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 Monthly Dividend Strategy Fee Cap for Dividend Strategy Qualified Open Outcry Orders, 29771-29774 [2023-09680]

Download as PDF Federal Register / Vol. 88, No. 88 / Monday, May 8, 2023 / Notices opportunity to earn this rebate until the program expires. The Exchange’s proposal to sunset the QCC Growth Tier Rebate is equitable and not unfairly discriminatory because all members and member organizations will be subject to the program during the 6 months it is offered. The Exchange would no longer offer the rebate to any member or member organization after the sunset date. Additionally, the Exchange’s proposal to establish a QCC Growth Tier Rebate is equitable and not unfairly discriminatory because any member or member organization may qualify for this rebate. 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. ddrumheller on DSK120RN23PROD with NOTICES1 Inter-Market Competition 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 options. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its fees to remain competitive with other exchanges. Because competitors are free to modify their own fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which fee changes in this market may impose any burden on competition is extremely limited. Intra-Market Competition The proposed amendments do not impose an undue burden on intramarket competition. In terms of intramarket competition, the Exchange’s proposal to sunset the QCC Growth Tier Rebate does not impose an undue burden on competition because all members and member organizations will be subject to the program during the 6 months it is offered. The Exchange would no longer offer the rebate to any member or member organization after the sunset date. Additionally, the Exchange’s proposal to establish a QCC Growth Tier Rebate is equitable and not unfairly discriminatory because any VerDate Sep<11>2014 21:48 May 05, 2023 Jkt 259001 member or member organization may qualify for this rebate. 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 Act.15 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: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) 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 rule-comments@ sec.gov. Please include File Number SR– Phlx–2023–14 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–Phlx–2023–14. 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. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–Phlx–2023–14 and should be submitted on or before May 30, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–09678 Filed 5–5–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97418; File No. SR–BOX– 2023–12] 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 Monthly Dividend Strategy Fee Cap for Dividend Strategy Qualified Open Outcry Orders May 2, 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 May 1, 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 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 15 15 PO 00000 U.S.C. 78s(b)(3)(A)(ii). Frm 00151 Fmt 4703 Sfmt 4703 29771 E:\FR\FM\08MYN1.SGM 08MYN1 29772 Federal Register / Vol. 88, No. 88 / Monday, May 8, 2023 / Notices 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 monthly dividend strategy fee cap for dividend strategy Qualified Open Outcry (‘‘QOO’’) Orders on the BOX Options Market LLC (‘‘BOX’’) options facility. The text of the proposed rule change is available from the principal office of the Exchange, at the Commission’s Public Reference Room and also on the Exchange’s internet website at https:// 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. ddrumheller on DSK120RN23PROD with NOTICES1 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 BOX Fee Schedule to establish a monthly dividend strategy fee cap for dividend strategy Qualified Open Outcry (‘‘QOO’’) Orders. Specifically, the Exchange is proposing to: (1) rename Section V.D to Section V.D.1; (2) add Section V.D.2; and (3) to establish a monthly dividend strategy fee cap for dividend strategy QOO Orders. Currently, the transaction fees for QOO Orders, including Strategy 5 QOO 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 Strategy orders are defined as one of the following: A ‘‘short stock interest strategy’’ is defined as a transaction done to achieve a short stock interest arbitrage involving the purchase, sale, and exercise of in-the-money options of the same class. A ‘‘long stock interest strategy’’ is defined as VerDate Sep<11>2014 21:48 May 05, 2023 Jkt 259001 Orders, are detailed in Section V of the BOX Fee Schedule. Specifically, Broker Dealer QOO transactions are assessed $0.25 per contract and Market Maker QOO transactions are assessed $0.35 per contract. Public Customers and Broker Dealers facilitating a Public Customer are assessed $0.00. Professional Customers are assessed $0.10 per contract.6 Additionally, Floor Brokers are eligible for a rebate for QOO Orders presented on the Trading Floor.7 The rebate does not apply to Public Customer executions, executions subject to the Strategy QOO Order Fee Cap and Rebate, discussed below, or Broker Dealer executions where