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, 7146-7151 [2019-03706]
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Federal Register / Vol. 84, No. 41 / Friday, March 1, 2019 / Notices
options exchanges to harmonize and
improve the process related to the
adjustment and nullification of
erroneous options transactions. The
Exchange does not believe that the rules
applicable to such process is an area
where options exchanges should
compete, but rather, that all options
exchanges should have consistent rules
to the extent possible. Particularly
where a market participant trades on
several different exchanges and an
erroneous trade may occur on multiple
markets nearly simultaneously, the
Exchange believes that a participant
should have a consistent experience
with respect to the nullification or
adjustment of transactions. Several
other options exchanges have virtually
identical rules.34
The Exchange does not believe that
the proposed rule change imposes a
burden on intramarket competition
because the obvious error provisions
apply to all market participants equally
within each participant category (i.e.,
Customers and non-Customers). With
respect to competition between
Customer and non-Customer market
participants, the Exchange believes that
the proposed rule change acknowledges
competing concerns and tries to strike
the appropriate balance between such
concerns. For instance, the Exchange
believes that protection of Customers is
important due to their direct
participation in the options markets as
well as the fact that they are not, by
definition, market professionals. At the
same time, the Exchange believes due to
the quote-driven nature of the options
markets, the importance of liquidity
provision in such markets and the risk
that liquidity providers bear when
quoting a large breadth of products that
are derivative of underlying securities,
that the protection of liquidity providers
and the practice of adjusting
transactions rather than nullifying them
is of critical importance. As described
above, the Exchange will apply specific
and objective criteria to determine
whether an erroneous transaction has
occurred and, if so, how to adjust or
nullify a transaction.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
34 See Cboe Options Rule 6.25, Interpretation and
Policy .07, ISE Rule 720, Supplementary Material
.05, and MIAX Rule 521, Interpretation and Policy
.03.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not:
A. significantly affect the protection
of investors or the public interest;
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 35 and Rule 19b–4(f)(6) 36
thereunder. At any time within 60 days
of the filing of the proposed rule change,
the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeEDGX–2019–005 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–CboeEDGX–2019–005. 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–CboeEDGX–2019–005 and
should be submitted on or before March
22, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03705 Filed 2–28–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85201; File No. SR–BOX–
2019–04]
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
February 26, 2019.
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 February
13, 2019, BOX Exchange LLC
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I and II below,
which Items have been prepared by the
37 17
35 15
U.S.C. 78s(b)(3)(A).
36 17 CFR 240.19b–4(f)(6).
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 84, No. 41 / Friday, March 1, 2019 / Notices
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 to establish
BOX Connectivity Fees for Participants
and non-Participants who connect to the
BOX network. 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.
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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:
3 15
4 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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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
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
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.
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.
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7147
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
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 Exchange then filed a
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’’).
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
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Federal Register / Vol. 84, No. 41 / Friday, March 1, 2019 / Notices
statement to reiterate the arguments set
for in its petition for review and to
supplement that petition with
additional information.16
The Exchange subsequently refiled its
fee proposal on November 30th, 2018.
The proposed fees were noticed and
again temporarily suspended pursuant
to a 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.17 The
Commission received two comment
letters supporting the decision to
suspend and institute proceedings on
the proposed fee change.18
The SIFMA, Healthy Markets and
Chester Spatt 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 once again re-filing
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 US options
industry. Additionally, 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 centers 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,19 and by
suspending the Exchange’s initial fee
filing the Division has placed the
Exchange at a competitive disadvantage
within the US options industry. Without
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.
16 See Letter from Amir Tayrani, Partner, Gibson,
Dunn & Crutcher LLP, dated December 10, 2018.
17 See Securities Exchange Act Release No. 84823
(December 14, 2018), 83 FR 65381 (December 20,
2018) (SR–BOX–2018–37).
18 See Letters from Tyler Gellasch, Executive
Director, The Healthy Markets Association
(‘‘Second Healthy Markets Letter’’), and Chester
Spatt, Pamela R. and Kenneth B. Dunn Professor of
Finance, Tepper School of Business, Carnegie
Mellon University (‘‘Chester Spatt Letter’’), to Brent
J. Fields, Secretary, Commission, dated January 2,
2019.
19 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.
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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,20 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.21
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.22 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
20 15
U.S.C. 78f(b)(4) and (5).
supra note 8.
21 See
22 Id.
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Federal Register / Vol. 84, No. 41 / Friday, March 1, 2019 / Notices
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.
