Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Allow Electronic Multi-Leg Orders on BOX, 67731-67735 [2022-24413]
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Federal Register / Vol. 87, No. 216 / Wednesday, November 9, 2022 / Notices
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CBOE–2022–055 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
Paper Comments
[Release No. 34–96225; File No. SR–BOX–
2022–27]
• 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–2022–055. 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–CBOE–2022–055 and
should be submitted on or before
November 30, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
J. Matthew DeLesDernier,
Deputy Secretary.
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[FR Doc. 2022–24412 Filed 11–8–22; 8:45 am]
BILLING CODE 8011–01–P
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Allow Electronic MultiLeg Orders on BOX
November 3, 2022.
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 October
26, 2022, 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 Exchange filed the
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 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 amend
BOX Rule 7240 (Complex Orders) to
permit electronic Multi-Leg Orders on
BOX. 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://
rules.boxexchange.com/rulefilings.
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.
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
2 17
23 17
CFR 200.30–3(a)(12), (59).
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Currently, only Multi-Leg Orders
defined as ‘‘Complex Orders’’ trade
electronically on BOX.5 The Exchange
now proposes to allow Multi-Leg Orders
that are not Complex Orders to trade
electronically on BOX. As such, the
Exchange proposes BOX Rule
7240(a)(10) which states that the term
‘‘Multi-Leg Order’’ means any order
involving the simultaneous purchase
and/or sale of two or more different
options series in the same underlying
security, for the same account, and for
the purpose of executing a particular
investment strategy, in a ratio that is
less than one-to-three (.333) or greater
than three-to-one (3.00). The Exchange
notes that similar functionality is
currently available at another options
exchange and on the BOX Trading
Floor.6 Multi-Leg Orders involve the
simultaneous purchase and/or sale of
two or more different options series in
the same underlying security, for the
same account, and for the purpose of
executing a particular investment
strategy.7 In particular, Multi-Leg
Orders are distinguished from Complex
Orders by the ratio between each leg of
the orders. Complex Orders have a ratio
between the legs of equal to or greater
than one-to-three and less than or equal
to three-to-one. Multi-Leg Orders consist
of strategies with ratios greater than
three-to-one or less than one-to-three.
Participants may determine that using
Multi-Leg Orders is appropriate for their
investment and hedging purposes. The
Exchange again notes that multi-leg
Qualified Open Outcry (‘‘QOO’’) Orders
may currently be executed on the BOX
Trading Floor.8
5 Multi-Leg Orders and Complex Orders are
distinguished by the ratio between each leg of the
orders. Complex Orders have a ratio between the
legs of equal to or greater than one to three and less
than or equal to three to one. Multi-Leg Orders for
these purposes consist of all other ratios between
the legs.
6 See Chicago Board of Options Exchange, Inc.
(‘‘CBOE’’) Rule 1.1 (stating in the definition of
Complex Order that ‘‘the exchange determines on
a class-by-class basis whether complex orders with
ratios less than one-to-three (.333) or greater than
three-to-one (3.00) (except for Index Combo orders)
are eligible for electronic processing’’). The
Exchange notes that multi-leg Qualified Open
Outcry (‘‘QOO’’) orders are currently traded on the
BOX Trading Floor. See BOX Rule 7600(c).
7 See BOX Rule 7600(c).
8 Each component series of a multi-leg QOO order
must be executed at a price that is equal to or better
than the NBBO for that series subject to the
exceptions of Rule 15010(b). Each component series
of a multi-leg QOO order (1) may not trade through
Continued
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Federal Register / Vol. 87, No. 216 / Wednesday, November 9, 2022 / Notices
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The Exchange now proposes BOX
Rule 7240(b)(2)(iii) to detail the trading
priority requirements for Multi-Leg
Orders. Proposed BOX Rule
7240(b)(2)(iii) provides that each
component leg of a Multi-Leg Order will
be required to trade (A) at or between
the NBBO, and (B) at a price that is at
least $0.01 better than any Public
Customer order on the BOX Book.9 The
Exchange notes that the proposed
trading priority for Multi-Leg Orders is
similar to the priority for multi-leg QOO
Orders on the BOX Trading Floor in that
the priority rules for both order types
are designed to protect Public Customer
interest on the BOX Book.10
The following example illustrates the
execution of a Multi-Leg Order:
Example 1—Execution of a Multi-Leg
Order
BOX Leg A Book: 6.00—6.60 (no
Public Customer interest)
BOX Leg B Book: 3.00—3.30 (no
Public Customer interest)
Leg A NBBO: 6.00—6.60
Leg B NBBO: 3.00—3.30
Strategy: Buy 4 A Calls, Sell 1 B Call
The Exchange receives a Multi-Leg
Order for the purchase of the strategy at
a net price of 22.80, buying 4 A Calls
and selling 1 B Call. Since the order can
be executed at a price that is at or
between the NBBO for each component
series, and at a price that is at least
$0.01 better than any Public Customer
order on the BOX Book, the legs of the
Multi-Leg Order will be executed at 6.45
for leg A and 3.00 for leg B to achieve
any equal or better priced Public Customer bids or
offers on the BOX Book for that series or any nonPublic Customer bids or offers on the BOX Book for
that series that are ranked ahead of or equal to
better priced Public Customer bids or offers, and (2)
may not trade through any non-Public Customer
bids or offers for that series on the BOX Book that
are priced better than the proposed execution price.
The initiating side of a multi-leg QOO order must
execute against equal or better priced interest on the
BOX Book as provided by Rules 7600(d) and (h)
before executing against the contra-side QOO order.
Id.
