Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule 4120 (Transactions of Certain Public Customers) and BOX Rule 100 (Definitions) and Adopt IM-4120-1, 41437-41439 [2023-13458]
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Federal Register / Vol. 88, No. 121 / Monday, June 26, 2023 / Notices
Commission temporarily suspended the
proposed rule change and instituted
proceedings to determine whether to
approve or disapprove the proposed
rule change.4 On June 14, 2023, the
Exchange withdrew the proposed rule
change (CboeEDGX–2023–016).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.5
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–13450 Filed 6–23–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97772; File No. SR–BOX–
2023–02]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend BOX Rule 4120
(Transactions of Certain Public
Customers) and BOX Rule 100
(Definitions) and Adopt IM–4120–1
June 20, 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 June 5,
2023, BOX Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared primarily by the Exchange.
The Exchange filed the proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6)
thereunder,4 such that the proposed rule
change was immediately effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
from interested persons.
ddrumheller on DSK120RN23PROD with NOTICES1
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
BOX Rule 4120 (Transactions of Certain
Public Customers) and BOX Rule 100
(Definitions) and adopt IM–4120–1. The
text of the proposed rule change is
available from the principal office of the
www.sec.gov/comments/sr-cboeedgx-2023-016/
srcboeedgx2023016.htm.
4 See Securities Exchange Act Release No. 97406,
88 FR 28641 (May 4, 2023).
5 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
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Exchange, at the Commission’s Public
Reference Room and also on the
Exchange’s internet website at https://
rules.boxexchange.com/rulefilings.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
BOX Rule 4120 (Transactions of Certain
Public Customers) and BOX Rule 100
(Definitions) and adopt IM–4120–1. The
purpose of the proposed rule change is
to amend the BOX Rule that governs
interested transactions to, among other
things, clarify that clearing firms are not
intended to be included within the
scope of BOX Rule 4120. The Exchange
notes that the proposed changes are
similar to the scope of activities covered
by existing rules at other options
exchanges.5
Rule 4120 and Proposed IM–4120–1
Presently, BOX Rule 4120 prohibits
an OFP,6 without prior consent, from
executing any transaction in securities
or carrying a position in any security in
which: (1) an officer or employee of the
Exchange or any national securities
5 See NYSE Rule 407 and NYSE American Rule
407. The Exchange believes NYSE and NYSE
American similarly do not include clearing firms
within the scope of their rules.
6 The terms ‘‘Order Flow Provider’’ or ‘‘OFP’’
mean those Options Participants representing as
agent Customer Orders on BOX and those nonMarket Maker Participants conducting proprietary
trading. See BOX Rule 100(a)(47). The term
‘‘Customer Order’’ means an agency order for the
account of either a Public Customer, as defined
herein, or a broker-dealer. See BOX Rule 100(a)(18).
The term ‘‘Market Maker’’ means an Options
Participant registered with the Exchange for the
purpose of making markets in options contracts
traded on the Exchange and that is vested with the
rights and responsibilities specified in the Rule
8000 Series. All Market Makers are designated as
specialists on the Exchange for all purposes under
the Exchange Act or Rules thereunder. The term
‘‘Public Customer’’ means a person that is not a
broker or dealer in securities. See BOX Rule
100(a)(53).
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41437
exchange that is a participant of the
Clearing Corporation,7 or an officer or
employee of a corporation in which the
Exchange, or such other exchange owns
the majority of the capital stock, is
directly or indirectly interested; or (2) a
partner, officer, director, principal
shareholder or employee of another OFP
is directly or indirectly interested. In
such circumstances, the OFP is required
to receive written consent from the
Exchange or consent of the other OFP
prior to taking such action.
