Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing of Proposed Rule Change Related to BOX Exchange LLC and BOX Holdings Group LLC Ownership Transfer Transactions, 51410-51414 [2021-19864]
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Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 10 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
that the proposed rule changes
regarding the manner in which the
System treats non-Priority Customer
with orders and quotes at the same price
for the purposes of the participation
entitlement and applies the PMM
participation entitlement percentages
removes impediments to and perfects
the mechanism of a free and open
market and national market system by
amending Rule 5.32(a)(2)(B) to be
consistent with current functionality.
The proposed changes are merely a
clarification and a correction to
inadvertently changed rule text in the
Rule intended to more accurately reflect
how the System currently works,
thereby increasing transparency in the
Rule and ultimately benefitting
investors. The proposed clarification
and correction do not alter any current
functionality nor the current
participation entitlement percentage
structures, which are consistent with
pre-migration provisions as previously
filed with the Commission, but instead
provide clarity to the Rule by more
accurately describing the current
participation entitlement process.
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B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule changes to Rule
5.32(a)(2)(B) are not competitive in
nature but are merely a clarification and
correction in the Rule, consistent with
existing System functionality and
intended to provide clarity to the Rule
by more accurately reflecting the current
participation entitlement process.
DPMs, LMMs and PMMs will continue
to receive participation entitlements in
the same manner as they do today.
10 Id.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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 11 and Rule 19b–
4(f)(6) thereunder.12 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2021–052 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–CBOE–2021–052. This file
11 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.
12 17
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number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CBOE–2021–052, and
should be submitted on or before
October 6, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–19858 Filed 9–14–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92926; File No. SR–BOX–
2021–19]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing of
Proposed Rule Change Related to BOX
Exchange LLC and BOX Holdings
Group LLC Ownership Transfer
Transactions
September 9, 2021.
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 August
13 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices
27, 2021, BOX Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘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 change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to update its
ownership schedule and accomplish the
following ownership transfer
transactions, resulting in changes to the
ownership of the Exchange and BOX
Holdings Group LLC, an affiliate of the
Exchange (‘‘BOX Holdings’’): (i) The
Exchange proposes to repurchase the
ownership interests in the Exchange
held by Citigroup Financial Products
Inc. (‘‘Citi’’) and CSFB Next Fund Inc.
(‘‘CSFB’’); (ii) BOX Holdings proposes to
repurchase the ownership interests in
BOX Holdings held by Citi and CSFB;
and (iii) Wolverine Holdings, L.P.
(‘‘Wolverine’’) proposes to purchase an
ownership interest in the Exchange from
MX US 2, Inc., a wholly-owned
subsidiary of TMX Group Limited
(‘‘MXUS2’’). 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://boxoptions.com.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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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
The Exchange is a limited liability
company, organized under the laws of
the State of Delaware on August 26,
2010. The Exchange’s charter is a
Second Amended and Restated Limited
Liability Company Agreement, dated as
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of May 29, 2020, as amended November
30, 2020 (the ‘‘Exchange LLC
Agreement’’). Each of Citi, CSFB and
MXUS2 became a Member 3 of the
Exchange on May 10, 2012. Wolverine
is not currently a Member of the
Exchange.
BOX Holdings is a limited liability
company, organized under the laws of
the State of Delaware on August 26,
2010. BOX Holdings is the sole owner
of BOX Options Market LLC, a facility
of the Exchange (‘‘BOX Options’’). The
BOX Holdings charter is a Second
Amended and Restated Limited
Liability Company Agreement, dated as
of September 13, 2018 (the ‘‘Holdings
LLC Agreement’’). Each of Citi and
CSFB became a Member 4 of BOX
Holdings on May 10, 2012.
6,445 Economic Units 5 and 8,388
Voting Units 6 represent Citi’s interest in
the Exchange, comprising 7.683% of all
outstanding Economic Units and
9.999% of all outstanding Voting Units
of the Exchange, respectively (the ‘‘Citi
Exchange Units’’). 1,155 Class A Units 7
and 25 Class B Units 8 represent Citi’s
interest in BOX Holdings, comprising
7.853% of all outstanding Class A Units
and Class B Units (collectively, ‘‘Units’’)
of BOX Holdings (the ‘‘Citi Holdings
Units’’ and, together with the Citi
Exchange Units, the ‘‘Citi Units’’). Citi’s
voting power with respect to votes of
3 A ‘‘Member’’ of the Exchange means the current
owners of Economic Units and Voting Units of the
Exchange and will include any person subsequently
admitted to the Exchange as an additional or
substitute Member of the Exchange. See Exchange
LLC Agreement § 1.1.
4 A ‘‘Member’’ of BOX Holdings means the
current owners of Units of BOX Holdings and will
include any Person subsequently admitted to BOX
Holdings as an additional or substitute Member of
BOX Holdings. See Holdings LLC Agreement § 1.1.
Current Members of BOX Holdings are: MXUS2, IB
Exchange Corp., Citadel Securities Principal
Investments LLC; Citigroup Financial Products Inc.,
UBS Americas Inc., CSFB Next Fund Inc., JPMC
Strategic Investments I Corporation, Wolverine and
Aragon Solutions Ltd.
5 ‘‘Economic Units’’ of the Exchange means equal
units of limited liability company interest in the
Exchange collectively comprising all interests in the
profits and losses of the Exchange and all rights to
receive distributions from the Exchange as set forth
in the Exchange LLC Agreement. See Exchange LLC
Agreement § 2.5(a).
6 ‘‘Voting Units’’ of the Exchange means equal
units of limited liability company interest in the
Exchange collectively comprising all voting
interests of Members with respect to Exchange
matters. See Exchange LLC Agreement § 2.5(b).
7 ‘‘Class A Units’’ of BOX Holdings means equal
units of limited liability company interest in BOX
Holdings, including an interest in the ownership
and profits and losses of BOX Holdings and the
right to receive distributions from BOX Holdings.
See Holdings LLC Agreement § 1.1.
8 ‘‘Class B Units’’ of BOX Holdings are identical
to Class A Units except Class B Units include
conversion rights, a liquidation preference and class
voting rights with respect to those matters. See
Holdings LLC Agreement §§ 1.1 and 2.5.
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51411
Members of BOX Holdings is 8.13% and
Citi’s voting power on the Board of
Directors of BOX Holdings is 8.38%.
