Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 7130, 17441-17445 [2019-08331]

Download as PDF Federal Register / Vol. 84, No. 80 / Thursday, April 25, 2019 / Notices competition, including by attracting additional liquidity to the Exchange, which would continue to make the Exchange a more competitive venue for, among other things, order execution and price discovery. The Exchange does not believe that the proposed changes would impair the ability of any market participants or competing order execution venues to maintain their competitive standing in the financial markets. Further, the incentive would be available to all similarly-situated participants, and, as such, the proposed changes would not impose a disparate burden on competition either among or between classes of market participants and, in fact, may encourage competition. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. khammond on DSKBBV9HB2PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) 6 of the Act and subparagraph (f)(2) of Rule 19b–4 7 thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–85695; File No. SR–BOX– 2019–12] • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2019–24 on the subject line. Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 7130 April 19, 2019. 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–NYSEArca–2019–24. 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 (http://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–NYSEArca–2019–24 and should be submitted on or before May 16, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–08332 Filed 4–24–19; 8:45 am] Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 9, 2019, BOX Exchange LLC (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend Rule 7130. 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 http://boxoptions.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose BOX Rule 7130(a)(4) governs the criteria for order matching and trade execution priority on BOX. BOX Rule 7130(a)(4)(iv), Options Participant Match Trade Prevention, describes an exception to the order matching and BILLING CODE 8011–01–P U.S.C. 78s(b)(3)(A). 7 17 CFR 240.19b–4(f)(2). 6 15 VerDate Sep<11>2014 16:25 Apr 24, 2019 1 15 8 17 Jkt 247001 17441 PO 00000 CFR 200.30–3(a)(12). Frm 00068 Fmt 4703 2 17 Sfmt 4703 E:\FR\FM\25APN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 25APN1 17442 Federal Register / Vol. 84, No. 80 / Thursday, April 25, 2019 / Notices khammond on DSKBBV9HB2PROD with NOTICES trade priority within that rule. Under this exception, a Participant may direct that its Market Maker or broker dealer orders entered on BOX not execute against Market Maker quotes or orders, or broker dealer orders that originated from such Participant and were resting on the BOX Book. The Exchange now proposes to amend Rule 7130 to remove the Options Participant Match Trade Prevention rule discussed above and adopt three forms of Self-Trade Prevention modifiers. Specifically, the Exchange proposes the Cancel Newest, Cancel Oldest, and Cancel Both Self-Trade Prevention modifiers. Under this proposal, a BOX Participant may elect for all of its orders to be marked with a Self-Trade modifier.3 If a Participant makes such an election, any order that is submitted will be prevented from executing against a resting opposite side order or quote that is labeled as originating from the Same Participant (for purposes of this rule, orders and quotes originating from the same Participant ID). A Participant may only elect one of the following: Cancel Newest, Cancel Oldest, or Cancel Both Self-Prevention options. The Exchange also proposes IM– 7130–2(c). This provision states that Participants who elect for Self-Trade Prevention modifiers may also elect for all of their resting interest to be ‘‘skipped over.’’ 4 In choosing to have their resting interest ‘‘skipped over,’’ incoming orders may trade with another eligible order or quote originating from any origin other than the Same Participant ID (for purposes of this rule, ‘‘Another Participant ID’’). If the Participant elects for resting interest to be ‘‘skipped over,’’ the incoming order may only trade with another eligible order or quote originating from Another Participant ID if the other (Another) Participant ID order or quote is at the price of the order or quote from the Same Participant ID that is being ‘‘skipped over.’’ The resting order or quote that was ‘‘skipped over’’ will remain on the BOX Book with the same 3 To elect for all orders to be marked with a SelfTrade Prevention modifier, Participants must contact the Market Operations Center (‘‘MOC’’). Such election will be effective until the Participant receives MOC’s written confirmation of the Participant’s written discretion to discontinue the effectiveness of the election for such Participant. 4 Similar to the election for Self-Trade Prevention modifiers, Participants must contact the MOC if they elect for all of their resting interest to be ‘‘skipped over.’’ Such election will be effective until the Participant receives MOC’s written confirmation of the Participant’s written discretion to discontinue the effectiveness of the election for such Participant. VerDate Sep<11>2014 16:25 Apr 24, 2019 Jkt 247001 priority. This election will apply to each of the modifiers discussed herein. Below are examples of each SelfTrade Prevention modifier (some which include the election for resting interest to be ‘‘skipped over’’): Cancel Newest First, the Exchange proposes the STP Cancel Newest (‘‘STPN’’) modifier.5 If a Participant chooses this modifier, any incoming order submitted by a Participant will not execute against opposite side interest from the Same Participant ID. The incoming order will be cancelled back to the Participant. The resting order or quote from the Same Participant will remain on the BOX Book. STPN Example 1: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Newest Self-Trade Prevention modifier rests on the BOX Book with no resting interest behind it. An order to sell 10 contracts @ $1.00 comes in from the Same Participant. The incoming order to sell 10 contracts @ $1.00 is then cancelled back to the originating Participant. The resting buy order for 10 contracts $1.00 remains on the BOX Book. STPN Example 2: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Newest Self-Trade Prevention modifier (and has elected for its resting orders to be ‘‘skipped over’’) rests on the BOX Book with another order to buy 10 contracts @ $1.00 from Another Participant resting behind it. An order to sell 10 contracts @ $1.00 comes in from the Same Participant. The incoming sell order for 10 contracts @ $1.00 would not trade with the order to buy 10 contracts @ $1.00 from the Same Participant, but would trade with the order to buy 10 contracts @ $1.00 from the other Participant resting behind the buy order from the Same Participant because the price is at the Same Participant buy order.6 The resting buy order for 10 contracts @ $1.00 from the Same Participant will remain on the BOX Book because the Participant elected for its resting orders to be ‘‘skipped over.’’ STPN Example 3: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Newest Self-Trade Prevention modifier (and has not elected for its resting orders to the ‘‘skipped over’’) rests on the BOX Book 5 The Exchange notes that the Cancel Newest modifier is similar to the functionality of the current Options Participant Match Trade Prevention. 6 The Exchange notes that the incoming order would have been cancelled had the Participant not elected for its resting interest to be ‘‘skipped over.’’ PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 with another order to buy 10 contracts @ $1.00 from Another Participant resting behind it. An order to sell 10 contracts @ $1.00 comes in from the Same Participant. The incoming sell order for 10 contracts @ $1.00 from the Same Participant is cancelled back to the Same Participant (because the Participant did not elect for its resting orders to be ‘‘skipped over’’). The resting sell order for 10 contracts @ $1.00 from the Same Participant will remain on the BOX Book. STPN Example 4: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Newest Self-Trade Prevention modifier (and has elected for its resting interest to be ‘‘skipped over’’) rests on the BOX Book with another order to buy 10 contracts @ $0.99 from Another Participant resting behind it. An order to sell 10 contracts @ $1.00 comes in from the Same Participant. The incoming sell order for 10 contracts would not trade with the order to buy 10 contracts @ $1.00 from the Same Participant and would also not trade with the order to buy 10 contracts @ $0.99 from Another Participant resting behind the buy order from the Same Participant.7 The incoming sell order for 10 contracts is then cancelled back to the originating Participant. The resting buy order for 10 contracts @ $1.00 from the Same Participant remains on the BOX Book. Cancel Oldest Next, the Exchange proposes the STP Cancel Oldest (‘‘STPO’’) modifier. If a Participant chooses this modifier, any incoming order submitted by a Participant will not execute against opposite side resting interest from the same Participant ID. When a Participant submits an incoming order that would trade against opposite side resting interest from the same Participant ID, the opposite side interest will be cancelled back to the Participant. STPO Example 1: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Oldest Self-Trade Prevention modifier rests on the BOX Book with no resting interest behind it. An order to sell 10 contracts @ $1.00 comes in from the Same Participant. The resting buy order for 10 contracts @ $1.00 is then cancelled back to the originating Participant. The incoming sell order for 10 contracts @ $1.00 is entered into the BOX Book.8 7 This is because the price of the eligible order from Another Participant ID is not at the same price level as the resting order on the BOX Book. As such, the incoming order is cancelled back to the Participant. 8 In this example, regardless of whether the Participant elected for its resting interest to be E:\FR\FM\25APN1.SGM 25APN1 Federal Register / Vol. 84, No. 80 / Thursday, April 25, 2019 / Notices STPO Example 2: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Oldest Self-Trade Prevention modifier (and has elected for its resting interest to be ‘‘skipped over’’) rests on the BOX Book with another order to buy 10 contracts @ $1.00 from Another Participant resting behind it. An order to sell 10 contracts @ $1.00 comes in from the Same Participant. The incoming sell order for 10 contracts @ $1.00 would trade with the order to buy 10 contracts @ $1.00 from the other (Another) Participant resting behind the buy order from the Same Participant. The resting buy order from the Same Participant will remain on the BOX Book. STPO Example 3: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Oldest Self-Trade Prevention modifier (and has not elected for its resting interest to be ‘‘skipped over’’) rests on the BOX Book with another order to buy 10 contracts @ $1.00 from Another Participant resting behind it. An order to sell 10 contracts at $1.00 comes in from the Same Participant. The resting buy order for 10 contracts @ $1.00 from the Same Participant is cancelled back to the Same Participant. The incoming sell order for 10 contracts @ $1.00 would trade with the order to buy 10 contracts @ $1.00 from the other (Another) Participant resting behind the buy order from the Same Participant. STPO Example 4: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Oldest Self-Trade Prevention modifier rests on the BOX Book with another order to buy 10 contracts @ $0.99 from Another Participant resting behind it. An order to sell 10 contracts comes in from the Same Participant. The resting buy order for 10 contracts @ $1.00 is cancelled back to the originating Participant. The incoming sell order for 10 contracts would trade with the order to buy 10 contracts @ $0.99 from Another Participant that had been resting behind the buy order from the Same Participant (since the resting buy order from the Same Participant was cancelled).9 khammond on DSKBBV9HB2PROD with NOTICES Cancel Both Lastly, the Exchange proposes the STP Cancel Both (‘‘STPC’’) modifier. If a Participant chooses this modifier, any ‘‘skipped over,’’ the result would be the same because there is no resting interest behind the resting Participant order. 9 In this example, the resting order will be cancelled back to the Participant regardless of whether the Participant has elected to allow for the resting order to be skipped because the buy order for 10 contracts @ $0.99 is at a different price behind the resting order. VerDate Sep<11>2014 16:25 Apr 24, 2019 Jkt 247001 incoming order submitted by a Participant will not execute against opposite side resting interest from the same Participant ID. When a Participant submits an incoming order that would trade against opposite side resting interest from the same Participant ID, the entire size of both orders (or order and resting quote) will be cancelled back to the originating Participant ID. STPC Example 1: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Both Self-Trade Prevention modifier rests on the BOX Book with no resting interest behind it. An order to sell 10 contracts @ 1.00 comes in from the Same Participant. Both orders would be cancelled back to the Participant.10 STPC Example 2: An order to buy 10 contracts @ $1.00 from a Participant who has elected for the Cancel Both Self-Trade Prevention modifier (and has elected for its resting interest to be ‘‘skipped over’’) rests on the BOX Book with another order to buy 10 contracts @ $1.00 from Another Participant resting behind it. An order to sell 10 contracts @ $1.00 comes in from the Same Participant. The incoming order would trade with the order to buy 10 contracts @ $1.00 from the other (Another) Participant resting behind the order from the Same Participant. The resting order will remain on the BOX Book. As explained above, orders may skip over orders or quotes from the Same Participant ID and trade against eligible orders or quotes with lower priority that originate from Another Participant, provided the prices are the same. Therefore, the Exchange proposes to add IM–7130–2(d) to provide that in instances in which the Self-Trade Prevention modifiers are implicated, the Self-Trade Prevention modifier rules will supersede other allocation methods only for the purpose of preventing selftrades as described in the Self-Trade Prevention modifier rule. The Exchange notes that this rule is similar to another rule that was in place at another exchange.11 Additional Discussion The Exchange notes that the proposed modifiers discussed herein are similar to modifiers used at other options 10 In this example, regardless of whether the Participant elected for its resting interest to be ‘‘skipped over,’’ the result would be the same. 11 See Securities Exchange Act Release No. 67152 (June 7, 2012), 77 FR 35448 (June 13, 2012) (Order Approving SR–CBOE–2012–013). While this rule previously applied to Cboe’s equities market, the Exchange believes that it should be permitted on the options market as it allows for increased executions without taking liquidity from the BOX Book which benefits all market participants. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 17443 exchanges.12 The Exchange believes that the proposed changes will allow BOX Participants to better manage order flow and prevent undesirable or unexpected executions with themselves. Given enhancements in technology in today’s trading environment, Participants often have multiple connections into the Exchange. Orders, for example, routed by the Same Participant via different connections may, in certain circumstances, trade against each other. The proposed STP modifiers would 12 See Cboe BZX Exchange, Inc. (‘‘Cboe BZX’’) Rule 21.1(g). The Exchange notes a few minor differences between Cboe BZX’s rule and BOX’s proposed rule. First, the Exchange notes that it is not copying Cboe BZX Rule 21.1(g)(3) and (5). These rules detail two modifiers that BOX does not wish to offer on the Exchange at this time. Second, the Exchange notes that it is not copying certain language in Cboe BZX Rule 21.1(g) that states that the ‘‘modifier on the incoming order controls the interaction between two orders marked with modifiers.’’ Under the Proposal, if a Participant elects for its orders to be marked with one of the three proposed modifiers, all orders will be marked with the elected modifier, not on an order-by-order basis. Third, the Exchange notes that proposed IM– 7130–2(c) differs from the Cboe BZX rule. As proposed, Participants who elect for Self-Trade Prevention modifiers may also elect for resting interest to be ‘‘skipped over.’’ Participants may elect for their resting interest to be ‘‘skipped over’’ so incoming orders may trade with another eligible order or quote originating from any origin other than the Same Participant ID (for purposes of this rule, ‘‘Another Participant ID’’). If the Participant elects for resting interest to be ‘‘skipped over,’’ the incoming order may only trade with another eligible order or quote originating from Another Participant ID if the other (Another) Participant ID order or quote is at the price of the order or quote from the Same Participant ID that is being ‘‘skipped over.’’ The resting order or quote that was ‘‘skipped over’’ will remain on the BOX Book. The Exchange notes that allowing Participants to elect whether its resting interest can be ‘‘skipped over’’ is reasonable and non-controversial as it will allow the incoming order to execute against the next resting order or quote on the BOX Book (as long as the next resting order or quote from Another Participant ID is at the price of the resting order or quote from the Same Participant that is being ‘‘skipped over’’) and allow the resting interest to remain on the BOX Book. The Exchange further notes that similar functionality was previously available at Cboe Exchange Inc (‘‘Cboe’’) for their Cancel Newest modifier. See Securities Exchange Act Release No. 67152 (June 7, 2012), 77 FR 35448 (June 13, 2012) (Order Approving SR–CBOE–2012–013). Further, the Exchange proposes to allow similar functionality discussed above in all proposed modifiers and not just the Cancel Newest modifier. Specifically, the Exchange proposes to allow Participants the ability to elect for their resting interest to be ‘‘skipped over’’ at the same price for both the STPO and STPC modifiers. The Exchange believes that this is reasonable and non-controversial as it will allow incoming orders to execute against the next resting order or quote on the BOX Book (as long as the next resting order or quote from Another Participant ID is at the price of the resting order or quote from the Same Participant ID) and allow the resting order from the Same Participant ID to remain on the BOX Book. As such, the Exchange believes that this functionality, while similar to the Cancel Newest modifier previously available at Cboe, should be applied to all of the proposed modifiers. The functionality will result in increased executions without taking liquidity from the BOX Book. E:\FR\FM\25APN1.SGM 25APN1 17444 Federal Register / Vol. 84, No. 80 / Thursday, April 25, 2019 / Notices provide Participants the opportunity to prevent these potentially undesirable interactions occurring under the same Participant ID on both the buy and sell side of an execution. As proposed, the STP modifiers would not be applicable to Qualified Contingent Cross (‘‘QCC’’) Orders, auctions (COPIP, Facilitation and Solicitation) and Qualified Open Outcry (‘‘QOO’’) Orders. Both QCC Orders and auctions are paired orders intended to serve a particular investment purpose that are contingent on the execution of the options legs, in the case of a QCC Order, and the execution of both sides of an auction order. Because the nonexecution of a leg of a QCC Order or an auction order is contrary to the investment purpose of such orders, the Exchange has determined not to apply the STP modifiers in a manner that would prevent the execution of a QCC Order or an auction. Similarly, QOO Orders on the BOX Trading Floor are paired orders. The Exchange has determined not to apply the STP modifiers in a manner that would prevent the execution of such orders. khammond on DSKBBV9HB2PROD with NOTICES Implementation The Exchange anticipates implementing the proposed change during the second quarter of 2019. The Exchange will provide notice of the exact implementation date, via Circular, prior to implementing the proposed change. 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act,13 in general, and Section 6(b)(5) of the Act,14 in particular, that the rules of an exchange be designed to promote just and equitable principles of trade, to prevent fraudulent and manipulative acts, to remove impediments to and to perfect the mechanism for a free and open market and a national market system, and, in general, to protect investors and the public interest. The proposed rule change advances these objectives by making available to all Participants (not just Market Makers as the current rule provides) order modifiers that will assist them in preventing unwanted executions against themselves. Allowing all Participants to prevent unwanted executions against themselves removes impediments to and perfects the mechanism for a free and open market by allowing market participants to better manage order flow and prevent undesirable or unexpected 13 15 14 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). VerDate Sep<11>2014 16:25 Apr 24, 2019 Jkt 247001 executions with themselves. Further, the Exchange believes that expanding self-trade prevention to all Participants is reasonable and appropriate as similar functionality is available at other options exchanges in the industry.15 Further, the Exchange notes that current rule 7130(a)(4)(iv) (Options Participant Match Trade Prevention) functions similar to the proposed Cancel Newest modifier. The Exchange believes that expanding self-trade prevention by adding Cancel Oldest and Cancel Both modifiers is reasonable as they exist at other options exchanges in the industry.16 Further, as discussed herein, the Exchange believes that all proposed modifiers will allow Participants to better manage their order flow and prevent undesirable or unexpected executions with themselves. The Exchange believes that proposed IM–7130–2(c) is reasonable as a similar rule was in place at another exchange.17 As discussed above, the functionality that was previously available at Cboe was available on their equities market. The Exchange believes that the proposed functionality is appropriate and should be applied to the options market because it will allow increased executions on the Exchange without taking liquidity from the BOX Book, thus benefitting all market participants. Further, the Exchange notes that the proposed functionality was only available on Cboe’s Cancel Newest STP modifier. The Exchange believes that expanding this functionality to all proposed modifiers is appropriate as it will allow increased executions, regardless of what modifier the Participant elects to use on its orders. For example, Participant A has elected for the Cancel Oldest Self-Trade Prevention modifier to be applied to all of their orders and has also elected for its resting interest to be ‘‘skipped over.’’ 18 Participant A has an order to buy 10 contracts @ $1.00 resting on the 15 See supra note 12. See also Cboe EDGX Exchange, Inc. (‘‘EDGX’’) On EDGX, Match Trade Prevention (‘‘MTP’’) modifiers are available to all users, and not just Market Makers. The Exchange believes that expanding functionality to all Participants is appropriate as it will allow for all options market participants to better manage their order flow and prevent undesirable or unexpected executions with themselves. 