This Rule 4120 is intended to govern
conflicts of interest and regulate
interested transactions.8 The Rule
prohibits OFPs from engaging in
specified interested actions without
obtaining prior written consent from the
Exchange or consent of the other OFP
prior to taking such action. For example,
under Rule 4120, an OFP may not
execute a transaction in a security in
which an employee of the Exchange is
directly interested, without first
obtaining written consent from the
Exchange. The Exchange is proposing to
amend BOX Rule 4120 to clarify that
clearing firms are not intended to be
included within the scope of BOX Rule
4120. Specifically, the Exchange is
proposing to add ‘‘open a securities or
commodities account’’ and remove ‘‘in
securities or carry a position in any
security’’ within BOX Rule 4120(a) to
amend the scope of this requirement,
which is in line with the scope and
language of other exchanges.9 The
Exchange believes that this change
removes unintended parties from the
scope of the rule and thus allows for
more effective supervision of interested
transactions. At present, due to the
broad language within Rule 4120(a)
stating that no OFP shall ‘‘carry a
position in any security’’ clearing firms
are being captured within the scope of
the Rule. The Exchange is proposing to
amend Rule 4120 to remove the
language relating to carrying a position
in a security to clarify that clearing
firms are not included in the scope of
this Rule due to only carrying a
position, which the Exchange believes is
in line with the intent of the rule and
existing practices at other exchanges.10
7 The term ‘‘Clearing Corporation’’ or ‘‘OCC’’
means The Options Clearing Corporation.
8 BOX Rule 4120 governs direct or indirect
conflicts of interest involving officers or employees
of the Exchange or any national securities exchange
that is a participant of the OCC, an officer or
employee of a corporation in which the Exchange,
or such other exchange owns the majority of the
capital stock, and partners, officers, directors,
principal shareholders or employees of another
OFP. See BOX Rule 4120.
9 See supra note 3.
10 Id.
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ddrumheller on DSK120RN23PROD with NOTICES1
41438
Federal Register / Vol. 88, No. 121 / Monday, June 26, 2023 / Notices
The proposed amended language
within BOX Rule 4120(a) would
provide, ‘‘No OFP shall open a
securities or commodities account or
execute any transaction in which: (1) an
officer or employee of the Exchange or
any national securities exchange that is
a participant of the Clearing
Corporation, or an officer or employee
of a corporation in which the Exchange,
or such other exchange owns the
majority of the capital stock, is directly
or indirectly interested, without the
prior written consent of the Exchange;
or (2) a partner, officer, director,
principal shareholder or employee of
another OFP is directly or indirectly
interested, without the consent of such
other OFP.’’ Rule 4120 also requires that
where the required consent has been
granted, duplicate reports of the
transaction and position shall promptly
be sent to the Exchange or OFP, as the
case may be. Additionally, the Exchange
is proposing to adopt language to
provide that the Exchange may, upon
written request, and where good cause
is shown, waive any requirements of
Rule 4120. The Exchange notes that this
proposed waiver language is identical to
language found within NYSE American
Rule 407 and NYSE Rule 407.11 The
Exchange believes that the adoption of
this provision will provide the
Exchange with greater flexibility, to
allow for more effective and efficient
supervision of the interested
transactions that are governed by Rule
4120.
The Exchange is also proposing to
adopt IM–4120–1. Proposed IM–4120–1
would provide that the term ‘‘securities
or commodities accounts’’ as used in
Rule 4120 shall include, but not be
limited to, limited or general
partnership interests in investment
partnerships. As part of the proposed
changes detailed above, the Exchange is
adopting language within Rule 4120(a)
to provide that no OFP shall ‘‘open a
securities or commodities account.’’ The
Exchange believes that adopting IM–
4120–1, which provides that for the
purposes of Rule 4120, securities or
commodities accounts also include
limited or general partnership interests
in investment partnerships, will reduce
the potential for investor confusion
regarding what is included within the
scope of the Rule. Additionally,
proposed IM–4120–1 would require
OFPs to develop and maintain written
procedures for reviewing such accounts
and transactions and assure that their
associated persons are not improperly
recommending or marketing such
securities or products to others through
11 Id.
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19:33 Jun 23, 2023
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Participants 12 or Participant
organizations. At present, Rule 4120 is
silent on the requirements for how an
OFP must ensure compliance with this
Rule. The Exchange is now proposing to
adopt language codifying the
requirement for OFPs to develop and
maintain written procedures for
reviewing these transactions and
accounts. The Exchange believes that
OFPs already maintain such written
procedures in practice and is looking to
codify the requirement for clarity. The
Exchange is adopting IM–4120–1 to
provide more clarity on what is covered
under the term ‘‘securities or
commodities accounts,’’ and the
obligation for OFPs to develop related
written procedures.