6,123 Economic Units and 8,388
Voting Units represent CSFB’s interest
in the Exchange, comprising 7.299% of
all outstanding Economic Units and
9.999% of all outstanding Voting Units
of the Exchange, respectively (the
‘‘CSFB Exchange Units’’). 475 Class A
Units represent CSFB’s interest in BOX
Holdings, comprising 3.161% of all
outstanding Units of BOX Holdings (the
‘‘CSFB Holdings Units’’ and, together
with the CSFB Exchange Units, the
‘‘CSFB Units’’). CSFB’s voting power
with respect to votes of Members of
BOX Holdings is 3.27% and CSFB’s
voting power on the Board of Directors
of BOX Holdings is 3.37%.
33,554 Economic Units and 16,777
Voting Units represent MXUS2’s
interest in the Exchange, comprising
40% of all outstanding Economic Units
and 20% of all outstanding Voting Units
of the Exchange, respectively.
Wolverine currently does not hold any
interest in the Exchange.
The Exchange has agreed with Citi to
purchase the Citi Exchange Units. BOX
Holdings has agreed with Citi to
purchase the Citi Holdings Units.
Accordingly, it is proposed that Citi
transfer all of the Citi Exchange Units to
the Exchange and all of the Citi
Holdings Units to BOX Holdings (the
‘‘Citi Transfer’’).
The Exchange has agreed with CSFB
to purchase the CSFB Exchange Units.
BOX Holdings has agreed with CSFB to
purchase the CSFB Holdings Units.
Accordingly, it is proposed that CSFB
transfer all of the CSFB Exchange Units
to the Exchange and all of the CSFB
Holdings Units to BOX Holdings (the
‘‘CSFB Transfer’’).
Wolverine has agreed with MXUS2 to
purchase one (1) Economic Unit in the
Exchange from MXUS2. Accordingly, it
is proposed that MXUS2 transfer one (1)
Economic Unit to Wolverine (the
‘‘Wolverine Transfer’’ and, together with
the Citi Transfer and the CSFB Transfer,
the ‘‘Transfers’’). Wolverine is an
existing Exchange Facility Participant.9
At the time of the Wolverine Transfer,
Wolverine will become a Member of the
Exchange. As a holder of one (1)
Economic Unit in the Exchange,
Wolverine will also be allocated 2,637
Voting Units as provided in the
9 ‘‘Exchange Facility Participant’’ means a firm or
organization that is registered with the Exchange
pursuant to the Exchange Rules for purposes of
participating in trading on any Exchange Facility.
See Exchange LLC Agreement § 1.1.
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Exchange LLC Agreement,10 comprising
0.002% of all outstanding Economic
Units and 5.026% of all outstanding
Voting Units of the Exchange,
respectively.
Pursuant to the Exchange LLC
Agreement, Wolverine will not become
a Member of the Exchange unless
Wolverine is first accepted and
approved as a transferee 11 and admitted
as a Member by the affirmative vote of
Members holding a majority of the
Voting Percentage Interest,12 Wolverine
executes a counterpart of the Exchange
LLC Agreement and agrees in writing to
assume the obligations of a Member
under the Exchange LLC Agreement,
and the Board determines the Wolverine
Transfer is permitted by the Exchange
LLC Agreement.13 Attached [sic] as
Exhibit 5A is a form of Instrument of
Accession to be executed by Wolverine
prior to closing of the Wolverine
Transfer to comply with the foregoing
requirements.
After the Citi Transfer, the Citi Units
will no longer be outstanding and Citi
will have no remaining rights under the
Exchange LLC Agreement or the
Holdings LLC Agreement. After the
CSFB Transfer, the CSFB Units will no
longer be outstanding and CSFB will
have no remaining rights under the
Exchange LLC Agreement or the
Holdings LLC Agreement. In connection
with the Transfers, the Exchange
proposes to amend Schedule A to the
Exchange LLC Agreement, in the form of
Exhibit 5B to this filing, to reflect the
changes in Exchange ownership. No
amendment of the Holdings LLC
Agreement is proposed.
As provided in Section 7.3(f) of the
Exchange LLC Agreement, ‘‘no Person,
alone or together with any Related
Persons, shall own, directly or
indirectly, of record or beneficially, an
aggregate Economic Percentage
10 As discussed below, § 7.3(g) of the Exchange
LLC Agreement provides that a Member of the
Exchange may hold a different number of Voting
Units than Economic Units due to the application
of Voting Ownership Limits to other Members.
11 To be eligible for such approval, the proposed
transferee must (x) be of high professional and
financial standing, (y) be able to carry out its duties
as a Member hereunder, if admitted as such, and
(z) be under no regulatory or governmental bar or
disqualification. See Exchange LLC Agreement
§ 7.1(a).
12 ‘‘Voting Percentage Interest’’ with respect to a
Member means the ratio of the number of Voting
Units held by the Member, directly or indirectly, of
record or beneficially, to the total of all of the
issued and outstanding Voting Units held by
Members, expressed as a percentage. Voting Units
held by a Member that are ineligible to vote shall
not be counted in the numerator or the denominator
when determining such ratio. See Exchange LLC
Agreement § 1.1.
13 See Exchange LLC Agreement § 7.1(c).
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Interest 14 greater than 40% (or 20% if
such Person is an Exchange Facility
Participant) (the ‘‘Economic Ownership
Limit’’) . . . .’’ Accordingly, because
the total number of outstanding
Economic Units of the Exchange are
reduced in the Transfers, outstanding
Economic Units held by any remaining
Members of the Exchange will be
cancelled to the extent necessary to
ensure compliance with the Economic
Ownership Limit.
As provided in Section 7.3(g) of the
Exchange LLC Agreement, ‘‘no Person,
alone or together with any Related
Persons, shall own, directly or
indirectly, of record or beneficially, an
aggregate Voting Percentage Interest of
greater than 20% (the ‘‘Voting
Ownership Limit’’) . . . .’’ 15 Further,
Section 7.3(g) of the Exchange LLC
Agreement provides that, upon any
change in economic ownership, the
number of Voting Units held by each
Member of the Exchange shall
automatically adjust to maintain
compliance with the Voting Ownership
Limit. Accordingly, because the number
of Economic Units held by Members of
the Exchange are reduced by the
Transfers, the number of outstanding
Voting Units of the Exchange will be
reduced accordingly and the number of
Voting Units held by each of the
remaining Members of the Exchange,
including Wolverine, will be adjusted to
the extent necessary to ensure
compliance with the Voting Ownership
Limit.
