to
$0.50 from $0.45 in Penny Pilot Classes.
Additionally, the Exchange proposes to
increase the fees assessed for
Professional Customers and Broker
Dealers making liquidity against
Professional Customers and Broker
Dealers and Market Makers in Penny
Pilot Classes to $0.15 from $0.05. For
Non-Penny Pilot Classes, the Exchange
proposes to increase the fees assessed
for Professional Customers and Broker
Dealers making liquidity against NonPublic Customers to $0.15 from $0.05.
The Exchange also proposes to increase
the fees assessed for Professional
Customers and Broker Dealers taking
liquidity from Public Customers to
$0.95 from $0.85 in Non-Penny Pilot
Classes. Lastly, with regard to
4 17
Jkt 244001
$0.05
0.05
0.05
0.60
0.05
0.05
0.27
0.00
0.00
PO 00000
Taker fee
$0.05
0.05
0.05
0.45
0.45
0.45
0.43
0.29
0.29
Fmt 4703
Sfmt 4703
$0.05
0.05
0.05
0.95
0.05
0.05
0.65
0.00
0.00
Taker fee
$0.05
0.05
0.05
0.85
0.60
0.60
0.80
0.40
0.40
Professional Customers/Broker Dealers
taking liquidity from Professional
Customers/Broker Dealers and Market
Makers in Non-Penny Pilot Classes, the
Exchange proposes to increase the fees
assessed to $0.85 from $0.60.
The Exchange then proposes to adjust
the fees assessed for Market Makers in
Non-Auction Transactions. First, the
Exchange proposes to increase the fees
assessed on Market Makers making
liquidity against a Public Customer to
$0.50 from $0.27 in Penny Pilot Classes.
With regard to Market Makers taking
liquidity against Public Customers in
Penny Pilot Classes, the Exchange
proposes to increase the fee to $0.50
from $0.43. Further, the Exchange
proposes to increase the fee for Market
Makers taking liquidity against
Professional Customers and Broker
Dealers and Market Makers in Penny
Pilot Classes to $0.50 from $0.29. Lastly,
the Exchange proposes to adjust the fees
assessed to Market Makers in NonPenny Pilot Classes. Specifically, the
CFR 240.19b–4(f)(2).
Frm 00060
Maker fee
E:\FR\FM\14JNN1.SGM
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Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices
Exchange proposes to increase the fee
assessed to a Market Maker when
making liquidity from a Public
Customer in Non-Penny Pilot Classes to
$0.95 from $0.65. In Non-Penny Pilot
Classes, the Exchange proposes to
Broker Dealers and Market Makers in
Non-Penny Pilot Classes to $0.75 from
$0.40.
The fees for Non-Auction
Transactions will be as follows:
increase the fee assessed to Market
Makers taking liquidity from a Public
Customer to $0.95 from $0.80. Lastly,
the Exchange proposes to increase the
fees assessed to Market Makers taking
liquidity from Professional Customers/
Penny Pilot Classes
Account type
Maker fee
Public Customer ........................................
Professional Customer or Broker Dealer
Market Maker ............................................
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ...........................................
Public Customer .......................................
Professional Customer/Broker Dealer
Market Maker ...........................................
Public Customer .......................................
Professional Customer/Broker Dealer ......
Market Maker ...........................................
Tiered Volume Rebate for Non-Auction
Transactions
The Exchange proposes to amend
Section I.A.1. of the BOX Fee Schedule,
1
2
3
4
.............
.............
.............
.............
.............
.............
.............
.............
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The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the Act,
in general, and Section 6(b)(4) and
6(b)(5)of the Act,5 in particular, in that
it provides for the equitable allocation
of reasonable dues, fees, and other
charges among BOX Participants and
other persons using its facilities and
does not unfairly discriminate between
customers, issuers, brokers or dealers.
The proposed changes will allow the
5 15
U.S.C. 78f(b)(4) and (5).
VerDate Sep<11>2014
16:38 Jun 13, 2018
Jkt 244001
$0.00
0.00
0.00
0.95
0.15
0.15
0.95
0.00
0.00
Taker fee
$0.00
(0.50)
(0.50)
0.95
0.85
0.85
0.95
0.75
0.75
$0.00
(0.05)
(0.15)
(0.25)
Non-Penny Pilot Classes
Maker
$0.00
(0.20)
(0.30)
(0.50)
Taker
$0.00
(0.20)
(0.30)
(0.50)
Section I.A.1. of the BOX Fee Schedule
will be as follows:
Per contract rebate
Penny Pilot Classes
Maker
Non-Auction Transactions
The Exchange believes it is equitable,
reasonable and not unfairly
discriminatory to assess fees according
Fmt 4703
Sfmt 4703
Taker
$0.00
(0.05)
(0.10)
(0.27)
Exchange to be competitive with other
exchanges and to apply fees, credits and
rebates in a manner that is equitable
among all BOX Participants. Further,
the Exchange operates within a highly
competitive market in which market
participants can readily direct order
flow to any other competing exchange if
they determine fees at a particular
exchange to be excessive.
Frm 00061
Taker
$0.00
(0.05)
(0.15)
(0.25)
Penny Pilot Classes and Non-Penny
Pilot Classes. The new per contract
rebate for Public Customers in NonAuction Transactions as set forth in
PO 00000
Maker fee
Customers in Non Auction
Transactions. The current Tiered
Volume Rebate for Public Customers in
Non-Auction Transactions is as follows:
Maker
0.000–0.129 .................................................................................................
0.130–0.339 .................................................................................................
0.340–0.549 .................................................................................................
0.550 and Above .........................................................................................
2. Statutory Basis
$0.00
(0.20)
(0.20)
0.50
0.50
0.50
0.50
0.50
0.50
Penny Pilot Classes
Percentage thresholds
of national customer
volume in multiplylisted options classes
(monthly)
Tier
Taker fee
Per contract rebate
0.000–0.129 .................................................................................................
