Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule for Trading on the BOX Options Market LLC Facility To Amend Sections IV.A (Non-Auction Transactions) and IV.A.1 (Tiered Volume Rebate for Non-Auction Transactions), 80353-80356 [2023-25379]
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Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to file
number SR–CboeBZX–2023–091. 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
a.m. and 3 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–CboeBZX–2023–091 and should be
submitted on or before December 8,
2023.
[Release No. 34–98906; File No. SR–BOX–
2023–25]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–25383 Filed 11–16–23; 8:45 am]
khammond on DSKJM1Z7X2PROD with NOTICES
BILLING CODE 8011–01–P
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fee
Schedule for Trading on the BOX
Options Market LLC Facility To Amend
Sections IV.A (Non-Auction
Transactions) and IV.A.1 (Tiered
Volume Rebate for Non-Auction
Transactions)
November 13, 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 November
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 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 Section IV.A (Non-Auction
Transactions) and Section IV.A.1
(Tiered Volume Rebate for Non-Auction
Transactions) of the Fee Schedule 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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
22 17
CFR 200.30–3(a)(12).
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80353
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
Section IV.A (Non-Auction
Transactions) and Section IV.A.1
(Tiered Volume Rebate for Non-Auction
Transactions) of the BOX Fee Schedule.
First, the Exchange proposes to increase
Public Customer taker fees on
transactions for options overlying the
Standard and Poor’s Depositary Receipts
Trust (‘‘SPY’’) in Section IV.A.5 Next,
the Exchange proposes to reduce Tier 4
rebates and establish a new Tier 5 in the
Tiered Volume Rebate for Non-Auction
Transactions for Percentage National
Customer Volume in Multiply-Listed
Options Classes.
Non-Auction Transactions
In Section IV.A of the BOX Fee
Schedule, fees and credits for Electronic
Non-Auction Transactions are assessed
depending on three factors: (i) the
account type of the Participant
submitting the order; (ii) whether the
Participant is a liquidity provider or
liquidity taker; and (iii) the account type
of the contra party. Currently, when a
Public Customer SPY order is a liquidity
taker contra to a Professional Customer,
Broker Dealer, or a Market Maker, the
Public Customer is assessed no fee. The
Exchange now proposes to increase
Public Customer taker fees on SPY NonAuction Transactions. Accordingly,
when a Public Customer SPY order is a
liquidity taker contra to a Professional
Customer, Broker Dealer, or a Market
Maker, the Public Customer will be
assessed a fee of $0.10.
Tiered Volume Rebate for Non-Auction
Transactions
The Exchange also proposes to amend
Section IV.A.1 of the Fee Schedule.
Specifically, the Exchange proposes to
add a Tier and to adjust the Percentage
Thresholds of National Customer
Volume in Multiply-Listed Options
Classes. Currently, Public Customers
5 Options overlying Standard and Poor’s
Depositary Receipts/SPDRs (‘‘SPY’’) are based on
the SPDR exchange-traded fund (‘‘ETF’’), which is
designed to track the performance of the S&P 500
Index.
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Federal Register / Vol. 88, No. 221 / Friday, November 17, 2023 / Notices
receive a per contract rebate for
electronic Non-Auction Transactions
according to the Tier achieved by the
Public Customer as provided in the
Percentage Thresholds of National
Customer Volume in Multiply-Listed
Options Classes table in Section IV.A.1
of the BOX Fee Schedule.6 Percentage
thresholds are calculated on a monthly
basis by totaling the Public Customer’s
executed Auction and Non-Auction
transaction volume on BOX, relative to
the total national customer volume in
multiply-listed options classes.
The Exchange notes that Non-Auction
Transactions where a Public Customer
order interacts with another Public
Customer order are exempt from a per
contract rebate. However, these
transactions still count toward the
Public Customer’s monthly volume on
BOX. The current thresholds and
rebates are as follows:
Per contract rebate
Tier
Percentage thresholds of national customer volume in multiplylisted options classes
(monthly)
Penny interval
classes
Maker
1
2
3
4
...............
...............
...............
...............
0.000–0.249 ................................................................................
0.250–0.499 ................................................................................
0.500–0.749 ................................................................................
0.750 and Above ........................................................................
The Exchange proposes to modify
Tier 4 from 0.750% and Above to
0.750%–0.999% and to establish Tier 5
which will be 1.000% and Above. The
Exchange also proposes to reduce Tier
4 rebates to $0.20 and $0.22 for Maker
and Taker respectively in Penny Interval
Non-penny
interval classes
Taker
$0.00
(0.05)
(0.10)
(0.27)
$0.00
(0.15)
(0.20)
(0.27)
Classes, $0.45 and $0.35 for Maker and
Taker respectively in Non-Penny
Interval Classes, and $0.20 and $0.00 for
Maker and Taker respectively in SPY.
