Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market LLC (“BOX”) Options Facility To Establish BOX Connectivity Fees for Participants and Non-Participants Who Connect to the BOX Network; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change, 65381-65385 [2018-27512]
Download as PDF
<![CDATA[
Federal Register / Vol. 83, No. 244 / Thursday, December 20, 2018 / Notices
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–NYSE–2018–54. 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–NYSE–2018–54, and
should be submitted on or before
January 10, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018–27510 Filed 12–19–18; 8:45 am]
khammond on DSK30JT082PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–84823; File No. SR–BOX–
2018–37]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing of a
Proposed Rule Change To Amend the
Fee Schedule on the BOX Market LLC
(‘‘BOX’’) Options Facility To Establish
BOX Connectivity Fees for Participants
and Non-Participants Who Connect to
the BOX Network; Suspension of and
Order Instituting Proceedings To
Determine Whether To Approve or
Disapprove the Proposed Rule Change
December 14, 2018.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
30, 2018, BOX Exchange LLC
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Item II below, which
Item has been prepared by the
Exchange. The Exchange filed the
proposed rule change pursuant to
Section 19(b)(3)(A)(ii) of the Act,3 and
Rule 19b–4(f)(2) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons and is,
pursuant to Section 19(b)(3)(C) of the
Act, hereby: (i) Temporarily suspending
the proposed rule change; and (ii)
instituting proceedings to determine
whether to approve or disapprove the
proposed rule change.
I. Self-Regulatory Organization’s
Statement of the Terms of 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.
The fees became operative on December
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
Description of the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
12 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:21 Dec 19, 2018
Jkt 247001
PO 00000
Frm 00045
Fmt 4703
Sfmt 4703
65381
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 amend
Section VI. (Technology Fees) of the
BOX Fee Schedule to establish BOX
Connectivity Fees for Participants and
non-Participants who connect to the
BOX network. Connectivity fees will be
based upon the amount of bandwidth
that will be used by the Participant or
non-Participant. Further, BOX
Participants or non-Participants
connected as of the last trading day of
each calendar month will be charged the
applicable Connectivity Fee for that
month. The Connectivity Fees will be as
follows:
Connection type
Non-10 Gb Connection.
10 Gb Connection .....
Monthly fees
$1,000 per connection
$5,000 per connection
The Exchange also proposes to amend
certain language and numbering in
Section VI.A to reflect the changes
discussed above. Specifically, BOX
proposes to add the title ‘‘Third Party
Connectivity Fees’’ under Section VI.A.
Further, the Exchange proposes to add
Section VI.A.2, which details the
proposed BOX Connectivity Fees
discussed above.
Participants and non-Participants
with ten (10) Gigabit (‘‘Gb’’) connections
will be charged a monthly fee of $5,000
per connection. Participants and nonParticipants with non-10 Gb
connections will be charged a monthly
fee of $1,000 per connection. The
Exchange notes that another exchange
in the industry has similar connectivity
fees 5 and that several other exchanges
5 See Miami International Securities Exchange
LLC (‘‘MIAX’’) Fee Schedule. MIAX charges its
Members and non-Members a monthly fee of $1,100
for each 1 Gigabit connection and $5,500 for each
10 Gigabit connection to MIAX’s Primary/
Secondary Facility. The Exchange notes a minor
difference between MIAX’s connectivity fees and
BOX’s proposal. MIAX prorates their connectivity
fees when a Member makes a change to their
connectivity (by adding or deleting connections).
BOX notes that, like the Exchange’s Port Fees and
Continued
E:\FR\FM\20DEN1.SGM
20DEN1
65382
Federal Register / Vol. 83, No. 244 / Thursday, December 20, 2018 / Notices
khammond on DSK30JT082PROD with NOTICES
charge higher connectivity fees.6 The
Exchange also notes that certain fees
will continue to be assessed by the
datacenters and will be billed directly to
the market participant.
Next, the Exchange is amending
Section VI.C. High Speed Vendor Feed
(‘‘HSVF’’) of the Fee Schedule.
Specifically, BOX is proposing to delete
Section VI.C. and reclassify the HSVF
Connection as a Port Fee. The Exchange
believes this reclassification is more
accurate, as HSVF subscription is not
dependent on a physical connection to
the Exchange. Instead, subscribers must
be credentialed by BOX to receive the
HSVF. The HSVF Fee will remain
unchanged; BOX will assess a HSVF
Port Fee of $1,500 per month 7 for each
month a Participant or non-Participant
is credentialed to use the HSVF Port.
The Exchange notes that another
exchange has a similar classification
and charges similar fees.8
The Exchange initially filed the
proposed fees on July 19, 2018,
designating the proposed fees effective
July 1, 2018 [sic]. The proposed rule
change was published for comment in
the Federal Register on August 2, 2018.9
The Commission received one comment
letter on the proposal.10 The proposed
fees remained in effect until they were
temporarily suspended pursuant to a
suspension order (the ‘‘Suspension
Order’’) issued by the Division of
Trading and Markets, which also
instituted proceedings to determine
whether to approve or disapprove the
HSVF Fees, Participants or non-Participants
connected as of the last trading day of each calendar
month will be charged the applicable Connectivity
Fee for that month.
6 See infra note 12.
7 The Exchange notes that with the proposed
change discussed herein, Participants and nonParticipants credentialed to use the HSVF Port who
also have physical connections to the BOX system
will be charged for both the HSVF monthly fee and
the applicable amount for their physical
connections to BOX. For example, if nonParticipant X is credentialed to use the HSVF Port
and has three (3) physical non-10Gb connections to
BOX, non-Participant X will be charged $1500 for
the monthly HSVF Port Fee and $3000 for the three
non-10Gb physical connections to BOX.
8 See Cboe Data Services, LLC. (‘‘Cboe CDS’’) Fee
Schedule. Cboe CDS charges its Customers that
receive data through a direct connection to CDS or
through a connection to CDS provided by an
extranet provider $500 per port per month. Cboe
CDS’s port fee applies to receipt of any Cboe
Options data feed but is only assessed once per data
port. In addition to the data port fee, Cboe Exchange
Inc. (‘‘Cboe’’) charges connectivity fees based on the
bandwidth used to connect to the Exchange to
receive such data. See Cboe Fee Schedule.