0.130–0.339 .................................................................................................
0.340–0.549 .................................................................................................
0.550 and Above .........................................................................................
The Exchange proposes to adjust
certain maker and taker rebates in Tiers
2 through 4 of the Tiered Volume Rebate
structure for Public Customers in both
1
2
3
4
$0.00
0.00
0.00
0.60
0.15
0.15
0.50
0.00
0.00
Tiered Volume Rebate for Non-Auction
Transactions. Specifically, the Exchange
proposes to adjust the rebates in the
Tiered Volume Rebate for Public
Percentage thresholds
of national customer
volume in multiplylisted options classes
(monthly)
Tier
Non-Penny Pilot Classes
Contra party
$0.00
(0.15)
(0.20)
(0.27)
Non-Penny Pilot Classes
Maker
$0.00
(0.15)
(0.30)
(0.60)
Taker
$0.00
(0.27)
(0.32)
(0.40)
to the account type of the Participant
originating the order and the contra
party. This fee structure has been in
place on the Exchange since 2014 and
the Exchange is simply adjusting certain
fees within the structure.6 The result of
this structure is that a Participant does
not know the fee it will be charged
when submitting certain orders.
Therefore, the Participant must
recognize that it could be charged the
6 See Securities Exchange Release No. 73547
(November 6, 2014), 79 FR 67520 (November 13,
2014) (Notice of Filing and Immediate Effectiveness
SR–BOX–2014–25).
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Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices
highest applicable fee on the Exchange’s
schedule, which may, instead, be
lowered depending upon how the order
interacts.
The Exchange believes removing nonauction transaction fees for Public
Customers making or taking liquidity
against Public Customers in Penny and
Non-Penny Pilot Classes, as well as
Public Customers making liquidity
against Professional Customers, Broker
Dealers and Market Makers is
reasonable, equitable and not unfairly
discriminatory. Further, the Exchange
believes that providing a $0.20 and
$0.50 credit to Public Customers that
take liquidity from Professional
Customers, Broker Dealers and Market
Makers in Penny Pilot Classes and NonPenny Pilot Classes, respectively, is also
reasonable, equitable and not unfairly
discriminatory. The Exchange notes that
it has either not charged or provided a
credit to Public Customers for NonAuction Transactions on BOX in the
past.7 Further, the Exchange believes
providing a credit or charging no fee to
Public Customers for all Non-Auction
Transactions is equitable and not
unfairly discriminatory. The securities
markets generally, and BOX in
particular, have historically aimed to
improve markets for investors and
develop various features within the
market structure for Public Customer
benefit. Accordingly, the Exchange
believes that charging no fee or
providing a credit for Public Customers
is appropriate and not unfairly
discriminatory. Public Customers are
less sophisticated than other
Participants and the credit will help to
attract a high level of Public Customer
order flow to the BOX Book and create
liquidity, which the Exchange believes
will ultimately benefit all Participants
trading on BOX.
Finally, the Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to give Public Customers
a credit (or charge no fee) when their
orders execute against a non-Public
Customer and, accordingly, charge nonPublic Customers a higher fee when
their orders execute against a Public
Customer. As stated above, the
Exchange aims to improve markets by
developing features for the benefit of its
Public Customers. Similar to the
payment for order flow and other
pricing models that have been adopted
by the Exchange and other exchanges to
attract Public Customer order flow, the
Exchange increases fees to non-Public
Customers in order to provide
7 Id. See also Securities Exchange Act Release No.
75350 (July 1, 2015), 80 FR 39169 (July 8, 2015)
(SR–BOX–2015–24).
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16:38 Jun 13, 2018
Jkt 244001
incentives for Public Customers.
Further, the Exchange believes that
providing a higher credit in Non-Penny
Pilot Classes is reasonable. As discussed
herein, Non-Penny Pilot Classes are
traded less actively and the Exchange
believes that providing this higher
credit in Non-Penny Pilot Classes will
provide incentive for Public Customers
to trade in these classes. The Exchange
believes that providing incentives for
Non-Auction Transactions by Public
Customers is reasonable and, ultimately,
will benefit all Participants trading on
the Exchange by attracting Public
Customer order flow.
The Exchange believes that the
proposed fees for Professional
Customers and Broker Dealers in NonAuction Transactions are reasonable.
Under the proposed fee structure, a
Professional Customer or Broker Dealer
making liquidity and interacting with a
Professional Customer, Broker Dealer or
Market Marker will now be charged a
fee of $0.15 in both Penny and NonPenny Pilot Classes. If the Professional
Customer or Broker Dealer is instead
taking liquidity in the Penny Pilot, it
will be charged $0.50 against any other
Participant. If the Professional Customer
or Broker Dealer is taking liquidity in
the Non-Penny Pilot, it will be charged
$0.95 if it interacts with a Public
Customer and $0.85 if it interacts with
a Professional Customer/Broker Dealer
or Market Maker. The Exchange believes
that the proposed fees are reasonable as
they are in line with the current fees
assessed by another competing
exchange.8
The Exchange believes that charging
Professional Customers and Broker
Dealers higher fees than Public
Customers for their Non-Auction
Transactions is equitable and not
unfairly discriminatory. Professional
Customers, while Public Customers by
virtue of not being Broker Dealers,
generally engage in trading activity
more similar to Broker Dealer
proprietary trading accounts. The
Exchange believes that the higher level
of trading activity from these
Participants will draw a greater amount
of BOX system resources; the Exchange
aims to recover its costs by assessing
Professional Customers and Broker
Dealers higher fees for transactions.
The Exchange believes that the
proposed fees for Market Makers in
8 See Nasdaq ISE, LLC (‘‘ISE’’) Fee Schedule. On
ISE, Professional Customers and Broker Dealers are
charged $0.10 for making liquidity in Penny Pilot
Classes and charged $0.46 for taking liquidity in
Penny Pilot Classes. See also NYSE Arca Inc
(‘‘Arca’’) Fee Schedule. Arca charges Professional
Customers and Broker Dealers $1.10 for taking
liquidity in Non-Penny Pilot Classes.