Finally, the Exchange proposes to
establish Tier 5 rebates of $0.27 and
$0.27 for Maker and Taker respectively
Maker
SPY
Taker
$0.00
(0.15)
(0.30)
(0.60)
$0.00
(0.27)
(0.32)
(0.40)
Maker
Taker
$0.00
(0.05)
(0.10)
(0.27)
$0.00
0.00
0.00
0.00
in Penny Interval Classes, $0.60 and
$0.40 for Maker and Taker respectively
in Non-Penny Interval Classes, and
$0.27 and $0.11 for Maker and Taker
respectively in SPY. The proposed
rebate structure is as follows:
Per contract rebate
Tier
Percentage thresholds of national customer volume in multiplylisted options classes
(monthly)
Penny interval
classes
Maker
1
2
3
4
5
...............
...............
...............
...............
...............
0.000–0.249 ................................................................................
0.250–0.499 ................................................................................
0.500–0.749 ................................................................................
0.750–0.999 ................................................................................
1.000 and Above ........................................................................
Taker
$0.00
(0.15)
(0.20)
(0.22)
(0.27)
Maker
SPY
Taker
$0.00
(0.15)
(0.30)
(0.45)
(0.60)
$0.00
(0.27)
(0.32)
(0.35)
(0.40)
Maker
$0.00
(0.05)
(0.10)
(0.20)
(0.27)
Taker
$0.00
0.00
0.00
0.00
(0.11)
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,9 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 17 registered
options exchanges that trade options.
Based on publicly available information,
no single options exchange has more
than 21% of the market share and
currently the Exchange represents only
approximately 7% of the market
share.10 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.’’ 11 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 Public Customer
electronic non-auction order flow to
BOX.
6 The Exchange notes that Public Customers do
not initiate transactions on BOX directly. BOX
Participants initiate Electronic Non-Auction
Transactions on the behalf of Public Customers and
are assessed fees or provided rebates by the
Exchange.
7 See e.g., Nasdaq PHLX LLC, Options 7, Section
3 Part A. (‘‘Simple Order’’ Customer fee for
removing SPY liquidity of $0.41); Cboe C2
Exchange, Inc. Fee Schedule (‘‘Transaction Fees’’
applicable to SPY for Public Customer Remove rates
of $0.37); MIAX PEARL, LLC Fee Schedule
(‘‘Transaction Rebates/Fees’’ for Priority Customer
SPY Taker in Tier 1 of $0.46).
8 See Nasdaq PHLX LLC (‘‘Nasdaq PHLX’’)
Options 7, Section 2 (Customer Rebate Program)
and Cboe Exchange, Inc. (‘‘CBOE’’) Fee Schedule
(Volume Incentive Program). The Exchange notes
that these programs use different tier structures,
volume calculations, and rebate amounts, however,
their rebate programs operate similarly to BOX’s in
that they are driven by volume and designed to
incentivize Public Customer order flow.
9 15 U.S.C. 78f(b)(4) and (5).
10 See Cboe Global Markets U.S. Options Market
Month-to-Date Volume Summary (September 29,
2023), available at https://markets.cboe.com/us/
options/market_statistics/.
11 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
The Exchange notes that the proposed
SPY taker fees are lower than
comparable taker fees at several other
exchanges.7 The Exchange notes further
that other exchanges employ similar
incentive programs; and the Exchange
believes that the proposed changes are
reasonable and competitive when
compared to incentive structures at
other exchanges.8
2. Statutory Basis
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$0.00
(0.05)
(0.10)
(0.20)
(0.27)
Non-penny
interval classes
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khammond on DSKJM1Z7X2PROD with NOTICES
Non-Auction Transactions
The Exchange believes the proposed
electronic Non-Auction transaction
taker fees for Public Customer SPY
transactions are reasonable as the
proposed taker fees are lower than
similar transaction fees assessed at other
exchanges.12 The Exchange further
believes that the proposed SPY taker fee
for electronic Non-Auction Public
Customer transactions will not
disincentivize Public Customer order
flow because BOX’s electronic NonAuction Transactions fee structure is
designed to attract competitive quotes
and orders, which results in liquid
markets that Public Customers may find
attractive. Specifically, the Exchange
assesses no fees for Public Customers
that make liquidity in SPY and, no fees
for Market Makers that make liquidity in
SPY, which incentivizes competitive
quotes and resting orders. The Exchange
believes that Public Customers may be
willing to pay a nominal taker fee of
$0.10 to access such competitive
markets. The Exchange notes that other
exchanges assess fees between $0.37
and $0.46 for customer transactions
taking liquidity in SPY.13
The Exchange believes that assessing
Public Customers a taker fee of $0.10 for
SPY electronic Non-Auction
Transactions is equitable and not
unfairly discriminatory. The Exchange
notes that Professional Customer, Broker
Dealer, and Market Maker taker fees for
SPY electronic Non-Auction
Transactions are $0.50. The securities
markets generally, and BOX in
particular, have historically aimed to
improve markets for investors and
develop various features within the
market structure for Public Customer
benefit. Accordingly, the Exchange
believes that charging a lower taker fee
for Public Customers for their SPY
transactions compared to other account
types on BOX is appropriate and not
unfairly discriminatory.