9 See Securities Exchange Act Release No. 83728
(July 27, 2018), 83 FR 37853 (August 2, 2018) (SR–
BOX–2018–24).
10 See Letter from Tyler Gellasch, Executive
Director, The Healthy Markets Association, to Brent
J. Fields, Secretary, Commission, dated August 23,
2018 (‘‘Healthy Markets Letter’’).
VerDate Sep<11>2014
17:21 Dec 19, 2018
Jkt 247001
proposed rule change.11 The
Commission subsequently received one
further comment letter on the proposed
rule change, supporting the decision to
suspend and institute proceedings on
the proposed fee change.12
In response to the Suspension Order,
the Exchange timely filed a Notice of
Intention to Petition for Review 13 and
Petition for Review to vacate the
Division’s Order,14 which stayed the
Division’s suspension of the filing. On
November 16, 2018 the Commission
granted the Exchange’s Petition for
Review but discontinued the automatic
stay.15
The Healthy Markets and SIFMA
Comment Letters (collectively, the
‘‘Comment Letters’’) argued that the
Exchange did not provide sufficient
information in its filing to support a
finding that the proposal is consistent
with the Act. Specifically, the Comment
Letters objected to the Exchange’s
reliance on the fees of other exchanges
to demonstrate that its fee increases are
consistent with the Act. In addition, the
Comment Letters argued that the
Exchange did not offer any details to
support its basis for asserting that the
proposed fees are consistent with the
Act. The Exchange is now re-filing the
proposed fees and is also providing
additional detail regarding the basis for
11 See Securities Exchange Act Release No. 34–
84168 (September 17, 2018).
12 See Letter from Theodore R. Lazo, Managing
Director and Associate General Counsel, and Ellen
Greene, Managing Director, Financial Services
Operations, Securities Industry and Financial
Markets Association, dated October 15, 2018.
13 See Letter from Amir Tayrani, Partner, Gibson,
Dunn & Crutcher LLP, dated September 19, 2018.
14 See Petition for Review of Order Temporarily
Suspending BOX Exchange LLC’s Proposal to
Amend the Fee Schedule on BOX Market LLC,
dated September 26, 2018.
15 See Securities Exchange Act Release No. 84614.
Order Granting Petition for Review and Scheduling
Filing of Statements, dated November 16, 2018.
Separately, the Securities Industry and Financial
Markets Association filed an application under
Section 19(d) of the Exchange Act challenging the
Exchange’s proposed fees as alleged prohibitions or
limitations on access. See In re Securities Industry
and Financial Markets Association, Admin. Proc.
File No. 3–18680 (Aug. 24, 2018). The Commission
thereafter remanded that denial-of-access
proceeding to the Exchange while ‘‘express[ing] no
view regarding the merits’’ and emphasizing that it
was ‘‘not set[ting] aside the challenged rule change[
].’’ In re Applications of SIFMA & Bloomberg,
Exchange Act Rel. No. 84433, at 2 (Oct. 16, 2018)
(‘‘Remand Order’’), available at https://
www.sec.gov/litigation/opinions/2018/3484433.pdf. The Division’s Suspension Order is
inconsistent with the Commission’s intent in the
Remand Order to leave the challenged fees in place
during the pendency of the remand proceedings
and singles out the Exchange for disparate
treatment because it means that the Exchange—
unlike every other exchange whose rule changes
were the subject of the Remand Order—is not
permitted to continue charging the challenged fees
during the remand proceedings.
PO 00000
Frm 00046
Fmt 4703
Sfmt 4703
the proposed fees. The proposed rule
change is immediately effective upon
filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.
The Exchange has always offered
various bandwidth choices for physical
connectivity to the Exchange for
Participants and non-Participants to
access the Exchange’s trading platforms,
market data, test systems and disaster
recovery facilities. These physical
connections consist of 10Gb and non10Gb connections, where the 10Gb
connection provides for faster
processing of messages sent to it in
comparison to the non-10Gb
connection. While the Exchange has not
charged for physical connectivity
before, the Exchange believes that it is
reasonable and appropriate to begin
charging for this physical connectivity
to partially offset the costs associated
with maintaining and enhancing a stateof-the-art exchange network
infrastructure in the U.S. options
industry. There are significant costs
associated with various projects and
initiatives to improve overall network
performance and stability, as well as
costs paid to the third-party data center
for space rental, power used, etc. The
Exchange notes that unlike other
options exchanges, the Exchange does
not own and operate its own data center
and therefore cannot control data center
costs.
The Exchange also notes that all other
options exchanges charge for similar
physical connectivity,16 and by
16 In addition to the MIAX connectivity fees cited
above, Nasdaq PHLX LLC (‘‘Phlx’’), The Nasdaq
Stock Market LLC (‘‘Nasdaq’’), NYSE Arca, Inc.
(‘‘Arca’’), NYSE American LLC (‘‘NYSE American’’),
Nasdaq ISE, LLC (‘‘ISE’’), Cboe Exchange, Inc.
(‘‘Cboe’’), Cboe BZX Exchange, Inc. (‘‘CboeBZX’’),
Cboe EDGX Exchange, Inc. (‘‘CboeEDGX’’) and Cboe
C2 Exchange, Inc. (‘‘C2’’) all offer a type of 10Gb
and non-10Gb connectivity alternative to their
participants. See Phlx, and ISE Rules, General
Equity and Options Rules, General 8, Section 1(b).
Phlx and ISE each charge a monthly fee of $2,500
for each 1Gb connection, $10,000 for each 10Gb
connection and $15,000 for each 10Gb Ultra
connection, which is the equivalent of the
Exchange’s 10Gb ULL connection. See also Nasdaq
Price List—Trading Connectivity. Nasdaq charges a
monthly fee of $7,500 for each 10Gb direct
connection to Nasdaq and $2,500 for each direct
connection that supports up to 1Gb. See also NYSE
American Fee Schedule, Section V.B, and Arca Fees
and Charges, Co-Location Fees. NYSE American
and Arca each charge a monthly fee of $5,000 for
each 1Gb circuit, $14,000 for each 10Gb circuit and
$22,000 for each 10Gb LX circuit, which is the
equivalent of the Exchange’s 10Gb ULL connection.