As discussed above, all ownership
limits relating to the Exchange will
continue to be strictly respected. The
Transfer will not result in any Member
of the Exchange exceeding its applicable
Economic Ownership Limit or Voting
Ownership Limit (collectively, its
‘‘Ownership Limits’’). Prior to the
Transfers, some Members of the
Exchange already held the maximum
ownership percentages allowed under
the Exchange LLC Agreement. The
ownership percentages held by these
Members will remain below the
applicable Ownership Limits after
giving effect to the Transfers. For other
Members of the Exchange, adjustments
to ownership percentages resulting from
the Transfer will be made to comply
14 ‘‘Economic Percentage Interest’’ with respect to
a Member means the ratio of the number of
Economic Units held by the Member, directly or
indirectly, of record or beneficially, to the total of
all of the issued and outstanding Economic Units
held by Members, expressed as a percentage. See
Exchange LLC Agreement § 1.1.
15 Any Member may voluntarily set a lower
Voting Ownership Limit for itself at its own
discretion. See Exchange LLC Agreement § 7.3(g)(i).
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with all Ownership Limits.16 After
giving effect to the Transfers, no
Member will hold more than 40%
Economic Percentage Interest, no
Exchange Facility Participant will hold
more than 20% Economic Percentage
Interest, and no Member will hold more
than 20% Voting Percentage Interest in
the Exchange. Upon the closing of the
Transfers, each of MXUS2 and IB
Exchange Corp. (‘‘IB’’) would hold the
maximum number of Economic Units
permitted under its applicable
Economic Ownership Limit and each
Member of the Exchange except
Wolverine would hold the maximum
number of Voting Units permitted under
its applicable Voting Ownership Limit.
The composition of the Board of
Directors of the Exchange will remain
unaffected by the Transfer. The makeup
of the Board will still be comprised of
at least 20% of Directors who are
Participant Directors,17 a majority of
Directors who are Non-industry
Directors,18 and one (1) Director who is
also an officer or director of BOX
Holdings, if BOX Holdings chooses to
exercise its right to appoint such a
director.19
Section 7.4(e) of the Holdings LLC
Agreement provides that BOX Holdings
shall provide the SEC with written
notice ten (10) days prior to the closing
date of any acquisition that results in a
Member’s Percentage Interest 20 meeting
or crossing the threshold level of 5% or
16 Any Economic Units held by a Member in
excess of its Economic Ownership Limit are
cancelled because the existence of such Units is not
permitted by the Exchange LLC Agreement. The
number and allocation of Voting Units
automatically adjust upon any change in ownership
of Economic Units pursuant to Exchange LLC
Agreement § 7.3(g)(iii).
17 ‘‘Participant Director’’ means a Director of the
Exchange who is an officer, director or employee of
an Exchange Facility Participant. See BOX
Exchange LLC Bylaws § 1.01.
18 ‘‘Non-industry Director’’ means a Director of
the Exchange who (i) has no material business
relationship with the Exchange or any Affiliate of
the Exchange, or any Exchange Facility Participant
or any Affiliate of any Exchange Facility Participant
and is not associated with any broker or dealer as
required pursuant to Section 6(b)(3) of the
Securities Exchange Act of 1934, as amended or (ii)
is not an Industry Representative. ‘‘Industry
Representative’’ means an individual who is an
officer, director or employee of a broker or dealer
or who has been employed in any such capacity at
any time within the prior three (3) years, as well
as an individual who has, or has had, a consulting
or employment relationship with the Exchange, or
any Affiliate of the Exchange, at any time within the
prior three (3) years. See BOX Exchange LLC
Bylaws § 1.01.
19 See BOX Exchange LLC Bylaws § 4.02.
20 ‘‘Percentage Interest’’ with respect to a Member
of BOX Holdings means the ratio of the number of
Units held by the Member to the total of all of the
issued Units, expressed as a percentage and
determined with respect to each class of Units,
whenever applicable. See Holdings LLC Agreement
§ 1.1.
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the successive levels of 10% and 15%.
Although Citadel Securities Principal
Investments LLC (‘‘Citadel’’) is not
acquiring any additional Units of BOX
Holdings in the Transfers, the reduction
of the total number of outstanding Units
of BOX Holdings in connection with the
Transfers will result in a corresponding
increase in the Percentage Interest held
by Citadel from 13.80% to 15.50% and
thereby crossing the 15% level.
The change in Citadel’s Percentage
Interest resulting from the Transfers will
also increase the voting power of Citadel
in BOX Holdings. After giving effect to
the Transfers, Citadel’s voting power
with respect to votes of Members of
BOX Holdings will increase from
14.28% to 16.65% and Citadel’s total
voting power on the Board of Directors
of BOX Holdings will increase from
14.73% to 16.65%. Citadel currently has
the power to appoint one (1)
representative to the BOX Holdings
Board of Directors 21 and, after giving
effect to the Transfers, Citadel will have
the power to appoint two (2) Directors
of BOX Holdings.22
Section 7.4(f) of the Holdings LLC
Agreement provides that a rule filing
pursuant to Section 19 of the Exchange
Act is required with respect to certain
transactions that result in the
acquisition and holding by a person of
an aggregate Percentage Interest in BOX
Holdings which meets or crosses the
threshold level of 20% or any
successive 5% level. Although MXUS2
is not acquiring any additional Units of
BOX Holdings in connection with the
Transfers, the reduction of the total
number of outstanding Units of BOX
Holdings in connection with the
Transfers will result in a corresponding
increase in the Percentage Interest held
by MXUS2 from 42.62% to 47.89% and
thereby crossing the 45% level.
Although IB is not acquiring any
additional Units of BOX Holdings in
connection with the Transfers, the
reduction of the total number of
outstanding Units of BOX Holdings in
connection with the Transfers will
result in a corresponding increase in the
Percentage Interest held by IB from
22.69% to 25.50% and thereby crossing
the 25% level.
The change in IB’s ownership
percentage of Holdings resulting from
the Transfers will not affect IB’s voting
percentage because, as an Exchange
Facility Participant on BOX Options,
IB’s allowable voting percentage is
limited to 20%, as provided by the
Holdings LLC Agreement 23 and will
21 See
Holdings LLC Agreement § 4.1(a)(i).
Holdings LLC Agreement § 4.1(a)(iii).