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III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,23 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,24 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–
2018–24, was published for comment in
the Federal Register on August 2,
23 15
24 15
U.S.C. 78s(b)(3)(C).
U.S.C. 78s(b)(1).
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18:13 Feb 28, 2019
Jkt 247001
2018.25 The Commission received one
comment letter on that proposal.26 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.27
The Commission received one
additional comment letter on that
proposal in response to the Order
Instituting Proceedings.28 On September
19, 2018, pursuant to Rule 430 of the
Commission’s Rules of Practice,29 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.30 On November
16, 2018, the Commission granted the
Exchange’s Petition and discontinued
the automatic stay of delegated action.31
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, 2018.32
The Commission received two such
statements from the Exchange.33
Identical fee changes to those
proposed herein were again filed on
November 30, 2018. That proposal,
BOX–2018–37, was published for
comment in the Federal Register on
December 20, 2018.34 Simultaneous
with the publication of such notice,
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.35 The
Commission received two comment
letters in response to the proposal.36
The instant filing proposes identical
25 See
supra note 9, and accompanying text.
supra note 10.
27 See Securities Exchange Act Release No. 84168
(September 17, 2018), 83 FR 47947 (September 21,
2018) (‘‘Order Instituting Proceedings’’).
28 See supra note 12.
29 17 CFR 201.430.
30 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).
31 See supra note 15, and accompanying text.
32 See Securities Exchange Act Release No. 84614
(November 16, 2018), 83 FR 59432 (November 23,
2018).
33 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.
34 See Securities Exchange Act Release No. 84823
(December 14, 2018), 83 FR 65381.
35 See id.
36 See supra note 18.
26 See
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7149
fees and raises similar concerns as to
whether they are consistent with the
Act.37
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.38 The
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.’’ 39
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; 40 (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; 41 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.42
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.43
37 See
Order Instituting Proceedings, supra note
27.
38 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’’).
39 Id.
40 15 U.S.C. 78f(b)(4).
41 15 U.S.C. 78f(b)(5).
42 15 U.S.C. 78f(b)(8).
43 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
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Federal Register / Vol. 84, No. 41 / Friday, March 1, 2019 / Notices
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.44
jbell on DSK30RV082PROD with NOTICES
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) 45 and 19(b)(2)(B) of the
Act 46 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,47 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,’’ 48
• 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,’’ 49 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].’’ 50
As noted above, the proposal imposes
new fees for physical connections to the
44 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).
45 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.
46 15 U.S.C. 78s(b)(2)(B).
47 15 U.S.C. 78s(b)(2)(B).
48 15 U.S.C. 78f(b)(4).
49 15 U.S.C. 78f(b)(5).
50 15 U.S.C. 78f(b)(8).
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Exchange. The Exchange states that
these fees would partially offset costs
associated with maintaining and
enhancing this technology.51 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.52
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.53
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.’’ 54 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,55 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.56
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.57
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
51 See
supra Section II.A.1.
id.
53 See supra Section II.A.2.
54 Rule 700(b)(3), Commission Rules of Practice,
17 CFR 201.700(b)(3).
55 See id.
56 See id.
57 See 15 U.S.C. 78f(b)(4), (5), and (8).
52 See
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as any other relevant concerns. Such
comments should be submitted by
March 11, 2019. Rebuttal comments
should be submitted by March 18, 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.58
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–2019–04 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–2019–04. 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
58 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).
E:\FR\FM\01MRN1.SGM
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Federal Register / Vol. 84, No. 41 / Friday, March 1, 2019 / Notices
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–2019–04 and should
be submitted on or before March 11,
2019. Rebuttal comments should be
submitted by March 18, 2019.
Europe. ICE Clear Europe filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act,3 and Rule
19b–4(f)(4)(ii) thereunder,4 so that the
proposal was immediately effective
upon filing. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,59 that File
Number SR–BOX–2019–04 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.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, ICE
Clear Europe 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. ICE
Clear Europe has prepared summaries,
set forth in sections (A), (B), and (C)
below, of the most significant aspects of
such statements.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.60
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03706 Filed 2–28–19; 8:45 am]
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85187; File No. SR–ICEEU–
2019–002]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Amendments to the ICE Clear Europe
Delivery Procedures
jbell on DSK30RV082PROD with NOTICES
February 25, 2019.
