Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Options Market LLC Facility To Establish a New Qualified Contingent Cross (“QCC”) Growth Rebate, 22506-22509 [2023-07734]

Download as PDF 22506 Federal Register / Vol. 88, No. 71 / Thursday, April 13, 2023 / Notices • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2022–079 on the subject line. SECURITIES AND EXCHANGE COMMISSION 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 Numbers SR–NASDAQ–2022–079. 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 these filings 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–NASDAQ–2022–079 and should be submitted on or before May 4, 2023. Rebuttal comments should be submitted by May 18, 2023. [Release No. 34–97266; File No. SR–BOX– 2023–10] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.53 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–07733 Filed 4–12–23; 8:45 am] lotter on DSK11XQN23PROD with NOTICES1 BILLING CODE 8011–01–P Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Options Market LLC Facility To Establish a New Qualified Contingent Cross (‘‘QCC’’) Growth Rebate April 7, 2023. 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 March 31, 2023, BOX Exchange LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) of the Act,3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to amend the Fee Schedule to establish a new Qualified Contingent Cross (‘‘QCC’’) Growth Rebate on the BOX Options Market LLC (‘‘BOX’’) options facility. While changes to the fee schedule pursuant to this proposal will be effective upon filing, the changes will become operative on April 3, 2023. 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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Fee Schedule for trading on BOX to establish a new Qualified Contingent Cross (‘‘QCC’’) Growth Rebate. Currently, BOX assesses $0.20 per contract to Broker Dealers and Market Makers for both the Agency Order and contra order of a QCC transaction. Public Customers and Professional Customers are not assessed a QCC Transaction Fee. Further, rebates are paid on all qualifying orders pursuant to Section IV.D.1 of the BOX Fee Schedule. Specifically, a QCC Rebate is paid to the Participant that entered the order into the BOX system when at least one party to the QCC transaction is a Broker Dealer or Market Maker. The Participant receives a per contract rebate on QCC transactions according to the tier achieved. Volume thresholds will be calculated on a monthly basis by totaling the Participant’s QCC Agency Order volume on BOX. The Exchange notes that the QCC Rebate is intended to incentivize the sending of more QCC Orders to BOX. The QCC Rebate tier structure is as follows: Tier QCC Agency order volume on BOX (per month) 1 .................................................. 2 .................................................. 3 .................................................. 0 to 1,499,999 contracts ................................................................. 1,500,000 to 2,499,999 contracts ................................................... 2,500,000 to 3,499,999 contracts ................................................... 53 17 2 17 1 15 CFR 200.30–3(a)(12), (57). U.S.C. 78s(b)(1). 3 15 VerDate Sep<11>2014 17:56 Apr 12, 2023 Jkt 259001 PO 00000 CFR 240.19b–4. U.S.C. 78s(b)(3)(A)(ii). Frm 00103 Fmt 4703 Sfmt 4703 Rebate 1 (per contract) 4 17 E:\FR\FM\13APN1.SGM ($0.14) (0.16) (0.16) CFR 240.19b–4(f)(2). 13APN1 Rebate 2 (per contract) ($0.22) (0.24) (0.25) Federal Register / Vol. 88, No. 71 / Thursday, April 13, 2023 / Notices Tier QCC Agency order volume on BOX (per month) 4 .................................................. 3,500,000+ contracts ...................................................................... lotter on DSK11XQN23PROD with NOTICES1 The Exchange now proposes to establish Section IV.D.1.b., QCC Growth Rebate.5 Specifically, the Exchange proposes that if a Participant’s QCC Agency Order volume on BOX achieves Tier 3 of the QCC Rebate in the month AND the Participant’s total QCC volume combined with total QOO volume exceeds 11 million contracts per month, then the Participant will qualify for the rebates in Tier 4 of the QCC Rebate (‘‘QCC Growth Rebate qualifications’’). Strategy QOO Orders and Strategy QCC Orders will not be counted toward the QCC Growth rebate volume. Further, the Exchange proposes that Participants are entitled to one QCC Rebate in a given month, which would be the greater of the QCC Rebate in Section (a) or the QCC Growth Rebate detailed in Section (b), but not both. The Exchange notes that the proposed change is a competitive response as a similar QCC Growth Rebate currently exists at another options exchange.6 Further, the Exchange believes that the proposal will encourage Participants to send increased QCC and QOO order flow to BOX in order to achieve a higher rebate. Lastly, the Exchange is proposing to amend Section IV.D.2 to make changes that reflect the addition of Section IV.D.1.a. and Section IV.D.1.b. to the BOX Fee Schedule. 