23 See Holdings LLC Agreement § 7.4(h).
remain at 19.999%. As a result of this
limitation of IB’s voting percentage, the
changes resulting from the Transfers
will also increase the voting power of
MXUS2 in BOX Holdings as IB’s voting
power above 19.999% will be
reallocated among other Members of
BOX Holdings. After giving effect to the
Transfers, MXUS2’s voting power with
respect to votes of Members of BOX
Holdings will increase from 44.10% to
51.43% and MXUS2’s total voting
power on the Board of Directors of BOX
Holdings will increase from 45.50% to
51.43%, providing MXUS2 the ability to
control votes of the Board of Directors
of BOX Holdings that require a simple
majority vote. MXUS2 currently has the
power to appoint three (3)
representatives to the BOX Holdings
Board of Directors 24 and, after giving
effect to the Transfers, MXUS2 will still
have the power to appoint the same
number of Directors of BOX Holdings.
No other Member of BOX Holdings
will have its ownership percentage in
BOX Holdings adjusted by more than
1% of the total BOX Holdings
ownership as a result of the Transfers.
Section 7.3(e) of the Exchange LLC
Agreement provides that the Exchange
shall provide the SEC with written
notice ten (10) days prior to the closing
date of any acquisition that would result
in a Member having a Voting Percentage
Interest of five percent (5%) or more.
Although Wolverine proposes to acquire
only one (1) Exchange Economic Unit of
the Exchange, the allocation of
Exchange Voting Units resulting from
the Transfers would result in Wolverine
holding 2,637 Exchange Voting Units,
representing a 5.03% Voting Percentage
Interest and thereby crossing the 5%
level.
As discussed above, all Exchange
owners are subject to a Voting
Ownership Limit of 20%. Although
Aragon Solutions Ltd. (‘‘Aragon’’) is not
acquiring any additional Economic
Units of the Exchange in the Transfers,
the reallocation of Exchange Voting
Units resulting from the Transfers
would result in Aragon holding 10,493
Exchange Voting Units, representing
19.999% Voting Percentage Interest,
compared with 6.294% prior to the
Transfers.
No other Member of the Exchange
will have its Economic Percentage
Interest or its Voting Percentage Interest
in the Exchange adjusted by more than
5% of the total BOX Holdings
ownership as a result of the Transfers.
The consideration paid to Citi and
CSFB by the Exchange will not
materially affect the Exchange’s
22 See
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24 See
PO 00000
Holdings LLC Agreement § 4.1(a)(iv).
Frm 00076
Fmt 4703
Sfmt 4703
51413
capitalization. After payment by the
Exchange of the purchase price to each
of Citi and CSFB, the Exchange will
continue to reserve sufficient assets to
operate and fulfill its regulatory
responsibilities with respect to itself
and BOX Options. The Exchange Board
of Directors remains committed to
ensuring the Exchange is sufficiently
capitalized to meet its obligations. The
Exchange and BOX Options continue to
be subject to a written Facility
Agreement, which provides that the
Exchange receives and retains all assets
deemed to be necessary for regulatory
purposes by the Exchange.25
Accordingly, payments made to
consummate the Transfers will not have
a material effect on the Exchange’s
ability to carry out its duties and
obligations as an SRO.
LabMorgan Corp., a Member of the
Exchange, notified the Exchange it has
changed its legal name to JPMC
Strategic Investments I Corporation. The
updated name of this Member is
reflected in the amendment to the
Exchange LLC Agreement attached [sic]
hereto as Exhibit 5B.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Act,26 in general, and furthers the
objectives of Section 6(b)(1),27 in
particular, in that it enables the
Exchange to be so organized so as to
have the capacity to be able to carry out
the purposes of the Act and to comply,
and to enforce compliance by its
exchange members and persons
associated with its exchange members,
with the provisions of the Act, the rules
and regulations thereunder, and the
rules of the Exchange.
The Exchange believes that the
proposed name change and changes in
ownership are necessary to
accommodate the desires of certain
Members to arrange their affairs,
including to exit ownership of the
Exchange and BOX Holdings. The
Exchange believes that this filing
furthers the objectives of Section 6(b)(5)
of the Act because the proposed rule
change would be consistent with and
facilitate a governance and regulatory
structure that is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
25 See Securities Exchange Act Release No. 34–
66871 (April 27, 2012) 77 FR 26323 (May 3, 2012)
(Order granting approval of BOX Exchange).
26 15 U.S.C. 78f(b).
27 15 U.S.C. 78f(b)(5).
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15SEN1
51414
Federal Register / Vol. 86, No. 176 / Wednesday, September 15, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to,
and perfect the mechanism of a free and
open market and a national market
system and, in general, to protect
investors and the public interest.
Accordingly, the proposed ownership
changes will ensure the continued
operation of both the Exchange and
BOX Holdings without any detrimental
effect on the operations of either the
Exchange or its facility.
Further, the Exchange believes the
proposed name change and ownership
changes are consistent with, and will
not interfere with, the self-regulatory
obligations of BOX Exchange. The
Exchange importantly notes that it is not
proposing to amend any of the
provisions within the Holdings LLC
Agreement or the BOX Exchange LLC
Agreement dealing with the availability
or protection of information, books and
records, undue influence, conflicts of
interest, unfair control by an affiliate,
and regulatory independence of BOX
Exchange.28 In addition, the ownership
changes proposed by the Exchange in
this filing are consistent with past
ownership and voting levels held by
Members of BOX Holdings, MXUS2 has
previously held voting power in BOX
Holdings in excess of 50% 29 and IB has
previously held a Percentage Interest in
BOX Holdings greater than 25%.30 The
ability of the Exchange to operate and
fulfill its regulatory responsibilities will
continue unaffected by this proposal
and the Exchange will continue to be
able to serve its independent regulatory
functions as an SRO after the proposed
transactions are consummated.
The Exchange also believes that this
filing furthers the objectives of Section
6(b)(5) of the Act 31 in that it is designed
to facilitate transactions in securities, to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and in general, to protect
28 See
Securities Exchange Act Release No. 34–
66871 (April 27, 2012) 77 FR 26323 (May 3, 2012)
(Order granting approval of BOX Exchange).
29 See Securities Exchange Act Release No. 74477
(March 11, 2015), 80 FR 13932 (March 17, 2015)
(SR–BOX–2015–14).
30 See Securities Exchange Act Release No. 74403
(March 18, 2016), 81 FR 15772 (March 24, 2016)
(SR–BOX–2016–12).
31 15 U.S.C. 78f(b)(1).
