Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Options Market LLC (“BOX”) Facility To Amend Section I.D., Qualified Contingent Cross Transactions, 31005-31007 [2020-10927]

Download as PDF Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Notices stock will be traded on an exchange that is a member of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement; (f) described the sources of pricing information for components of the Tracking Basket; (g) represented that the website of each series of Tracking Fund Share would disclose the percentage weight overlap between the holdings of the Tracking Basket compared to a Fund’s holdings for the prior business day; (h) noted that an issuer will comply with Regulation Fair Disclosure; and (i) represented that any person or entity, including any service provider for the Funds, who has access to nonpublic information regarding a Fund Portfolio or Tracking Basket or changes thereto for a Fund or Funds would be subject to procedures designed to prevent the use and dissemination of material nonpublic information, and that any such person or entity that is registered as a broker-dealer or affiliated with a broker dealer has erected and will maintain a ‘‘fire wall’’ between the person or entity and the broker-dealer with respect to access to information concerning the composition and/or changes to such Fund Portfolio or Tracking Basket. Amendment No. 5 also provides other clarifications and additional information to the proposed rule change.60 The changes and additional information in Amendment No. 5 assist the Commission in finding that the proposal is consistent with the Exchange Act. Accordingly, the Commission finds good cause, pursuant to Section 19(b)(2) of the Exchange Act,61 to approve the proposed rule change, as modified by Amendment No. 5, on an accelerated basis. VI. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act 62 that the proposed rule change (SR–CboeBZX– 2019–107), as modified by Amendment No. 5, be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.63 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–10932 Filed 5–20–20; 8:45 am] BILLING CODE 8011–01–P 60 See 61 15 Amendment No. 4, supra note 11. U.S.C. 78s(b)(2). 62 Id. 63 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:18 May 20, 2020 Jkt 250001 31005 SECURITIES AND EXCHANGE COMMISSION the most significant aspects of such statements. [Release No. 34–88882; File No. SR–BOX– 2020–10] A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Options Market LLC (‘‘BOX’’) Facility To Amend Section I.D., Qualified Contingent Cross Transactions May 15, 2020. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on May 1, 2020, BOX Exchange LLC (the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to amend the Fee Schedule on the BOX Options Market LLC (‘‘BOX’’) facility. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s internet website at https:// boxexchange.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 2 17 PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 1. Purpose The Exchange proposes to amend the Fee Schedule for trading on BOX to amend Section I.D., Qualified Contingent Cross (‘‘QCC’’) 5 Transactions. Currently, Professional Customers, Broker Dealers and Market Makers are assessed a $0.17 fee for their Agency Orders and a $0.17 fee for their Contra Orders for QCC transactions. Public Customers are not assessed a QCC Transaction Fee. The Exchange proposes to no longer assess Professional Customers QCC Transaction Fees. The Exchange also proposes to amend the rebate for QCC Transactions. Currently, a $0.14 per contract rebate is applied to the Agency Order where at least one party to the QCC transaction is a Non-Public Customer. The Exchange now proposes to apply the $0.14 per contract rebate to the Agency Order where at least one party to the QCC Transaction is either a Broker Dealer or a Market Maker. The rebate will continue to be paid to the Participant that entered the order into the BOX system. Lastly, the Exchange proposes to establish a $0.22 per contract rebate that will be applied to the Agency Order when both parties to the QCC Transaction are a Broker Dealer or Market Maker. The rebate will be paid to the Participant that entered the order into the BOX system. Further, if the Participant qualifies for both rebates, only the larger rebate will be applied to the QCC transaction. 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,6 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 no longer assessing QCC transaction fees for 5 A QCC Order is an originating order (Agency Order) to buy or sell at least 1,000 standard option contracts, or 10,000 mini-option contracts, that is identified as being part of a qualified contingent trade, coupled with a contra side order to buy or sell an equal number of contracts. 