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 February
15, 2019, ICE Clear Europe Limited
(‘‘ICE Clear Europe’’ or the ‘‘Clearing
House’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule changes described in
Items I, II and III below, which Items
have been prepared by ICE Clear
59 15
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(12), (57), and (58).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
60 17
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18:13 Feb 28, 2019
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I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The principal purpose of the
proposed amendments is for ICE Clear
Europe to to [sic] add delivery terms
relating to the ICE Futures Europe (‘‘ICE
Futures Europe’’ or ‘‘IFEU’’) Permian
West Texas Intermediate Crude Oil
Storage Futures Contracts (the
‘‘Contracts’’).5
(a) Purpose
ICE Clear Europe is amending its
Delivery Procedures to add a new
Section 10 and a new Part DD regarding
delivery procedures relating to a new
Contract that will be traded on ICE
Futures Europe and cleared by ICE Clear
Europe.
New Part DD sets out the delivery
specifications and procedures for
deliveries of storage capacity under the
Contract. Delivery is effected by
Magellan Crude Oil Pipeline Company,
L.P. (‘‘Magellan’’) providing to the buyer
a Capacity Allocation Contract
(‘‘CAC’’) 6 for storage of one or more
increments of 1,000 barrels of Permian
West Texas Intermediate crude oil for a
3 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(4)(ii).
5 Capitalized terms used but not defined herein
have the meaning specified in the ICE Clear Europe
Clearing Rules (the ‘‘Rules’’).
6 This is a standardized agreement between
Magellan and a buyer providing the contractual
right to use designated Permian WTI Storage in the
delivery month as further detailed in the Permian
WTI Storage Contract.
4 17
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7151
named calendar month at Magellan’s
East Houston terminal (‘‘MEH’’). The
amendments also establish standards for
the storage provided, as well as relevant
procedures for exchange of futures for
physical transactions under exchange
rules.
Part DD addresses certain the
responsibilities of the Clearing House
and relevant parties for delivery under
the Contracts, supplementing the
existing provisions of the Rules.
Specifically, neither the Clearing House
nor ICE Futures Europe are responsible
for the performance of Magellan or any
person operating MEH, nor do they give
any undertaking or warranty to any
person as to the effect of the Contract
Terms and Delivery Procedures as
regards title to Permian WTI Storage.
Further, neither the Clearing House nor
ICE Futures Europe will have any
liability for the condition of the
Magellan storage system or for the
performance by Magellan or any person
who operates such system of any
responsibilities they may assume
towards Clearing Members or other
persons pursuant to the Contract Terms,
except for liability for fraud or bad faith
or liability which cannot lawfully be
excluded. Neither the Clearing House
nor ICE Futures Europe has any
obligation to any person to ensure the
accuracy or availability of any
information in Magellan’s records in
relation to storage rights arising from
CACs in relation to Permian WTI
Storage.
Part DD addresses delivery margin
and invoicing with respect to the
Contract and specifies certain details of
the delivery process. Delivery of
Contracts will be based on open contract
positions at the close of trading on the
last trading day for which physical
delivery is specified. The procedures
include a detailed timeframe for
relevant notices of intent to deliver or
receive, nominations of parties to
delivery or receive, delivery
confirmations, invoicing, release of
delivery margin following completion of
delivery and other matters.
New Section 10 addresses alternative
delivery procedures (ADP) that the
parties to a Contract may agree in lieu
of the standard delivery arrangements in
Part DD and relevant exchange rules.
Section 10 addresses procedures for
requesting such an alternative
arrangement, disclosure of the
counterparty (if amenable to an
alternative arrangement), and
confirmation and settlement of the
alternative arrangement.
E:\FR\FM\01MRN1.SGM
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]]>Agencies
[Federal Register Volume 84, Number 41 (Friday, March 1, 2019)]
[Notices]
[Pages 7146-7151]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03706]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85201; File No. SR-BOX-2019-04]
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
February 26, 2019.
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 February 13, 2019, BOX Exchange LLC (``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') a proposed rule
change as described in Items I and II below, which Items have been
prepared by the
[[Page 7147]]
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 to
establish BOX Connectivity Fees for Participants and non-Participants
who connect to the BOX network. 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 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\ The Exchange then filed a
[[Page 7148]]
statement to reiterate the arguments set for in its petition for review
and to supplement that petition with additional information.\16\
---------------------------------------------------------------------------
\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.
\16\ See Letter from Amir Tayrani, Partner, Gibson, Dunn &
Crutcher LLP, dated December 10, 2018.
---------------------------------------------------------------------------
The Exchange subsequently refiled its fee proposal on November
30th, 2018. The proposed fees were noticed and again temporarily
suspended pursuant to a 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.\17\ The
Commission received two comment letters supporting the decision to
suspend and institute proceedings on the proposed fee change.\18\
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 84823 (December 14,
2018), 83 FR 65381 (December 20, 2018) (SR-BOX-2018-37).