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17:08 Sep 14, 2021
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investors and the public interest. The
Exchange believes these objectives are
supported by having active, interested
owners of the Exchange. The Exchange
further believes accommodating the
transfer of ownership interests in the
Exchange and its facility between
willing buyers and sellers ensures the
health and vitality of the Exchange and
encourages robust interest in the
Exchange’s operations, which promotes
effective, efficient markets.
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 because the
changes proposed are limited to
ownership of the Exchange and an
affiliate of a facility of the Exchange and
do not change the operation of the
Exchange or any facility of the
Exchange. The proposed rule change is
not designed to address any competitive
issue or have any impact on
competition; rather the proposed rule
change lays out the transfer ownership
interests.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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:
PO 00000
Frm 00077
Fmt 4703
Sfmt 9990
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2021–19 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–2021–19. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–BOX–2021–19, and should
be submitted on or before October 6,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–19864 Filed 9–14–21; 8:45 am]
BILLING CODE 8011–01–P
32 17
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CFR 200.30–3(a)(12).
15SEN1
]]>Agencies
[Federal Register Volume 86, Number 176 (Wednesday, September 15, 2021)]
[Notices]
[Pages 51410-51414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19864]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92926; File No. SR-BOX-2021-19]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
of Proposed Rule Change Related to BOX Exchange LLC and BOX Holdings
Group LLC Ownership Transfer Transactions
September 9, 2021.
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 August
[[Page 51411]]
27, 2021, BOX Exchange LLC (the ``Exchange'') filed with the Securities
and Exchange Commission (the ``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 change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to update its ownership schedule and
accomplish the following ownership transfer transactions, resulting in
changes to the ownership of the Exchange and BOX Holdings Group LLC, an
affiliate of the Exchange (``BOX Holdings''): (i) The Exchange proposes
to repurchase the ownership interests in the Exchange held by Citigroup
Financial Products Inc. (``Citi'') and CSFB Next Fund Inc. (``CSFB'');
(ii) BOX Holdings proposes to repurchase the ownership interests in BOX
Holdings held by Citi and CSFB; and (iii) Wolverine Holdings, L.P.
(``Wolverine'') proposes to purchase an ownership interest in the
Exchange from MX US 2, Inc., a wholly-owned subsidiary of TMX Group
Limited (``MXUS2''). 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://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
The Exchange is a limited liability company, organized under the
laws of the State of Delaware on August 26, 2010. The Exchange's
charter is a Second Amended and Restated Limited Liability Company
Agreement, dated as of May 29, 2020, as amended November 30, 2020 (the
``Exchange LLC Agreement''). Each of Citi, CSFB and MXUS2 became a
Member \3\ of the Exchange on May 10, 2012. Wolverine is not currently
a Member of the Exchange.
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\3\ A ``Member'' of the Exchange means the current owners of
Economic Units and Voting Units of the Exchange and will include any
person subsequently admitted to the Exchange as an additional or
substitute Member of the Exchange. See Exchange LLC Agreement Sec.
1.1.
---------------------------------------------------------------------------
BOX Holdings is a limited liability company, organized under the
laws of the State of Delaware on August 26, 2010. BOX Holdings is the
sole owner of BOX Options Market LLC, a facility of the Exchange (``BOX
Options''). The BOX Holdings charter is a Second Amended and Restated
Limited Liability Company Agreement, dated as of September 13, 2018
(the ``Holdings LLC Agreement''). Each of Citi and CSFB became a Member
\4\ of BOX Holdings on May 10, 2012.
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\4\ A ``Member'' of BOX Holdings means the current owners of
Units of BOX Holdings and will include any Person subsequently
admitted to BOX Holdings as an additional or substitute Member of
BOX Holdings. See Holdings LLC Agreement Sec. 1.1. Current Members
of BOX Holdings are: MXUS2, IB Exchange Corp., Citadel Securities
Principal Investments LLC; Citigroup Financial Products Inc., UBS
Americas Inc., CSFB Next Fund Inc., JPMC Strategic Investments I
Corporation, Wolverine and Aragon Solutions Ltd.
---------------------------------------------------------------------------
6,445 Economic Units \5\ and 8,388 Voting Units \6\ represent
Citi's interest in the Exchange, comprising 7.683% of all outstanding
Economic Units and 9.999% of all outstanding Voting Units of the
Exchange, respectively (the ``Citi Exchange Units''). 1,155 Class A
Units \7\ and 25 Class B Units \8\ represent Citi's interest in BOX
Holdings, comprising 7.853% of all outstanding Class A Units and Class
B Units (collectively, ``Units'') of BOX Holdings (the ``Citi Holdings
Units'' and, together with the Citi Exchange Units, the ``Citi
Units''). Citi's voting power with respect to votes of Members of BOX
Holdings is 8.13% and Citi's voting power on the Board of Directors of
BOX Holdings is 8.38%.
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\5\ ``Economic Units'' of the Exchange means equal units of
limited liability company interest in the Exchange collectively
comprising all interests in the profits and losses of the Exchange
and all rights to receive distributions from the Exchange as set
forth in the Exchange LLC Agreement. See Exchange LLC Agreement
Sec. 2.5(a).
\6\ ``Voting Units'' of the Exchange means equal units of
limited liability company interest in the Exchange collectively
comprising all voting interests of Members with respect to Exchange
matters. See Exchange LLC Agreement Sec. 2.5(b).
\7\ ``Class A Units'' of BOX Holdings means equal units of
limited liability company interest in BOX Holdings, including an
interest in the ownership and profits and losses of BOX Holdings and
the right to receive distributions from BOX Holdings. See Holdings
LLC Agreement Sec. 1.1.
\8\ ``Class B Units'' of BOX Holdings are identical to Class A
Units except Class B Units include conversion rights, a liquidation
preference and class voting rights with respect to those matters.
See Holdings LLC Agreement Sec. Sec. 1.1 and 2.5.
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6,123 Economic Units and 8,388 Voting Units represent CSFB's
interest in the Exchange, comprising 7.299% of all outstanding Economic
Units and 9.999% of all outstanding Voting Units of the Exchange,
respectively (the ``CSFB Exchange Units''). 475 Class A Units represent
CSFB's interest in BOX Holdings, comprising 3.161% of all outstanding
Units of BOX Holdings (the ``CSFB Holdings Units'' and, together with
the CSFB Exchange Units, the ``CSFB Units''). CSFB's voting power with
respect to votes of Members of BOX Holdings is 3.27% and CSFB's voting
power on the Board of Directors of BOX Holdings is 3.37%.
