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]

Download as PDF 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: 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– 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 Jkt 244001 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 E:\FR\FM\14JNN1.SGM 14JNN1 27808 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices 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 .. daltland on DSKBBV9HB2PROD with NOTICES 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 14JNN1 27809 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 ............. ............. ............. ............. ............. ............. ............. ............. daltland on DSKBBV9HB2PROD with NOTICES 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). E:\FR\FM\14JNN1.SGM 14JNN1 daltland on DSKBBV9HB2PROD with NOTICES 27810 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). VerDate Sep<11>2014 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. E:\FR\FM\14JNN1.SGM 14JNN1 Federal Register / Vol. 83, No. 115 / Thursday, June 14, 2018 / Notices daltland on DSKBBV9HB2PROD with NOTICES 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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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


This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.