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
Non-Auction Transactions are
reasonable. With the proposed fee
changes, a Market Maker making
liquidity will now be charged a higher
fee of $0.50 (Penny Pilot) and $0.95
(Non-Penny Pilot) for interacting with a
Public Customer. Further, a Market
Maker taking liquidity against a Public
Customer will now be charged $0.50 in
Penny Pilot Classes and $0.95 in NonPenny Pilot Classes. If a Market Maker
is taking liquidity in Penny Pilot Classes
and interacts with a Professional
Customer/Broker Dealer or Market
Maker they will now be charged a fee
of $0.50. Lastly, if a Market Maker is
taking liquidity in Non-Penny Pilot
Classes and interacts with a Professional
Customer/Broker Dealer or Market
Maker, they will now be charged $0.75.
The Exchange believes the fees listed
above are reasonable and appropriate as
they are in line with what is currently
charged by the industry.9
Further, the Exchange believes it is
equitable and not unfairly
discriminatory to charge the Market
Maker equal or less for making or taking
liquidity than Professional Customers or
Broker Dealers. Specifically, Market
Makers have certain obligations that
other Participants do not and can
ultimately provide more value by
directing liquidity to the Exchange,
which the Exchange believes will
benefit all Participants trading on BOX.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory for Professional
Customers, Broker Dealers and Market
Makers to be charged higher fees when
interacting with Public Customers than
interacting with other Participants on
BOX. The Exchange believes they are
reasonable as they are in a similar range
with the fees in the options industry.10
Further, as stated above, the Exchange
believes charging a higher fee for
interactions with a Public Customer
when compared to interactions with
other Participants is equitable and not
unfairly discriminatory because it
allows the Exchange to incentivize
Public Customer order flow by offering
low fees and rebate potential to Public
Customers in Non-Auction
Transactions. The Exchange believes
that providing these incentives for NonAuction Transactions by Public
9 Id. On ISE and Arca, the general range for
Market Maker fees is between $0.10 and $1.10. The
Exchange notes that Arca provides a rebate to
Market Makers that post liquidity in both Penny
and Non-Penny Pilot Classes.
10 Id. On ISE and Arca, the general range for
Broker Dealer and Professional Customer fees is
between $0.10 and $1.10. The Exchange notes that
Arca provides a rebate to Broker Dealers and
Professional Customers that make liquidity in
Penny and Non-Penny Pilot Classes.
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Customers will benefit all Participants
trading on the Exchange by attracting
this Public Customer order flow.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory that Professional
Customers, Broker Dealers and Market
Makers be charged a higher fee for
certain orders removing liquidity, when
compared to the fee they receive for
orders that add liquidity. Charging a
lower fee for orders that add liquidity
will promote liquidity on the Exchange
and ultimately benefit all participants
on BOX. Further, the concept of
incentivizing orders that add liquidity
over orders that remove liquidity is
commonly accepted within the industry
as part of the ‘‘Make/Take’’ liquidity
model.
The Exchange believes that providing
a credit to Public Customers that take
liquidity from Professional Customers/
Broker Dealers and Market Makers in
Penny and Non-Penny Pilot Classes,
compared to the $0.00 fee they are
assessed when making liquidity against
Professional Customers/Broker Dealers
and Market Makers, is reasonable,
equitable and not unfairly
discriminatory. Instead of providing a
credit for both making and taking
liquidity, the Exchange believes the
high credit for taking liquidity will
attract Public Customer order flow to
BOX which, in turn, will lead to more
robust market making on the Exchange,
thus benefitting all market participants.
The securities markets generally, and
BOX in particular, have historically
aimed to improve markets for investors
and develop various features within the
market structure for Public Customer
benefit. As such, the Exchange believes
the proposed credit to Public Customers
that take liquidity from Professional
Customers/Broker Dealers and Market
Makers in Penny and Non-Penny Pilot
classes is reasonable.
Finally, the Exchange also believes it
is reasonable to charge Professional
Customers and Broker Dealers and
Market Makers less for certain
executions in Penny Pilot issues
compared to Non-Penny Pilot issues
because these classes are typically more
actively traded; assessing lower fees will
further incentivize order flow in Penny
Pilot issues on the Exchange, ultimately
benefiting all Participants trading on
BOX.
Tiered Volume Rebate for Non-Auction
Transactions
BOX believes it is reasonable,
equitable and not unfairly
discriminatory to adjust certain rebates
in the volume based thresholds for
Public Customers in all Non-Auction
VerDate Sep<11>2014
16:38 Jun 13, 2018
Jkt 244001
Transactions. The volume based
thresholds and applicable rebates are
meant to incentivize Public Customers
to direct order flow to the Exchange to
obtain the benefit of the rebate, which
will in turn benefit all market
participants by increasing liquidity on
the Exchange. Other exchanges employ
similar incentive programs; 11 and the
Exchange believes that the proposed
changes to the volume based rebates are
reasonable and competitive when
compared to incentive structures at
other exchanges.
The Exchange believes it is reasonable
to offer a higher per contract rebate for
transactions in Non-Penny Pilot Classes
compared to Penny Pilot Classes
because Non-Penny Pilot Classes are
typically less actively traded and have
wider spreads. The Exchange believes
that offering a higher rebate will
incentivize Public Customer order flow
in Non-Penny Pilot issues on the
Exchange, ultimately benefitting all
Participants trading on BOX.
The Exchange believes it is reasonable
to adjust certain rebates in Tiers 2
through 4 of the Tiered Volume Rebate
for Public Customers making and taking
liquidity in Non-Auction Transactions.
The rebates are meant to incentivize
Public Customers to direct order flow to
the Exchange to obtain the benefit of the
rebate, which will in turn benefit all
market participants by increasing
liquidity on the Exchange.