See also Cboe, CboeBZX, CboeEDGX and C2 Fee
Schedules. Cboe charges monthly quoting and order
entry bandwidth packet fees. Specifically, Cboe
charges $1,600 for the 1st through 5th packet, $800
for the 6th through 8th packet, $400 for the 9th
through 13th packet and $200 for the 14th packet
and each additional packet. CboeBZX, CboeEDGX
and C2 each charge a monthly fee of $2,500 for each
1Gb connection and $7,500 for each 10Gb
connection.
E:\FR\FM\20DEN1.SGM
20DEN1
Federal Register / Vol. 83, No. 244 / Thursday, December 20, 2018 / Notices
khammond on DSK30JT082PROD with NOTICES
suspending the Exchange’s initial fee
filing the Division has placed the
Exchange at a competitive disadvantage
within the U.S. options industry.
Without these fees to partially offset the
costs associated with maintaining and
enhancing a state-of-the-art exchange
network infrastructure in the US options
industry, the Exchange may not be able
to make the planned enhancements to
its infrastructure.
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,17 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 Exchange believes that the
proposed Connectivity Fees in general
constitute an equitable allocation of
fees, and are not unfairly
discriminatory, because they allow the
Exchange to recover costs associated
with offering access through the
network connections. The proposed
Connectivity Fees are also expected to
offset the costs both the Exchange and
BOX incur in maintaining and
implementing ongoing improvements to
the trading systems, including
connectivity costs, costs incurred on
software and hardware enhancements
and resources dedicated to software
development, quality assurance, and
technology support. The Exchange
believes that its proposed fees are
reasonable in that they are comparable
to those charged by another exchange
and lower than those charged by several
other exchanges. Further, the Exchange
believes that the proposed Connectivity
Fees are not unfairly discriminatory as
they are assessed to all market
participants who wish to connect to the
BOX network.
The Exchange believes that the
proposed HSVF Port Fee is reasonable
as it is similar to fees assessed at
another exchange in the industry.18
Further, the Exchange believes that
charging Participants and nonParticipants for both the HSVF monthly
fee and applicable physical connection
fees as outlined in the example above is
reasonable as it is in line with another
exchange in the industry.19 Further, the
Exchange believes that the proposed
change is equitable and not unfairly
17 15
U.S.C. 78f(b)(4) and (5).
supra note 8.
discriminatory because it allows the
Exchange to recoup ongoing
expenditures made by the Exchange in
order to offer such services to
Participants and non-Participants.
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. Unilateral
action by the Exchange in establishing
fees for services provided to its
Participants and others using its
facilities will not have an impact on
competition. As a small exchange in the
already highly competitive environment
for options trading, the Exchange does
not have the market power necessary to
set prices for services that are
unreasonable or unfairly discriminatory
in violation of the Exchange Act. The
Exchange’s proposed fees, as described
herein, are comparable to and generally
lower than fees charged by other options
exchanges for the same or similar
services. Lastly, the Exchange believes
the proposed change will not impose a
burden on intramarket competition as
the proposed fees are applicable to all
Participants and others using its
facilities that connect to BOX.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,20 at any time within 60 days of the
date of filing of a proposed rule change
pursuant to Section 19(b)(1) of the
Act,21 the Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) 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. As discussed below, the
Commission believes a temporary
suspension of the proposed rule change
is necessary and appropriate to allow for
additional analysis of the proposed rule
change’s consistency with the Act and
the rules thereunder.
Identical fee changes to those
proposed herein were originally filed on
July 19, 2018. That proposal, BOX–
18 See
20 15
19 Id.
21 15
VerDate Sep<11>2014
17:21 Dec 19, 2018
Jkt 247001
PO 00000
U.S.C. 78s(b)(3)(C).
U.S.C. 78s(b)(1).
Frm 00047
Fmt 4703
Sfmt 4703
65383
2018–24, was published for comment in
the Federal Register on August 2,
2018.22 The Commission received one
comment letter on that proposal.23 On
September 17, 2018, pursuant to Section
19(b)(3)(C) of the Act, the Commission:
(1) Temporarily suspended the
proposed rule change; and (2) instituted
proceedings to determine whether to
approve or disapprove the proposal.24
The Commission received one
additional comment letter on that
proposal in response to the Order
Instituting Proceedings.25 On September
19, 2018, pursuant to Rule 430 of the
Commission’s Rules of Practice,26 the
Exchange filed a notice of intention to
petition for review of the Order
Instituting Proceedings and, on
September 26, 2018, the Exchange filed
a petition for review of the Order
Instituting Proceedings.27 On November
16, 2018, the Commission granted the
Exchange’s Petition and discontinued
the automatic stay of delegated action.28
In addition, the Commission ordered
that any party or other person could file
a statement in support or in opposition
to the action made by delegated
authority provided such statement was
filed on or before December 10, 2018.29
The Commission received two such
statements from the Exchange.30 The
instant filing proposes identical fees and
raises similar concerns as to whether
they are consistent with the Act.31
When exchanges file their proposed
rule changes with the Commission,
including fee filings like the Exchange’s
present proposal, they are required to
provide a statement supporting the
proposal’s basis under the Act and the
rules and regulations thereunder
applicable to the exchange.32 The
22 See
supra note 9, and accompanying text.
supra note 10.
24 See Securities Exchange Act Release No. 84168
(September 17, 2018), 83 FR 47947 (September 21,
2018) (‘‘Order Instituting Proceedings’’).
25 See supra note 12.
26 17 CFR 201.430.
27 See supra notes 13–14, and accompanying text.
Pursuant to Rule 431(e) of the Commission’s Rules
of Practice, a notice of intention to petition for
review results in an automatic stay of the action by
delegated authority. 17 CFR 201.431(e).
28 See supra note 15, and accompanying text.
29 See Securities Exchange Act Release No. 84614
(November 16, 2018), 83 FR 59432 (November 23,
2018).