9 Proposed BOX Rule 7240(b)(1) states that the
minimum increment for bids and offers on MultiLeg Orders, with a ratio between the legs of less
than one-to-three or greater than three-to-one, is
$0.01 and the leg(s) of a Multi-Leg Order may be
executed in one cent increments, regardless of the
minimum increments otherwise applicable to the
individual legs of the order.
10 See BOX Rule 7600(c). The priority rules of
multi-leg QOO Orders and electronic Multi-Leg
Orders differ in that a component leg of a multi-leg
QOO Order must trade against any Public Customer
interest and any non-Public Customer interest
ranked equal to or better than the Public Customer
interest at the same price as the contra side of the
multi-leg QOO order, whereas each component leg
of an electronic Multi-Leg Order must improve any
Public Customer order on the BOX Book or the
order will be rejected. The proposed electronic
Multi-Leg Order priority is designed to be
consistent with other electronic order types on
BOX. See BOX Rule 7110.
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the net price of 22.80 (6.45 times 4
equals 25.80 less 3.00 equals 22.80).
Example 2—Execution of a Multi-Leg
Order
BOX Leg A Book: 6.00—6.60 (no
Public Customer interest)
BOX Leg B Book: 3.00—3.30 (Public
Customer to sell at 3.30)
Leg A NBBO: 6.00—6.60
Leg B NBBO: 3.00—3.30
Strategy: Buy 4 A Calls, Sell 1 B Call
The Exchange receives a Multi-Leg
Order for the purchase of the strategy at
a net price of 20.70, buying 4 A Calls
and selling 1 B Call. Since there is a
Public Customer Order on the BOX
Book for Leg B to sell at 3.30 and the
Multi-Leg Order can only be purchased
at a net price of 20.70 if leg A is
purchased at 6.00 (6.00 times 4 equals
24.00) and leg B is sold at 3.30 (24.00
less 20.70 equals 3.30), the Multi-Leg
Order will be rejected.
The Exchange proposes further, in
proposed Rule 7240(b)(1), that the
minimum increment for bids and offers
on electronic Multi-Leg Orders will be
$0.01 and each leg of an electronic
Multi-Leg Order may be executed in one
cent increments, regardless of the
minimum increments otherwise
applicable to the individual legs of the
order.11 The Exchange notes that
electronic trading of Multi-Leg Orders in
one cent increments was recently
established on another exchange.12
Further, the Exchange notes that
Complex Orders are currently traded
electronically in one cent increments on
BOX 13 and the proposed change will
allow electronic trading of Multi-Leg
Orders in one cent increments that
merely have a different ratio between
the legs as compared to Complex
Orders. The Exchange notes it is not
proposing to extend the Complex Order
priority afforded to Complex Orders to
the proposed Multi-Leg Orders.14 As
discussed above, proposed Rule
7240(b)(2)(iii) will require that each
component leg execute at or between
the NBBO, and at a price that is least
$0.01 better than any Public Customer
order on the BOX Book.
The Exchange understands that there
may be some concerns that if the ratios
of multi-legged strategies, where each
component leg is allowed to trade in
11 See
proposed Rule 7240(b)(1).
Securities Exchange Act Release No. 94204
(February 9, 2022), 87 FR 8625 (February 15, 2022)
(SR–CBOE–2021–046).
13 See BOX Rule 7240(b)(1).
14 See BOX Rule 7240(b)(2). The Exchange also
notes that it will not generate Legging Orders for
Multi-Leg Orders. Legging Orders are only
generated on BOX for Complex Orders with two
legs and with a ratio of one-to-one. See BOX Rule
7240(c)(1).
12 See
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one cent increments, are too greatly
expanded, market participants will, for
example, enter multi-legged strategies
designed primarily to trade orders in a
class in pennies that cannot otherwise
execute as simple orders in that class in
pennies. The Exchange believes it is
highly unlikely that market participants
will submit non-bona-fide trading
strategies with larger ratios just to trade
in penny increments. Adding a single
leg to a larger order just to obtain penny
pricing may further reduce execution
opportunities for such an order because
it may be less likely that sufficient
contracts in the appropriate ratio would
be available and because it is unlikely
that other market participants would be
willing to execute against an order that
is not a bona-fide trading strategy.
Further, the Exchange notes that all
option series traded on BOX can
currently trade in penny increments in
the Price Improvement Period (‘‘PIP’’)
regardless of the minimum increment
otherwise applicable.15 Lastly, the
Exchange notes that pursuant to BOX
Rule 3000(a), no Participant shall
engage in acts or practices inconsistent
with just and equitable principles of
trade and non-bona-fide trading
strategies may constitute acts or
practices inconsistent with just and
equitable principles of trade.
The Exchange will announce the
implementation of Multi-Leg Orders by
Informational Circular at least 48 hours
prior to deployment of this
functionality, as the Exchange believes
that 48 hours of notice is adequate for
Participants.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.16 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 17 requirements that the rules of
an exchange be 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
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
15 See
BOX Rules 7150(f)(2) and 7150(k).
U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
16 15
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Federal Register / Vol. 87, No. 216 / Wednesday, November 9, 2022 / Notices
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 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
the proposed rule change will remove
impediments to and perfect the
mechanism of a free and open market
and benefit investors because another
exchange has established both
electronic and open outcry execution of
Multi-Leg Orders, regardless of ratio.18
The Exchange believes that, with the
proposed changes discussed herein,
market participants will no longer have
to trade Multi-Leg Orders electronically
on the one other exchange that offers
this functionality and could instead
select the exchange that is most
convenient, offers the best fees, and/or
provides better trade execution services.