The Exchange continues to believe it
is equitable and not unfairly
discriminatory to have these rebate
structures for Public Customers in NonAuction transactions. The practice of
incentivizing increased Public Customer
order flow is common in the options
markets. While the Exchange proposes
to decrease some of the Public Customer
rebates in Penny and Non-Penny Pilot
Classes, the Exchange believes that
Public Customers will still benefit from
the opportunity to obtain a rebate.
Additionally, most Public Customers
currently achieve a volume based rebate
in their Non-Auction transactions.
Further, the Exchange believes that
providing a higher per contract rebate
for Public Customers taking liquidity in
Penny and Non-Penny Pilot Classes
compared to making liquidity is
reasonable and appropriate. As
discussed above, the Exchange believes
the proposed rebates for taking liquidity
in Penny and Non-Penny Pilot Classes
11 See Section B of the PHLX Pricing Schedule
entitled ‘‘Customer Rebate Program;’’ and Cboe
Exchange, Inc. (‘‘CBOE’’) Volume Incentive Program
(‘‘VIP’’). CBOE’s VIP pays certain tiered rebates to
Trading Permit Holders for electronically executed
multiply-listed option orders, which include AIM
orders.
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
27811
will attract Public Customer order flow
to BOX which, in turn, will lead to more
robust market making on the Exchange,
thus benefitting all market participants.
As such, the Exchange believes that the
proposed changes are reasonable and
appropriate.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
The Exchange believes that the
proposed adjustments to fees in the
Non-Auction Transactions fee structure
will not impose a burden on
competition among various Exchange
Participants. Rather, BOX believes that
the changes will result in the
Participants being charged appropriately
for these transactions and are designed
to enhance competition in Non-Auction
transactions on BOX. Submitting an
order is entirely voluntary and
Participants can determine which type
of order they wish to submit, if any, to
the Exchange.
The Exchange believes that amending
the proposed rebate structure for Public
Customer Non-Auction Transactions
will not impose a burden on
competition among various Exchange
Participants. The Exchange believes that
the proposed changes will result in
Public Customers being rebated
appropriately for these transactions.
Further, the Exchange believes that this
proposal will enhance competition
between exchanges because it is
designed to allow the Exchange to better
compete with other exchanges for order
flow.
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing exchanges. In
such an environment, the Exchange
must continually review, and consider
adjusting, its fees and credits to remain
competitive with other exchanges. For
the reasons described above, the
Exchange believes that the proposed
rule change reflects this competitive
environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
E:\FR\FM\14JNN1.SGM
14JNN1
27812
Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act 12
and Rule 19b–4(f)(2) thereunder,13
because it establishes or changes a due,
or fee.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend the rule change if
it appears to the Commission that the
action is necessary or appropriate in the
public interest, for the protection of
investors, or would otherwise further
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
daltland on DSKBBV9HB2PROD 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–2018–21 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–2018–21. 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
12 15
13 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
16:38 Jun 13, 2018
Jkt 244001
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–2018–21, and should
be submitted on or before July 5, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–12751 Filed 6–13–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83401; File No. SR–FICC–
2018–003]
Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Order
Approving Proposed Rule Change To
Amend the Fee Structure of the
Government Securities Division
Rulebook
June 8, 2018.
On April 27, 2018, Fixed Income
Clearing Corporation (‘‘FICC’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–FICC–2018–003,
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder.2
The proposed rule change was
published for comment in the Federal
Register on May 8, 2018.3 The
Commission received one comment
letter on the proposed rule change.4 For
the reasons discussed below, the
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Securities Exchange Act Release No. 83153 (May
2, 2018), 83 FR 20882 (May 8, 2018) (SR–FICC–
2018–003) (‘‘Notice’’).
4 Letter from Ted Bragg, Vice President—Head of
U.S. Fixed Income, Nasdaq (‘‘Nasdaq’’), dated May
14, 2018, to Eduardo A. Aleman, Assistant
Secretary, Commission (‘‘Nasdaq Letter’’) available
at https://www.sec.gov/comments/sr-ficc-2018-003/
ficc2018003.htm.
Commission approves the proposed rule
change.
I. Description of the Proposed Rule
Change
The proposed rule change would
amend the FICC Government Securities
Division (‘‘GSD’’) Rulebook (‘‘GSD
Rules’’) 5 to modify the GSD Fee
Structure. FICC states that it designed
the proposed rule change to reduce
complexity and to better align pricing
with the costs of services provided by
GSD.6 More specifically, FICC states
that the transaction processing fees and
the position management fees associated
with the delivery-versus-payment
(‘‘DVP’’) service account for
approximately 30 percent and 70
percent, respectively, of GSD’s projected
costs from the DVP service.7
Accordingly, FICC states that the
proposed fee changes are designed to
align GSD’s revenue with that 30/70
percent split between transaction
processing and position management
costs, respectively.8 In doing so, FICC
would shift the GSD Fee Structure
regarding the DVP service away from
the existing volume-driven approach to
a position-based approach.9 Ultimately,
FICC expects GSD’s net revenue to
remain relatively unchanged as a result
of this proposal.10
A. Proposed Changes to the GSD Fee
Structure
The proposed GSD Fee Structure
would, in effect, establish 4 new fees,
modify 1 existing fee, and eliminate 12
fees.11 These proposed changes are
summarized below.