30 See letters to Brent J. Fields, Secretary,
Commission, from Lisa J. Fall, President, BOX,
dated December 7, 2018, and Amir C. Tayrani,
Gibson, Dunn & Crutcher LLP, dated December 10,
2018.
31 See Order Instituting Proceedings, supra note
24.
32 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
23 See
E:\FR\FM\20DEN1.SGM
20DEN1
65384
Federal Register / Vol. 83, No. 244 / Thursday, December 20, 2018 / Notices
instructions to Form 19b–4, on which
exchanges file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 33
Among other things, exchange
proposed rule changes are subject to
Section 6 of the Act, including Sections
6(b)(4), (5), and (8), which requires the
rules of an exchange to (1) provide for
the equitable allocation of reasonable
fees among members, issuers, and other
persons using the exchange’s
facilities; 34 (2) perfect the mechanism of
a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 35 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.36
In temporarily suspending the
Exchange’s fee change, the Commission
intends to further consider whether the
proposed fees to connect to the
Exchange are consistent with the
statutory requirements applicable to a
national securities exchange under the
Act. In particular, the Commission will
consider whether the proposed rule
change satisfies the standards under the
Act and the rules thereunder requiring,
among other things, that an exchange’s
rules provide for the equitable
allocation of reasonable fees among
members, issuers, and other persons
using its facilities; not permit unfair
discrimination between customers,
issuers, brokers or dealers; and do not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.37
Therefore, the Commission finds that
it is appropriate in the public interest,
for the protection of investors, and
otherwise in furtherance of the purposes
of the Act, to temporarily suspend the
proposed rule change.38
IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change
The Commission is instituting
proceedings pursuant to Sections
khammond on DSK30JT082PROD with NOTICES
33 Id.
34 15
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(5).
36 15 U.S.C. 78f(b)(8).
37 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
38 For purposes of temporarily suspending the
proposed rule change, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
35 15
VerDate Sep<11>2014
17:21 Dec 19, 2018
Jkt 247001
19(b)(3)(C) 39 and 19(b)(2)(B) of the
Act 40 to determine whether the
proposed rule change should be
approved or disapproved. Institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, the Commission
seeks and encourages interested persons
to provide additional comment on the
proposed rule change to inform the
Commission’s analysis of whether to
disapprove the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,41 the Commission is providing
notice of the grounds for possible
disapproval under consideration:
• Section 6(b)(4) of the Act, which
requires that the rules of a national
securities exchange ‘‘provide for the
equitable allocation of reasonable dues,
fees, and other charges among its
members and issuers and other persons
using its facilities,’’ 42
• Section 6(b)(5) of the Act, which
requires, among other things, that the
rules of a national securities exchange
be designed to ‘‘perfect the mechanism
of a free and open market and a national
market system’’ and ‘‘protect investors
and the public interest,’’ and not be
‘‘designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers,’’ 43 and
• Section 6(b)(8) of the Act, which
requires that the rules of a national
securities exchange ‘‘not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of [the Act].’’ 44
As noted above, the proposal imposes
new fees for physical connections to the
Exchange. The Exchange states that
these fees would partially offset costs
associated with maintaining and
enhancing this technology.45 In the
instant filing the Exchange states that its
associated costs relate to costs paid to
the Exchange’s third-party data center
and costs associated with projects and
initiatives designed to improve overall
network performance and stability.46
The Exchange also states that these fees
are expected to offset costs of
maintaining and implementing ongoing
improvements to BOX’s trading systems,
39 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
40 15 U.S.C. 78s(b)(2)(B).
41 15 U.S.C. 78s(b)(2)(B).
42 15 U.S.C. 78f(b)(4).
43 15 U.S.C. 78f(b)(5).
44 15 U.S.C. 78f(b)(8).
45 See supra Section II.A.1.
46 See id.
PO 00000
Frm 00048
Fmt 4703
Sfmt 4703
including connectivity costs, costs
incurred on software and hardware
enhancements, and resources dedicated
to software development, quality
assurance, and technology support.47
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 48 The description of a
proposed rule change, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,49 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.50
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposed fees are
consistent with the Act, and
specifically, with its requirements that
exchange fees be reasonable and
equitably allocated; be designed to
perfect the mechanism of a free and
open market and the national market
system, protect investors and the public
interest, and not be unfairly
discriminatory; or not impose an
unnecessary or inappropriate burden on
competition.51
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. Such
comments should be submitted by
January 10, 2019. Rebuttal comments
should be submitted by January 24,
2019. Although there do not appear to
be any issues relevant to approval or
disapproval which would be facilitated
by an oral presentation of views, data,
and arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.52
47 See
supra Section II.A.2.
700(b)(3), Commission Rules of Practice,
17 CFR 201.700(b)(3).
49 See id.
50 See id.
51 See 15 U.S.C. 78f(b)(4), (5), and (8).
52 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
48 Rule
E:\FR\FM\20DEN1.SGM
20DEN1
Federal Register / Vol. 83, No. 244 / Thursday, December 20, 2018 / Notices
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposal, in addition to
any other comments they may wish to
submit about the proposed rule change.
Interested persons are invited to submit
written data, views, and arguments
concerning the proposed rule change,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSK30JT082PROD 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–2018–37 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BOX–2018–37. 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 the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
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
for consideration of a particular proposal by an
SRO. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
VerDate Sep<11>2014
17:21 Dec 19, 2018
Jkt 247001
submissions should refer to File
Number SR–BOX–2018–37 and should
be submitted on or before January 10,
2019. Rebuttal comments should be
submitted by January 24, 2019.
VI. Conclusion
IT IS THEREFORE ORDERED,
pursuant to Section 19(b)(3)(C) of the
Act,53 that File
Number SR–BOX–2018–37 be and
hereby is, temporarily suspended. In
addition, the Commission is instituting
proceedings to determine whether the
proposed rule change should be
approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.54
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018–27512 Filed 12–19–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
33323; 812–14893]
Investment Managers Series Trust and
361 Capital, LLC
December 14, 2018.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of an application under section
6(c) of the Investment Company Act of
1940 (‘‘Act’’) for an exemption from
section 15(a) of the Act and rule 18f–2
under the Act, as well as from certain
disclosure requirements in rule 20a–1
under the Act, Item 19(a)(3) of Form N–
1A, Items 22(c)(1)(ii), 22(c)(1)(iii),
22(c)(8) and 22(c)(9) of Schedule 14A
under the Securities Exchange Act of
1934, and sections 6–07(2)(a), (b), and
(c) of Regulation S–X (‘‘Disclosure
Requirements’’). The requested
exemption would permit an investment
adviser to hire and replace certain subadvisers without shareholder approval
and grant relief from the Disclosure
Requirements as they relate to fees paid
to the sub-advisers.