The Exchange believes that proposed
IM–4120–1, which provides greater
clarity on the requirements of Rule
4120, will allow for more effective
regulatory compliance. The Exchange
also notes that proposed IM–4120–1 is
substantively identical to an existing
rule at NYSE American and NYSE.13
Technical Amendments
In addition to the proposed
amendments, the Exchange is proposing
to amend Rule 100(a)(16) to update the
cross references to the rules of the OCC
within the definition of the term
‘‘covered short position.’’ The OCC has
amended their Rule 610 since BOX
adopted Rule 100(a)(16), so the
Exchange is proposing to update the
OCC cross references within BOX Rule
100(a)(16). The Exchange is proposing
to update the cross reference to OCC
Rule 610(f) to 610(A) and 610(B) and the
cross reference to OCC Rule 610(g) to
610(C).14 The Exchange is not proposing
to make any substantive changes to Rule
100(a)(16).
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),15 in general, and Section 6(b)(5)
of the Act,16 in particular, in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
12 The term ‘‘Participant’’ means a firm, or
organization that is registered with the Exchange
pursuant to the Rule 2000 Series for purposes of
participating in trading on a facility of the Exchange
and includes an ‘‘Options Participant’’ and ‘‘BSTX
Participant.’’
13 See NYSE American Rule 407, Supplementary
Material .11 and NYSE Rule 407, Supplementary
Material .11.
14 See OCC Rules 610A (Member Specific
Deposits), 610B (Third-Party Specific Deposits), and
610C (Escrow Deposits).
15 15 U.S.C. 78f(b).
16 15 U.S.C. 78f(b)(5).
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Frm 00068
Fmt 4703
Sfmt 4703
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general to protect investors and the
public interest.
Rule 4120 and Proposed IM–4120–1
Together, the proposed amendment of
Rule 4120 and the proposed adoption of
IM–4120–1 are intended to amend the
BOX Rule governing conflicts of interest
by updating and adopting rules that
regulate interested transactions.17
Specifically, the proposed changes are
intended to clarify that clearing firms
are not intended to be included within
the scope of BOX Rule 4120. The
Exchange believes that the proposed
rule change may reduce potential
investor or market participant confusion
over which BOX Participants are
covered under scope of BOX Rule 4120.
As such, the proposed rule change
would foster cooperation and
coordination with persons engaged in
facilitating transactions in securities and
would remove impediments to and
perfect the mechanism of a free and
open market and a national market
system.
The Exchange also believes that the
proposed rule change may result in
more efficient regulatory compliance, as
the proposed updates are similar in
relevant part to existing rules at NYSE
American and NYSE.18 As such, the
Exchange believes that the proposed
rule change is in the public interest and
therefore, is consistent with the Act.
Technical Changes
In addition, the Exchange believes
that the proposed non-substantive
clarifying changes described above to
update the OCC cross references within
BOX Rule 100(a)(16) would add clarity
to the Exchange’s rules. The Exchange
believes that adding such clarity would
also be consistent with the public
interest and the protection of investors
because investors will not be harmed
and in fact would benefit from increased
clarity, thereby reducing potential
confusion. In addition, the Exchange
believes that amending the OCC cross
references to accurately reflect the
updated section numbers within the
OCC Rulebook would promote fairness
and consistency in the marketplace by
providing investors with access to the
appropriate citations as detailed within
the Rules of the OCC. The proposed
17 See
supra notes 3 and 11.