the Broker Dealer is facilitating a Public Customer. Currently, to further incentivize Participants to execute strategy QOO transactions on BOX, BOX offers the Strategy QOO Order Fee Cap and Rebate in Section V.D of its Fee Schedule.8 Specifically, the manual transaction fees for certain Strategy QOO Orders are capped on a daily basis. Short stock interest, long stock interest, merger, reversal, conversion, jelly roll, and box spread strategies executed on the same trading day are capped at $500 per day per customer. Further, dividend strategies executed on the same trading day in the same options class are capped at $1,000 per day per customer. a transaction done to achieve long stock involving the purchase, sale, and exercise of in-the-money options of the same class. A ‘‘merger strategy’’ is defined as transactions done to achieve a merger arbitrage involving the purchase, sale and exercise of options of the same class and expiration date, each executed prior to the date on which shareholders of record are required to elect their respective form of consideration, i.e., cash or stock. A ‘‘reversal strategy’’ is established by combining a short security position with a short put and a long call position that shares the same strike and expiration. A ‘‘conversion strategy’’ is established by combining a long position in the underlying security with a long put and a short call position that shares the same strike and expiration. A ‘‘jelly roll strategy’’ is created by entering into two separate positions simultaneously. One position involves buying a put and selling a call with the same strike price and expiration. The second position involves selling a put and buying a call, with the same strike price, but with a different expiration from the first position. A ‘‘box spread strategy’’ is a strategy that synthesizes long and short stock positions to create a profit. Specifically, a long call and short put at one strike is combined with a short call and long put at a different strike to create synthetic long and synthetic short stock positions, respectively. A ‘‘dividend strategy’’ is defined as a transaction done to achieve a dividend arbitrage involving the purchase, sale and exercise of in-the-money options of the same class, executed the first business day prior to the date on which the underlying stock goes ex-dividend. See BOX Fee Schedule, notes 30 and 36. 6 See BOX Fee Schedule, Section V.A, ‘‘Manual Transaction Fees’’. 7 See BOX Fee Schedule, Section V.C, ‘‘QOO Order Rebate’’. 8 See BOX Fee Schedule, Section V.D, ‘‘Strategy QOO Order Fee Cap and Rebate’’. PO 00000 Frm 00152 Fmt 4703 Sfmt 4703 In addition to the fee caps detailed above, on each trading day, Floor Brokers are eligible to receive a $500 rebate per customer for presenting certain Strategy QOO Orders on the Trading Floor. The rebate is applied once the $500 fee cap, per customer, for all short stock interest, long stock interest, merger, reversal, conversion, jelly roll, and box spread strategies is met. For dividend strategies, the rebate of $500 per customer is applied once the $1,000 fee cap, per customer, is met.9 The Exchange now proposes to: (1) rename Section V.D to Section V.D.1; (2) add Section V.D.2; and (3) to establish a monthly dividend strategy QOO Order fee cap. The Exchange proposes to add Section V.D.2 in order to separate dividend strategy fee caps and rebates from short stock interest, long stock interest, merger, reversal, conversion, jelly roll, and box spread strategy fee caps and rebates. Specifically, the references to dividend strategies in current Section V.D will be removed and added to proposed Section V.D.2 and what remains of current Section V.D will be renamed Section V.D.1. As such, proposed Section V.D.2 will include the dividend strategy provisions moved from current Section V.D and will establish a new monthly fee cap for dividend strategy QOO Orders. Specifically, under this proposal, dividend strategies executed in the same month will be capped at $65,000 per month per customer. Manual transaction fees for dividend strategies will continue to be capped at $1,000 per day per options class per customer. The monthly cap for dividend strategies will be applied to manual transaction fees for dividend strategies executed in the same month per customer. Floor Brokers will not be eligible to receive a $500 daily rebate for dividend strategies once the monthly cap is met. The Exchange notes that all Strategy QOO and dividend strategy transactions will continue to count toward Market Maker and Public Customer monthly executed volume on BOX, as detailed in Section IV.A.1 (Tiered Volume Rebate for Non-Auction Transactions) of the BOX Fee Schedule. The Exchange notes that the proposed change is designed to compete with another monthly fee cap for strategy orders.10 Therefore, the Exchange 9 Id. 10 See Nasdaq PHLX LLC (‘‘PHLX’’) Options 7, Section 4 (providing that dividend strategies, among others, per member organization’s combined executions in a month when trading in its own proprietary accounts qualify for a $65,000 monthly cap if the buy and sell side of a transaction originates either from the PHLX Trading Floor or as a Floor Qualified Contingent Cross Order). The E:\FR\FM\08MYN1.SGM 08MYN1 Federal Register / Vol. 88, No. 88 / Monday, May 8, 2023 / Notices believes the proposed change may further incentivize Participants to direct dividend strategy order volume to the BOX Trading Floor. 