APPLICANTS: Investment Managers
Series Trust (the ‘‘Trust’’), a Delaware
statutory trust registered under the Act
as an open-end management investment
company, and 361 Capital, LLC (the
‘‘Adviser’’), a Delaware limited liability
company registered as an investment
adviser under the Investment Advisers
53 15
54 17
PO 00000
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(12), (57), and (58).
Frm 00049
Fmt 4703
Sfmt 4703
65385
Act of 1940 (together with the Trust, the
‘‘Applicants’’).
FILING DATES: The application was filed
on April 5, 2018 and amended on
August 16, 2018.
HEARING OR NOTIFICATION OF HEARING:
An order granting the application will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on January 8, 2019, and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit or, for lawyers, a certificate
of service. Pursuant to rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE, Washington, DC 20549–1090.
Applicants: 235 West Galena Street,
Milwaukee, WI 53212 and 4600 South
Syracuse Street, Suite 500, Denver,
Colorado 80237.
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, at (202)
551–6876, or Andrea Ottomanelli
Magovern, Branch Chief, at (202) 551–
6821 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
website by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Summary of the Application:
1. The Adviser will serve as the
investment adviser to the Subadvised
Series pursuant to an investment
advisory agreement with the Trust
(each, an ‘‘Investment Management
Agreement’’ and, collectively, the
‘‘Investment Management
Agreements’’).1 The Adviser will
1 Applicants request relief with respect to any
existing or future series of the Trust and any other
existing or future registered open-end management
company or series thereof that intends to rely on the
requested order and that: (a) Is advised by the
Adviser, or any person controlling, controlled by or
under common control with the Adviser or its
successors; (b) uses the multi-manager structure
described in the application; and (c) complies with
the terms and conditions of the application (each,
E:\FR\FM\20DEN1.SGM
Continued
20DEN1
]]>Agencies
[Federal Register Volume 83, Number 244 (Thursday, December 20, 2018)]
[Notices]
[Pages 65381-65385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-27512]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-84823; File No. SR-BOX-2018-37]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market
LLC (``BOX'') Options Facility To Establish BOX Connectivity Fees for
Participants and Non-Participants Who Connect to the BOX Network;
Suspension of and Order Instituting Proceedings To Determine Whether To
Approve or Disapprove the Proposed Rule Change
December 14, 2018.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 30, 2018, BOX Exchange LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change as described in Item II below, which Item has been prepared by
the Exchange. The Exchange filed the proposed rule change pursuant to
Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-4(f)(2)
thereunder.\4\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons and is,
pursuant to Section 19(b)(3)(C) of the Act, hereby: (i) Temporarily
suspending the proposed rule change; and (ii) instituting proceedings
to determine whether to approve or disapprove the proposed rule change.
---------------------------------------------------------------------------
\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 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. The fees became
operative on December 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 Description of 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 amend Section VI. (Technology Fees) of the
BOX Fee Schedule to establish BOX Connectivity Fees for Participants
and non-Participants who connect to the BOX network. Connectivity fees
will be based upon the amount of bandwidth that will be used by the
Participant or non-Participant. Further, BOX Participants or non-
Participants connected as of the last trading day of each calendar
month will be charged the applicable Connectivity Fee for that month.
The Connectivity Fees will be as follows:
------------------------------------------------------------------------
Connection type Monthly fees
------------------------------------------------------------------------
Non-10 Gb Connection...................... $1,000 per connection
10 Gb Connection.......................... $5,000 per connection
------------------------------------------------------------------------
The Exchange also proposes to amend certain language and numbering
in Section VI.A to reflect the changes discussed above. Specifically,
BOX proposes to add the title ``Third Party Connectivity Fees'' under
Section VI.A. Further, the Exchange proposes to add Section VI.A.2,
which details the proposed BOX Connectivity Fees discussed above.
Participants and non-Participants with ten (10) Gigabit (``Gb'')
connections will be charged a monthly fee of $5,000 per connection.
Participants and non-Participants with non-10 Gb connections will be
charged a monthly fee of $1,000 per connection. The Exchange notes that
another exchange in the industry has similar connectivity fees \5\ and
that several other exchanges
[[Page 65382]]
charge higher connectivity fees.\6\ The Exchange also notes that
certain fees will continue to be assessed by the datacenters and will
be billed directly to the market participant.
---------------------------------------------------------------------------
\5\ See Miami International Securities Exchange LLC (``MIAX'')
Fee Schedule. MIAX charges its Members and non-Members a monthly fee
of $1,100 for each 1 Gigabit connection and $5,500 for each 10
Gigabit connection to MIAX's Primary/Secondary Facility. The
Exchange notes a minor difference between MIAX's connectivity fees
and BOX's proposal. MIAX prorates their connectivity fees when a
Member makes a change to their connectivity (by adding or deleting
connections). BOX notes that, like the Exchange's Port Fees and HSVF
Fees, Participants or non-Participants connected as of the last
trading day of each calendar month will be charged the applicable
Connectivity Fee for that month.
\6\ See infra note 12.
---------------------------------------------------------------------------
Next, the Exchange is amending Section VI.C. High Speed Vendor Feed
(``HSVF'') of the Fee Schedule. Specifically, BOX is proposing to
delete Section VI.C. and reclassify the HSVF Connection as a Port Fee.
The Exchange believes this reclassification is more accurate, as HSVF
subscription is not dependent on a physical connection to the Exchange.
Instead, subscribers must be credentialed by BOX to receive the HSVF.