18 Id.
E:\FR\FM\26JNN1.SGM
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Federal Register / Vol. 88, No. 121 / Monday, June 26, 2023 / Notices
change is not intended to make any
substantive change to the definition of
‘‘covered short position’’ within the
BOX Rulebook.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. In this regard
and as indicated above, the Exchange
notes that the rule change is being
proposed to clarify that clearing firms
are not intended to be included within
the scope of BOX Rule 4120. The
Exchange notes that, the proposed
updates are similar in relevant part to
existing rules at NYSE American and
NYSE.19 The proposed rule change does
not impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
The proposed rule change is not
designed to address any competitive
issues but rather to clarify that clearing
firms are not intended to be included
within the scope of BOX Rule 4120. The
Exchange’s proposal to amend BOX
Rule 4120 does not impose an undue
burden on competition as all
Participants that conduct business with
the public would be subject to the
proposed rules.
The proposed rule change is not
designed to address any competitive
issues but rather seeks to clarify that
clearing firms are not intended to be
included within the scope of BOX Rule
4120. The Exchange’s proposal to adopt
proposed IM–4120–1 does not impose
an undue burden on competition as all
Participants that conduct business with
the public would be subject to the
proposed rules.
Technical Amendments
ddrumheller on DSK120RN23PROD with NOTICES1
The Exchange’s proposal to amend
BOX Rule 100(a)(16) to update the cross
references to the rules of the OCC
within the definition of the term
‘‘covered short position’’ is a nonsubstantive amendment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
(a) This proposed rule change is filed
pursuant to paragraph (A) of section
19(b)(3) of the Exchange Act 20 and Rule
19b–4(f)(6) thereunder.21
(b) This proposed rule change does
not significantly affect the protection of
investors or the public interest, does not
impose any significant burden on
competition, and, by its terms, does not
become operative for 30 days after the
date of the filing, or such shorter time
as the Commission may designate if
consistent with the protection of
investors and the public interest.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2023–02 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–2023–02. 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, on official business
days between the hours of 10:00 a.m.
and 3:00 p.m., located at 100 F Street
NE, Washington, DC 20549. Copies of
such filing also will be available for
inspection and copying at the principal
office of the Exchange.
All comments received will be posted
without change. Persons submitting
comments are cautioned that we do not
redact or edit personal identifying
information from comment submissions.
You should submit only information
that you wish to make available
publicly.
All submissions should refer to File
Number SR–BOX–2023–02 and should
be submitted on or before July 17, 2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–13458 Filed 6–23–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97766; File No. SR–ICEEU–
2023–013]
Self-Regulatory Organizations; ICE
Clear Europe Limited; Notice of Filing
of Proposed Rule Change Relating to
Amendments the Collateral and
Haircut Procedures
June 20, 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 June 9,
2023, ICE Clear Europe Limited (‘‘ICE
Clear Europe’’ or the ‘‘Clearing House’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule changes described in
Items I, II, and III below, which Items
have been primarily prepared by ICE
Clear Europe. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
22 17
20 15
19 See
U.S.C. 78s(b)(3)(A).
21 17 CFR 240.19b–4(f)(6).
supra notes 3 and 11.
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19:33 Jun 23, 2023
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41439
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 88, Number 121 (Monday, June 26, 2023)]
[Notices]
[Pages 41437-41439]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-13458]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97772; File No. SR-BOX-2023-02]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule
4120 (Transactions of Certain Public Customers) and BOX Rule 100
(Definitions) and Adopt IM-4120-1
June 20, 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 June 5, 2023, BOX Exchange LLC (the ``Exchange'') filed with the
Securities and Exchange Commission (``Commission'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared primarily by the Exchange. The Exchange filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\ and
Rule 19b-4(f)(6) thereunder,\4\ such that the proposed rule change was
immediately effective upon filing with the Commission. The Commission
is publishing this notice to solicit comments on the proposed rule 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).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend BOX Rule 4120 (Transactions of
Certain Public Customers) and BOX Rule 100 (Definitions) and adopt IM-
4120-1. The text of the proposed rule change is available from the
principal office of the Exchange, at the Commission's Public Reference
Room and also on the Exchange's internet website at https://rules.boxexchange.com/rulefilings.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend BOX Rule 4120 (Transactions of
Certain Public Customers) and BOX Rule 100 (Definitions) and adopt IM-
4120-1. The purpose of the proposed rule change is to amend the BOX
Rule that governs interested transactions to, among other things,
clarify that clearing firms are not intended to be included within the
scope of BOX Rule 4120. The Exchange notes that the proposed changes
are similar to the scope of activities covered by existing rules at
other options exchanges.\5\
---------------------------------------------------------------------------
\5\ See NYSE Rule 407 and NYSE American Rule 407. The Exchange
believes NYSE and NYSE American similarly do not include clearing
firms within the scope of their rules.