33,554 Economic Units and 16,777 Voting Units represent MXUS2's
interest in the Exchange, comprising 40% of all outstanding Economic
Units and 20% of all outstanding Voting Units of the Exchange,
respectively. Wolverine currently does not hold any interest in the
Exchange.
The Exchange has agreed with Citi to purchase the Citi Exchange
Units. BOX Holdings has agreed with Citi to purchase the Citi Holdings
Units. Accordingly, it is proposed that Citi transfer all of the Citi
Exchange Units to the Exchange and all of the Citi Holdings Units to
BOX Holdings (the ``Citi Transfer'').
The Exchange has agreed with CSFB to purchase the CSFB Exchange
Units. BOX Holdings has agreed with CSFB to purchase the CSFB Holdings
Units. Accordingly, it is proposed that CSFB transfer all of the CSFB
Exchange Units to the Exchange and all of the CSFB Holdings Units to
BOX Holdings (the ``CSFB Transfer'').
Wolverine has agreed with MXUS2 to purchase one (1) Economic Unit
in the Exchange from MXUS2. Accordingly, it is proposed that MXUS2
transfer one (1) Economic Unit to Wolverine (the ``Wolverine Transfer''
and, together with the Citi Transfer and the CSFB Transfer, the
``Transfers''). Wolverine is an existing Exchange Facility
Participant.\9\ At the time of the Wolverine Transfer, Wolverine will
become a Member of the Exchange. As a holder of one (1) Economic Unit
in the Exchange, Wolverine will also be allocated 2,637 Voting Units as
provided in the
[[Page 51412]]
Exchange LLC Agreement,\10\ comprising 0.002% of all outstanding
Economic Units and 5.026% of all outstanding Voting Units of the
Exchange, respectively.
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\9\ ``Exchange Facility Participant'' means a firm or
organization that is registered with the Exchange pursuant to the
Exchange Rules for purposes of participating in trading on any
Exchange Facility. See Exchange LLC Agreement Sec. 1.1.
\10\ As discussed below, Sec. 7.3(g) of the Exchange LLC
Agreement provides that a Member of the Exchange may hold a
different number of Voting Units than Economic Units due to the
application of Voting Ownership Limits to other Members.
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Pursuant to the Exchange LLC Agreement, Wolverine will not become a
Member of the Exchange unless Wolverine is first accepted and approved
as a transferee \11\ and admitted as a Member by the affirmative vote
of Members holding a majority of the Voting Percentage Interest,\12\
Wolverine executes a counterpart of the Exchange LLC Agreement and
agrees in writing to assume the obligations of a Member under the
Exchange LLC Agreement, and the Board determines the Wolverine Transfer
is permitted by the Exchange LLC Agreement.\13\ Attached [sic] as
Exhibit 5A is a form of Instrument of Accession to be executed by
Wolverine prior to closing of the Wolverine Transfer to comply with the
foregoing requirements.
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\11\ To be eligible for such approval, the proposed transferee
must (x) be of high professional and financial standing, (y) be able
to carry out its duties as a Member hereunder, if admitted as such,
and (z) be under no regulatory or governmental bar or
disqualification. See Exchange LLC Agreement Sec. 7.1(a).
\12\ ``Voting Percentage Interest'' with respect to a Member
means the ratio of the number of Voting Units held by the Member,
directly or indirectly, of record or beneficially, to the total of
all of the issued and outstanding Voting Units held by Members,
expressed as a percentage. Voting Units held by a Member that are
ineligible to vote shall not be counted in the numerator or the
denominator when determining such ratio. See Exchange LLC Agreement
Sec. 1.1.
\13\ See Exchange LLC Agreement Sec. 7.1(c).
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After the Citi Transfer, the Citi Units will no longer be
outstanding and Citi will have no remaining rights under the Exchange
LLC Agreement or the Holdings LLC Agreement. After the CSFB Transfer,
the CSFB Units will no longer be outstanding and CSFB will have no
remaining rights under the Exchange LLC Agreement or the Holdings LLC
Agreement. In connection with the Transfers, the Exchange proposes to
amend Schedule A to the Exchange LLC Agreement, in the form of Exhibit
5B to this filing, to reflect the changes in Exchange ownership. No
amendment of the Holdings LLC Agreement is proposed.
As provided in Section 7.3(f) of the Exchange LLC Agreement, ``no
Person, alone or together with any Related Persons, shall own, directly
or indirectly, of record or beneficially, an aggregate Economic
Percentage Interest \14\ greater than 40% (or 20% if such Person is an
Exchange Facility Participant) (the ``Economic Ownership Limit'') . . .
.'' Accordingly, because the total number of outstanding Economic Units
of the Exchange are reduced in the Transfers, outstanding Economic
Units held by any remaining Members of the Exchange will be cancelled
to the extent necessary to ensure compliance with the Economic
Ownership Limit.
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\14\ ``Economic Percentage Interest'' with respect to a Member
means the ratio of the number of Economic Units held by the Member,
directly or indirectly, of record or beneficially, to the total of
all of the issued and outstanding Economic Units held by Members,
expressed as a percentage. See Exchange LLC Agreement Sec. 1.1.
---------------------------------------------------------------------------
As provided in Section 7.3(g) of the Exchange LLC Agreement, ``no
Person, alone or together with any Related Persons, shall own, directly
or indirectly, of record or beneficially, an aggregate Voting
Percentage Interest of greater than 20% (the ``Voting Ownership
Limit'') . . . .'' \15\ Further, Section 7.3(g) of the Exchange LLC
Agreement provides that, upon any change in economic ownership, the
number of Voting Units held by each Member of the Exchange shall
automatically adjust to maintain compliance with the Voting Ownership
Limit. Accordingly, because the number of Economic Units held by
Members of the Exchange are reduced by the Transfers, the number of
outstanding Voting Units of the Exchange will be reduced accordingly
and the number of Voting Units held by each of the remaining Members of
the Exchange, including Wolverine, will be adjusted to the extent
necessary to ensure compliance with the Voting Ownership Limit.
---------------------------------------------------------------------------
\15\ Any Member may voluntarily set a lower Voting Ownership
Limit for itself at its own discretion. See Exchange LLC Agreement
Sec. 7.3(g)(i).