The HSVF Fee will remain unchanged; BOX will assess a HSVF Port Fee of
$1,500 per month \7\ for each month a Participant or non-Participant is
credentialed to use the HSVF Port. The Exchange notes that another
exchange has a similar classification and charges similar fees.\8\
---------------------------------------------------------------------------
\7\ The Exchange notes that with the proposed change discussed
herein, Participants and non-Participants credentialed to use the
HSVF Port who also have physical connections to the BOX system will
be charged for both the HSVF monthly fee and the applicable amount
for their physical connections to BOX. For example, if non-
Participant X is credentialed to use the HSVF Port and has three (3)
physical non-10Gb connections to BOX, non-Participant X will be
charged $1500 for the monthly HSVF Port Fee and $3000 for the three
non-10Gb physical connections to BOX.
\8\ See Cboe Data Services, LLC. (``Cboe CDS'') Fee Schedule.
Cboe CDS charges its Customers that receive data through a direct
connection to CDS or through a connection to CDS provided by an
extranet provider $500 per port per month. Cboe CDS's port fee
applies to receipt of any Cboe Options data feed but is only
assessed once per data port. In addition to the data port fee, Cboe
Exchange Inc. (``Cboe'') charges connectivity fees based on the
bandwidth used to connect to the Exchange to receive such data. See
Cboe Fee Schedule.
---------------------------------------------------------------------------
The Exchange initially filed the proposed fees on July 19, 2018,
designating the proposed fees effective July 1, 2018 [sic]. The
proposed rule change was published for comment in the Federal Register
on August 2, 2018.\9\ The Commission received one comment letter on the
proposal.\10\ The proposed fees remained in effect until they were
temporarily suspended pursuant to a suspension order (the ``Suspension
Order'') issued by the Division of Trading and Markets, which also
instituted proceedings to determine whether to approve or disapprove
the proposed rule change.\11\ The Commission subsequently received one
further comment letter on the proposed rule change, supporting the
decision to suspend and institute proceedings on the proposed fee
change.\12\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 83728 (July 27,
2018), 83 FR 37853 (August 2, 2018) (SR-BOX-2018-24).
\10\ See Letter from Tyler Gellasch, Executive Director, The
Healthy Markets Association, to Brent J. Fields, Secretary,
Commission, dated August 23, 2018 (``Healthy Markets Letter'').
\11\ See Securities Exchange Act Release No. 34-84168 (September
17, 2018).
\12\ See Letter from Theodore R. Lazo, Managing Director and
Associate General Counsel, and Ellen Greene, Managing Director,
Financial Services Operations, Securities Industry and Financial
Markets Association, dated October 15, 2018.
---------------------------------------------------------------------------
In response to the Suspension Order, the Exchange timely filed a
Notice of Intention to Petition for Review \13\ and Petition for Review
to vacate the Division's Order,\14\ which stayed the Division's
suspension of the filing. On November 16, 2018 the Commission granted
the Exchange's Petition for Review but discontinued the automatic
stay.\15\
---------------------------------------------------------------------------
\13\ See Letter from Amir Tayrani, Partner, Gibson, Dunn &
Crutcher LLP, dated September 19, 2018.
\14\ See Petition for Review of Order Temporarily Suspending BOX
Exchange LLC's Proposal to Amend the Fee Schedule on BOX Market LLC,
dated September 26, 2018.
\15\ See Securities Exchange Act Release No. 84614. Order
Granting Petition for Review and Scheduling Filing of Statements,
dated November 16, 2018. Separately, the Securities Industry and
Financial Markets Association filed an application under Section
19(d) of the Exchange Act challenging the Exchange's proposed fees
as alleged prohibitions or limitations on access. See In re
Securities Industry and Financial Markets Association, Admin. Proc.
File No. 3-18680 (Aug. 24, 2018). The Commission thereafter remanded
that denial-of-access proceeding to the Exchange while
``express[ing] no view regarding the merits'' and emphasizing that
it was ``not set[ting] aside the challenged rule change[ ].'' In re
Applications of SIFMA & Bloomberg, Exchange Act Rel. No. 84433, at 2
(Oct. 16, 2018) (``Remand Order''), available at https://www.sec.gov/litigation/opinions/2018/34-84433.pdf. The Division's
Suspension Order is inconsistent with the Commission's intent in the
Remand Order to leave the challenged fees in place during the
pendency of the remand proceedings and singles out the Exchange for
disparate treatment because it means that the Exchange--unlike every
other exchange whose rule changes were the subject of the Remand
Order--is not permitted to continue charging the challenged fees
during the remand proceedings.
---------------------------------------------------------------------------
The Healthy Markets and SIFMA Comment Letters (collectively, the
``Comment Letters'') argued that the Exchange did not provide
sufficient information in its filing to support a finding that the
proposal is consistent with the Act. Specifically, the Comment Letters
objected to the Exchange's reliance on the fees of other exchanges to
demonstrate that its fee increases are consistent with the Act. In
addition, the Comment Letters argued that the Exchange did not offer
any details to support its basis for asserting that the proposed fees
are consistent with the Act. The Exchange is now re-filing the proposed
fees and is also providing additional detail regarding the basis for
the proposed fees. The proposed rule change is immediately effective
upon filing with the Commission pursuant to Section 19(b)(3)(A) of the
Act.
The Exchange has always offered various bandwidth choices for
physical connectivity to the Exchange for Participants and non-
Participants to access the Exchange's trading platforms, market data,
test systems and disaster recovery facilities. These physical
connections consist of 10Gb and non-10Gb connections, where the 10Gb
connection provides for faster processing of messages sent to it in
comparison to the non-10Gb connection. While the Exchange has not
charged for physical connectivity before, the Exchange believes that it
is reasonable and appropriate to begin charging for this physical
connectivity to partially offset the costs associated with maintaining
and enhancing a state-of-the-art exchange network infrastructure in the
U.S. options industry. There are significant costs associated with
various projects and initiatives to improve overall network performance
and stability, as well as costs paid to the third-party data center for
space rental, power used, etc. The Exchange notes that unlike other
options exchanges, the Exchange does not own and operate its own data
center and therefore cannot control data center costs.