Further, the Exchange believes that
market participants may find it more
convenient or cost effective to access
one exchange over another and may
choose to concentrate their volume at a
particular exchange in order to
maximize the impact of volume-based
incentive programs. As such, the
Exchange believes that the proposed
change removes impediments to and
perfects the mechanism of a free and
open market and benefits investors.
The Exchange believes that the
proposed change perfects the
mechanism of a free and open market
and protects investors and the public
interest by continuing to protect the
priority of Public Customers as
evidenced by the requirements detailed
in proposed Rule 7240(b)(2)(iii). In
particular, the execution of each leg of
a Multi-Leg Order (i) will be at a price
that is at least $0.01 better than any
Public Customer order on the BOX
Book; and (ii) will be at or between the
NBBO. The Exchange notes that another
exchange has established multi-leg
electronic trading, regardless of the
ratios between the component legs.
Therefore, the proposed rules perfect
the mechanism of a free and open
market and protect investor and the
public interest by increasing efficiency
and competitive pricing by establishing
Multi-Leg Orders on BOX which creates
intermarket competition between
exchanges.
The Exchange also believes that
establishing electronic Multi-Leg Orders
benefits investors and provides a means
for market participants to execute MultiLeg Orders outside of the BOX Trading
Floor, as multi-leg QOO Orders are
18 See
supra, note 10. [sic]
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currently the only way to execute MultiLeg Orders on BOX. Participants may
find it more convenient and efficient to
execute Multi-Leg Orders electronically
because they do not require manual
handling or the services of a Floor
Broker.
Additionally, the Exchange believes
that electronic trading of Multi-Leg
Orders in one cent increments will
remove impediments to and perfect the
mechanism of a free and open market
and benefit investors, because it will
provide Participants with the same
pricing flexibility with respect to all of
their Multi-Leg Orders on BOX (i.e. each
component leg of Complex Orders
already trades in one cent increments).
Participants may determine that
investment and hedging strategies with
ratios greater than three-to-one or less
than one-to-three are appropriate for
their investment purposes, and the
Exchange believes it will benefit
Participants if they have additional
flexibility to price their investment and
hedging strategies to achieve their
desired investment results. Further, the
Exchange believes that the proposed
change with respect to the minimum
increment requirement may enable
Participants to execute their customers’
Multi-Leg Orders at better prices, rather
than executing at prices that fit within
the confines of a larger increment. The
Exchange also believes that allowing the
legs of Multi-Leg Orders to trade in one
cent increments will help protect
investors by allowing Participants to
receive better execution prices and
improve their ability to execute at or
within the NBBO. Further, the Exchange
believes that requiring each leg of a
Multi-Leg Order to execute at a price
that is at least $0.01 better than any
Public Customer order on the BOX Book
continues to protect Public Customer
interest and thus perfects the
mechanism of a free and open market
and protects investors and the public
interest.
The Exchange believes the proposed
changes will increase opportunities for
execution of Multi-Leg Orders and lead
to tighter spreads on BOX, which will
benefit investors. The Exchange also
believes that the proposed rule change
is designed to not permit unfair
discrimination among market
participants, as all market participants
may trade electronic Multi-Leg Orders,
and the priority requirements apply to
electronic Multi-Leg Orders of all
market participants.
Lastly, the Exchange notes that the
proposed changes discussed herein are
not novel. The trading of multi-leg QOO
orders in one cent increments was
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67733
recently adopted by BOX.19 Further, as
noted herein, another exchange has
established both electronic and open
outcry execution of all Multi-Leg
Orders, regardless of ratio, and the
execution of these Multi-Leg Orders in
one cent increments.20
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe the
proposed rule change will impose any
burden on intramarket competition, as
the proposed rule change will apply in
the same manner to all Participants. The
Exchange notes that all Participants,
regardless of account type, will have the
ability to submit electronic Multi-Leg
Orders with any ratio in the increments
permitted by the proposed rule change.
Further, the proposed rule change will
provide all Participants with an
additional means for trading Multi-Leg
Orders on BOX. The Exchange believes
the proposed rule change does not
impose any undue burden on
intermarket competition and may, on
the contrary, promote competition, as
another exchange currently offers the
proposed functionality.21 As discussed
herein, trading the legs of Multi-Leg
Orders in one cent increments is
currently allowed for multi-leg QOO
orders on the BOX Trading Floor.
Lastly, the Exchange notes that the
remaining exchanges are free to adopt
similar rules to those proposed here. As
such, 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.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not (a) significantly affect
the protection of investors or the public
interest; (b) impose any significant
burden on competition; and (c) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19 See Securities Exchange Act Release No. 95173
(June 28, 2022), 87 FR 39880 (July 5, 2022) (SR–
BOX–2022–21).
20 See supra, note 10. [sic]
21 Id. See also CBOE Rules 1.1 and 5.33(f).
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19(b)(3)(A) of the Act 22 and Rule 19b–
4(f)(6) thereunder.23
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),24 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay. The Exchange states
that because multi-leg orders with a
ratio less than one-to-three or greater
than three-to-one currently may trade
electronically in $0.01 increments on
another exchange, waiver of the
operative delay will allow the Exchange
to immediately offer market participants
the choice of another execution venue
for the electronic trading of Multi-Leg
Orders. The Exchange states that market
participants may find it more
convenient and efficient to execute
Multi-Leg Orders electronically because
they do not require manual handling or
the services of a Floor Broker. The
Exchange further states that the
proposal will protect the priority of
Public Customer orders by requiring
each component leg of an electronically
traded Multi-Leg Order to trade at a
price that is at least $0.01 better than
any Public Customer order on the BOX
Book, in addition to trading at a price
that is at or between the NBBO for the
series. In addition, the Exchange states
that allowing electronically traded
Multi-Leg Orders to trade in $0.01
increments will provide market
participants with additional flexibility
in pricing their investment and hedging
strategies to achieve their desired
investment results.