2. Statutory Basis ddrumheller on DSK120RN23PROD with NOTICES1 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,11 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 notes that it operates in a highly competitive environment. Indeed, there are currently 16 registered options exchanges that trade options. Based on publicly available information, no single options exchange has more than 18% of the market share and currently the Exchange represents only approximately 5% of the market share.12 The Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Particularly, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ 13 As stated above, the Exchange 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. The proposed fee changes reflect a competitive pricing structure designed to incentivize market participants to direct their order flow to BOX, in particular dividend strategy QOO Orders. The Exchange believes the proposed change is reasonable, equitable, and not unfairly discriminatory as there is another exchange with a similar Exchange notes that PHLX’s monthly fee cap applies to dividend, merger, short stock interest, reversal and conversion, jelly roll and box spread strategies, while this proposal applies only to dividend strategies. 11 15 U.S.C. 78f(b)(4) and (5). 12 See Cboe Global Markets U.S. Options Market Month-to-Date Volume Summary (February 13, 2023), available at https://markets.cboe.com/us/ options/market_statistics/. 13 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). VerDate Sep<11>2014 21:48 May 05, 2023 Jkt 259001 monthly fee cap for strategy orders 14 and the proposed fee cap is uniformly applicable to all Participants. The Exchange also believes the proposed change would further incentivize Participants to execute dividend strategy QOO Orders on BOX and may encourage Participants to aggregate all types of strategy orders at BOX as a primary execution venue. The Exchange believes that Participants may consolidate different order types for execution on a single exchange because it increases the volume counted towards volume-based fee incentives, such as, the Tiered Volume Rebate for NonAuction Transactions in Section IV.A.1., of the BOX Fee Schedule, which provides Market Makers and Public Customers with incentives to achieve certain volume thresholds on BOX.15 To the extent that the proposed change attracts more dividend strategy orders to BOX, this increased order flow may make BOX a more competitive venue for order execution. The Exchange also believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue or reduce use of certain categories of products in response to fee changes. Accordingly, competitive forces constrain options exchange transaction fees. Stated differently, changes to exchange transaction fees can have a direct effect on the ability of an exchange to compete for order flow. The Exchange believes the proposed change is a reasonable attempt to effectively compete for manual dividend strategy orders. The Exchange believes that the proposed change may encourage Participants to execute dividend strategy orders on BOX and, in turn, may increase the depth of the market to the benefit of all market participants. The Exchange notes that Participants may avail themselves of the proposed dividend strategy order pricing on BOX or they can opt for similar offerings at another exchange.16 The Exchange believes that not allowing Floor Brokers to be eligible to receive a daily $500 rebate for dividend strategies once the monthly cap is met is reasonable, equitable and not unfairly discriminatory because, as proposed, this limitation applies to all Floor Brokers equally and a fee is not assessed for transactions once the monthly cap is met. As such, the Exchange believes that Participants do not require additional 14 See supra note 10. 15 See BOX Fee Schedule, Section IV.A.1, ‘‘Tiered Volume Rebate for Non-Auction Transactions’’. 16 See supra note 10. PO 00000 Frm 00153 Fmt 4703 Sfmt 4703 29773 incentives to execute these transactions on BOX once the monthly cap is met. 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 proposed change is designed to attract additional order flow to BOX. The Exchange believes that the proposed change could further incentivize market participants to direct their dividend strategy orders to BOX. As noted herein, the proposed monthly cap for dividend strategy fees would be applicable to all similarly situated market participants, and, as such, the proposed change would not impose a disparate burden on competition among Participants on BOX. Further, the Exchange also does not believe that the proposed fees will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the Act because, as noted above, another competing options exchange currently has a similar fee cap in place in connection with strategy orders.17 Because competitors are free to modify their own fees or fee caps in response to competing exchanges, the Exchange believes that the degree to which changes in this market may impose any burden on competition is limited. Further, the Exchange believes that the proposed change could promote competition between BOX and other execution venues, including those that currently offer similar strategy order fees or fee caps. Finally, the Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. 