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act, in general, and Section 6(b)(4) and 6(b)(5) of the Act,7 in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among BOX Participants and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange’s proposal to establish a new QCC Growth Rebate is reasonable because this rebate will provide additional incentives for BOX Participants to engage in substantial amounts of trading activity which would serve to bring additional open outcry liquidity to the Trading Floor 5 Additionally, the Exchange proposes to retitle the current QCC Rebate as Section IV.D.1.a. 6 See Nasdaq Phlx LLC (‘‘Phlx’’) Pricing Schedule and Securities Exchange Act Release No. 96990 (February 27, 2023), 88 FR 13477 (March 3, 2023)(SR–PHLX–2023–06). 7 15 U.S.C. 78f(b)(4) and (5). VerDate Sep<11>2014 17:56 Apr 12, 2023 Jkt 259001 and additional QCC order flow to BOX. This incentive may also encourage Participants to begin sending such order flow to BOX for the opportunity to earn this rebate. As discussed above, the Exchange notes that a similar QCC Growth Rebate currently exists at another exchange. At Phlx, in order to qualify for the QCC Growth Tier Rebate, a member’s or member organization’s total floor transaction, and electronic QCC Orders and Floor QCC Orders volume must exceed 12,500,000 contracts in a given month. In addition to the aforementioned criteria, the member’s or member organization’s respective Phlx House Account must execute QCC transaction volume of 250,000 or more contracts in excess of the member’s or member organization’s QCC transaction volume in January 2023. For members or member organizations with no QCC transaction volume in January 2023, the QCC transaction volume, in their respective Phlx House Account, must be 250,000 or more contracts in a given month. Additionally, Phlx offers an alternative to qualify for the QCC Growth Tier Rebate. Specifically, if a member’s or member organization’s Open Outcry Floor Transaction volume in a given month exceeds 500,000 contracts and a member’s or member organization’s respective Phlx House Account executes QCC transaction volume of 2,500,000 or more contracts in excess of the member’s or member organization’s QCC transaction volume in January 2023, the member or member organization will qualify for the QCC Growth Tier Rebate. BOX is proposing a similar structure in that a BOX Participant will qualify for the QCC Growth Rebate if the Participant achieves Tier 3 of the current QCC Rebate structure (QCC Agency Order volume on BOX is 2,500,000 to 3,499,999 contracts in a given month) AND the Participant’s QCC and QOO volume exceeds 11 million contracts in the given month. The Exchange believes that the proposed QCC Growth Rebate qualifications are reasonable because they offer Participants an additional opportunity to achieve a higher QCC rebate. Additionally, the Exchange’s proposal to establish a new QCC Growth Rebate is equitable and not unfairly discriminatory because any Participant PO 00000 Frm 00104 Fmt 4703 Sfmt 4703 Rebate 1 (per contract) (0.17) 22507 Rebate 2 (per contract) (0.27) may qualify for this rebate.8 All BOX Participants may enter order flow to obtain a QCC Growth Rebate. The Exchange believes the proposal will create an incentive for Participants to bring liquidity to BOX—both electronically and on the Trading Floor. The Exchange believes that if the proposed incentive is effective, then an ensuing increase in trading activity on BOX will improve the quality of the market overall to the benefit of all market participants. Further, to the extent this proposal attracts new Participant volume to BOX, all market participants should benefit through increased liquidity and more trading opportunities. The Exchange believes this proposal is designed to increase participation on BOX and reward those Participants for the unique role they play in ensuring a robust market. The Exchange believes that combining a Participant’s total QCC and QOO volume to count toward the QCC Growth Rebate is not a novel idea. On NYSE American LLC (‘‘NYSE American’’), Floor Brokers qualify for rebates by achieving billable manual volume of combined