6 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\21MYN1.SGM 21MYN1 31006 Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Notices Professional Customers, thus permitting Professional Customer orders to be treated similar to Public Customer Orders with respect to the QCC order type, is reasonable. QCC Orders are an order to buy or sell at least 1,000 contracts, or 10,000 contracts in the case of Mini Options. These large-sized contingent orders are complex in nature and have a stock-tied component, which requires the option leg to be executed at the NBBO or better. The parties to a contingent trade are focused on the spread or ratio between the transaction prices for each of the component instruments (i.e., the net price of the entire contingent trade), rather than on the absolute price of any single component. The differentiation between a Public Customer and Professional Customer is not necessary with respect to QCC Orders because these orders are exempt from requirements regarding order exposure.7 In addition, when the Exchange originally adopted fees for the QCC order type, the Exchange was largely focused on maintaining a market structure with features to benefit Public Customers.8 This still holds true today, and the Exchange will continue to do this by charging no fees to Public Customers in QCC transactions. In the current proposal, the Exchange simply wishes to extend this benefit to an additional type of market participant, specifically Professional Customers.9 The Exchange believes that charging no fees to Public Customers and Professional Customers is reasonable and, ultimately, will benefit all Participants trading on the Exchange by attracting additional order flow. Further, QCC Orders are not executed pursuant to a priority scheme.10 As discussed herein, the Exchange believes that treating Public Customer orders and Professional Customer orders in a similar manner with respect to fees, when transacting QCC Orders, will attract more QCC Orders to the Exchange because there would be no fee for Professional Customer orders. Lastly, the Exchange notes that another options exchange assesses no fees to Professional Customers for their QCC transactions.11 7 See Rule 7110(c)(6). SR–BOX–2017–24. 9 The Exchange notes Professional Customers are not brokers or dealers in securities, their designation is derived from the higher number of orders placed in comparison to Public Customers. 10 By way of comparison, Public Customers receive priority over other market participants with respect to the execution of their orders within the Exchange’s order book or on the Floor. 11 See Nasdaq Phlx LLC (‘‘Phlx’’) Fee Schedule Options 7 Pricing Schedule; Section 4 (‘‘Customers 8 See VerDate Sep<11>2014 17:18 May 20, 2020 Jkt 250001 The Exchange believes the proposed changes with respect to the QCC Rebate is reasonable, equitable and not unfairly discriminatory. The Exchange believes that applying the $0.14 per contract rebate to the Agency Order where at least one party to the QCC transaction is a Broker Dealer or Market Maker is reasonable as Professional Customers will no longer be assessed a fee for these transactions. The Exchange believes that Professional Customers no longer need the incentive of the rebate since the Exchange will no longer assess fees for their Agency Orders or Contra Orders for QCC transactions pursuant to this proposal. Further, the Exchange believes that the proposed change is equitable and not unfairly discriminatory because it potentially applies to all Participants that enter the originating order (except for when both the agency order and contra-side orders are Public Customers or Professional Customers) and because it is intended to incentivize the sending of more QCC Orders to the Exchange. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to not provide a rebate for the originating order for QCC transactions when both the originating order and contra side orders are from Public Customers or Professional Customers, since Public Customers and Professional Customers are already incentivized by having no transaction fee for QCC Orders. The Exchange notes that another exchange in the industry does not apply rebates to these types of orders.12 Lastly, the Exchange believes the proposal to adopt the $0.22 per contract rebate applied to the Agency Order when both parties to the QCC transaction are a Broker Dealer and a Market Maker is reasonable, equitable and not unfairly discriminatory. The Exchange again notes that Public Customers are generally assessed a $0.00 transaction fee. Further, under this proposal, Professional Customers will no longer be assessed transaction fees for their QCC Orders. As discussed herein, Professional Customers do not need the incentive of the proposed rebate since there are no fees assessed for their Agency Orders or Contra Orders for QCC transactions. Further, the Exchange believes that it is reasonable, equitable, and not unfairly discriminatory to adopt the proposed and Professionals are not assessed a QCC Transaction Fee’’). 