---------------------------------------------------------------------------
Rule 4120 and Proposed IM-4120-1
Presently, BOX Rule 4120 prohibits an OFP,\6\ without prior
consent, from executing any transaction in securities or carrying a
position in any security in which: (1) an officer or employee of the
Exchange or any national securities exchange that is a participant of
the Clearing Corporation,\7\ or an officer or employee of a corporation
in which the Exchange, or such other exchange owns the majority of the
capital stock, is directly or indirectly interested; or (2) a partner,
officer, director, principal shareholder or employee of another OFP is
directly or indirectly interested. In such circumstances, the OFP is
required to receive written consent from the Exchange or consent of the
other OFP prior to taking such action.
---------------------------------------------------------------------------
\6\ The terms ``Order Flow Provider'' or ``OFP'' mean those
Options Participants representing as agent Customer Orders on BOX
and those non-Market Maker Participants conducting proprietary
trading. See BOX Rule 100(a)(47). The term ``Customer Order'' means
an agency order for the account of either a Public Customer, as
defined herein, or a broker-dealer. See BOX Rule 100(a)(18). The
term ``Market Maker'' means an Options Participant registered with
the Exchange for the purpose of making markets in options contracts
traded on the Exchange and that is vested with the rights and
responsibilities specified in the Rule 8000 Series. All Market
Makers are designated as specialists on the Exchange for all
purposes under the Exchange Act or Rules thereunder. The term
``Public Customer'' means a person that is not a broker or dealer in
securities. See BOX Rule 100(a)(53).
\7\ The term ``Clearing Corporation'' or ``OCC'' means The
Options Clearing Corporation.
---------------------------------------------------------------------------
This Rule 4120 is intended to govern conflicts of interest and
regulate interested transactions.\8\ The Rule prohibits OFPs from
engaging in specified interested actions without obtaining prior
written consent from the Exchange or consent of the other OFP prior to
taking such action. For example, under Rule 4120, an OFP may not
execute a transaction in a security in which an employee of the
Exchange is directly interested, without first obtaining written
consent from the Exchange. The Exchange is proposing to amend BOX Rule
4120 to clarify that clearing firms are not intended to be included
within the scope of BOX Rule 4120. Specifically, the Exchange is
proposing to add ``open a securities or commodities account'' and
remove ``in securities or carry a position in any security'' within BOX
Rule 4120(a) to amend the scope of this requirement, which is in line
with the scope and language of other exchanges.\9\ The Exchange
believes that this change removes unintended parties from the scope of
the rule and thus allows for more effective supervision of interested
transactions. At present, due to the broad language within Rule 4120(a)
stating that no OFP shall ``carry a position in any security'' clearing
firms are being captured within the scope of the Rule. The Exchange is
proposing to amend Rule 4120 to remove the language relating to
carrying a position in a security to clarify that clearing firms are
not included in the scope of this Rule due to only carrying a position,
which the Exchange believes is in line with the intent of the rule and
existing practices at other exchanges.\10\
---------------------------------------------------------------------------
\8\ BOX Rule 4120 governs direct or indirect conflicts of
interest involving officers or employees of the Exchange or any
national securities exchange that is a participant of the OCC, an
officer or employee of a corporation in which the Exchange, or such
other exchange owns the majority of the capital stock, and partners,
officers, directors, principal shareholders or employees of another
OFP. See BOX Rule 4120.
\9\ See supra note 3.
\10\ Id.