16 See Cboe BZX Exchange, Inc. (‘‘Cboe BZX’’) Rule 21.1(g). The Exchange again notes it is not proposing to include the modifiers codified in CboeBZX Rule 21.1(g)(3) and (5). 17 See Securities Exchange Act Release No. 67152 (June 7, 2012), 77 FR 35448 (June 13, 2012) (Order Approving SR–CBOE–2012–013). 18 The Exchange again notes that these voluntary functionalities (the STP modifiers and the ‘‘skip over’’ election) are applied to all orders by the Market Operations Center at the request of the BOX Participant. PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 BOX Book with a Participant B buy order for 10 contracts $1.00 resting behind it. An order to sell 10 contracts @ $1.00 comes in from Participant A. Based on Participant A’s elections, the incoming sell order for 10 contracts @ $1.00 would trade with Participant B’s buy order for 10 contracts @ $1.00 and Participant A’s resting buy order would remain on the BOX Book. Because Participant A elected for the skip over functionality, their resting buy order will be permitted to stay on the BOX Book despite their election of the STPO modifier. This election will, in turn, allow Participant A’s resting interest the ability to stay on the BOX Book and potentially execute with another incoming sell order instead of being cancelled back to Participant A, thus potentially resulting in an execution that otherwise would not have occurred. Further, the Exchange believes that adding proposed IM–7130–2(d) to provide that, in instances in which the Self-Trade Prevention modifiers are implicated, the Self-Trade Prevention modifier rules will supersede other allocation methods only for the purposes of preventing self-trades, as described in the proposed rule perfects the mechanism for a free and open national market system and protects investors and the public interest by removing any potential confusion regarding priority and allocation methods. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is designed to enhance the Exchange’s current Match Trade Prevention rule and will benefit Participants that wish to protect their orders and quotes against trading with other orders that originate from the same Participant ID. This new functionality, which is similar to functionality offered on other Exchanges, is also voluntary and the Exchange therefore does not believe that providing an enhanced offering to prevent against self-trading will have any significant impact on competition. The Exchange believes the proposed rule change is evidence of the competitive environment in the options industry where exchanges must continually improve their offerings to maintain competitive standing. E:\FR\FM\25APN1.SGM 25APN1 Federal Register / Vol. 84, No. 80 / Thursday, April 25, 2019 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 19 and Rule 19b– 4(f)(6) thereunder.20 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BOX–2019–12 on the subject line. khammond on DSKBBV9HB2PROD with 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–BOX–2019–12. This file 19 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 20 17 VerDate Sep<11>2014 16:25 Apr 24, 2019 Jkt 247001 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 (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BOX–2019–12 and should be submitted on or before May 16, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Eduardo A. Aleman, Deputy Secretary. [FR Doc. 2019–08331 Filed 4–24–19; 8:45 am] BILLING CODE 8011–01–P SURFACE TRANSPORTATION BOARD [Docket No. AB 6 (Sub-No. 498X)] BNSF Railway Company— Abandonment Exemption—in Pawnee County, Okla. BNSF Railway Company (BNSF) has filed a verified notice of exemption under 49 CFR pt. 1152 subpart F— Exempt Abandonments to abandon approximately 0.74 miles of Line Segment 1047 (formerly 7401), track 5403 between milepost 6.47 and milepost 7.21 in Pawnee County, Okla. (the Line). The Line traverses U.S. Postal Service Zip Code 74058. BNSF has certified that: (1) No local traffic has moved over the Line since 21 17 PO 00000 CFR 200.30–3(a)(12). Frm 00072 Fmt 4703 Sfmt 4703 17445 prior to 2008; (2) there is no overhead traffic on the Line; (3) no formal complaint filed by a user of rail service on the Line (or by a state or local government entity acting on behalf of such user) regarding cessation of service over the Line either is pending with the Surface Transportation Board (Board) or any U.S. District Court or has been decided in favor of a complainant within the two-year period; and (4) the requirements at 49 CFR 1105.12 (newspaper publication), 49 CFR 1152.50(d)(1) (notice to governmental agencies), and 49 CFR 1105.7 and 1105.8 (environment and historic report), have been met. As a condition to this exemption, any employee adversely affected by the abandonment shall be protected under Oregon Short Line Railroad— Abandonment Portion Goshen Branch Between Firth & Ammon, in Bingham & Bonneville Counties, Idaho, 360 I.C.C. 91 (1979). To address whether this condition adequately protects affected employees, a petition for partial revocation under 49 U.S.C. 10502(d) must be filed. Provided no formal expression of intent to file an offer of financial assistance (OFA) 1 has been received, this exemption will be effective on May 25, 2019, unless stayed pending reconsideration. Petitions to stay that do not involve environmental issues 2 must be filed by May 3, 2019. Formal expressions of intent to file an OFA under 49 CFR 1152.27(c)(2),3 and trail use/rail banking requests under 49 CFR 1152.29 must be filed by May 6, 2019. Petitions to reopen or requests for public use conditions under 49 CFR 1152.28 must be filed by May 15, 2019, with the Surface Transportation Board, 395 E Street SW, Washington, DC 20423–0001. A copy of any petition filed with Board should be sent to BNSF’s representative, Peter Denton, Steptoe & 1 The Board modified its OFA procedures effective July 29, 2017. Among other things, the OFA process now requires potential offerors, in their formal expression of intent, to make a preliminary financial responsibility showing based on a calculation using information contained in the carrier’s filing and publicly available information. See Offers of Financial Assistance, EP 729 (STB served June 29, 2017); 82 FR 30,997 (July 5, 2017). 2 The Board will grant a stay if an informed decision on environmental issues (whether raised by a party or by the Board’s Office of Environmental Analysis (OEA) in its independent investigation) cannot be made before the exemption’s effective date. See Exemption of Out-of-Serv. Rail Lines, 5 I.C.C.2d 377 (1989). Any request for a stay should be filed as soon as possible so that the Board may take appropriate action before the exemption’s effective date. 3 Each OFA must be accompanied by the filing fee, which is currently set at $1,800. See 49 CFR 1002.2(f)(25). E:\FR\FM\25APN1.SGM 25APN1