12 See Phlx Fee Schedule Options 7 Pricing Schedule; Section 4. On Phlx, QCC rebates will be applied for all qualifying executed QCC orders except where the transaction is either: (i) Customerto-Customer; (ii) Customer-to-Professional; and (iii) Professional-to-Professional. PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 QCC rebate for when both parties to the QCC transaction are a Broker Dealer or Market Maker, in order to increase competition and potentially attract different combinations of additional QCC order flow to the Exchange. Further, the Exchange notes that another exchange currently applies a similar rebate to QCC transactions.13 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. In terms of inter-market competition, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the degree to which fee changes in this market may impose any burden on competition is extremely limited. The initial purpose of the distinction between a Public Customer order and a Professional Customer order was to prevent market professionals with access to sophisticated trading systems that contain functionality not available to retail customers, from taking advantage of Public Customer priority, where Public Customer orders are given execution priority over Non-Public Customer orders. QCC Orders are by definition largesized contingent orders which have a stock-tied component. The parties to a contingent trade are focused on the spread or ratio between the transaction prices for each of the component instruments (i.e., the net price of the entire contingent trade), rather than on the absolute price of any single component. Treating Public Customer orders and Professional Customer orders in the same manner in terms of pricing 13 See Miami International Securities Exchange LLC (‘‘MIAX’’) Fee Schedule. MIAX offers a $0.22 per contract rebate to Market Makers and Broker Dealers when their Contra Order is from a NonPublic Customer. The Exchange notes that under this proposal, Professional Customers will not be assessed fees for their QCC transactions (unlike MIAX who assesses a $0.15 and $0.17 fee for their Agency Orders and Contra Order, respectively). As such, the Exchange believes it is reasonable and appropriate to establish a similar rebate for these types of orders. E:\FR\FM\21MYN1.SGM 21MYN1 Federal Register / Vol. 85, No. 99 / Thursday, May 21, 2020 / Notices with respect to QCC Orders does not provide any advantage to a Professional Customer. The distinction does not create an opportunity to burden competition, for the reasons stated herein with respect to priority. Further, the Exchange notes that another Exchange in the options industry treats Public Customers and Professional Customers the same with regard to QCC transactions.14 Lastly, the Exchange believes that the proposed rebates will not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act because it will encourage increased QCC order flow, which will bring greater volume and liquidity, thereby benefitting all market participants by providing more trading opportunities and tighter spreads. 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. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act 15 and Rule 19b–4(f)(2) thereunder,16 because it establishes or changes a due, or fee. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: • Send an email to rule-comments@ sec.gov. Please include File Number SR– BOX–2020–10 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–2020–10. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BOX–2020–10, and should be submitted on or before June 11, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–10927 Filed 5–20–20; 8:45 am] BILLING CODE 8011–01–P Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or 14 See supra note 11. U.S.C. 78s(b)(3)(A)(ii). 16 17 CFR 240.19b–4(f)(2). 15 15 VerDate Sep<11>2014 17:18 May 20, 2020 17 17 Jkt 250001 PO 00000 CFR 200.30–3(a)(12). Frm 00083 Fmt 4703 Sfmt 4703 31007 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88885; File No. SR–NSCC– 2020–003] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Designation of Longer Period for Commission Action on a Proposed Rule Change To Enhance National Securities Clearing Corporation’s Haircut-Based Volatility Charge Applicable to Illiquid Securities and UITs and Make Certain Other Changes to Procedure XV May 15, 2020. On March 16, 2020, National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–NSCC–2020– 003 (‘‘Proposed Rule Change’’) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 The Proposed Rule Change was published for comment in the Federal Register on March 31, 2020.3 The Commission has received four comment letters on the Proposed Rule Change.4 Section 19(b)(2) of the Act 5 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 88474 (March 25, 2020), 85 FR 17910 (March 31, 2020) (SR–NSCC–2020–003) (‘‘Notice’’). NSCC also filed the proposal contained in the Proposed Rule Change as advance notice SR–FICC–2020–802 (‘‘Advance Notice’’) with the Commission pursuant to Section 806(e)(1) of the Dodd-Frank Wall Street Reform and Consumer Protection Act entitled the Payment, Clearing, and Settlement Supervision Act of 2010 (‘‘Clearing Supervision Act’’). 12 U.S.C. 5465(e)(1); 17 CFR 240.19b–4(n)(1)(i). Notice of filing of the Advance Notice was published for comment in the Federal Register on April 15, 2020. Securities Exchange Act Release No. 88615 (April 9, 2020), 85 FR 21037 (April 15, 2020) (SR–NSCC– 2020–802). The proposal contained in the Proposed Rule Change and the Advance Notice shall not take effect until all regulatory actions required with respect to the proposal are completed. 4 Letter from Christopher R. Doubek, CEO, Alpine Securities Corporation (April 21, 2020); Letter from John Busacca, Founder, Securities Industry Professional Association (April 23, 2020); Letter from Charles F. Lek, Lek Securities Corporation (April 30, 2020); Letter from James C. Snow, President/CCO, Wilson-Davis & Co., Inc., all available at https://www.sec.gov/comments/sr-nscc2020-003/srnscc2020003.htm. 5 15 U.S.C. 78s(b)(2). 2 17 E:\FR\FM\21MYN1.SGM 21MYN1