---------------------------------------------------------------------------
[[Page 41438]]
The proposed amended language within BOX Rule 4120(a) would
provide, ``No OFP shall open a securities or commodities account or
execute any transaction in which: (1) an officer or employee of the
Exchange or any national securities exchange that is a participant of
the Clearing Corporation, or an officer or employee of a corporation in
which the Exchange, or such other exchange owns the majority of the
capital stock, is directly or indirectly interested, without the prior
written consent of the Exchange; or (2) a partner, officer, director,
principal shareholder or employee of another OFP is directly or
indirectly interested, without the consent of such other OFP.'' Rule
4120 also requires that where the required consent has been granted,
duplicate reports of the transaction and position shall promptly be
sent to the Exchange or OFP, as the case may be. Additionally, the
Exchange is proposing to adopt language to provide that the Exchange
may, upon written request, and where good cause is shown, waive any
requirements of Rule 4120. The Exchange notes that this proposed waiver
language is identical to language found within NYSE American Rule 407
and NYSE Rule 407.\11\ The Exchange believes that the adoption of this
provision will provide the Exchange with greater flexibility, to allow
for more effective and efficient supervision of the interested
transactions that are governed by Rule 4120.
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\11\ Id.
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The Exchange is also proposing to adopt IM-4120-1. Proposed IM-
4120-1 would provide that the term ``securities or commodities
accounts'' as used in Rule 4120 shall include, but not be limited to,
limited or general partnership interests in investment partnerships. As
part of the proposed changes detailed above, the Exchange is adopting
language within Rule 4120(a) to provide that no OFP shall ``open a
securities or commodities account.'' The Exchange believes that
adopting IM-4120-1, which provides that for the purposes of Rule 4120,
securities or commodities accounts also include limited or general
partnership interests in investment partnerships, will reduce the
potential for investor confusion regarding what is included within the
scope of the Rule. Additionally, proposed IM-4120-1 would require OFPs
to develop and maintain written procedures for reviewing such accounts
and transactions and assure that their associated persons are not
improperly recommending or marketing such securities or products to
others through Participants \12\ or Participant organizations. At
present, Rule 4120 is silent on the requirements for how an OFP must
ensure compliance with this Rule. The Exchange is now proposing to
adopt language codifying the requirement for OFPs to develop and
maintain written procedures for reviewing these transactions and
accounts. The Exchange believes that OFPs already maintain such written
procedures in practice and is looking to codify the requirement for
clarity. The Exchange is adopting IM-4120-1 to provide more clarity on
what is covered under the term ``securities or commodities accounts,''
and the obligation for OFPs to develop related written procedures.
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\12\ The term ``Participant'' means a firm, or organization that
is registered with the Exchange pursuant to the Rule 2000 Series for
purposes of participating in trading on a facility of the Exchange
and includes an ``Options Participant'' and ``BSTX Participant.''
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The Exchange believes that proposed IM-4120-1, which provides
greater clarity on the requirements of Rule 4120, will allow for more
effective regulatory compliance. The Exchange also notes that proposed
IM-4120-1 is substantively identical to an existing rule at NYSE
American and NYSE.\13\
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\13\ See NYSE American Rule 407, Supplementary Material .11 and
NYSE Rule 407, Supplementary Material .11.
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Technical Amendments
In addition to the proposed amendments, the Exchange is proposing
to amend Rule 100(a)(16) to update the cross references to the rules of
the OCC within the definition of the term ``covered short position.''
The OCC has amended their Rule 610 since BOX adopted Rule 100(a)(16),
so the Exchange is proposing to update the OCC cross references within
BOX Rule 100(a)(16). The Exchange is proposing to update the cross
reference to OCC Rule 610(f) to 610(A) and 610(B) and the cross
reference to OCC Rule 610(g) to 610(C).\14\ The Exchange is not
proposing to make any substantive changes to Rule 100(a)(16).
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\14\ See OCC Rules 610A (Member Specific Deposits), 610B (Third-
Party Specific Deposits), and 610C (Escrow Deposits).