17 Id. E:\FR\FM\08MYN1.SGM 08MYN1 29774 Federal Register / Vol. 88, No. 88 / Monday, May 8, 2023 / Notices 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 18 and Rule 19b–4(f)(2) thereunder,19 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: ddrumheller on DSK120RN23PROD with NOTICES1 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–2023–12 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–BOX–2023–12. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (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. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–BOX–2023–12, and should be submitted on or before May 30, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–09680 Filed 5–5–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97423; File No. SR–MSRB– 2023–04] Self-Regulatory Organizations; Municipal Securities Rulemaking Board; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MSRB Rule G–27 To Further Extend the Current Regulatory Relief for Remote Office Inspections Through June 30, 2024 and Amend MSRB Rule G–16 To Delete Temporary Relief for the Initiation of Periodic Compliance Examinations of Dealers by the Examining Authorities May 2, 2023. Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on April 27, 2023, the Municipal Securities Rulemaking Board (‘‘MSRB’’ or ‘‘Board’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the MSRB. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 18 15 U.S.C. 78s(b)(3)(A)(ii). 19 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 21:48 May 05, 2023 1 15 Jkt 259001 PO 00000 Frm 00154 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The MSRB filed with the Commission a proposed rule change to (i) amend Supplementary Material .01, Temporary Relief for Completing Office Inspections, of MSRB Rule G–27, on Supervision, to further extend the current regulatory relief and permit brokers, dealers and municipal securities dealers (each, individually ‘‘dealer’’ and collectively ‘‘dealers’’) to conduct office inspections due to be completed during calendar year 2023 remotely through December 31, 2023, and office inspections due to be completed during calendar year 2024 remotely through June 30, 2024; and (ii) delete Supplementary Material .01, Temporary Relief for Completing Periodic Compliance Examination, of MSRB Rule G–16, on periodic compliance examinations, which provided temporary relief for the initiation of periodic compliance examinations of dealers by registered securities associations 3 and appropriate regulatory agencies 4 (collectively, the ‘‘examining authorities’’) (collectively the ‘‘proposed rule change’’). The MSRB has designated the proposed rule change as constituting a ‘‘noncontroversial’’ rule change under section 19(b)(3)(A) 5 of the Act and Rule 19b–4(f)(6) 6 thereunder, which renders the proposal effective upon receipt of this filing by the Commission. The MSRB proposes an operative date of July 1, 2023. The text of the proposed rule change is available on the MSRB’s website at https://msrb.org/2023-SEC-Filings, at 3 Section 15B(c)(7)(A)(i) of the Exchange Act provides that periodic examinations of municipal securities brokers and municipal securities dealers shall be conducted by a registered securities association, in the case of municipal securities brokers and municipal securities dealers that are members of such association. The Financial Industry Regulatory Authority (‘‘FINRA’’) is currently the only registered securities association. See https://www.sec.gov/rules/sro.shtml. 4 Pursuant to section 15B(c)(7)(A)(ii) of the Exchange Act, municipal securities brokers and municipal securities dealers who are not members of a registered securities association shall be examined by their appropriate regulatory agency. The term ‘‘appropriate regulatory agency’’ when used with respect to municipal securities dealers means, in part, the Office of the Comptroller of the Currency (‘‘OCC’’), the Board of Governors of the Federal Reserve System (‘‘FRB’’), and the Federal Deposit Insurance Corporation (‘‘FDIC’’). See 15 U.S.C. 78c(a)(34)(A). The Commission also has the authority to examine all registered municipal securities dealers if the Commission deems it necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purpose of the Exchange Act. See 15 U.S.C. 78q(b)(1). 5 15 U.S.C. 78s(b)(3)(A). 6 17 CFR 240.19b–4(f)(6). E:\FR\FM\08MYN1.SGM 08MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 88, Number 88 (Monday, May 8, 2023)]
[Notices]
[Pages 29771-29774]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09680]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97418; File No. SR-BOX-2023-12]