manual transactions and QCC transactions.9 Similarly, the Exchange proposes to combine a Participant’s QOO and QCC volume in order to qualify for the proposed QCC Growth Rebate. As discussed herein, the Exchange believes this structure will incentivize Participants to direct order flow to BOX—both electronically and on the BOX Trading Floor—in order to take advantage of the proposed rebate, thus resulting in increased liquidity and trading opportunities to the benefit of all market participants. The Exchange’s exclusion of QCC and QOO strategy transactions is reasonable as Strategy QCC transactions are not currently assessed a fee and Strategy QOO transactions are subject to the fee cap and rebates detailed in Section V.D of the BOX Fee Schedule. The Exchange 8 The Exchange notes that all BOX Participants may transact an options business electronically or on the BOX Trading Floor with a registered Trading Permit. BOX Participants may transact business on the Trading Floor through a Floor Broker. 9 See NYSE American Fee Schedule. The Exchange notes that while the concept of combining electronic and floor volume is not novel, the details of NYSE American’s Floor Broker rebate program differ from what BOX is proposing herein. Specifically, the volume qualifications and the per contract rebates on NYSE American are different from BOX’s proposal. E:\FR\FM\13APN1.SGM 13APN1 22508 Federal Register / Vol. 88, No. 71 / Thursday, April 13, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 also notes that another exchange excludes strategy transactions from their respective QCC Growth Rebate.10 Further, the exclusion of strategy transactions from the QCC Growth Rebate is equitable and not unfairly discriminatory as this exclusion will be uniformly applied to all Participant types. The Exchange believes this proposal to pay Participants the greater of the QCC Rebate in proposed Section IV.D.1.a or the QCC Growth Rebate in proposed Section IV.D.1.b in a given month, but not both QCC Rebates, is reasonable, equitable, and not unfairly discriminatory because BOX is simply offering another way for Participants to qualify for rebates that already exist today and BOX would uniformly only pay the greater of the two QCC Rebates. 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. The proposal does not impose an undue burden on inter-market competition. The Exchange believes its proposal remains competitive with other options markets and will offer market participants with another choice of where to transact its business. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges. Because competitors are free to modify their own fees and rebates in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. The proposed changes do not impose an undue burden on intra-market competition. In terms of intra-market competition, the Exchange does not believe that its proposals will place any category of market participant at a competitive disadvantage. The Exchange believes that the proposed QCC Growth Rebate will encourage market participants to send a greater amount of QCC orders and QOO Orders to BOX for execution in order to obtain greater rebates and lower their costs. Further, the proposed QCC Growth Rebate should incentivize a greater amount of floor transactions on BOX, thereby allowing BOX to compete more effectively with other options floor models. The Exchange again notes that any market participant may send an order to a BOX Floor Broker for execution on BOX’s Trading Floor. The Exchange believes that the additional liquidity will enhance the quality of BOX’s market and increase certain trading opportunities on BOX’s Trading Floor. The Exchange’s proposal to establish the QCC Growth Rebate does not impose an undue burden on competition, rather is it pro-competitive in that would serve to increase liquidity on BOX, thus rendering BOX a more attractive and vibrant venue to market participants. The QCC Growth Rebate Qualifications do not impose an undue burden on competition because, as discussed above, all Participants may qualify for the QCC Growth Rebate. Further, the QCC Growth Rebate Qualifications do not impose an undue burden on competition because the proposal is designed to increase participation on BOX and reward those Participants for providing increased order flow to BOX to the benefit of all market participants. The Exchange’s exclusion of strategy transactions does not impose an undue burden on competition as the exclusion will be uniformly applied to all Participant types. Lastly, the Exchange’s proposal to pay Participants the greater of the QCC Rebate in Section IV.D.1.a or the QCC Growth Rebate in Section IV.D.1.b in a given month, but not both QCC Rebates, does not impose an undue burden on competition because BOX is simply offering another way for Participants to qualify for rebates that already exist today and BOX would uniformly only pay the greater of the two QCC Rebates. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act 11 and Rule 19b–4(f)(2) thereunder,12 11 15 10 See Phlx Pricing Schedule. VerDate Sep<11>2014 17:56 Apr 12, 2023 12 17 Jkt 259001 PO 00000 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). Frm 00105 Fmt 4703 Sfmt 4703 because it establishes or changes a due, or fee. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend the rule change if it appears to the Commission that the action is necessary or appropriate in the public interest, for the protection of investors, or would otherwise further the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 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–2023–10 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–BOX–2023–10. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. E:\FR\FM\13APN1.SGM 13APN1 Federal Register / Vol. 88, No. 71 / Thursday, April 13, 2023 / Notices 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–2023–10, and should be submitted on or before May 4, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–07734 Filed 4–12–23; 8:45 am] BILLING CODE 8011–01–P publication of the notice for this proposed rule change is April 16, 2023. The Commission is extending this 45day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,5 designates May 31, 2023, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR–ISE– 2023–08). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Sherry R. Haywood, Assistant Secretary. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97261; File No. SR–ISE– 2023–08] [FR Doc. 2023–07731 Filed 4–12–23; 8:45 am] BILLING CODE 8011–01–P Self-Regulatory Organizations; Nasdaq ISE, LLC; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change To Make Permanent Certain P.M.-Settled Pilots [Release No. 34–97262; File No. SR– CboeEDGX–2023–023] April 7, 2023. lotter on DSK11XQN23PROD with NOTICES1 SECURITIES AND EXCHANGE COMMISSION On February 23, 2023, Nasdaq ISE, LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to make permanent the pilot to permit the listing and trading of options based on 1⁄5 the value of the Nasdaq-100 Index and the Exchange’s nonstandard expirations pilot program. The proposed rule change was published for comment in the Federal Register on March 2, 2023.3 Section 19(b)(2) of the Act 4 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding, or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 96979 (February 24, 2023), 88 FR 13182. 4 15 U.S.C. 78s(b)(2). Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Concerning Order-to-Trade Ratio Fees for Market Makers April 7, 2023. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’),2 and Rule 19b–4 thereunder,3 notice is hereby given that on March 29, 2023, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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 Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX Options’’) proposes to amend its Fee Schedule. The text of the proposed rule change is provided in Exhibit 5. 13 17 VerDate Sep<11>2014 17:56 Apr 12, 2023 Jkt 259001 5 Id. 6 17 CFR 200.30–3(a)(31). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 22509 The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule to adopt Order-to-Trade Ratio Fees.4 The Exchange first notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. More specifically, the Exchange is only one of 16 options venues to which market participants may direct their order flow. Based on publicly available information, no single options exchange has more than 16% of the market share and currently the Exchange represents only approximately 6% of the market share.5 Thus, in such a low-concentrated and highly competitive market, no single options exchange, including the Exchange, possesses significant pricing power in the execution of option order flow. The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to fee changes. Accordingly, competitive forces 4 The Exchange initially filed the proposed rule change on February 1, 2023 (SR–CboeEDGX–2023– 009). On March 29, 2023, the Exchange withdrew that filing and submitted this proposal. 5 See Cboe Global Markets U.S. Options Market Monthly Volume Summary (March 24, 2023), available at https://markets.cboe.com/us/options/ market_statistics/. E:\FR\FM\13APN1.SGM 13APN1