The Commission finds that waiving
the 30-day operative delay is consistent
with the protection of investors and the
public interest. The proposal will
provide investors with an additional
venue for electronically trading complex
orders with a ratio less than one-to-three
or greater than three-to-one. The
Commission believes that proposal does
not raise new or novel regulatory issues
because another options exchange
currently provides for the electronic
trading of complex orders with a ratio
less than one-to-three or greater than
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22 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.
24 17 CFR 240.19b–4(f)(6)(iii).
23 17
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three-to-one.25 The proposal protects
the priority of resting Public Customer
orders by requiring each component leg
of a Multi-Leg Order to be executed at
a price that is at least $0.01 better than
any Public Customer Order on the BOX
Book.26 This requirement is consistent
with the rules of another options
exchange.27 In addition, as discussed
above, the Exchange states that it is
highly unlikely that a market participant
would submit a complex order with a
ratio less than one-to-three or greater
than three-to-one that is not a bona fide
trading strategy solely for the purpose of
trading in $0.01 increments. The
Exchange believes that there would be
reduced execution opportunities for
such an order because it is unlikely that
other market participants would be
willing to trade against an order that is
not a bona-fide trading strategy. In
addition, the Exchange states that all
option series may trade in $0.01
increments in the PIP auction.28 The
Exchange further states that submitting
an order that is not a bona-fide trading
strategy may constitute an act or
practice inconsistent with just and
equitable principles of trade, in
violation of Exchange Rule 3000(a). For
these reasons, the Commission
designates the proposal operative upon
filing.29
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
25 See Securities Exchange Act Release No. 94204
(February 9, 2022), 87 FR 8625 (February 15, 2022)
(order approving File No. SR–CBOE–2021–046). See
also Cboe Rules 1.1 (stating, in the definition of
complex order, that ‘‘the Exchange determines on
a class-by-class basis whether complex orders with
ratios less than one-to-three (.333) or greater than
three-to-one (3.00) (except for Index Combo orders)
are eligible for electronic processing’’).
26 See proposed Exchange Rule 7240(b)(2)(iii).
27 See Cboe Rule 5.33(f)(2)(iv)(b) (stating that if a
complex order has a ratio less than one-to-three
(.333) or greater than three-to-one (3.00), the
component(s) of the complex order for the leg(s)
with a Priority Customer order at the BBO must
execute at a price that improves the price of that
Priority Customer order(s) on the Simple Book by
at least one minimum increment).
28 See BOX Rules 7150(f)(2) and 7150(k).
29 For purposes only of accelerating the operative
date of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
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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–
BOX–2022–27.
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–2022–27. 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–2022–27, and should
be submitted on or before November 30,
2022.
E:\FR\FM\09NON1.SGM
09NON1
Federal Register / Vol. 87, No. 216 / Wednesday, November 9, 2022 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022–24413 Filed 11–8–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–96226; File No. SR–ICEEU–
2022–021]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to
Amendments to the Rate of Return on
Euro Cash Margin and Guaranty Fund
Deposits
November 3, 2022.
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 October
25, 2022, ICE Clear Europe Limited
(‘‘ICE Clear Europe’’ or the ‘‘Clearing
House’’) filed with the Securities and
Exchange Commission (‘‘Commission’’)
the proposed rule changes described in
Items I, II and III below, which Items
have been prepared primarily by ICE
Clear Europe. ICE Clear Europe filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(2) 4 thereunder, such that the
proposed rule change was immediately
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
khammond on DSKJM1Z7X2PROD with NOTICES
The principal purpose of the
proposed amendments is for ICE Clear
Europe to amend the rate of return paid
by the Clearing House on Euro (‘‘EUR’’)
cash margin and Guaranty Fund
deposits. The proposed amendments do
not involve any changes to the ICE Clear
Europe Clearing Rules or Procedures.5
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(2).
5 Capitalized terms used but not defined herein
have the meanings specified in the ICE Clear
Europe Clearing Rules.
1 15
VerDate Sep<11>2014
17:09 Nov 08, 2022
Jkt 259001
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission, ICE
Clear Europe included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. ICE
Clear Europe has prepared summaries,
set forth in sections (A), (B), and (C)
below, of the most significant aspects of
such statements.
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
(a) Purpose
The purpose of the proposed rule
changes is for ICE Clear Europe to its
rate of return paid on EUR cash margin
and Guaranty Fund deposits applicable
to all Clearing Members for house and
customer accounts. ICE Clear Europe
pays a rate of return on cash deposited
by Clearing Members in respect of
margin and Guaranty Fund
requirements referred to as the ICE
Deposit Rate (the ‘‘IDR’’). The IDR is
calculated daily and applied to cash
balances held at the close of business on
the previous business day in respect of
US Dollar (‘‘USD’’), EUR and Pound
Sterling (‘‘GBP’’) deposits. The IDR is
calculated as the net income earned on
cash deposits in the relevant currency
(positive or negative) less a charge or
spread.
ICE Clear Europe is proposing to
reduce the spread for EUR balances
from 25 bps to 15 bps. The spread for
USD balances and GBP balances would
remain unchanged at 15 bps and 12 bps
respectively. ICE Clear Europe has
determined that in light of current
financial market conditions, including
central bank rates for Euro deposits and
repo rates available in the market, it is
appropriate to increase the net IDR on
EUR balances (through a lower spread).