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 Monthly 
Dividend Strategy Fee Cap for Dividend Strategy Qualified Open Outcry 
Orders

May 2, 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 May 1, 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

[[Page 29772]]

19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-4(f)(2) thereunder,\4\ 
which renders the proposal effective upon filing with the Commission. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change to amend the Fee Schedule to 
establish a monthly dividend strategy fee cap for dividend strategy 
Qualified Open Outcry (``QOO'') Orders on the BOX Options Market LLC 
(``BOX'') options facility. The text of the proposed rule change is 
available from the principal office of the Exchange, at the 
Commission's Public Reference Room and also on the Exchange's internet 
website at https://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 BOX Fee Schedule to establish a 
monthly dividend strategy fee cap for dividend strategy Qualified Open 
Outcry (``QOO'') Orders. Specifically, the Exchange is proposing to: 
(1) rename Section V.D to Section V.D.1; (2) add Section V.D.2; and (3) 
to establish a monthly dividend strategy fee cap for dividend strategy 
QOO Orders.
    Currently, the transaction fees for QOO Orders, including Strategy 
\5\ QOO Orders, are detailed in Section V of the BOX Fee Schedule. 
Specifically, Broker Dealer QOO transactions are assessed $0.25 per 
contract and Market Maker QOO transactions are assessed $0.35 per 
contract. Public Customers and Broker Dealers facilitating a Public 
Customer are assessed $0.00. Professional Customers are assessed $0.10 
per contract.\6\ Additionally, Floor Brokers are eligible for a rebate 
for QOO Orders presented on the Trading Floor.\7\ The rebate does not 
apply to Public Customer executions, executions subject to the Strategy 
QOO Order Fee Cap and Rebate, discussed below, or Broker Dealer 
executions where the Broker Dealer is facilitating a Public Customer.
---------------------------------------------------------------------------

    \5\ Strategy orders are defined as one of the following: A 
``short stock interest strategy'' is defined as a transaction done 
to achieve a short stock interest arbitrage involving the purchase, 
sale, and exercise of in-the-money options of the same class. A 
``long stock interest strategy'' is defined as a transaction done to 
achieve long stock involving the purchase, sale, and exercise of in-
the-money options of the same class. A ``merger strategy'' is 
defined as transactions done to achieve a merger arbitrage involving 
the purchase, sale and exercise of options of the same class and 
expiration date, each executed prior to the date on which 
shareholders of record are required to elect their respective form 
of consideration, i.e., cash or stock. A ``reversal strategy'' is 
established by combining a short security position with a short put 
and a long call position that shares the same strike and expiration. 
A ``conversion strategy'' is established by combining a long 
position in the underlying security with a long put and a short call 
position that shares the same strike and expiration. A ``jelly roll 
strategy'' is created by entering into two separate positions 
simultaneously. One position involves buying a put and selling a 
call with the same strike price and expiration. The second position 
involves selling a put and buying a call, with the same strike 
price, but with a different expiration from the first position. A 
``box spread strategy'' is a strategy that synthesizes long and 
short stock positions to create a profit. Specifically, a long call 
and short put at one strike is combined with a short call and long 
put at a different strike to create synthetic long and synthetic 
short stock positions, respectively. A ``dividend strategy'' is 
defined as a transaction done to achieve a dividend arbitrage 
involving the purchase, sale and exercise of in-the-money options of 
the same class, executed the first business day prior to the date on 
which the underlying stock goes ex-dividend. See BOX Fee Schedule, 
notes 30 and 36.
    \6\ See BOX Fee Schedule, Section V.A, ``Manual Transaction 
Fees''.
    \7\ See BOX Fee Schedule, Section V.C, ``QOO Order Rebate''.
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    Currently, to further incentivize Participants to execute strategy 
QOO transactions on BOX, BOX offers the Strategy QOO Order Fee Cap and 
Rebate in Section V.D of its Fee Schedule.\8\ Specifically, the manual 
transaction fees for certain Strategy QOO Orders are capped on a daily 
basis. Short stock interest, long stock interest, merger, reversal, 
conversion, jelly roll, and box spread strategies executed on the same 
trading day are capped at $500 per day per customer. Further, dividend 
strategies executed on the same trading day in the same options class 
are capped at $1,000 per day per customer. In addition to the fee caps 
detailed above, on each trading day, Floor Brokers are eligible to 
receive a $500 rebate per customer for presenting certain Strategy QOO 
Orders on the Trading Floor. The rebate is applied once the $500 fee 
cap, per customer, for all short stock interest, long stock interest, 
merger, reversal, conversion, jelly roll, and box spread strategies is 
met. For dividend strategies, the rebate of $500 per customer is 
applied once the $1,000 fee cap, per customer, is met.\9\
---------------------------------------------------------------------------