Agencies

[Federal Register Volume 88, Number 71 (Thursday, April 13, 2023)]
[Notices]
[Pages 22506-22509]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-07734]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97266; File No. SR-BOX-2023-10]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee 
Schedule on the BOX Options Market LLC Facility To Establish a New 
Qualified Contingent Cross (``QCC'') Growth Rebate

April 7, 2023.
    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 March 31, 2023, BOX Exchange LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Exchange filed the proposed rule 
change pursuant to Section 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing 
with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule to 
establish a new Qualified Contingent Cross (``QCC'') Growth Rebate on 
the BOX Options Market LLC (``BOX'') options facility. While changes to 
the fee schedule pursuant to this proposal will be effective upon 
filing, the changes will become operative on April 3, 2023. 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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule for trading on BOX 
to establish a new Qualified Contingent Cross (``QCC'') Growth Rebate.
    Currently, BOX assesses $0.20 per contract to Broker Dealers and 
Market Makers for both the Agency Order and contra order of a QCC 
transaction. Public Customers and Professional Customers are not 
assessed a QCC Transaction Fee. Further, rebates are paid on all 
qualifying orders pursuant to Section IV.D.1 of the BOX Fee Schedule. 
Specifically, a QCC Rebate is paid to the Participant that entered the 
order into the BOX system when at least one party to the QCC 
transaction is a Broker Dealer or Market Maker. The Participant 
receives a per contract rebate on QCC transactions according to the 
tier achieved. Volume thresholds will be calculated on a monthly basis 
by totaling the Participant's QCC Agency Order volume on BOX. The 
Exchange notes that the QCC Rebate is intended to incentivize the 
sending of more QCC Orders to BOX.
    The QCC Rebate tier structure is as follows:

----------------------------------------------------------------------------------------------------------------
                                             QCC Agency order volume on      Rebate 1 (per       Rebate 2 (per
                   Tier                            BOX (per month)             contract)           contract)
----------------------------------------------------------------------------------------------------------------
1.........................................  0 to 1,499,999 contracts....             ($0.14)             ($0.22)
2.........................................  1,500,000 to 2,499,999                    (0.16)              (0.24)
                                             contracts.
3.........................................  2,500,000 to 3,499,999                    (0.16)              (0.25)
                                             contracts.

[[Page 22507]]

 
4.........................................  3,500,000+ contracts........              (0.17)              (0.27)
----------------------------------------------------------------------------------------------------------------

    The Exchange now proposes to establish Section IV.D.1.b., QCC 
Growth Rebate.\5\ Specifically, the Exchange proposes that if a 
Participant's QCC Agency Order volume on BOX achieves Tier 3 of the QCC 
Rebate in the month AND the Participant's total QCC volume combined 
with total QOO volume exceeds 11 million contracts per month, then the 
Participant will qualify for the rebates in Tier 4 of the QCC Rebate 
(``QCC Growth Rebate qualifications''). Strategy QOO Orders and 
Strategy QCC Orders will not be counted toward the QCC Growth rebate 
volume. Further, the Exchange proposes that Participants are entitled 
to one QCC Rebate in a given month, which would be the greater of the 
QCC Rebate in Section (a) or the QCC Growth Rebate detailed in Section 
(b), but not both.
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    \5\ Additionally, the Exchange proposes to retitle the current 
QCC Rebate as Section IV.D.1.a.
---------------------------------------------------------------------------