ICE Clear Europe believes the change
would better align the relative costs and
benefits of using EUR to cover margin
and Guaranty Fund obligations with
otherwise available market rates and
facilitate the Clearing House’s ability to
maintain adequate EUR balances for
liquidity management purposes.
(b) Statutory Basis
ICE Clear Europe believes that the
proposed rule changes are consistent
with the requirements of the Act,
including Section 17A of the Act 6 and
6 15
PO 00000
U.S.C. 78q–1.
Frm 00067
Fmt 4703
Sfmt 4703
67735
regulations thereunder applicable to it.
In particular, Section 17A(b)(3)(D) of the
Act 7 requires that ‘‘[t]he rules of the
clearing agency provide for the
equitable allocation of reasonable dues,
fees and other charges among its
participants’’. ICE Clear Europe believes
that the IDR, as proposed to be
amended, would be reasonable and
appropriate in light of current market
conditions, including available repo
rates and central bank rates for EUR
deposits available in the market. The
proposed modifications would apply to
all Clearing Members and other market
participants who hold cash balances in
EUR. Further, ICE Clear Europe has
determined that the revised spread
would better align the relative costs and
benefits of using EUR with otherwise
available market rates for EUR balances
and thereby facilitate the Clearing
House’s liquidity management with
regard to EUR balances. As such, in ICE
Clear Europe’s view, the amendments
are consistent with the equitable
allocation of reasonable dues, fees and
other charges among its Clearing
Members and other market participants,
within the meaning of Section
17A(b)(3)(D) of the Act.8
The proposed amendments are also
consistent with the requirements of
Section 17A(b)(3)(F) of the Act 9 which
requires, among other things, that ‘‘[t]he
rules of a clearing agency [. . .] are not
designed to permit unfair
discrimination in the admission of
participants or among participants in
the use of the clearing agency’’. As
noted above, the EUR spread, as
proposed to be amended, would apply
on a currency level and would apply to
all Clearing Members. The amendments
would not otherwise change the ability
of Clearing Members to post EUR in
satisfaction of their obligations. As a
result, the amendments would not result
in any unfair discrimination among
Clearing Members in their use of the
Clearing House, within the meaning of
Section 17A(b)(3)(F) of the Act.10
(B) Clearing Agency’s Statement on
Burden on Competition
ICE Clear Europe does not believe the
proposed rule changes would have any
impact, or impose any burden, on
competition not necessary or
appropriate in furtherance of the
purpose of the Act. Although ICE Clear
Europe is revising a certain spread
applied to the IDR, as set forth herein,
it believes such changes are appropriate
7 15
U.S.C. 78q–1(b)(3)(D).
U.S.C. 78q–1(b)(3)(D).
9 15 U.S.C. 78q–1(b)(3)(F).
10 15 U.S.C. 78q–1(b)(3)(F).
8 15
E:\FR\FM\09NON1.SGM
09NON1
]]>Agencies
[Federal Register Volume 87, Number 216 (Wednesday, November 9, 2022)]
[Notices]
[Pages 67731-67735]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-24413]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96225; File No. SR-BOX-2022-27]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Allow
Electronic Multi-Leg Orders on BOX
November 3, 2022.
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 October 26, 2022, 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 Exchange filed the proposed
rule change pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and
Rule 19b-4(f)(6) thereunder.\4\ 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)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BOX Rule 7240 (Complex Orders) to
permit electronic Multi-Leg Orders on BOX. 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://rules.boxexchange.com/rulefilings.
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
Currently, only Multi-Leg Orders defined as ``Complex Orders''
trade electronically on BOX.\5\ The Exchange now proposes to allow
Multi-Leg Orders that are not Complex Orders to trade electronically on
BOX. As such, the Exchange proposes BOX Rule 7240(a)(10) which states
that the term ``Multi-Leg Order'' means any order involving the
simultaneous purchase and/or sale of two or more different options
series in the same underlying security, for the same account, and for
the purpose of executing a particular investment strategy, in a ratio
that is less than one-to-three (.333) or greater than three-to-one
(3.00). The Exchange notes that similar functionality is currently
available at another options exchange and on the BOX Trading Floor.\6\
Multi-Leg Orders involve the simultaneous purchase and/or sale of two
or more different options series in the same underlying security, for
the same account, and for the purpose of executing a particular
investment strategy.\7\ In particular, Multi-Leg Orders are
distinguished from Complex Orders by the ratio between each leg of the
orders. Complex Orders have a ratio between the legs of equal to or
greater than one-to-three and less than or equal to three-to-one.
Multi-Leg Orders consist of strategies with ratios greater than three-
to-one or less than one-to-three. Participants may determine that using
Multi-Leg Orders is appropriate for their investment and hedging
purposes. The Exchange again notes that multi-leg Qualified Open Outcry
(``QOO'') Orders may currently be executed on the BOX Trading Floor.\8\
---------------------------------------------------------------------------
\5\ Multi-Leg Orders and Complex Orders are distinguished by the
ratio between each leg of the orders. Complex Orders have a ratio
between the legs of equal to or greater than one to three and less
than or equal to three to one. Multi-Leg Orders for these purposes
consist of all other ratios between the legs.
\6\ See Chicago Board of Options Exchange, Inc. (``CBOE'') Rule
1.1 (stating in the definition of Complex Order that ``the exchange
determines on a class-by-class basis whether complex orders with
ratios less than one-to-three (.333) or greater than three-to-one
(3.00) (except for Index Combo orders) are eligible for electronic
processing''). The Exchange notes that multi-leg Qualified Open
Outcry (``QOO'') orders are currently traded on the BOX Trading
Floor. See BOX Rule 7600(c).