Agencies

[Federal Register Volume 84, Number 80 (Thursday, April 25, 2019)]
[Notices]
[Pages 17441-17445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08331]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85695; File No. SR-BOX-2019-12]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 7130

April 19, 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 April 9, 2019, BOX Exchange LLC (the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend Rule 7130. 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 http://boxoptions.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    BOX Rule 7130(a)(4) governs the criteria for order matching and 
trade execution priority on BOX. BOX Rule 7130(a)(4)(iv), Options 
Participant Match Trade Prevention, describes an exception to the order 
matching and

[[Page 17442]]

trade priority within that rule. Under this exception, a Participant 
may direct that its Market Maker or broker dealer orders entered on BOX 
not execute against Market Maker quotes or orders, or broker dealer 
orders that originated from such Participant and were resting on the 
BOX Book.
    The Exchange now proposes to amend Rule 7130 to remove the Options 
Participant Match Trade Prevention rule discussed above and adopt three 
forms of Self-Trade Prevention modifiers. Specifically, the Exchange 
proposes the Cancel Newest, Cancel Oldest, and Cancel Both Self-Trade 
Prevention modifiers. Under this proposal, a BOX Participant may elect 
for all of its orders to be marked with a Self-Trade modifier.\3\ If a 
Participant makes such an election, any order that is submitted will be 
prevented from executing against a resting opposite side order or quote 
that is labeled as originating from the Same Participant (for purposes 
of this rule, orders and quotes originating from the same Participant 
ID). A Participant may only elect one of the following: Cancel Newest, 
Cancel Oldest, or Cancel Both Self-Prevention options.
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    \3\ To elect for all orders to be marked with a Self-Trade 
Prevention modifier, Participants must contact the Market Operations 
Center (``MOC''). Such election will be effective until the 
Participant receives MOC's written confirmation of the Participant's 
written discretion to discontinue the effectiveness of the election 
for such Participant.
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    The Exchange also proposes IM-7130-2(c). This provision states that 
Participants who elect for Self-Trade Prevention modifiers may also 
elect for all of their resting interest to be ``skipped over.'' \4\ In 
choosing to have their resting interest ``skipped over,'' incoming 
orders may trade with another eligible order or quote originating from 
any origin other than the Same Participant ID (for purposes of this 
rule, ``Another Participant ID''). If the Participant elects for 
resting interest to be ``skipped over,'' the incoming order may only 
trade with another eligible order or quote originating from Another 
Participant ID if the other (Another) Participant ID order or quote is 
at the price of the order or quote from the Same Participant ID that is 
being ``skipped over.'' The resting order or quote that was ``skipped 
over'' will remain on the BOX Book with the same priority. This 
election will apply to each of the modifiers discussed herein.
---------------------------------------------------------------------------

    \4\ Similar to the election for Self-Trade Prevention modifiers, 
Participants must contact the MOC if they elect for all of their 
resting interest to be ``skipped over.'' Such election will be 
effective until the Participant receives MOC's written confirmation 
of the Participant's written discretion to discontinue the 
effectiveness of the election for such Participant.
---------------------------------------------------------------------------

    Below are examples of each Self-Trade Prevention modifier (some 
which include the election for resting interest to be ``skipped 
over''):
Cancel Newest
    First, the Exchange proposes the STP Cancel Newest (``STPN'') 
modifier.\5\ If a Participant chooses this modifier, any incoming order 
submitted by a Participant will not execute against opposite side 
interest from the Same Participant ID. The incoming order will be 
cancelled back to the Participant. The resting order or quote from the 
Same Participant will remain on the BOX Book.
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    \5\ The Exchange notes that the Cancel Newest modifier is 
similar to the functionality of the current Options Participant 
Match Trade Prevention.
---------------------------------------------------------------------------