1. New Fees
In proposed Section I of the GSD Fee
Structure, FICC would replace the
seven-tiered trade submission fees for
both dealer accounts and broker
accounts with a single transaction
processing fee that would be charged to
GSD members (‘‘Members’’) upon the
comparison of a side of a buy/sell
transaction or a Repo Transaction in the
DVP service.12 Specifically, dealer
accounts would be charged a fee of
$0.04 per million par value for
transaction processing, and broker
accounts would be charged a fee of
1 15
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
5 Available at https://www.dtcc.com/legal/rulesand-procedures.
6 Notice, 83 FR at 20882.
7 Id. at 20884.
8 Id.
9 Id.
10 Id.
11 Id.
12 Id.
E:\FR\FM\14JNN1.SGM
14JNN1
]]>Agencies
[Federal Register Volume 83, Number 115 (Thursday, June 14, 2018)]
[Notices]
[Pages 27807-27812]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12751]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83396; File No. SR-BOX-2018-21]
Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule on the BOX Market LLC (``BOX'') Options Facility
To Amend Fees and Rebates for Non-Auction Transactions
June 8, 2018.
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 May 31, 2018, BOX Options Exchange LLC (the ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Exchange filed the
proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the
[[Page 27808]]
Act,\3\ and Rule 19b-4(f)(2) thereunder,\4\ which renders the proposal
effective upon filing with the Commission. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule on
the BOX Market LLC (``BOX'') options facility. While changes to the fee
schedule pursuant to this proposal will be effective upon filing, the
changes will become operative on June 1, 2018. 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://boxexchange.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to make changes to Section I. (Electronic
Transaction Fees).
Exchange Fees for Non-Auction Transactions
The Exchange proposes to adjust certain fees for Non-Auction
Transactions. Currently, for all non-auction transactions, fees and
credits are assessed depending upon three factors: (i) The account type
of the Participant submitting the order; (ii) whether the Participant
is a liquidity provider or liquidity taker; and (iii) the account type
of the contra party. Non-Auction Transactions in Penny Pilot Classes
are assessed different fees or credits than Non-Auction Transactions in
Non-Penny Pilot Classes.
The current fees for Non-Auction Transactions are:
----------------------------------------------------------------------------------------------------------------
Penny Pilot Classes Non-Penny Pilot Classes
Account type Contra party ---------------------------------------------------
Maker fee Taker fee Maker fee Taker fee
----------------------------------------------------------------------------------------------------------------
Public Customer..................... Public Customer....... $0.05 $0.05 $0.05 $0.05
Professional Customer/ 0.05 0.05 0.05 0.05
Broker Dealer.
Market Maker.......... 0.05 0.05 0.05 0.05
Professional Customer or Broker Public Customer....... 0.60 0.45 0.95 0.85
Dealer. Professional Customer/ 0.05 0.45 0.05 0.60
Broker Dealer.
Market Maker.......... 0.05 0.45 0.05 0.60
Market Maker........................ Public Customer....... 0.27 0.43 0.65 0.80
Professional Customer/ 0.00 0.29 0.00 0.40
Broker Dealer.
Market Maker.......... 0.00 0.29 0.00 0.40
----------------------------------------------------------------------------------------------------------------
First, the Exchange proposes to remove the fees assessed for Public
Customers that make or take liquidity against Public Customers in Penny
Pilot and Non-Penny Pilot Classes. Next, the Exchange proposes to
eliminate the fees assessed to Public Customers that make liquidity
against Professional Customers/Broker Dealers and Market Makers in
Penny Pilot and Non-Penny Pilot Classes. Lastly, the Exchange proposes
to assess a $0.20 credit for Public Customers that take liquidity from
Professional Customers/Broker Dealers and Market Makers in Penny Pilot
Classes and a $0.50 credit for Public Customers that take liquidity
from Professional Customers/Broker Dealers and Market Makers in Non-
Penny Pilot Classes.
The Exchange proposes to adjust the fees assessed for Professional
Customers and Broker Dealers. In Penny Pilot Classes, the Exchange
proposes to adjust the fees assessed for Professional Customers and
Broker Dealers that that take liquidity from all other Participants.
Specifically, the Exchange proposes to increase the fee assessed to
Professional Customers and Broker Dealers that take liquidity from
Public Customers, Professional Customers/Broker Dealers and Market
Makers to $0.50 from $0.45 in Penny Pilot Classes. Additionally, the
Exchange proposes to increase the fees assessed for Professional
Customers and Broker Dealers making liquidity against Professional
Customers and Broker Dealers and Market Makers in Penny Pilot Classes
to $0.15 from $0.05. For Non-Penny Pilot Classes, the Exchange proposes
to increase the fees assessed for Professional Customers and Broker
Dealers making liquidity against Non-Public Customers to $0.15 from
$0.05. The Exchange also proposes to increase the fees assessed for
Professional Customers and Broker Dealers taking liquidity from Public
Customers to $0.95 from $0.85 in Non-Penny Pilot Classes. Lastly, with
regard to Professional Customers/Broker Dealers taking liquidity from
Professional Customers/Broker Dealers and Market Makers in Non-Penny
Pilot Classes, the Exchange proposes to increase the fees assessed to
$0.85 from $0.60.
The Exchange then proposes to adjust the fees assessed for Market
Makers in Non-Auction Transactions. First, the Exchange proposes to
increase the fees assessed on Market Makers making liquidity against a
Public Customer to $0.50 from $0.27 in Penny Pilot Classes. With regard
to Market Makers taking liquidity against Public Customers in Penny
Pilot Classes, the Exchange proposes to increase the fee to $0.50 from
$0.43. Further, the Exchange proposes to increase the fee for Market
Makers taking liquidity against Professional Customers and Broker
Dealers and Market Makers in Penny Pilot Classes to $0.50 from $0.29.
Lastly, the Exchange proposes to adjust the fees assessed to Market
Makers in Non-Penny Pilot Classes. Specifically, the
[[Page 27809]]
Exchange proposes to increase the fee assessed to a Market Maker when
making liquidity from a Public Customer in Non-Penny Pilot Classes to
$0.95 from $0.65. In Non-Penny Pilot Classes, the Exchange proposes to
increase the fee assessed to Market Makers taking liquidity from a
Public Customer to $0.95 from $0.80. Lastly, the Exchange proposes to
increase the fees assessed to Market Makers taking liquidity from
Professional Customers/Broker Dealers and Market Makers in Non-Penny
Pilot Classes to $0.75 from $0.40.