\7\ See BOX Rule 7600(c).
\8\ Each component series of a multi-leg QOO order must be
executed at a price that is equal to or better than the NBBO for
that series subject to the exceptions of Rule 15010(b). Each
component series of a multi-leg QOO order (1) may not trade through
any equal or better priced Public Customer bids or offers on the BOX
Book for that series or any non-Public Customer bids or offers on
the BOX Book for that series that are ranked ahead of or equal to
better priced Public Customer bids or offers, and (2) may not trade
through any non-Public Customer bids or offers for that series on
the BOX Book that are priced better than the proposed execution
price. The initiating side of a multi-leg QOO order must execute
against equal or better priced interest on the BOX Book as provided
by Rules 7600(d) and (h) before executing against the contra-side
QOO order. Id.
---------------------------------------------------------------------------
[[Page 67732]]
The Exchange now proposes BOX Rule 7240(b)(2)(iii) to detail the
trading priority requirements for Multi-Leg Orders. Proposed BOX Rule
7240(b)(2)(iii) provides that each component leg of a Multi-Leg Order
will be required to trade (A) at or between the NBBO, and (B) at a
price that is at least $0.01 better than any Public Customer order on
the BOX Book.\9\ The Exchange notes that the proposed trading priority
for Multi-Leg Orders is similar to the priority for multi-leg QOO
Orders on the BOX Trading Floor in that the priority rules for both
order types are designed to protect Public Customer interest on the BOX
Book.\10\
---------------------------------------------------------------------------
\9\ Proposed BOX Rule 7240(b)(1) states that the minimum
increment for bids and offers on Multi-Leg Orders, with a ratio
between the legs of less than one-to-three or greater than three-to-
one, is $0.01 and the leg(s) of a Multi-Leg Order may be executed in
one cent increments, regardless of the minimum increments otherwise
applicable to the individual legs of the order.
\10\ See BOX Rule 7600(c). The priority rules of multi-leg QOO
Orders and electronic Multi-Leg Orders differ in that a component
leg of a multi-leg QOO Order must trade against any Public Customer
interest and any non-Public Customer interest ranked equal to or
better than the Public Customer interest at the same price as the
contra side of the multi-leg QOO order, whereas each component leg
of an electronic Multi-Leg Order must improve any Public Customer
order on the BOX Book or the order will be rejected. The proposed
electronic Multi-Leg Order priority is designed to be consistent
with other electronic order types on BOX. See BOX Rule 7110.
---------------------------------------------------------------------------
The following example illustrates the execution of a Multi-Leg
Order:
Example 1--Execution of a Multi-Leg Order
BOX Leg A Book: 6.00--6.60 (no Public Customer interest)
BOX Leg B Book: 3.00--3.30 (no Public Customer interest)
Leg A NBBO: 6.00--6.60
Leg B NBBO: 3.00--3.30
Strategy: Buy 4 A Calls, Sell 1 B Call
The Exchange receives a Multi-Leg Order for the purchase of the
strategy at a net price of 22.80, buying 4 A Calls and selling 1 B
Call. Since the order can be executed at a price that is at or between
the NBBO for each component series, and at a price that is at least
$0.01 better than any Public Customer order on the BOX Book, the legs
of the Multi-Leg Order will be executed at 6.45 for leg A and 3.00 for
leg B to achieve the net price of 22.80 (6.45 times 4 equals 25.80 less
3.00 equals 22.80).
Example 2--Execution of a Multi-Leg Order
BOX Leg A Book: 6.00--6.60 (no Public Customer interest)
BOX Leg B Book: 3.00--3.30 (Public Customer to sell at 3.30)
Leg A NBBO: 6.00--6.60
Leg B NBBO: 3.00--3.30
Strategy: Buy 4 A Calls, Sell 1 B Call
The Exchange receives a Multi-Leg Order for the purchase of the
strategy at a net price of 20.70, buying 4 A Calls and selling 1 B
Call. Since there is a Public Customer Order on the BOX Book for Leg B
to sell at 3.30 and the Multi-Leg Order can only be purchased at a net
price of 20.70 if leg A is purchased at 6.00 (6.00 times 4 equals
24.00) and leg B is sold at 3.30 (24.00 less 20.70 equals 3.30), the
Multi-Leg Order will be rejected.
The Exchange proposes further, in proposed Rule 7240(b)(1), that
the minimum increment for bids and offers on electronic Multi-Leg
Orders will be $0.01 and each leg of an electronic Multi-Leg Order may
be executed in one cent increments, regardless of the minimum
increments otherwise applicable to the individual legs of the
order.\11\ The Exchange notes that electronic trading of Multi-Leg
Orders in one cent increments was recently established on another
exchange.\12\ Further, the Exchange notes that Complex Orders are
currently traded electronically in one cent increments on BOX \13\ and
the proposed change will allow electronic trading of Multi-Leg Orders
in one cent increments that merely have a different ratio between the
legs as compared to Complex Orders. The Exchange notes it is not
proposing to extend the Complex Order priority afforded to Complex
Orders to the proposed Multi-Leg Orders.\14\ As discussed above,
proposed Rule 7240(b)(2)(iii) will require that each component leg
execute at or between the NBBO, and at a price that is least $0.01
better than any Public Customer order on the BOX Book.
---------------------------------------------------------------------------
\11\ See proposed Rule 7240(b)(1).
\12\ See Securities Exchange Act Release No. 94204 (February 9,
2022), 87 FR 8625 (February 15, 2022) (SR-CBOE-2021-046).
\13\ See BOX Rule 7240(b)(1).