\18\ See Letters from Tyler Gellasch, Executive Director, The
Healthy Markets Association (``Second Healthy Markets Letter''), and
Chester Spatt, Pamela R. and Kenneth B. Dunn Professor of Finance,
Tepper School of Business, Carnegie Mellon University (``Chester
Spatt Letter''), to Brent J. Fields, Secretary, Commission, dated
January 2, 2019.
---------------------------------------------------------------------------
The SIFMA, Healthy Markets and Chester Spatt 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 once again re-filing 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
US options industry. Additionally, 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 centers 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,\19\ and by suspending the Exchange's
initial fee filing the Division has placed the Exchange at a
competitive disadvantage within the US 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.
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\19\ 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.
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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,\20\ 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.
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\20\ 15 U.S.C. 78f(b)(4) and (5).
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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.\21\ 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.\22\ 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
[[Page 7149]]
order to offer such services to Participants and non-Participants.
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\21\ See supra note 8.
\22\ Id.
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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,\23\ 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,\24\ 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.
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\23\ 15 U.S.C. 78s(b)(3)(C).
\24\ 15 U.S.C. 78s(b)(1).
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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.\25\ The Commission
received one comment letter on that proposal.\26\ 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.\27\ The Commission received one additional comment letter on
that proposal in response to the Order Instituting Proceedings.\28\ On
September 19, 2018, pursuant to Rule 430 of the Commission's Rules of
Practice,\29\ 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.\30\ On November 16, 2018, the Commission granted the
Exchange's Petition and discontinued the automatic stay of delegated
action.\31\ 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.\32\ The Commission received two such
statements from the Exchange.\33\
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\25\ See supra note 9, and accompanying text.
\26\ See supra note 10.
\27\ See Securities Exchange Act Release No. 84168 (September
17, 2018), 83 FR 47947 (September 21, 2018) (``Order Instituting
Proceedings'').
\28\ See supra note 12.
\29\ 17 CFR 201.430.
\30\ 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).
\31\ See supra note 15, and accompanying text.
\32\ See Securities Exchange Act Release No. 84614 (November 16,
2018), 83 FR 59432 (November 23, 2018).
\33\ 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.
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Identical fee changes to those proposed herein were again filed on
November 30, 2018. That proposal, BOX-2018-37, was published for
comment in the Federal Register on December 20, 2018.\34\ Simultaneous
with the publication of such notice, 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.\35\ The Commission received two comment
letters in response to the proposal.\36\ The instant filing proposes
identical fees and raises similar concerns as to whether they are
consistent with the Act.\37\
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\34\ See Securities Exchange Act Release No. 84823 (December 14,
2018), 83 FR 65381.
\35\ See id.
\36\ See supra note 18.
\37\ See Order Instituting Proceedings, supra note 27.
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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.\38\ The 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.'' \39\
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\38\ 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'').
\39\ Id.
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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; \40\ (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; \41\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\42\
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\40\ 15 U.S.C. 78f(b)(4).
\41\ 15 U.S.C. 78f(b)(5).
\42\ 15 U.S.C. 78f(b)(8).
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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.\43\
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\43\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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[[Page 7150]]
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.\44\
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\44\ 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).
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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) \45\ and 19(b)(2)(B) of the Act \46\ 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.
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\45\ 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.
\46\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\47\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
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\47\ 15 U.S.C. 78s(b)(2)(B).
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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,'' \48\
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\48\ 15 U.S.C. 78f(b)(4).
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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,'' \49\ and
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\49\ 15 U.S.C. 78f(b)(5).
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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].'' \50\
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\50\ 15 U.S.C. 78f(b)(8).
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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.\51\ 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.\52\ 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.\53\
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\51\ See supra Section II.A.1.
\52\ See id.
\53\ See supra Section II.A.2.
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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.'' \54\ 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,\55\ 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.\56\
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\54\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\55\ See id.
\56\ See id.
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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.\57\
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\57\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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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 March 11, 2019. Rebuttal
comments should be submitted by March 18, 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.\58\
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\58\ 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).
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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-2019-04 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-2019-04. 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
[[Page 7151]]
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-
2019-04 and should be submitted on or before March 11, 2019. Rebuttal
comments should be submitted by March 18, 2019.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\59\ that File Number SR-BOX-2019-04 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.
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\59\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\60\
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\60\ 17 CFR 200.30-3(a)(12), (57), and (58).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03706 Filed 2-28-19; 8:45 am]
BILLING CODE 8011-01-P