The fees for Non-Auction Transactions will be as follows:
----------------------------------------------------------------------------------------------------------------
Penny Pilot Classes Non-Penny Pilot Classes
Account type Contra party ---------------------------------------------------
Maker fee Taker fee Maker fee Taker fee
----------------------------------------------------------------------------------------------------------------
Public Customer..................... Public Customer....... $0.00 $0.00 $0.00 $0.00
Professional Customer/ 0.00 (0.20) 0.00 (0.50)
Broker Dealer.
Market Maker.......... 0.00 (0.20) 0.00 (0.50)
Professional Customer or Broker Public Customer....... 0.60 0.50 0.95 0.95
Dealer Professional Customer/ 0.15 0.50 0.15 0.85
Broker Dealer.
Market Maker.......... 0.15 0.50 0.15 0.85
Market Maker........................ Public Customer....... 0.50 0.50 0.95 0.95
Professional Customer/ 0.00 0.50 0.00 0.75
Broker Dealer.
Market Maker.......... 0.00 0.50 0.00 0.75
----------------------------------------------------------------------------------------------------------------
Tiered Volume Rebate for Non-Auction Transactions
The Exchange proposes to amend Section I.A.1. of the BOX Fee
Schedule, Tiered Volume Rebate for Non-Auction Transactions.
Specifically, the Exchange proposes to adjust the rebates in the Tiered
Volume Rebate for Public Customers in Non Auction Transactions. The
current Tiered Volume Rebate for Public Customers in Non-Auction
Transactions is as follows:
----------------------------------------------------------------------------------------------------------------
Per contract rebate
Percentage thresholds of ---------------------------------------------------
Tier national customer volume in Penny Pilot Classes Non-Penny Pilot Classes
multiply- listed options ---------------------------------------------------
classes (monthly) Maker Taker Maker Taker
----------------------------------------------------------------------------------------------------------------
1........................... 0.000-0.129................... $0.00 $0.00 $0.00 $0.00
2........................... 0.130-0.339................... (0.05) (0.05) (0.20) (0.20)
3........................... 0.340-0.549................... (0.15) (0.15) (0.30) (0.30)
4........................... 0.550 and Above............... (0.25) (0.25) (0.50) (0.50)
----------------------------------------------------------------------------------------------------------------
The Exchange proposes to adjust certain maker and taker rebates in
Tiers 2 through 4 of the Tiered Volume Rebate structure for Public
Customers in both Penny Pilot Classes and Non-Penny Pilot Classes. The
new per contract rebate for Public Customers in Non-Auction
Transactions as set forth in Section I.A.1. of the BOX Fee Schedule
will be as follows:
----------------------------------------------------------------------------------------------------------------
Per contract rebate
Percentage thresholds of ---------------------------------------------------
Tier national customer volume in Penny Pilot Classes Non-Penny Pilot Classes
multiply- listed options ---------------------------------------------------
classes (monthly) Maker Taker Maker Taker
----------------------------------------------------------------------------------------------------------------
1........................... 0.000-0.129................... $0.00 $0.00 $0.00 $0.00
2........................... 0.130-0.339................... (0.05) (0.15) (0.15) (0.27)
3........................... 0.340-0.549................... (0.10) (0.20) (0.30) (0.32)
4........................... 0.550 and Above............... (0.27) (0.27) (0.60) (0.40)
----------------------------------------------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act, in general, and Section
6(b)(4) and 6(b)(5)of the Act,\5\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among BOX Participants and other persons using its facilities
and does not unfairly discriminate between customers, issuers, brokers
or dealers. The proposed changes will allow the Exchange to be
competitive with other exchanges and to apply fees, credits and rebates
in a manner that is equitable among all BOX Participants. Further, the
Exchange operates within a highly competitive market in which market
participants can readily direct order flow to any other competing
exchange if they determine fees at a particular exchange to be
excessive.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
Non-Auction Transactions
The Exchange believes it is equitable, reasonable and not unfairly
discriminatory to assess fees according to the account type of the
Participant originating the order and the contra party. This fee
structure has been in place on the Exchange since 2014 and the Exchange
is simply adjusting certain fees within the structure.\6\ The result of
this structure is that a Participant does not know the fee it will be
charged when submitting certain orders. Therefore, the Participant must
recognize that it could be charged the
[[Page 27810]]
highest applicable fee on the Exchange's schedule, which may, instead,
be lowered depending upon how the order interacts.
---------------------------------------------------------------------------
\6\ See Securities Exchange Release No. 73547 (November 6,
2014), 79 FR 67520 (November 13, 2014) (Notice of Filing and
Immediate Effectiveness SR-BOX-2014-25).
---------------------------------------------------------------------------
The Exchange believes removing non-auction transaction fees for
Public Customers making or taking liquidity against Public Customers in
Penny and Non-Penny Pilot Classes, as well as Public Customers making
liquidity against Professional Customers, Broker Dealers and Market
Makers is reasonable, equitable and not unfairly discriminatory.
Further, the Exchange believes that providing a $0.20 and $0.50 credit
to Public Customers that take liquidity from Professional Customers,
Broker Dealers and Market Makers in Penny Pilot Classes and Non-Penny
Pilot Classes, respectively, is also reasonable, equitable and not
unfairly discriminatory. The Exchange notes that it has either not
charged or provided a credit to Public Customers for Non-Auction
Transactions on BOX in the past.\7\ Further, the Exchange believes
providing a credit or charging no fee to Public Customers for all Non-
Auction Transactions is equitable and not unfairly discriminatory. The
securities markets generally, and BOX in particular, have historically
aimed to improve markets for investors and develop various features
within the market structure for Public Customer benefit. Accordingly,
the Exchange believes that charging no fee or providing a credit for
Public Customers is appropriate and not unfairly discriminatory. Public
Customers are less sophisticated than other Participants and the credit
will help to attract a high level of Public Customer order flow to the
BOX Book and create liquidity, which the Exchange believes will
ultimately benefit all Participants trading on BOX.