---------------------------------------------------------------------------
As discussed above, all ownership limits relating to the Exchange
will continue to be strictly respected. The Transfer will not result in
any Member of the Exchange exceeding its applicable Economic Ownership
Limit or Voting Ownership Limit (collectively, its ``Ownership
Limits''). Prior to the Transfers, some Members of the Exchange already
held the maximum ownership percentages allowed under the Exchange LLC
Agreement. The ownership percentages held by these Members will remain
below the applicable Ownership Limits after giving effect to the
Transfers. For other Members of the Exchange, adjustments to ownership
percentages resulting from the Transfer will be made to comply with all
Ownership Limits.\16\ After giving effect to the Transfers, no Member
will hold more than 40% Economic Percentage Interest, no Exchange
Facility Participant will hold more than 20% Economic Percentage
Interest, and no Member will hold more than 20% Voting Percentage
Interest in the Exchange. Upon the closing of the Transfers, each of
MXUS2 and IB Exchange Corp. (``IB'') would hold the maximum number of
Economic Units permitted under its applicable Economic Ownership Limit
and each Member of the Exchange except Wolverine would hold the maximum
number of Voting Units permitted under its applicable Voting Ownership
Limit.
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\16\ Any Economic Units held by a Member in excess of its
Economic Ownership Limit are cancelled because the existence of such
Units is not permitted by the Exchange LLC Agreement. The number and
allocation of Voting Units automatically adjust upon any change in
ownership of Economic Units pursuant to Exchange LLC Agreement Sec.
7.3(g)(iii).
---------------------------------------------------------------------------
The composition of the Board of Directors of the Exchange will
remain unaffected by the Transfer. The makeup of the Board will still
be comprised of at least 20% of Directors who are Participant
Directors,\17\ a majority of Directors who are Non-industry
Directors,\18\ and one (1) Director who is also an officer or director
of BOX Holdings, if BOX Holdings chooses to exercise its right to
appoint such a director.\19\
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\17\ ``Participant Director'' means a Director of the Exchange
who is an officer, director or employee of an Exchange Facility
Participant. See BOX Exchange LLC Bylaws Sec. 1.01.
\18\ ``Non-industry Director'' means a Director of the Exchange
who (i) has no material business relationship with the Exchange or
any Affiliate of the Exchange, or any Exchange Facility Participant
or any Affiliate of any Exchange Facility Participant and is not
associated with any broker or dealer as required pursuant to Section
6(b)(3) of the Securities Exchange Act of 1934, as amended or (ii)
is not an Industry Representative. ``Industry Representative'' means
an individual who is an officer, director or employee of a broker or
dealer or who has been employed in any such capacity at any time
within the prior three (3) years, as well as an individual who has,
or has had, a consulting or employment relationship with the
Exchange, or any Affiliate of the Exchange, at any time within the
prior three (3) years. See BOX Exchange LLC Bylaws Sec. 1.01.
\19\ See BOX Exchange LLC Bylaws Sec. 4.02.
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Section 7.4(e) of the Holdings LLC Agreement provides that BOX
Holdings shall provide the SEC with written notice ten (10) days prior
to the closing date of any acquisition that results in a Member's
Percentage Interest \20\ meeting or crossing the threshold level of 5%
or
[[Page 51413]]
the successive levels of 10% and 15%. Although Citadel Securities
Principal Investments LLC (``Citadel'') is not acquiring any additional
Units of BOX Holdings in the Transfers, the reduction of the total
number of outstanding Units of BOX Holdings in connection with the
Transfers will result in a corresponding increase in the Percentage
Interest held by Citadel from 13.80% to 15.50% and thereby crossing the
15% level.
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\20\ ``Percentage Interest'' with respect to a Member of BOX
Holdings means the ratio of the number of Units held by the Member
to the total of all of the issued Units, expressed as a percentage
and determined with respect to each class of Units, whenever
applicable. See Holdings LLC Agreement Sec. 1.1.
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The change in Citadel's Percentage Interest resulting from the
Transfers will also increase the voting power of Citadel in BOX
Holdings. After giving effect to the Transfers, Citadel's voting power
with respect to votes of Members of BOX Holdings will increase from
14.28% to 16.65% and Citadel's total voting power on the Board of
Directors of BOX Holdings will increase from 14.73% to 16.65%. Citadel
currently has the power to appoint one (1) representative to the BOX
Holdings Board of Directors \21\ and, after giving effect to the
Transfers, Citadel will have the power to appoint two (2) Directors of
BOX Holdings.\22\
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\21\ See Holdings LLC Agreement Sec. 4.1(a)(i).
\22\ See Holdings LLC Agreement Sec. 4.1(a)(iii).
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Section 7.4(f) of the Holdings LLC Agreement provides that a rule
filing pursuant to Section 19 of the Exchange Act is required with
respect to certain transactions that result in the acquisition and
holding by a person of an aggregate Percentage Interest in BOX Holdings
which meets or crosses the threshold level of 20% or any successive 5%
level. Although MXUS2 is not acquiring any additional Units of BOX
Holdings in connection with the Transfers, the reduction of the total
number of outstanding Units of BOX Holdings in connection with the
Transfers will result in a corresponding increase in the Percentage
Interest held by MXUS2 from 42.62% to 47.89% and thereby crossing the
45% level. Although IB is not acquiring any additional Units of BOX
Holdings in connection with the Transfers, the reduction of the total
number of outstanding Units of BOX Holdings in connection with the
Transfers will result in a corresponding increase in the Percentage
Interest held by IB from 22.69% to 25.50% and thereby crossing the 25%
level.
The change in IB's ownership percentage of Holdings resulting from
the Transfers will not affect IB's voting percentage because, as an
Exchange Facility Participant on BOX Options, IB's allowable voting
percentage is limited to 20%, as provided by the Holdings LLC Agreement
\23\ and will remain at 19.999%. As a result of this limitation of IB's
voting percentage, the changes resulting from the Transfers will also
increase the voting power of MXUS2 in BOX Holdings as IB's voting power
above 19.999% will be reallocated among other Members of BOX Holdings.
After giving effect to the Transfers, MXUS2's voting power with respect
to votes of Members of BOX Holdings will increase from 44.10% to 51.43%
and MXUS2's total voting power on the Board of Directors of BOX
Holdings will increase from 45.50% to 51.43%, providing MXUS2 the
ability to control votes of the Board of Directors of BOX Holdings that
require a simple majority vote. MXUS2 currently has the power to
appoint three (3) representatives to the BOX Holdings Board of
Directors \24\ and, after giving effect to the Transfers, MXUS2 will
still have the power to appoint the same number of Directors of BOX
Holdings.