    \8\ See BOX Fee Schedule, Section V.D, ``Strategy QOO Order Fee 
Cap and Rebate''.
    \9\ Id.
---------------------------------------------------------------------------

    The Exchange now proposes to: (1) rename Section V.D to Section 
V.D.1; (2) add Section V.D.2; and (3) to establish a monthly dividend 
strategy QOO Order fee cap. The Exchange proposes to add Section V.D.2 
in order to separate dividend strategy fee caps and rebates from short 
stock interest, long stock interest, merger, reversal, conversion, 
jelly roll, and box spread strategy fee caps and rebates. Specifically, 
the references to dividend strategies in current Section V.D will be 
removed and added to proposed Section V.D.2 and what remains of current 
Section V.D will be renamed Section V.D.1. As such, proposed Section 
V.D.2 will include the dividend strategy provisions moved from current 
Section V.D and will establish a new monthly fee cap for dividend 
strategy QOO Orders. Specifically, under this proposal, dividend 
strategies executed in the same month will be capped at $65,000 per 
month per customer. Manual transaction fees for dividend strategies 
will continue to be capped at $1,000 per day per options class per 
customer. The monthly cap for dividend strategies will be applied to 
manual transaction fees for dividend strategies executed in the same 
month per customer. Floor Brokers will not be eligible to receive a 
$500 daily rebate for dividend strategies once the monthly cap is met.
    The Exchange notes that all Strategy QOO and dividend strategy 
transactions will continue to count toward Market Maker and Public 
Customer monthly executed volume on BOX, as detailed in Section IV.A.1 
(Tiered Volume Rebate for Non-Auction Transactions) of the BOX Fee 
Schedule.
    The Exchange notes that the proposed change is designed to compete 
with another monthly fee cap for strategy orders.\10\ Therefore, the 
Exchange

[[Page 29773]]

believes the proposed change may further incentivize Participants to 
direct dividend strategy order volume to the BOX Trading Floor.
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    \10\ See Nasdaq PHLX LLC (``PHLX'') Options 7, Section 4 
(providing that dividend strategies, among others, per member 
organization's combined executions in a month when trading in its 
own proprietary accounts qualify for a $65,000 monthly cap if the 
buy and sell side of a transaction originates either from the PHLX 
Trading Floor or as a Floor Qualified Contingent Cross Order). The 
Exchange notes that PHLX's monthly fee cap applies to dividend, 
merger, short stock interest, reversal and conversion, jelly roll 
and box spread strategies, while this proposal applies only to 
dividend strategies.
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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,\11\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange notes that it operates in a highly competitive 
environment. Indeed, there are currently 16 registered options 
exchanges that trade options. Based on publicly available information, 
no single options exchange has more than 18% of the market share and 
currently the Exchange represents only approximately 5% of the market 
share.\12\ The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Particularly, in 
Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' \13\ As stated 
above, the Exchange 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. The proposed fee changes reflect a 
competitive pricing structure designed to incentivize market 
participants to direct their order flow to BOX, in particular dividend 
strategy QOO Orders.
---------------------------------------------------------------------------