Agencies

[Federal Register Volume 85, Number 99 (Thursday, May 21, 2020)]
[Notices]
[Pages 31005-31007]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10927]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88882; File No. SR-BOX-2020-10]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule on the BOX Options Market LLC (``BOX'') Facility To Amend 
Section I.D., Qualified Contingent Cross Transactions

May 15, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on May 1, 2020, BOX Exchange LLC (the ``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Exchange filed the proposed rule 
change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule on 
the BOX Options Market LLC (``BOX'') facility. The text of the proposed 
rule change is available from the principal office of the Exchange, at 
the Commission's Public Reference Room and also on the Exchange's 
internet website at https://boxexchange.com.

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

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

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule for trading on BOX 
to amend Section I.D., Qualified Contingent Cross (``QCC'') \5\ 
Transactions. Currently, Professional Customers, Broker Dealers and 
Market Makers are assessed a $0.17 fee for their Agency Orders and a 
$0.17 fee for their Contra Orders for QCC transactions. Public 
Customers are not assessed a QCC Transaction Fee. The Exchange proposes 
to no longer assess Professional Customers QCC Transaction Fees.
---------------------------------------------------------------------------

    \5\ A QCC Order is an originating order (Agency Order) to buy or 
sell at least 1,000 standard option contracts, or 10,000 mini-option 
contracts, that is identified as being part of a qualified 
contingent trade, coupled with a contra side order to buy or sell an 
equal number of contracts.
---------------------------------------------------------------------------

    The Exchange also proposes to amend the rebate for QCC 
Transactions. Currently, a $0.14 per contract rebate is applied to the 
Agency Order where at least one party to the QCC transaction is a Non-
Public Customer. The Exchange now proposes to apply the $0.14 per 
contract rebate to the Agency Order where at least one party to the QCC 
Transaction is either a Broker Dealer or a Market Maker. The rebate 
will continue to be paid to the Participant that entered the order into 
the BOX system.
    Lastly, the Exchange proposes to establish a $0.22 per contract 
rebate that will be applied to the Agency Order when both parties to 
the QCC Transaction are a Broker Dealer or Market Maker. The rebate 
will be paid to the Participant that entered the order into the BOX 
system. Further, if the Participant qualifies for both rebates, only 
the larger rebate will be applied to the QCC transaction.
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,\6\ 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that no longer assessing QCC transaction fees 
for