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\23\ See Holdings LLC Agreement Sec. 7.4(h).
\24\ See Holdings LLC Agreement Sec. 4.1(a)(iv).
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No other Member of BOX Holdings will have its ownership percentage
in BOX Holdings adjusted by more than 1% of the total BOX Holdings
ownership as a result of the Transfers.
Section 7.3(e) of the Exchange LLC Agreement provides that the
Exchange shall provide the SEC with written notice ten (10) days prior
to the closing date of any acquisition that would result in a Member
having a Voting Percentage Interest of five percent (5%) or more.
Although Wolverine proposes to acquire only one (1) Exchange Economic
Unit of the Exchange, the allocation of Exchange Voting Units resulting
from the Transfers would result in Wolverine holding 2,637 Exchange
Voting Units, representing a 5.03% Voting Percentage Interest and
thereby crossing the 5% level.
As discussed above, all Exchange owners are subject to a Voting
Ownership Limit of 20%. Although Aragon Solutions Ltd. (``Aragon'') is
not acquiring any additional Economic Units of the Exchange in the
Transfers, the reallocation of Exchange Voting Units resulting from the
Transfers would result in Aragon holding 10,493 Exchange Voting Units,
representing 19.999% Voting Percentage Interest, compared with 6.294%
prior to the Transfers.
No other Member of the Exchange will have its Economic Percentage
Interest or its Voting Percentage Interest in the Exchange adjusted by
more than 5% of the total BOX Holdings ownership as a result of the
Transfers.
The consideration paid to Citi and CSFB by the Exchange will not
materially affect the Exchange's capitalization. After payment by the
Exchange of the purchase price to each of Citi and CSFB, the Exchange
will continue to reserve sufficient assets to operate and fulfill its
regulatory responsibilities with respect to itself and BOX Options. The
Exchange Board of Directors remains committed to ensuring the Exchange
is sufficiently capitalized to meet its obligations. The Exchange and
BOX Options continue to be subject to a written Facility Agreement,
which provides that the Exchange receives and retains all assets deemed
to be necessary for regulatory purposes by the Exchange.\25\
Accordingly, payments made to consummate the Transfers will not have a
material effect on the Exchange's ability to carry out its duties and
obligations as an SRO.
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\25\ See Securities Exchange Act Release No. 34-66871 (April 27,
2012) 77 FR 26323 (May 3, 2012) (Order granting approval of BOX
Exchange).
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LabMorgan Corp., a Member of the Exchange, notified the Exchange it
has changed its legal name to JPMC Strategic Investments I Corporation.
The updated name of this Member is reflected in the amendment to the
Exchange LLC Agreement attached [sic] hereto as Exhibit 5B.
2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Act,\26\ in general, and furthers
the objectives of Section 6(b)(1),\27\ in particular, in that it
enables the Exchange to be so organized so as to have the capacity to
be able to carry out the purposes of the Act and to comply, and to
enforce compliance by its exchange members and persons associated with
its exchange members, with the provisions of the Act, the rules and
regulations thereunder, and the rules of the Exchange.
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\26\ 15 U.S.C. 78f(b).
\27\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed name change and changes in
ownership are necessary to accommodate the desires of certain Members
to arrange their affairs, including to exit ownership of the Exchange
and BOX Holdings. The Exchange believes that this filing furthers the
objectives of Section 6(b)(5) of the Act because the proposed rule
change would be consistent with and facilitate a governance and
regulatory structure that is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged
[[Page 51414]]
in regulating, clearing, settling, processing information with respect
to, and facilitating transactions in securities, to remove impediments
to, and perfect the mechanism of a free and open market and a national
market system and, in general, to protect investors and the public
interest. Accordingly, the proposed ownership changes will ensure the
continued operation of both the Exchange and BOX Holdings without any
detrimental effect on the operations of either the Exchange or its
facility.
Further, the Exchange believes the proposed name change and
ownership changes are consistent with, and will not interfere with, the
self-regulatory obligations of BOX Exchange. The Exchange importantly
notes that it is not proposing to amend any of the provisions within
the Holdings LLC Agreement or the BOX Exchange LLC Agreement dealing
with the availability or protection of information, books and records,
undue influence, conflicts of interest, unfair control by an affiliate,
and regulatory independence of BOX Exchange.\28\ In addition, the
ownership changes proposed by the Exchange in this filing are
consistent with past ownership and voting levels held by Members of BOX
Holdings, MXUS2 has previously held voting power in BOX Holdings in
excess of 50% \29\ and IB has previously held a Percentage Interest in
BOX Holdings greater than 25%.\30\ The ability of the Exchange to
operate and fulfill its regulatory responsibilities will continue
unaffected by this proposal and the Exchange will continue to be able
to serve its independent regulatory functions as an SRO after the
proposed transactions are consummated.
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\28\ See Securities Exchange Act Release No. 34-66871 (April 27,
2012) 77 FR 26323 (May 3, 2012) (Order granting approval of BOX
Exchange).
\29\ See Securities Exchange Act Release No. 74477 (March 11,
2015), 80 FR 13932 (March 17, 2015) (SR-BOX-2015-14).
\30\ See Securities Exchange Act Release No. 74403 (March 18,
2016), 81 FR 15772 (March 24, 2016) (SR-BOX-2016-12).
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The Exchange also believes that this filing furthers the objectives
of Section 6(b)(5) of the Act \31\ in that it is designed to facilitate
transactions in securities, to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and in general, to protect investors and the public interest.
The Exchange believes these objectives are supported by having active,
interested owners of the Exchange. The Exchange further believes
accommodating the transfer of ownership interests in the Exchange and
its facility between willing buyers and sellers ensures the health and
vitality of the Exchange and encourages robust interest in the
Exchange's operations, which promotes effective, efficient markets.
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\31\ 15 U.S.C. 78f(b)(1).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act because the changes proposed are
limited to ownership of the Exchange and an affiliate of a facility of
the Exchange and do not change the operation of the Exchange or any
facility of the Exchange. The proposed rule change is not designed to
address any competitive issue or have any impact on competition; rather
the proposed rule change lays out the transfer ownership interests.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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-2021-19 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-2021-19. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-BOX-2021-19, and should be submitted on
or before October 6, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19864 Filed 9-14-21; 8:45 am]
BILLING CODE 8011-01-P