---------------------------------------------------------------------------
\7\ Id. See also Securities Exchange Act Release No. 75350 (July
1, 2015), 80 FR 39169 (July 8, 2015) (SR-BOX-2015-24).
---------------------------------------------------------------------------
Finally, the Exchange believes it is reasonable, equitable and not
unfairly discriminatory to give Public Customers a credit (or charge no
fee) when their orders execute against a non-Public Customer and,
accordingly, charge non-Public Customers a higher fee when their orders
execute against a Public Customer. As stated above, the Exchange aims
to improve markets by developing features for the benefit of its Public
Customers. Similar to the payment for order flow and other pricing
models that have been adopted by the Exchange and other exchanges to
attract Public Customer order flow, the Exchange increases fees to non-
Public Customers in order to provide incentives for Public Customers.
Further, the Exchange believes that providing a higher credit in Non-
Penny Pilot Classes is reasonable. As discussed herein, Non-Penny Pilot
Classes are traded less actively and the Exchange believes that
providing this higher credit in Non-Penny Pilot Classes will provide
incentive for Public Customers to trade in these classes. The Exchange
believes that providing incentives for Non-Auction Transactions by
Public Customers is reasonable and, ultimately, will benefit all
Participants trading on the Exchange by attracting Public Customer
order flow.
The Exchange believes that the proposed fees for Professional
Customers and Broker Dealers in Non-Auction Transactions are
reasonable. Under the proposed fee structure, a Professional Customer
or Broker Dealer making liquidity and interacting with a Professional
Customer, Broker Dealer or Market Marker will now be charged a fee of
$0.15 in both Penny and Non-Penny Pilot Classes. If the Professional
Customer or Broker Dealer is instead taking liquidity in the Penny
Pilot, it will be charged $0.50 against any other Participant. If the
Professional Customer or Broker Dealer is taking liquidity in the Non-
Penny Pilot, it will be charged $0.95 if it interacts with a Public
Customer and $0.85 if it interacts with a Professional Customer/Broker
Dealer or Market Maker. The Exchange believes that the proposed fees
are reasonable as they are in line with the current fees assessed by
another competing exchange.\8\
---------------------------------------------------------------------------
\8\ See Nasdaq ISE, LLC (``ISE'') Fee Schedule. On ISE,
Professional Customers and Broker Dealers are charged $0.10 for
making liquidity in Penny Pilot Classes and charged $0.46 for taking
liquidity in Penny Pilot Classes. See also NYSE Arca Inc (``Arca'')
Fee Schedule. Arca charges Professional Customers and Broker Dealers
$1.10 for taking liquidity in Non-Penny Pilot Classes.
---------------------------------------------------------------------------
The Exchange believes that charging Professional Customers and
Broker Dealers higher fees than Public Customers for their Non-Auction
Transactions is equitable and not unfairly discriminatory. Professional
Customers, while Public Customers by virtue of not being Broker
Dealers, generally engage in trading activity more similar to Broker
Dealer proprietary trading accounts. The Exchange believes that the
higher level of trading activity from these Participants will draw a
greater amount of BOX system resources; the Exchange aims to recover
its costs by assessing Professional Customers and Broker Dealers higher
fees for transactions.
The Exchange believes that the proposed fees for Market Makers in
Non-Auction Transactions are reasonable. With the proposed fee changes,
a Market Maker making liquidity will now be charged a higher fee of
$0.50 (Penny Pilot) and $0.95 (Non-Penny Pilot) for interacting with a
Public Customer. Further, a Market Maker taking liquidity against a
Public Customer will now be charged $0.50 in Penny Pilot Classes and
$0.95 in Non-Penny Pilot Classes. If a Market Maker is taking liquidity
in Penny Pilot Classes and interacts with a Professional Customer/
Broker Dealer or Market Maker they will now be charged a fee of $0.50.
Lastly, if a Market Maker is taking liquidity in Non-Penny Pilot
Classes and interacts with a Professional Customer/Broker Dealer or
Market Maker, they will now be charged $0.75. The Exchange believes the
fees listed above are reasonable and appropriate as they are in line
with what is currently charged by the industry.\9\
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\9\ Id. On ISE and Arca, the general range for Market Maker fees
is between $0.10 and $1.10. The Exchange notes that Arca provides a
rebate to Market Makers that post liquidity in both Penny and Non-
Penny Pilot Classes.
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Further, the Exchange believes it is equitable and not unfairly
discriminatory to charge the Market Maker equal or less for making or
taking liquidity than Professional Customers or Broker Dealers.
Specifically, Market Makers have certain obligations that other
Participants do not and can ultimately provide more value by directing
liquidity to the Exchange, which the Exchange believes will benefit all
Participants trading on BOX.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory for Professional Customers, Broker Dealers and Market
Makers to be charged higher fees when interacting with Public Customers
than interacting with other Participants on BOX. The Exchange believes
they are reasonable as they are in a similar range with the fees in the
options industry.\10\ Further, as stated above, the Exchange believes
charging a higher fee for interactions with a Public Customer when
compared to interactions with other Participants is equitable and not
unfairly discriminatory because it allows the Exchange to incentivize
Public Customer order flow by offering low fees and rebate potential to
Public Customers in Non-Auction Transactions. The Exchange believes
that providing these incentives for Non-Auction Transactions by Public
[[Page 27811]]
Customers will benefit all Participants trading on the Exchange by
attracting this Public Customer order flow.
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\10\ Id. On ISE and Arca, the general range for Broker Dealer
and Professional Customer fees is between $0.10 and $1.10. The
Exchange notes that Arca provides a rebate to Broker Dealers and
Professional Customers that make liquidity in Penny and Non-Penny
Pilot Classes.