    \12\ See Cboe Global Markets U.S. Options Market Month-to-Date 
Volume Summary (February 13, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    The Exchange believes the proposed change is reasonable, equitable, 
and not unfairly discriminatory as there is another exchange with a 
similar monthly fee cap for strategy orders \14\ and the proposed fee 
cap is uniformly applicable to all Participants. The Exchange also 
believes the proposed change would further incentivize Participants to 
execute dividend strategy QOO Orders on BOX and may encourage 
Participants to aggregate all types of strategy orders at BOX as a 
primary execution venue. The Exchange believes that Participants may 
consolidate different order types for execution on a single exchange 
because it increases the volume counted towards volume-based fee 
incentives, such as, the Tiered Volume Rebate for Non-Auction 
Transactions in Section IV.A.1., of the BOX Fee Schedule, which 
provides Market Makers and Public Customers with incentives to achieve 
certain volume thresholds on BOX.\15\ To the extent that the proposed 
change attracts more dividend strategy orders to BOX, this increased 
order flow may make BOX a more competitive venue for order execution.
---------------------------------------------------------------------------

    \14\ See supra note 10.
    \15\ See BOX Fee Schedule, Section IV.A.1, ``Tiered Volume 
Rebate for Non-Auction Transactions''.
---------------------------------------------------------------------------

    The Exchange also believes that the ever-shifting market share 
among the exchanges from month to month demonstrates that market 
participants can shift order flow or discontinue or reduce use of 
certain categories of products in response to fee changes. Accordingly, 
competitive forces constrain options exchange transaction fees. Stated 
differently, changes to exchange transaction fees can have a direct 
effect on the ability of an exchange to compete for order flow. The 
Exchange believes the proposed change is a reasonable attempt to 
effectively compete for manual dividend strategy orders. The Exchange 
believes that the proposed change may encourage Participants to execute 
dividend strategy orders on BOX and, in turn, may increase the depth of 
the market to the benefit of all market participants. The Exchange 
notes that Participants may avail themselves of the proposed dividend 
strategy order pricing on BOX or they can opt for similar offerings at 
another exchange.\16\
---------------------------------------------------------------------------

    \16\ See supra note 10.
---------------------------------------------------------------------------

    The Exchange believes that not allowing Floor Brokers to be 
eligible to receive a daily $500 rebate for dividend strategies once 
the monthly cap is met is reasonable, equitable and not unfairly 
discriminatory because, as proposed, this limitation applies to all 
Floor Brokers equally and a fee is not assessed for transactions once 
the monthly cap is met. As such, the Exchange believes that 
Participants do not require additional incentives to execute these 
transactions on BOX once the monthly cap is met.

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 proposed change is designed to attract additional order flow to 
BOX. The Exchange believes that the proposed change could further 
incentivize market participants to direct their dividend strategy 
orders to BOX. As noted herein, the proposed monthly cap for dividend 
strategy fees would be applicable to all similarly situated market 
participants, and, as such, the proposed change would not impose a 
disparate burden on competition among Participants on BOX.
    Further, the Exchange also does not believe that the proposed fees 
will impose any burden on intermarket competition that is not necessary 
or appropriate in furtherance of the Act because, as noted above, 
another competing options exchange currently has a similar fee cap in 
place in connection with strategy orders.\17\ Because competitors are 
free to modify their own fees or fee caps in response to competing 
exchanges, the Exchange believes that the degree to which changes in 
this market may impose any burden on competition is limited. Further, 
the Exchange believes that the proposed change could promote 
competition between BOX and other execution venues, including those 
that currently offer similar strategy order fees or fee caps. Finally, 
the Exchange notes that it operates in a highly competitive market in 
which market participants can readily favor competing venues. In such 
an environment, the Exchange must continually review, and consider 
adjusting, its fees and credits to remain competitive with other 
exchanges. For the reasons described above, the Exchange believes that 
the proposed rule change reflects this competitive environment.
---------------------------------------------------------------------------

    \17\ Id.
---------------------------------------------------------------------------

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.

[[Page 29774]]

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 \18\ and Rule 19b-4(f)(2) 
thereunder,\19\ because it establishes or changes a due, or fee.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \19\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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-2023-12 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BOX-2023-12. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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. Do 
not include personal identifiable information in submissions; you 
should submit only information that you wish to make available 
publicly. We may redact in part or withhold entirely from publication 
submitted material that is obscene or subject to copyright protection.
    All submissions should refer to File Number SR-BOX-2023-12, and 
should be submitted on or before May 30, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09680 Filed 5-5-23; 8:45 am]
BILLING CODE 8011-01-P

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