\14\ See BOX Rule 7240(b)(2). The Exchange also notes that it
will not generate Legging Orders for Multi-Leg Orders. Legging
Orders are only generated on BOX for Complex Orders with two legs
and with a ratio of one-to-one. See BOX Rule 7240(c)(1).
---------------------------------------------------------------------------
The Exchange understands that there may be some concerns that if
the ratios of multi-legged strategies, where each component leg is
allowed to trade in one cent increments, are too greatly expanded,
market participants will, for example, enter multi-legged strategies
designed primarily to trade orders in a class in pennies that cannot
otherwise execute as simple orders in that class in pennies. The
Exchange believes it is highly unlikely that market participants will
submit non-bona-fide trading strategies with larger ratios just to
trade in penny increments. Adding a single leg to a larger order just
to obtain penny pricing may further reduce execution opportunities for
such an order because it may be less likely that sufficient contracts
in the appropriate ratio would be available and because it is unlikely
that other market participants would be willing to execute against an
order that is not a bona-fide trading strategy. Further, the Exchange
notes that all option series traded on BOX can currently trade in penny
increments in the Price Improvement Period (``PIP'') regardless of the
minimum increment otherwise applicable.\15\ Lastly, the Exchange notes
that pursuant to BOX Rule 3000(a), no Participant shall engage in acts
or practices inconsistent with just and equitable principles of trade
and non-bona-fide trading strategies may constitute acts or practices
inconsistent with just and equitable principles of trade.
---------------------------------------------------------------------------
\15\ See BOX Rules 7150(f)(2) and 7150(k).
---------------------------------------------------------------------------
The Exchange will announce the implementation of Multi-Leg Orders
by Informational Circular at least 48 hours prior to deployment of this
functionality, as the Exchange believes that 48 hours of notice is
adequate for Participants.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\16\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \17\ requirements that the rules of an exchange be
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 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
[[Page 67733]]
investors and the public interest. Additionally, the Exchange believes
the proposed rule change is consistent with the Section 6(b)(5)
requirement that the rules of an exchange not be designed to permit
unfair discrimination between customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed rule change will
remove impediments to and perfect the mechanism of a free and open
market and benefit investors because another exchange has established
both electronic and open outcry execution of Multi-Leg Orders,
regardless of ratio.\18\ The Exchange believes that, with the proposed
changes discussed herein, market participants will no longer have to
trade Multi-Leg Orders electronically on the one other exchange that
offers this functionality and could instead select the exchange that is
most convenient, offers the best fees, and/or provides better trade
execution services. Further, the Exchange believes that market
participants may find it more convenient or cost effective to access
one exchange over another and may choose to concentrate their volume at
a particular exchange in order to maximize the impact of volume-based
incentive programs. As such, the Exchange believes that the proposed
change removes impediments to and perfects the mechanism of a free and
open market and benefits investors.
---------------------------------------------------------------------------
\18\ See supra, note 10. [sic]
---------------------------------------------------------------------------
The Exchange believes that the proposed change perfects the
mechanism of a free and open market and protects investors and the
public interest by continuing to protect the priority of Public
Customers as evidenced by the requirements detailed in proposed Rule
7240(b)(2)(iii). In particular, the execution of each leg of a Multi-
Leg Order (i) will be at a price that is at least $0.01 better than any
Public Customer order on the BOX Book; and (ii) will be at or between
the NBBO. The Exchange notes that another exchange has established
multi-leg electronic trading, regardless of the ratios between the
component legs. Therefore, the proposed rules perfect the mechanism of
a free and open market and protect investor and the public interest by
increasing efficiency and competitive pricing by establishing Multi-Leg
Orders on BOX which creates intermarket competition between exchanges.
The Exchange also believes that establishing electronic Multi-Leg
Orders benefits investors and provides a means for market participants
to execute Multi-Leg Orders outside of the BOX Trading Floor, as multi-
leg QOO Orders are currently the only way to execute Multi-Leg Orders
on BOX. Participants may find it more convenient and efficient to
execute Multi-Leg Orders electronically because they do not require
manual handling or the services of a Floor Broker.
Additionally, the Exchange believes that electronic trading of
Multi-Leg Orders in one cent increments will remove impediments to and
perfect the mechanism of a free and open market and benefit investors,
because it will provide Participants with the same pricing flexibility
with respect to all of their Multi-Leg Orders on BOX (i.e. each
component leg of Complex Orders already trades in one cent increments).
Participants may determine that investment and hedging strategies with
ratios greater than three-to-one or less than one-to-three are
appropriate for their investment purposes, and the Exchange believes it
will benefit Participants if they have additional flexibility to price
their investment and hedging strategies to achieve their desired
investment results. Further, the Exchange believes that the proposed
change with respect to the minimum increment requirement may enable
Participants to execute their customers' Multi-Leg Orders at better
prices, rather than executing at prices that fit within the confines of
a larger increment. The Exchange also believes that allowing the legs
of Multi-Leg Orders to trade in one cent increments will help protect
investors by allowing Participants to receive better execution prices
and improve their ability to execute at or within the NBBO. Further,
the Exchange believes that requiring each leg of a Multi-Leg Order to
execute at a price that is at least $0.01 better than any Public
Customer order on the BOX Book continues to protect Public Customer
interest and thus perfects the mechanism of a free and open market and
protects investors and the public interest.
The Exchange believes the proposed changes will increase
opportunities for execution of Multi-Leg Orders and lead to tighter
spreads on BOX, which will benefit investors. The Exchange also
believes that the proposed rule change is designed to not permit unfair
discrimination among market participants, as all market participants
may trade electronic Multi-Leg Orders, and the priority requirements
apply to electronic Multi-Leg Orders of all market participants.