    STPN Example 1: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Newest Self-Trade Prevention 
modifier rests on the BOX Book with no resting interest behind it. An 
order to sell 10 contracts @ $1.00 comes in from the Same Participant. 
The incoming order to sell 10 contracts @ $1.00 is then cancelled back 
to the originating Participant. The resting buy order for 10 contracts 
$1.00 remains on the BOX Book.
    STPN Example 2: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Newest Self-Trade Prevention 
modifier (and has elected for its resting orders to be ``skipped 
over'') rests on the BOX Book with another order to buy 10 contracts @ 
$1.00 from Another Participant resting behind it. An order to sell 10 
contracts @ $1.00 comes in from the Same Participant. The incoming sell 
order for 10 contracts @ $1.00 would not trade with the order to buy 10 
contracts @ $1.00 from the Same Participant, but would trade with the 
order to buy 10 contracts @ $1.00 from the other Participant resting 
behind the buy order from the Same Participant because the price is at 
the Same Participant buy order.\6\ The resting buy order for 10 
contracts @ $1.00 from the Same Participant will remain on the BOX Book 
because the Participant elected for its resting orders to be ``skipped 
over.''
---------------------------------------------------------------------------

    \6\ The Exchange notes that the incoming order would have been 
cancelled had the Participant not elected for its resting interest 
to be ``skipped over.''
---------------------------------------------------------------------------

    STPN Example 3: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Newest Self-Trade Prevention 
modifier (and has not elected for its resting orders to the ``skipped 
over'') rests on the BOX Book with another order to buy 10 contracts @ 
$1.00 from Another Participant resting behind it. An order to sell 10 
contracts @ $1.00 comes in from the Same Participant. The incoming sell 
order for 10 contracts @ $1.00 from the Same Participant is cancelled 
back to the Same Participant (because the Participant did not elect for 
its resting orders to be ``skipped over''). The resting sell order for 
10 contracts @ $1.00 from the Same Participant will remain on the BOX 
Book.
    STPN Example 4: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Newest Self-Trade Prevention 
modifier (and has elected for its resting interest to be ``skipped 
over'') rests on the BOX Book with another order to buy 10 contracts @ 
$0.99 from Another Participant resting behind it. An order to sell 10 
contracts @ $1.00 comes in from the Same Participant. The incoming sell 
order for 10 contracts would not trade with the order to buy 10 
contracts @ $1.00 from the Same Participant and would also not trade 
with the order to buy 10 contracts @ $0.99 from Another Participant 
resting behind the buy order from the Same Participant.\7\ The incoming 
sell order for 10 contracts is then cancelled back to the originating 
Participant. The resting buy order for 10 contracts @ $1.00 from the 
Same Participant remains on the BOX Book.
---------------------------------------------------------------------------

    \7\ This is because the price of the eligible order from Another 
Participant ID is not at the same price level as the resting order 
on the BOX Book. As such, the incoming order is cancelled back to 
the Participant.
---------------------------------------------------------------------------

Cancel Oldest
    Next, the Exchange proposes the STP Cancel Oldest (``STPO'') 
modifier. If a Participant chooses this modifier, any incoming order 
submitted by a Participant will not execute against opposite side 
resting interest from the same Participant ID. When a Participant 
submits an incoming order that would trade against opposite side 
resting interest from the same Participant ID, the opposite side 
interest will be cancelled back to the Participant.
    STPO Example 1: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Oldest Self-Trade Prevention 
modifier rests on the BOX Book with no resting interest behind it. An 
order to sell 10 contracts @ $1.00 comes in from the Same Participant. 
The resting buy order for 10 contracts @ $1.00 is then cancelled back 
to the originating Participant. The incoming sell order for 10 
contracts @ $1.00 is entered into the BOX Book.\8\
---------------------------------------------------------------------------

    \8\ In this example, regardless of whether the Participant 
elected for its resting interest to be ``skipped over,'' the result 
would be the same because there is no resting interest behind the 
resting Participant order.

---------------------------------------------------------------------------

[[Page 17443]]

    STPO Example 2: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Oldest Self-Trade Prevention 
modifier (and has elected for its resting interest to be ``skipped 
over'') rests on the BOX Book with another order to buy 10 contracts @ 
$1.00 from Another Participant resting behind it. An order to sell 10 
contracts @ $1.00 comes in from the Same Participant. The incoming sell 
order for 10 contracts @ $1.00 would trade with the order to buy 10 
contracts @ $1.00 from the other (Another) Participant resting behind 
the buy order from the Same Participant. The resting buy order from the 
Same Participant will remain on the BOX Book.
    STPO Example 3: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Oldest Self-Trade Prevention 
modifier (and has not elected for its resting interest to be ``skipped 
over'') rests on the BOX Book with another order to buy 10 contracts @ 
$1.00 from Another Participant resting behind it. An order to sell 10 
contracts at $1.00 comes in from the Same Participant. The resting buy 
order for 10 contracts @ $1.00 from the Same Participant is cancelled 
back to the Same Participant. The incoming sell order for 10 contracts 
@ $1.00 would trade with the order to buy 10 contracts @ $1.00 from the 
other (Another) Participant resting behind the buy order from the Same 
Participant.
    STPO Example 4: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Oldest Self-Trade Prevention 
modifier rests on the BOX Book with another order to buy 10 contracts @ 
$0.99 from Another Participant resting behind it. An order to sell 10 
contracts comes in from the Same Participant. The resting buy order for 
10 contracts @ $1.00 is cancelled back to the originating Participant. 
The incoming sell order for 10 contracts would trade with the order to 
buy 10 contracts @ $0.99 from Another Participant that had been resting 
behind the buy order from the Same Participant (since the resting buy 
order from the Same Participant was cancelled).\9\
---------------------------------------------------------------------------

    \9\ In this example, the resting order will be cancelled back to 
the Participant regardless of whether the Participant has elected to 
allow for the resting order to be skipped because the buy order for 
10 contracts @ $0.99 is at a different price behind the resting 
order.
---------------------------------------------------------------------------

Cancel Both
    Lastly, the Exchange proposes the STP Cancel Both (``STPC'') 
modifier. If a Participant chooses this modifier, any incoming order 
submitted by a Participant will not execute against opposite side 
resting interest from the same Participant ID. When a Participant 
submits an incoming order that would trade against opposite side 
resting interest from the same Participant ID, the entire size of both 
orders (or order and resting quote) will be cancelled back to the 
originating Participant ID.
    STPC Example 1: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Both Self-Trade Prevention 
modifier rests on the BOX Book with no resting interest behind it. An 
order to sell 10 contracts @ 1.00 comes in from the Same Participant. 
Both orders would be cancelled back to the Participant.\10\
---------------------------------------------------------------------------