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The Exchange believes it is reasonable, equitable and not unfairly
discriminatory that Professional Customers, Broker Dealers and Market
Makers be charged a higher fee for certain orders removing liquidity,
when compared to the fee they receive for orders that add liquidity.
Charging a lower fee for orders that add liquidity will promote
liquidity on the Exchange and ultimately benefit all participants on
BOX. Further, the concept of incentivizing orders that add liquidity
over orders that remove liquidity is commonly accepted within the
industry as part of the ``Make/Take'' liquidity model.
The Exchange believes that providing a credit to Public Customers
that take liquidity from Professional Customers/Broker Dealers and
Market Makers in Penny and Non-Penny Pilot Classes, compared to the
$0.00 fee they are assessed when making liquidity against Professional
Customers/Broker Dealers and Market Makers, is reasonable, equitable
and not unfairly discriminatory. Instead of providing a credit for both
making and taking liquidity, the Exchange believes the high credit for
taking liquidity will attract Public Customer order flow to BOX which,
in turn, will lead to more robust market making on the Exchange, thus
benefitting all market participants. The securities markets generally,
and BOX in particular, have historically aimed to improve markets for
investors and develop various features within the market structure for
Public Customer benefit. As such, the Exchange believes the proposed
credit to Public Customers that take liquidity from Professional
Customers/Broker Dealers and Market Makers in Penny and Non-Penny Pilot
classes is reasonable.
Finally, the Exchange also believes it is reasonable to charge
Professional Customers and Broker Dealers and Market Makers less for
certain executions in Penny Pilot issues compared to Non-Penny Pilot
issues because these classes are typically more actively traded;
assessing lower fees will further incentivize order flow in Penny Pilot
issues on the Exchange, ultimately benefiting all Participants trading
on BOX.
Tiered Volume Rebate for Non-Auction Transactions
BOX believes it is reasonable, equitable and not unfairly
discriminatory to adjust certain rebates in the volume based thresholds
for Public Customers in all Non-Auction Transactions. The volume based
thresholds and applicable rebates are meant to incentivize Public
Customers to direct order flow to the Exchange to obtain the benefit of
the rebate, which will in turn benefit all market participants by
increasing liquidity on the Exchange. Other exchanges employ similar
incentive programs; \11\ and the Exchange believes that the proposed
changes to the volume based rebates are reasonable and competitive when
compared to incentive structures at other exchanges.
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\11\ See Section B of the PHLX Pricing Schedule entitled
``Customer Rebate Program;'' and Cboe Exchange, Inc. (``CBOE'')
Volume Incentive Program (``VIP''). CBOE's VIP pays certain tiered
rebates to Trading Permit Holders for electronically executed
multiply-listed option orders, which include AIM orders.
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The Exchange believes it is reasonable to offer a higher per
contract rebate for transactions in Non-Penny Pilot Classes compared to
Penny Pilot Classes because Non-Penny Pilot Classes are typically less
actively traded and have wider spreads. The Exchange believes that
offering a higher rebate will incentivize Public Customer order flow in
Non-Penny Pilot issues on the Exchange, ultimately benefitting all
Participants trading on BOX.
The Exchange believes it is reasonable to adjust certain rebates in
Tiers 2 through 4 of the Tiered Volume Rebate for Public Customers
making and taking liquidity in Non-Auction Transactions. The rebates
are meant to incentivize Public Customers to direct order flow to the
Exchange to obtain the benefit of the rebate, which will in turn
benefit all market participants by increasing liquidity on the
Exchange.
The Exchange continues to believe it is equitable and not unfairly
discriminatory to have these rebate structures for Public Customers in
Non-Auction transactions. The practice of incentivizing increased
Public Customer order flow is common in the options markets. While the
Exchange proposes to decrease some of the Public Customer rebates in
Penny and Non-Penny Pilot Classes, the Exchange believes that Public
Customers will still benefit from the opportunity to obtain a rebate.
Additionally, most Public Customers currently achieve a volume based
rebate in their Non-Auction transactions.
Further, the Exchange believes that providing a higher per contract
rebate for Public Customers taking liquidity in Penny and Non-Penny
Pilot Classes compared to making liquidity is reasonable and
appropriate. As discussed above, the Exchange believes the proposed
rebates for taking liquidity in Penny and Non-Penny Pilot Classes will
attract Public Customer order flow to BOX which, in turn, will lead to
more robust market making on the Exchange, thus benefitting all market
participants. As such, the Exchange believes that the proposed changes
are reasonable and appropriate.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange believes that the proposed adjustments to fees in the
Non-Auction Transactions fee structure will not impose a burden on
competition among various Exchange Participants. Rather, BOX believes
that the changes will result in the Participants being charged
appropriately for these transactions and are designed to enhance
competition in Non-Auction transactions on BOX. Submitting an order is
entirely voluntary and Participants can determine which type of order
they wish to submit, if any, to the Exchange.
The Exchange believes that amending the proposed rebate structure
for Public Customer Non-Auction Transactions will not impose a burden
on competition among various Exchange Participants. The Exchange
believes that the proposed changes will result in Public Customers
being rebated appropriately for these transactions. Further, the
Exchange believes that this proposal will enhance competition between
exchanges because it is designed to allow the Exchange to better
compete with other exchanges for order flow.
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing exchanges. In such an environment, the Exchange must
continually review, and consider adjusting, its fees and credits to
remain competitive with other exchanges. For the reasons described
above, the Exchange believes that the proposed rule change reflects
this competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
[[Page 27812]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act \12\ and Rule 19b-4(f)(2)
thereunder,\13\ because it establishes or changes a due, or fee.
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\12\ 15 U.S.C. 78s(b)(3)(A)(ii).
\13\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BOX-2018-21 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-2018-21. 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-2018-21, and should be submitted on
or before July 5, 2018.
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\14\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12751 Filed 6-13-18; 8:45 am]
BILLING CODE 8011-01-P