[[Page 31006]]

Professional Customers, thus permitting Professional Customer orders to 
be treated similar to Public Customer Orders with respect to the QCC 
order type, is reasonable. QCC Orders are an order to buy or sell at 
least 1,000 contracts, or 10,000 contracts in the case of Mini Options. 
These large-sized contingent orders are complex in nature and have a 
stock-tied component, which requires the option leg to be executed at 
the NBBO or better. The parties to a contingent trade are focused on 
the spread or ratio between the transaction prices for each of the 
component instruments (i.e., the net price of the entire contingent 
trade), rather than on the absolute price of any single component.
    The differentiation between a Public Customer and Professional 
Customer is not necessary with respect to QCC Orders because these 
orders are exempt from requirements regarding order exposure.\7\ In 
addition, when the Exchange originally adopted fees for the QCC order 
type, the Exchange was largely focused on maintaining a market 
structure with features to benefit Public Customers.\8\ This still 
holds true today, and the Exchange will continue to do this by charging 
no fees to Public Customers in QCC transactions. In the current 
proposal, the Exchange simply wishes to extend this benefit to an 
additional type of market participant, specifically Professional 
Customers.\9\ The Exchange believes that charging no fees to Public 
Customers and Professional Customers is reasonable and, ultimately, 
will benefit all Participants trading on the Exchange by attracting 
additional order flow. Further, QCC Orders are not executed pursuant to 
a priority scheme.\10\ As discussed herein, the Exchange believes that 
treating Public Customer orders and Professional Customer orders in a 
similar manner with respect to fees, when transacting QCC Orders, will 
attract more QCC Orders to the Exchange because there would be no fee 
for Professional Customer orders. Lastly, the Exchange notes that 
another options exchange assesses no fees to Professional Customers for 
their QCC transactions.\11\
---------------------------------------------------------------------------

    \7\ See Rule 7110(c)(6).
    \8\ See SR-BOX-2017-24.
    \9\ The Exchange notes Professional Customers are not brokers or 
dealers in securities, their designation is derived from the higher 
number of orders placed in comparison to Public Customers.
    \10\ By way of comparison, Public Customers receive priority 
over other market participants with respect to the execution of 
their orders within the Exchange's order book or on the Floor.
    \11\ See Nasdaq Phlx LLC (``Phlx'') Fee Schedule Options 7 
Pricing Schedule; Section 4 (``Customers and Professionals are not 
assessed a QCC Transaction Fee'').
---------------------------------------------------------------------------

    The Exchange believes the proposed changes with respect to the QCC 
Rebate is reasonable, equitable and not unfairly discriminatory. The 
Exchange believes that applying the $0.14 per contract rebate to the 
Agency Order where at least one party to the QCC transaction is a 
Broker Dealer or Market Maker is reasonable as Professional Customers 
will no longer be assessed a fee for these transactions. The Exchange 
believes that Professional Customers no longer need the incentive of 
the rebate since the Exchange will no longer assess fees for their 
Agency Orders or Contra Orders for QCC transactions pursuant to this 
proposal. Further, the Exchange believes that the proposed change is 
equitable and not unfairly discriminatory because it potentially 
applies to all Participants that enter the originating order (except 
for when both the agency order and contra-side orders are Public 
Customers or Professional Customers) and because it is intended to 
incentivize the sending of more QCC Orders to the Exchange. The 
Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to not provide a rebate for the originating order for 
QCC transactions when both the originating order and contra side orders 
are from Public Customers or Professional Customers, since Public 
Customers and Professional Customers are already incentivized by having 
no transaction fee for QCC Orders. The Exchange notes that another 
exchange in the industry does not apply rebates to these types of 
orders.\12\
---------------------------------------------------------------------------