    \10\ In this example, regardless of whether the Participant 
elected for its resting interest to be ``skipped over,'' the result 
would be the same.
---------------------------------------------------------------------------

    STPC Example 2: An order to buy 10 contracts @ $1.00 from a 
Participant who has elected for the Cancel Both Self-Trade Prevention 
modifier (and has elected for its resting interest to be ``skipped 
over'') rests on the BOX Book with another order to buy 10 contracts @ 
$1.00 from Another Participant resting behind it. An order to sell 10 
contracts @ $1.00 comes in from the Same Participant. The incoming 
order would trade with the order to buy 10 contracts @ $1.00 from the 
other (Another) Participant resting behind the order from the Same 
Participant. The resting order will remain on the BOX Book.
    As explained above, orders may skip over orders or quotes from the 
Same Participant ID and trade against eligible orders or quotes with 
lower priority that originate from Another Participant, provided the 
prices are the same. Therefore, the Exchange proposes to add IM-7130-
2(d) to provide that in instances in which the Self-Trade Prevention 
modifiers are implicated, the Self-Trade Prevention modifier rules will 
supersede other allocation methods only for the purpose of preventing 
self-trades as described in the Self-Trade Prevention modifier rule. 
The Exchange notes that this rule is similar to another rule that was 
in place at another exchange.\11\
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 67152 (June 7, 
2012), 77 FR 35448 (June 13, 2012) (Order Approving SR-CBOE-2012-
013). While this rule previously applied to Cboe's equities market, 
the Exchange believes that it should be permitted on the options 
market as it allows for increased executions without taking 
liquidity from the BOX Book which benefits all market participants.
---------------------------------------------------------------------------

Additional Discussion
    The Exchange notes that the proposed modifiers discussed herein are 
similar to modifiers used at other options exchanges.\12\ The Exchange 
believes that the proposed changes will allow BOX Participants to 
better manage order flow and prevent undesirable or unexpected 
executions with themselves. Given enhancements in technology in today's 
trading environment, Participants often have multiple connections into 
the Exchange. Orders, for example, routed by the Same Participant via 
different connections may, in certain circumstances, trade against each 
other. The proposed STP modifiers would

[[Page 17444]]

provide Participants the opportunity to prevent these potentially 
undesirable interactions occurring under the same Participant ID on 
both the buy and sell side of an execution.
---------------------------------------------------------------------------

    \12\ See Cboe BZX Exchange, Inc. (``Cboe BZX'') Rule 21.1(g). 
The Exchange notes a few minor differences between Cboe BZX's rule 
and BOX's proposed rule. First, the Exchange notes that it is not 
copying Cboe BZX Rule 21.1(g)(3) and (5). These rules detail two 
modifiers that BOX does not wish to offer on the Exchange at this 
time. Second, the Exchange notes that it is not copying certain 
language in Cboe BZX Rule 21.1(g) that states that the ``modifier on 
the incoming order controls the interaction between two orders 
marked with modifiers.'' Under the Proposal, if a Participant elects 
for its orders to be marked with one of the three proposed 
modifiers, all orders will be marked with the elected modifier, not 
on an order-by-order basis. Third, the Exchange notes that proposed 
IM-7130-2(c) differs from the Cboe BZX rule. As proposed, 
Participants who elect for Self-Trade Prevention modifiers may also 
elect for resting interest to be ``skipped over.'' Participants may 
elect for their resting interest to be ``skipped over'' so incoming 
orders may trade with another eligible order or quote originating 
from any origin other than the Same Participant ID (for purposes of 
this rule, ``Another Participant ID''). If the Participant elects 
for resting interest to be ``skipped over,'' the incoming order may 
only trade with another eligible order or quote originating from 
Another Participant ID if the other (Another) Participant ID order 
or quote is at the price of the order or quote from the Same 
Participant ID that is being ``skipped over.'' The resting order or 
quote that was ``skipped over'' will remain on the BOX Book. The 
Exchange notes that allowing Participants to elect whether its 
resting interest can be ``skipped over'' is reasonable and non-
controversial as it will allow the incoming order to execute against 
the next resting order or quote on the BOX Book (as long as the next 
resting order or quote from Another Participant ID is at the price 
of the resting order or quote from the Same Participant that is 
being ``skipped over'') and allow the resting interest to remain on 
the BOX Book. The Exchange further notes that similar functionality 
was previously available at Cboe Exchange Inc (``Cboe'') for their 
Cancel Newest modifier. See Securities Exchange Act Release No. 
67152 (June 7, 2012), 77 FR 35448 (June 13, 2012) (Order Approving 
SR-CBOE-2012-013). Further, the Exchange proposes to allow similar 
functionality discussed above in all proposed modifiers and not just 
the Cancel Newest modifier. Specifically, the Exchange proposes to 
allow Participants the ability to elect for their resting interest 
to be ``skipped over'' at the same price for both the STPO and STPC 
modifiers. The Exchange believes that this is reasonable and non-
controversial as it will allow incoming orders to execute against 
the next resting order or quote on the BOX Book (as long as the next 
resting order or quote from Another Participant ID is at the price 
of the resting order or quote from the Same Participant ID) and 
allow the resting order from the Same Participant ID to remain on 
the BOX Book. As such, the Exchange believes that this 
functionality, while similar to the Cancel Newest modifier 
previously available at Cboe, should be applied to all of the 
proposed modifiers. The functionality will result in increased 
executions without taking liquidity from the BOX Book.
---------------------------------------------------------------------------