    The Exchange notes that the proposed change is a competitive 
response as a similar QCC Growth Rebate currently exists at another 
options exchange.\6\ Further, the Exchange believes that the proposal 
will encourage Participants to send increased QCC and QOO order flow to 
BOX in order to achieve a higher rebate.
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    \6\ See Nasdaq Phlx LLC (``Phlx'') Pricing Schedule and 
Securities Exchange Act Release No. 96990 (February 27, 2023), 88 FR 
13477 (March 3, 2023)(SR-PHLX-2023-06).
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    Lastly, the Exchange is proposing to amend Section IV.D.2 to make 
changes that reflect the addition of Section IV.D.1.a. and Section 
IV.D.1.b. to the BOX Fee Schedule.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act, in general, and Section 
6(b)(4) and 6(b)(5) of the Act,\7\ in particular, in that it provides 
for the equitable allocation of reasonable dues, fees, and other 
charges among BOX Participants and other persons using its facilities 
and does not unfairly discriminate between customers, issuers, brokers 
or dealers.
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    \7\ 15 U.S.C. 78f(b)(4) and (5).
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    The Exchange's proposal to establish a new QCC Growth Rebate is 
reasonable because this rebate will provide additional incentives for 
BOX Participants to engage in substantial amounts of trading activity 
which would serve to bring additional open outcry liquidity to the 
Trading Floor and additional QCC order flow to BOX. This incentive may 
also encourage Participants to begin sending such order flow to BOX for 
the opportunity to earn this rebate.
    As discussed above, the Exchange notes that a similar QCC Growth 
Rebate currently exists at another exchange. At Phlx, in order to 
qualify for the QCC Growth Tier Rebate, a member's or member 
organization's total floor transaction, and electronic QCC Orders and 
Floor QCC Orders volume must exceed 12,500,000 contracts in a given 
month. In addition to the aforementioned criteria, the member's or 
member organization's respective Phlx House Account must execute QCC 
transaction volume of 250,000 or more contracts in excess of the 
member's or member organization's QCC transaction volume in January 
2023. For members or member organizations with no QCC transaction 
volume in January 2023, the QCC transaction volume, in their respective 
Phlx House Account, must be 250,000 or more contracts in a given month. 
Additionally, Phlx offers an alternative to qualify for the QCC Growth 
Tier Rebate. Specifically, if a member's or member organization's Open 
Outcry Floor Transaction volume in a given month exceeds 500,000 
contracts and a member's or member organization's respective Phlx House 
Account executes QCC transaction volume of 2,500,000 or more contracts 
in excess of the member's or member organization's QCC transaction 
volume in January 2023, the member or member organization will qualify 
for the QCC Growth Tier Rebate. BOX is proposing a similar structure in 
that a BOX Participant will qualify for the QCC Growth Rebate if the 
Participant achieves Tier 3 of the current QCC Rebate structure (QCC 
Agency Order volume on BOX is 2,500,000 to 3,499,999 contracts in a 
given month) AND the Participant's QCC and QOO volume exceeds 11 
million contracts in the given month. The Exchange believes that the 
proposed QCC Growth Rebate qualifications are reasonable because they 
offer Participants an additional opportunity to achieve a higher QCC 
rebate. Additionally, the Exchange's proposal to establish a new QCC 
Growth Rebate is equitable and not unfairly discriminatory because any 
Participant may qualify for this rebate.\8\ All BOX Participants may 
enter order flow to obtain a QCC Growth Rebate.
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    \8\ The Exchange notes that all BOX Participants may transact an 
options business electronically or on the BOX Trading Floor with a 
registered Trading Permit. BOX Participants may transact business on 
the Trading Floor through a Floor Broker.
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    The Exchange believes the proposal will create an incentive for 
Participants to bring liquidity to BOX--both electronically and on the 
Trading Floor. The Exchange believes that if the proposed incentive is 
effective, then an ensuing increase in trading activity on BOX will 
improve the quality of the market overall to the benefit of all market 
participants. Further, to the extent this proposal attracts new 
Participant volume to BOX, all market participants should benefit 
through increased liquidity and more trading opportunities. The 
Exchange believes this proposal is designed to increase participation 
on BOX and reward those Participants for the unique role they play in 
ensuring a robust market.
    The Exchange believes that combining a Participant's total QCC and 
QOO volume to count toward the QCC Growth Rebate is not a novel idea. 
On NYSE American LLC (``NYSE American''), Floor Brokers qualify for 
rebates by achieving billable manual volume of combined manual 
transactions and QCC transactions.\9\ Similarly, the Exchange proposes 
to combine a Participant's QOO and QCC volume in order to qualify for 
the proposed QCC Growth Rebate. As discussed herein, the Exchange 
believes this structure will incentivize Participants to direct order 
flow to BOX--both electronically and on the BOX Trading Floor--in order 
to take advantage of the proposed rebate, thus resulting in increased 
liquidity and trading opportunities to the benefit of all market 
participants.
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    \9\ See NYSE American Fee Schedule. The Exchange notes that 
while the concept of combining electronic and floor volume is not 
novel, the details of NYSE American's Floor Broker rebate program 
differ from what BOX is proposing herein. Specifically, the volume 
qualifications and the per contract rebates on NYSE American are 
different from BOX's proposal.
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    The Exchange's exclusion of QCC and QOO strategy transactions is 
reasonable as Strategy QCC transactions are not currently assessed a 
fee and Strategy QOO transactions are subject to the fee cap and 
rebates detailed in Section V.D of the BOX Fee Schedule. The Exchange