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2. Statutory Basis
The Exchange believes that the proposal is consistent with the
requirements of Section 6(b) of the Securities Exchange Act of 1934
(the ``Act''),\15\ in general, and Section 6(b)(5) of the Act,\16\ in
particular, in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general to protect investors and the
public interest.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
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Rule 4120 and Proposed IM-4120-1
Together, the proposed amendment of Rule 4120 and the proposed
adoption of IM-4120-1 are intended to amend the BOX Rule governing
conflicts of interest by updating and adopting rules that regulate
interested transactions.\17\ Specifically, the proposed changes are
intended to clarify that clearing firms are not intended to be included
within the scope of BOX Rule 4120. The Exchange believes that the
proposed rule change may reduce potential investor or market
participant confusion over which BOX Participants are covered under
scope of BOX Rule 4120. As such, the proposed rule change would foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and would remove impediments to and perfect
the mechanism of a free and open market and a national market system.
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\17\ See supra notes 3 and 11.
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The Exchange also believes that the proposed rule change may result
in more efficient regulatory compliance, as the proposed updates are
similar in relevant part to existing rules at NYSE American and
NYSE.\18\ As such, the Exchange believes that the proposed rule change
is in the public interest and therefore, is consistent with the Act.
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\18\ Id.
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Technical Changes
In addition, the Exchange believes that the proposed non-
substantive clarifying changes described above to update the OCC cross
references within BOX Rule 100(a)(16) would add clarity to the
Exchange's rules. The Exchange believes that adding such clarity would
also be consistent with the public interest and the protection of
investors because investors will not be harmed and in fact would
benefit from increased clarity, thereby reducing potential confusion.
In addition, the Exchange believes that amending the OCC cross
references to accurately reflect the updated section numbers within the
OCC Rulebook would promote fairness and consistency in the marketplace
by providing investors with access to the appropriate citations as
detailed within the Rules of the OCC. The proposed
[[Page 41439]]
change is not intended to make any substantive change to the definition
of ``covered short position'' within the BOX Rulebook.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. In this regard and as indicated
above, the Exchange notes that the rule change is being proposed to
clarify that clearing firms are not intended to be included within the
scope of BOX Rule 4120. The Exchange notes that, the proposed updates
are similar in relevant part to existing rules at NYSE American and
NYSE.\19\ The proposed rule change does not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\19\ See supra notes 3 and 11.
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The proposed rule change is not designed to address any competitive
issues but rather to clarify that clearing firms are not intended to be
included within the scope of BOX Rule 4120. The Exchange's proposal to
amend BOX Rule 4120 does not impose an undue burden on competition as
all Participants that conduct business with the public would be subject
to the proposed rules.
The proposed rule change is not designed to address any competitive
issues but rather seeks to clarify that clearing firms are not intended
to be included within the scope of BOX Rule 4120. The Exchange's
proposal to adopt proposed IM-4120-1 does not impose an undue burden on
competition as all Participants that conduct business with the public
would be subject to the proposed rules.
Technical Amendments
The Exchange's proposal to amend BOX Rule 100(a)(16) to update the
cross references to the rules of the OCC within the definition of the
term ``covered short position'' is a non-substantive amendment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
(a) This proposed rule change is filed pursuant to paragraph (A) of
section 19(b)(3) of the Exchange Act \20\ and Rule 19b-4(f)(6)
thereunder.\21\
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f)(6).
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(b) This proposed rule change does not significantly affect the
protection of investors or the public interest, does not impose any
significant burden on competition, and, by its terms, does not become
operative for 30 days after the date of the filing, or such shorter
time as the Commission may designate if consistent with the protection
of investors and the public interest.
At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-BOX-2023-02 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-2023-02. 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, on official business days between the hours of 10:00
a.m. and 3:00 p.m., located at 100 F Street NE, Washington, DC 20549.
Copies of such filing also will be available for inspection and copying
at the principal office of the Exchange.
All comments received will be posted without change. Persons
submitting comments are cautioned that we do not redact or edit
personal identifying information from comment submissions. You should
submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-BOX-2023-02 and
should be submitted on or before July 17, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-13458 Filed 6-23-23; 8:45 am]
BILLING CODE 8011-01-P