    As proposed, the STP modifiers would not be applicable to Qualified 
Contingent Cross (``QCC'') Orders, auctions (COPIP, Facilitation and 
Solicitation) and Qualified Open Outcry (``QOO'') Orders. Both QCC 
Orders and auctions are paired orders intended to serve a particular 
investment purpose that are contingent on the execution of the options 
legs, in the case of a QCC Order, and the execution of both sides of an 
auction order. Because the non-execution of a leg of a QCC Order or an 
auction order is contrary to the investment purpose of such orders, the 
Exchange has determined not to apply the STP modifiers in a manner that 
would prevent the execution of a QCC Order or an auction. Similarly, 
QOO Orders on the BOX Trading Floor are paired orders. The Exchange has 
determined not to apply the STP modifiers in a manner that would 
prevent the execution of such orders.
Implementation
    The Exchange anticipates implementing the proposed change during 
the second quarter of 2019. The Exchange will provide notice of the 
exact implementation date, via Circular, prior to implementing the 
proposed change.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\13\ in general, and Section 
6(b)(5) of the Act,\14\ in particular, that the rules of an exchange be 
designed to promote just and equitable principles of trade, to prevent 
fraudulent and manipulative acts, to remove impediments to and to 
perfect the mechanism for a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
The proposed rule change advances these objectives by making available 
to all Participants (not just Market Makers as the current rule 
provides) order modifiers that will assist them in preventing unwanted 
executions against themselves. Allowing all Participants to prevent 
unwanted executions against themselves removes impediments to and 
perfects the mechanism for a free and open market by allowing market 
participants to better manage order flow and prevent undesirable or 
unexpected executions with themselves. Further, the Exchange believes 
that expanding self-trade prevention to all Participants is reasonable 
and appropriate as similar functionality is available at other options 
exchanges in the industry.\15\ Further, the Exchange notes that current 
rule 7130(a)(4)(iv) (Options Participant Match Trade Prevention) 
functions similar to the proposed Cancel Newest modifier. The Exchange 
believes that expanding self-trade prevention by adding Cancel Oldest 
and Cancel Both modifiers is reasonable as they exist at other options 
exchanges in the industry.\16\ Further, as discussed herein, the 
Exchange believes that all proposed modifiers will allow Participants 
to better manage their order flow and prevent undesirable or unexpected 
executions with themselves.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ See supra note 12. See also Cboe EDGX Exchange, Inc. 
(``EDGX'') On EDGX, Match Trade Prevention (``MTP'') modifiers are 
available to all users, and not just Market Makers. The Exchange 
believes that expanding functionality to all Participants is 
appropriate as it will allow for all options market participants to 
better manage their order flow and prevent undesirable or unexpected 
executions with themselves.
    \16\ See Cboe BZX Exchange, Inc. (``Cboe BZX'') Rule 21.1(g). 
The Exchange again notes it is not proposing to include the 
modifiers codified in CboeBZX Rule 21.1(g)(3) and (5).
---------------------------------------------------------------------------

    The Exchange believes that proposed IM-7130-2(c) is reasonable as a 
similar rule was in place at another exchange.\17\ As discussed above, 
the functionality that was previously available at Cboe was available 
on their equities market. The Exchange believes that the proposed 
functionality is appropriate and should be applied to the options 
market because it will allow increased executions on the Exchange 
without taking liquidity from the BOX Book, thus benefitting all market 
participants. Further, the Exchange notes that the proposed 
functionality was only available on Cboe's Cancel Newest STP modifier. 
The Exchange believes that expanding this functionality to all proposed 
modifiers is appropriate as it will allow increased executions, 
regardless of what modifier the Participant elects to use on its 
orders. For example, Participant A has elected for the Cancel Oldest 
Self-Trade Prevention modifier to be applied to all of their orders and 
has also elected for its resting interest to be ``skipped over.'' \18\ 
Participant A has an order to buy 10 contracts @ $1.00 resting on the 
BOX Book with a Participant B buy order for 10 contracts $1.00 resting 
behind it. An order to sell 10 contracts @ $1.00 comes in from 
Participant A. Based on Participant A's elections, the incoming sell 
order for 10 contracts @ $1.00 would trade with Participant B's buy 
order for 10 contracts @ $1.00 and Participant A's resting buy order 
would remain on the BOX Book. Because Participant A elected for the 
skip over functionality, their resting buy order will be permitted to 
stay on the BOX Book despite their election of the STPO modifier. This 
election will, in turn, allow Participant A's resting interest the 
ability to stay on the BOX Book and potentially execute with another 
incoming sell order instead of being cancelled back to Participant A, 
thus potentially resulting in an execution that otherwise would not 
have occurred.
---------------------------------------------------------------------------

    \17\ See Securities Exchange Act Release No. 67152 (June 7, 
2012), 77 FR 35448 (June 13, 2012) (Order Approving SR-CBOE-2012-
013).
    \18\ The Exchange again notes that these voluntary 
functionalities (the STP modifiers and the ``skip over'' election) 
are applied to all orders by the Market Operations Center at the 
request of the BOX Participant.
---------------------------------------------------------------------------

    Further, the Exchange believes that adding proposed IM-7130-2(d) to 
provide that, in instances in which the Self-Trade Prevention modifiers 
are implicated, the Self-Trade Prevention modifier rules will supersede 
other allocation methods only for the purposes of preventing self-
trades, as described in the proposed rule perfects the mechanism for a 
free and open national market system and protects investors and the 
public interest by removing any potential confusion regarding priority 
and allocation methods.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The proposed rule change is designed to 
enhance the Exchange's current Match Trade Prevention rule and will 
benefit Participants that wish to protect their orders and quotes 
against trading with other orders that originate from the same 
Participant ID. This new functionality, which is similar to 
functionality offered on other Exchanges, is also voluntary and the 
Exchange therefore does not believe that providing an enhanced offering 
to prevent against self-trading will have any significant impact on 
competition. The Exchange believes the proposed rule change is evidence 
of the competitive environment in the options industry where exchanges 
must continually improve their offerings to maintain competitive 
standing.

[[Page 17445]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \19\ and Rule 19b-
4(f)(6) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BOX-2019-12 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2019-12. 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 (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BOX-2019-12 and should be submitted on 
or before May 16, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-08331 Filed 4-24-19; 8:45 am]
BILLING CODE 8011-01-P