[[Page 22508]]

also notes that another exchange excludes strategy transactions from 
their respective QCC Growth Rebate.\10\ Further, the exclusion of 
strategy transactions from the QCC Growth Rebate is equitable and not 
unfairly discriminatory as this exclusion will be uniformly applied to 
all Participant types.
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    \10\ See Phlx Pricing Schedule.
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    The Exchange believes this proposal to pay Participants the greater 
of the QCC Rebate in proposed Section IV.D.1.a or the QCC Growth Rebate 
in proposed Section IV.D.1.b in a given month, but not both QCC 
Rebates, is reasonable, equitable, and not unfairly discriminatory 
because BOX is simply offering another way for Participants to qualify 
for rebates that already exist today and BOX would uniformly only pay 
the greater of the two QCC Rebates.

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.
    The proposal does not impose an undue burden on inter-market 
competition. The Exchange believes its proposal remains competitive 
with other options markets and will offer market participants with 
another choice of where to transact its business. The Exchange notes 
that it operates in a highly competitive market in which market 
participants can readily favor competing venues if they deem fee levels 
at a particular venue to be excessive, or rebate opportunities 
available at other venues to be more favorable. In such an environment, 
the Exchange must continually adjust its fees and rebates to remain 
competitive with other exchanges. Because competitors are free to 
modify their own fees and rebates in response, and because market 
participants may readily adjust their order routing practices, the 
Exchange believes that the degree to which fee changes in this market 
may impose any burden on competition is extremely limited.
    The proposed changes do not impose an undue burden on intra-market 
competition. In terms of intra-market competition, the Exchange does 
not believe that its proposals will place any category of market 
participant at a competitive disadvantage. The Exchange believes that 
the proposed QCC Growth Rebate will encourage market participants to 
send a greater amount of QCC orders and QOO Orders to BOX for execution 
in order to obtain greater rebates and lower their costs. Further, the 
proposed QCC Growth Rebate should incentivize a greater amount of floor 
transactions on BOX, thereby allowing BOX to compete more effectively 
with other options floor models. The Exchange again notes that any 
market participant may send an order to a BOX Floor Broker for 
execution on BOX's Trading Floor. The Exchange believes that the 
additional liquidity will enhance the quality of BOX's market and 
increase certain trading opportunities on BOX's Trading Floor.
    The Exchange's proposal to establish the QCC Growth Rebate does not 
impose an undue burden on competition, rather is it pro-competitive in 
that would serve to increase liquidity on BOX, thus rendering BOX a 
more attractive and vibrant venue to market participants. The QCC 
Growth Rebate Qualifications do not impose an undue burden on 
competition because, as discussed above, all Participants may qualify 
for the QCC Growth Rebate. Further, the QCC Growth Rebate 
Qualifications do not impose an undue burden on competition because the 
proposal is designed to increase participation on BOX and reward those 
Participants for providing increased order flow to BOX to the benefit 
of all market participants.
    The Exchange's exclusion of strategy transactions does not impose 
an undue burden on competition as the exclusion will be uniformly 
applied to all Participant types. Lastly, the Exchange's proposal to 
pay Participants the greater of the QCC Rebate in Section IV.D.1.a or 
the QCC Growth Rebate in Section IV.D.1.b in a given month, but not 
both QCC Rebates, does not impose an undue burden on competition 
because BOX is simply offering another way for Participants to qualify 
for rebates that already exist today and BOX would uniformly only pay 
the greater of the two QCC Rebates.

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

    No written comments were either solicited or received.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Exchange Act \11\ and Rule 19b-4(f)(2) 
thereunder,\12\ because it establishes or changes a due, or fee.
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    \11\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \12\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend the rule 
change if it appears to the Commission that the action is necessary or 
appropriate in the public interest, for the protection of investors, or 
would otherwise further the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BOX-2023-10 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BOX-2023-10. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change.

[[Page 22509]]

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-2023-10, and should be 
submitted on or before May 4, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-07734 Filed 4-12-23; 8:45 am]
BILLING CODE 8011-01-P
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