    \12\ See Phlx Fee Schedule Options 7 Pricing Schedule; Section 
4. On Phlx, QCC rebates will be applied for all qualifying executed 
QCC orders except where the transaction is either: (i) Customer-to-
Customer; (ii) Customer-to-Professional; and (iii) Professional-to-
Professional.
---------------------------------------------------------------------------

    Lastly, the Exchange believes the proposal to adopt the $0.22 per 
contract rebate applied to the Agency Order when both parties to the 
QCC transaction are a Broker Dealer and a Market Maker is reasonable, 
equitable and not unfairly discriminatory. The Exchange again notes 
that Public Customers are generally assessed a $0.00 transaction fee. 
Further, under this proposal, Professional Customers will no longer be 
assessed transaction fees for their QCC Orders. As discussed herein, 
Professional Customers do not need the incentive of the proposed rebate 
since there are no fees assessed for their Agency Orders or Contra 
Orders for QCC transactions. Further, the Exchange believes that it is 
reasonable, equitable, and not unfairly discriminatory to adopt the 
proposed QCC rebate for when both parties to the QCC transaction are a 
Broker Dealer or Market Maker, in order to increase competition and 
potentially attract different combinations of additional QCC order flow 
to the Exchange. Further, the Exchange notes that another exchange 
currently applies a similar rebate to QCC transactions.\13\
---------------------------------------------------------------------------

    \13\ See Miami International Securities Exchange LLC (``MIAX'') 
Fee Schedule. MIAX offers a $0.22 per contract rebate to Market 
Makers and Broker Dealers when their Contra Order is from a Non-
Public Customer. The Exchange notes that under this proposal, 
Professional Customers will not be assessed fees for their QCC 
transactions (unlike MIAX who assesses a $0.15 and $0.17 fee for 
their Agency Orders and Contra Order, respectively). As such, the 
Exchange believes it is reasonable and appropriate to establish a 
similar rebate for these types of orders.
---------------------------------------------------------------------------

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. In terms of inter-market 
competition, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues if they deem fee levels at a particular venue to be 
excessive, or rebate opportunities available at other venues to be more 
favorable. In such an environment, the Exchange must continually adjust 
its fees to remain competitive with other exchanges. Because 
competitors are free to modify their own fees in response, and because 
market participants may readily adjust their order routing practices, 
the degree to which fee changes in this market may impose any burden on 
competition is extremely limited.
    The initial purpose of the distinction between a Public Customer 
order and a Professional Customer order was to prevent market 
professionals with access to sophisticated trading systems that contain 
functionality not available to retail customers, from taking advantage 
of Public Customer priority, where Public Customer orders are given 
execution priority over Non-Public Customer orders.
    QCC Orders are by definition large-sized contingent orders which 
have a stock-tied component. The parties to a contingent trade are 
focused on the spread or ratio between the transaction prices for each 
of the component instruments (i.e., the net price of the entire 
contingent trade), rather than on the absolute price of any single 
component. Treating Public Customer orders and Professional Customer 
orders in the same manner in terms of pricing

[[Page 31007]]

with respect to QCC Orders does not provide any advantage to a 
Professional Customer. The distinction does not create an opportunity 
to burden competition, for the reasons stated herein with respect to 
priority. Further, the Exchange notes that another Exchange in the 
options industry treats Public Customers and Professional Customers the 
same with regard to QCC transactions.\14\
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    \14\ See supra note 11.
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    Lastly, the Exchange believes that the proposed rebates will not 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act because it will encourage 
increased QCC order flow, which will bring greater volume and 
liquidity, thereby benefitting all market participants by providing 
more trading opportunities and tighter spreads.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act \15\ and Rule 19b-4(f)(2) 
thereunder,\16\ because it establishes or changes a due, or fee.
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    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BOX-2020-10 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-2020-10. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BOX-2020-10, and should be submitted on 
or before June 11, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-10927 Filed 5-20-20; 8:45 am]
BILLING CODE 8011-01-P
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