The Exchange also notes that all other options exchanges charge for
similar physical connectivity,\16\ and by
[[Page 65383]]
suspending the Exchange's initial fee filing the Division has placed
the Exchange at a competitive disadvantage within the U.S. options
industry. Without these fees to partially offset the costs associated
with maintaining and enhancing a state-of-the-art exchange network
infrastructure in the US options industry, the Exchange may not be able
to make the planned enhancements to its infrastructure.
---------------------------------------------------------------------------
\16\ In addition to the MIAX connectivity fees cited above,
Nasdaq PHLX LLC (``Phlx''), The Nasdaq Stock Market LLC
(``Nasdaq''), NYSE Arca, Inc. (``Arca''), NYSE American LLC (``NYSE
American''), Nasdaq ISE, LLC (``ISE''), Cboe Exchange, Inc.
(``Cboe''), Cboe BZX Exchange, Inc. (``CboeBZX''), Cboe EDGX
Exchange, Inc. (``CboeEDGX'') and Cboe C2 Exchange, Inc. (``C2'')
all offer a type of 10Gb and non-10Gb connectivity alternative to
their participants. See Phlx, and ISE Rules, General Equity and
Options Rules, General 8, Section 1(b). Phlx and ISE each charge a
monthly fee of $2,500 for each 1Gb connection, $10,000 for each 10Gb
connection and $15,000 for each 10Gb Ultra connection, which is the
equivalent of the Exchange's 10Gb ULL connection. See also Nasdaq
Price List--Trading Connectivity. Nasdaq charges a monthly fee of
$7,500 for each 10Gb direct connection to Nasdaq and $2,500 for each
direct connection that supports up to 1Gb. See also NYSE American
Fee Schedule, Section V.B, and Arca Fees and Charges, Co-Location
Fees. NYSE American and Arca each charge a monthly fee of $5,000 for
each 1Gb circuit, $14,000 for each 10Gb circuit and $22,000 for each
10Gb LX circuit, which is the equivalent of the Exchange's 10Gb ULL
connection. See also Cboe, CboeBZX, CboeEDGX and C2 Fee Schedules.
Cboe charges monthly quoting and order entry bandwidth packet fees.
Specifically, Cboe charges $1,600 for the 1st through 5th packet,
$800 for the 6th through 8th packet, $400 for the 9th through 13th
packet and $200 for the 14th packet and each additional packet.
CboeBZX, CboeEDGX and C2 each charge a monthly fee of $2,500 for
each 1Gb connection and $7,500 for each 10Gb connection.
---------------------------------------------------------------------------
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,\17\ 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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
The Exchange believes that the proposed Connectivity Fees in
general constitute an equitable allocation of fees, and are not
unfairly discriminatory, because they allow the Exchange to recover
costs associated with offering access through the network connections.
The proposed Connectivity Fees are also expected to offset the costs
both the Exchange and BOX incur in maintaining and implementing ongoing
improvements to the trading systems, including connectivity costs,
costs incurred on software and hardware enhancements and resources
dedicated to software development, quality assurance, and technology
support. The Exchange believes that its proposed fees are reasonable in
that they are comparable to those charged by another exchange and lower
than those charged by several other exchanges. Further, the Exchange
believes that the proposed Connectivity Fees are not unfairly
discriminatory as they are assessed to all market participants who wish
to connect to the BOX network.
The Exchange believes that the proposed HSVF Port Fee is reasonable
as it is similar to fees assessed at another exchange in the
industry.\18\ Further, the Exchange believes that charging Participants
and non-Participants for both the HSVF monthly fee and applicable
physical connection fees as outlined in the example above is reasonable
as it is in line with another exchange in the industry.\19\ Further,
the Exchange believes that the proposed change is equitable and not
unfairly discriminatory because it allows the Exchange to recoup
ongoing expenditures made by the Exchange in order to offer such
services to Participants and non-Participants.
---------------------------------------------------------------------------
\18\ See supra note 8.
\19\ Id.
---------------------------------------------------------------------------
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. Unilateral action by the
Exchange in establishing fees for services provided to its Participants
and others using its facilities will not have an impact on competition.
As a small exchange in the already highly competitive environment for
options trading, the Exchange does not have the market power necessary
to set prices for services that are unreasonable or unfairly
discriminatory in violation of the Exchange Act. The Exchange's
proposed fees, as described herein, are comparable to and generally
lower than fees charged by other options exchanges for the same or
similar services. Lastly, the Exchange believes the proposed change
will not impose a burden on intramarket competition as the proposed
fees are applicable to all Participants and others using its facilities
that connect to BOX.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\20\ at any time within
60 days of the date of filing of a proposed rule change pursuant to
Section 19(b)(1) of the Act,\21\ the Commission summarily may
temporarily suspend the change in the rules of a self-regulatory
organization (``SRO'') 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.
As discussed below, the Commission believes a temporary suspension of
the proposed rule change is necessary and appropriate to allow for
additional analysis of the proposed rule change's consistency with the
Act and the rules thereunder.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78s(b)(3)(C).
\21\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
Identical fee changes to those proposed herein were originally
filed on July 19, 2018. That proposal, BOX-2018-24, was published for
comment in the Federal Register on August 2, 2018.\22\ The Commission
received one comment letter on that proposal.\23\ On September 17,
2018, pursuant to Section 19(b)(3)(C) of the Act, the Commission: (1)
Temporarily suspended the proposed rule change; and (2) instituted
proceedings to determine whether to approve or disapprove the
proposal.\24\ The Commission received one additional comment letter on
that proposal in response to the Order Instituting Proceedings.\25\ On
September 19, 2018, pursuant to Rule 430 of the Commission's Rules of
Practice,\26\ the Exchange filed a notice of intention to petition for
review of the Order Instituting Proceedings and, on September 26, 2018,
the Exchange filed a petition for review of the Order Instituting
Proceedings.\27\ On November 16, 2018, the Commission granted the
Exchange's Petition and discontinued the automatic stay of delegated
action.\28\ In addition, the Commission ordered that any party or other
person could file a statement in support or in opposition to the action
made by delegated authority provided such statement was filed on or
before December 10, 2018.\29\ The Commission received two such
statements from the Exchange.\30\ The instant filing proposes identical
fees and raises similar concerns as to whether they are consistent with
the Act.\31\
---------------------------------------------------------------------------
\22\ See supra note 9, and accompanying text.