Lastly, the Exchange notes that the proposed changes discussed
herein are not novel. The trading of multi-leg QOO orders in one cent
increments was recently adopted by BOX.\19\ Further, as noted herein,
another exchange has established both electronic and open outcry
execution of all Multi-Leg Orders, regardless of ratio, and the
execution of these Multi-Leg Orders in one cent increments.\20\
---------------------------------------------------------------------------
\19\ See Securities Exchange Act Release No. 95173 (June 28,
2022), 87 FR 39880 (July 5, 2022) (SR-BOX-2022-21).
\20\ See supra, note 10. [sic]
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe the proposed rule change will impose
any burden on intramarket competition, as the proposed rule change will
apply in the same manner to all Participants. The Exchange notes that
all Participants, regardless of account type, will have the ability to
submit electronic Multi-Leg Orders with any ratio in the increments
permitted by the proposed rule change. Further, the proposed rule
change will provide all Participants with an additional means for
trading Multi-Leg Orders on BOX. The Exchange believes the proposed
rule change does not impose any undue burden on intermarket competition
and may, on the contrary, promote competition, as another exchange
currently offers the proposed functionality.\21\ As discussed herein,
trading the legs of Multi-Leg Orders in one cent increments is
currently allowed for multi-leg QOO orders on the BOX Trading Floor.
Lastly, the Exchange notes that the remaining exchanges are free to
adopt similar rules to those proposed here. As such, 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.
---------------------------------------------------------------------------
\21\ Id. See also CBOE Rules 1.1 and 5.33(f).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not (a)
significantly affect the protection of investors or the public
interest; (b) impose any significant burden on competition; and (c)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section
[[Page 67734]]
19(b)(3)(A) of the Act \22\ and Rule 19b-4(f)(6) thereunder.\23\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------
A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\24\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. The Exchange has asked
the Commission to waive the 30-day operative delay. The Exchange states
that because multi-leg orders with a ratio less than one-to-three or
greater than three-to-one currently may trade electronically in $0.01
increments on another exchange, waiver of the operative delay will
allow the Exchange to immediately offer market participants the choice
of another execution venue for the electronic trading of Multi-Leg
Orders. The Exchange states that market participants may find it more
convenient and efficient to execute Multi-Leg Orders electronically
because they do not require manual handling or the services of a Floor
Broker. The Exchange further states that the proposal will protect the
priority of Public Customer orders by requiring each component leg of
an electronically traded Multi-Leg Order to trade at a price that is at
least $0.01 better than any Public Customer order on the BOX Book, in
addition to trading at a price that is at or between the NBBO for the
series. In addition, the Exchange states that allowing electronically
traded Multi-Leg Orders to trade in $0.01 increments will provide
market participants with additional flexibility in pricing their
investment and hedging strategies to achieve their desired investment
results.
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\24\ 17 CFR 240.19b-4(f)(6)(iii).
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The Commission finds that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
The proposal will provide investors with an additional venue for
electronically trading complex orders with a ratio less than one-to-
three or greater than three-to-one. The Commission believes that
proposal does not raise new or novel regulatory issues because another
options exchange currently provides for the electronic trading of
complex orders with a ratio less than one-to-three or greater than
three-to-one.\25\ The proposal protects the priority of resting Public
Customer orders by requiring each component leg of a Multi-Leg Order to
be executed at a price that is at least $0.01 better than any Public
Customer Order on the BOX Book.\26\ This requirement is consistent with
the rules of another options exchange.\27\ In addition, as discussed
above, the Exchange states that it is highly unlikely that a market
participant would submit a complex order with a ratio less than one-to-
three or greater than three-to-one that is not a bona fide trading
strategy solely for the purpose of trading in $0.01 increments. The
Exchange believes that there would be reduced execution opportunities
for such an order because it is unlikely that other market participants
would be willing to trade against an order that is not a bona-fide
trading strategy. In addition, the Exchange states that all option
series may trade in $0.01 increments in the PIP auction.\28\ The
Exchange further states that submitting an order that is not a bona-
fide trading strategy may constitute an act or practice inconsistent
with just and equitable principles of trade, in violation of Exchange
Rule 3000(a). For these reasons, the Commission designates the proposal
operative upon filing.\29\
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\25\ See Securities Exchange Act Release No. 94204 (February 9,
2022), 87 FR 8625 (February 15, 2022) (order approving File No. SR-
CBOE-2021-046). See also Cboe Rules 1.1 (stating, in the definition
of complex order, that ``the Exchange determines on a class-by-class
basis whether complex orders with ratios less than one-to-three
(.333) or greater than three-to-one (3.00) (except for Index Combo
orders) are eligible for electronic processing'').
\26\ See proposed Exchange Rule 7240(b)(2)(iii).
\27\ See Cboe Rule 5.33(f)(2)(iv)(b) (stating that if a complex
order has a ratio less than one-to-three (.333) or greater than
three-to-one (3.00), the component(s) of the complex order for the
leg(s) with a Priority Customer order at the BBO must execute at a
price that improves the price of that Priority Customer order(s) on
the Simple Book by at least one minimum increment).
\28\ See BOX Rules 7150(f)(2) and 7150(k).
\29\ For purposes only of accelerating the operative date of
this proposal, the Commission has considered the proposed rule's
impact on efficiency, competition, and capital formation. 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BOX-2022-27.
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-2022-27. 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-2022-27, and should be submitted on
or before November 30, 2022.
[[Page 67735]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-24413 Filed 11-8-22; 8:45 am]
BILLING CODE 8011-01-P