\23\ See supra note 10.
\24\ See Securities Exchange Act Release No. 84168 (September
17, 2018), 83 FR 47947 (September 21, 2018) (``Order Instituting
Proceedings'').
\25\ See supra note 12.
\26\ 17 CFR 201.430.
\27\ See supra notes 13-14, and accompanying text. Pursuant to
Rule 431(e) of the Commission's Rules of Practice, a notice of
intention to petition for review results in an automatic stay of the
action by delegated authority. 17 CFR 201.431(e).
\28\ See supra note 15, and accompanying text.
\29\ See Securities Exchange Act Release No. 84614 (November 16,
2018), 83 FR 59432 (November 23, 2018).
\30\ See letters to Brent J. Fields, Secretary, Commission, from
Lisa J. Fall, President, BOX, dated December 7, 2018, and Amir C.
Tayrani, Gibson, Dunn & Crutcher LLP, dated December 10, 2018.
\31\ See Order Instituting Proceedings, supra note 24.
---------------------------------------------------------------------------
When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\32\ The
[[Page 65384]]
instructions to Form 19b-4, on which exchanges file their proposed rule
changes, specify that such statement ``should be sufficiently detailed
and specific to support a finding that the proposed rule change is
consistent with [those] requirements.'' \33\
---------------------------------------------------------------------------
\32\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\33\ Id.
---------------------------------------------------------------------------
Among other things, exchange proposed rule changes are subject to
Section 6 of the Act, including Sections 6(b)(4), (5), and (8), which
requires the rules of an exchange to (1) provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \34\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; \35\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\36\
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78f(b)(4).
\35\ 15 U.S.C. 78f(b)(5).
\36\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
In temporarily suspending the Exchange's fee change, the Commission
intends to further consider whether the proposed fees to connect to the
Exchange are consistent with the statutory requirements applicable to a
national securities exchange under the Act. In particular, the
Commission will consider whether the proposed rule change satisfies the
standards under the Act and the rules thereunder requiring, among other
things, that an exchange's rules provide for the equitable allocation
of reasonable fees among members, issuers, and other persons using its
facilities; not permit unfair discrimination between customers,
issuers, brokers or dealers; and do not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of the Act.\37\
---------------------------------------------------------------------------
\37\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------
Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\38\
---------------------------------------------------------------------------
\38\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change
The Commission is instituting proceedings pursuant to Sections
19(b)(3)(C) \39\ and 19(b)(2)(B) of the Act \40\ to determine whether
the proposed rule change should be approved or disapproved. Institution
of proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change to inform the
Commission's analysis of whether to disapprove the proposed rule
change.
---------------------------------------------------------------------------
\39\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\40\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\41\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Section 6(b)(4) of the Act, which requires that the rules
of a national securities exchange ``provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities,'' \42\
---------------------------------------------------------------------------
\42\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Section 6(b)(5) of the Act, which requires, among other
things, that the rules of a national securities exchange be designed to
``perfect the mechanism of a free and open market and a national market
system'' and ``protect investors and the public interest,'' and not be
``designed to permit unfair discrimination between customers, issuers,
brokers, or dealers,'' \43\ and
---------------------------------------------------------------------------
\43\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Section 6(b)(8) of the Act, which requires that the rules
of a national securities exchange ``not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of [the Act].'' \44\
---------------------------------------------------------------------------
\44\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As noted above, the proposal imposes new fees for physical
connections to the Exchange. The Exchange states that these fees would
partially offset costs associated with maintaining and enhancing this
technology.\45\ In the instant filing the Exchange states that its
associated costs relate to costs paid to the Exchange's third-party
data center and costs associated with projects and initiatives designed
to improve overall network performance and stability.\46\ The Exchange
also states that these fees are expected to offset costs of maintaining
and implementing ongoing improvements to BOX's trading systems,
including connectivity costs, costs incurred on software and hardware
enhancements, and resources dedicated to software development, quality
assurance, and technology support.\47\
---------------------------------------------------------------------------
\45\ See supra Section II.A.1.
\46\ See id.
\47\ See supra Section II.A.2.
---------------------------------------------------------------------------
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \48\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\49\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\50\
---------------------------------------------------------------------------
\48\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\49\ See id.
\50\ See id.
---------------------------------------------------------------------------
The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposed fees are consistent with the Act, and
specifically, with its requirements that exchange fees be reasonable
and equitably allocated; be designed to perfect the mechanism of a free
and open market and the national market system, protect investors and
the public interest, and not be unfairly discriminatory; or not impose
an unnecessary or inappropriate burden on competition.\51\
---------------------------------------------------------------------------
\51\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------
V. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by January 10, 2019.
Rebuttal comments should be submitted by January 24, 2019. Although
there do not appear to be any issues relevant to approval or
disapproval which would be facilitated by an oral presentation of
views, data, and arguments, the Commission will consider, pursuant to
Rule 19b-4, any request for an opportunity to make an oral
presentation.\52\
---------------------------------------------------------------------------
\52\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by an SRO. See Securities
Acts Amendments of 1975, Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
[[Page 65385]]
The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change. Interested persons are invited to submit written
data, views, and arguments concerning the proposed rule change,
including whether the proposed rule change is consistent with the Act.
Comments may be submitted by any of the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-BOX-2018-37 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BOX-2018-37. 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 the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. 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-2018-37 and should be submitted on
or before January 10, 2019. Rebuttal comments should be submitted by
January 24, 2019.
VI. Conclusion
IT IS THEREFORE ORDERED, pursuant to Section 19(b)(3)(C) of the
Act,\53\ that File
---------------------------------------------------------------------------
\53\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
Number SR-BOX-2018-37 be and hereby is, temporarily suspended. In
addition, the Commission is instituting proceedings to determine
whether the proposed rule change should be approved or disapproved.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\54\
---------------------------------------------------------------------------
\54\ 17 CFR 200.30-3(a)(12), (57), and (58).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2018-27512 Filed 12-19-18; 8:45 am]
BILLING CODE 8011-01-P