Tiered Volume Rebate for Non-Auction
Transactions
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to adjust certain
percentage thresholds in the volumebased thresholds for Public Customers
in electronic Non-Auction Transactions.
The volume-based thresholds and
applicable rebates are designed to
continue to incentivize Public
Customers to direct order flow to BOX
to obtain the benefit of the rebate, which
may in turn benefit all market
participants by increasing liquidity on
12 See
13 See
supra note 7.
supra note 7.
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BOX. The Exchange proposes to amend
Tier 4, which was 0.750% and Above,
to 0.750%–0.999%, and to add Tier 5
with a threshold of 1.000% and Above.
This fee structure is designed to
incentivize Public Customers to send
their order flow to BOX, which may
result in increased trading opportunities
and executions on BOX.14 Further, the
Exchange notes that the proposed
amendment to the percentage thresholds
in the volume-based thresholds for
Public Customers in electronic NonAuction Transactions is not designed to
benefit one firm in particular, but, as
discussed herein, is designed to further
incentivize order flow to BOX. While
the Exchange proposes to decrease Tier
4 rebates, the Exchange believes that
Public Customers will still benefit from
the opportunity to obtain a rebate for
their executions on BOX. The Exchange
notes that other exchanges employ
similar incentive programs; and the
Exchange believes that the proposed
changes are reasonable and competitive
when compared to incentive structures
at other exchanges.15
The Exchange believes that the
proposed changes to the thresholds in
Tiers 4 and 5 are equitable and not
unfairly discriminatory as they are
available to all Public Customers, and
Public Customers may choose whether
or not to take advantage of the
percentage thresholds and their
applicable rebates. The securities
markets generally, and BOX in
particular, have historically aimed to
improve markets for investors and
develop various features within the
market structure for Public Customer
benefit. Accordingly, the Exchange
believes that providing a rebate
structure for Public Customers is
appropriate and not unfairly
discriminatory. Based on its review of
competitor exchanges, the Exchange
believes that lowering Tier 4 rebates,
and adding more difficult to obtain Tier
5 rebates, will not disincentivize Public
Customer order flow. Rather, the
Exchange believes that the proposed
rebates will continue to help attract a
high level of Public Customer order flow
to the BOX, which will ultimately
benefit all Participants trading on BOX.
The Exchange believes that the evershifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow and discontinue or
reduce use of certain categories of
14 The Exchange notes that BOX Participants
collect rebates on behalf of Public Customers and
have independent fee arrangements with such
Public Customers.
15 See supra note 8.
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80355
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 changes
are a reasonable attempt to effectively
compete for electronic Non-Auction
Public Customer orders. The Exchange
believes that the proposed change may
incentivize Public Customer order flow
and, in turn, may make BOX a more
competitive venue for order execution
to the benefit of all Participants. Finally,
the Exchange believes the proposed
changes are consistent with the Act
because, to the extent the modifications
permit the Exchange to continue to
attract greater volume and liquidity, the
proposed changes would improve
BOX’s overall competitiveness and
strengthen market quality for all market
participants.
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 Exchange believes the proposed
changes to Public Customer SPY taker
fees in the electronic Non-Auction
Transactions fee structure will not
impose a burden on intramarket
competition as BOX believes that the
changes will result in Public Customers
being charged appropriately for their
SPY taker transactions. The proposed
change would apply to all similarly
situated market participants and,
accordingly, the proposed change would
not impose a disparate burden on
competition among Participants on
BOX. The proposed change is designed
to assess Public Customers a nominal
taker fee for Electronic SPY NonAuction Transactions. The Exchange
notes that Public Customer taker fees
remain lower than Professional
Customer, Broker Dealer, and Market
Maker taker fees because BOX has
historically aimed to improve markets
for investors and develop various
features within the market structure for
Public Customer benefit.
The Exchange believes further the
proposed changes to Public Customer
SPY taker fees in the Electronic NonAuction Transactions fee structure will
not impose a burden on intermarket
competition. The Exchange notes that
the Non-Auction Transaction fee
structure as a whole, including the
proposed change, is designed to be
competitive with other options
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exchanges and to attract order flow. The
Exchange believes the electronic NonAuction Transactions fee structure,
including the proposed change, will
remain competitive with other options
exchanges and will continue to assess
lower Public Customer taker fees than
several other exchanges.16
The Exchange believes the proposed
changes to Tier 4 and the addition of
Tier 5 in Section IV.A.1 will not impose
a burden on competition among various
BOX Participants. The Exchange
believes that the proposed changes will
result in Public Customers being rebated
appropriately for their transactions. The
Exchange believes further that the
proposed rebates will continue to attract
Public Customer order flow to the BOX,
which will ultimately benefit all
Participants trading on BOX.
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 rebates to remain
competitive with other exchanges.
Because competitors are free to modify
their own fees and rebates in response,
and because market participants may
readily adjust their order routing
practices, the Exchange believes that the
degree to which fee or rebate changes in
this market may impose any burden on
competition is extremely limited. The
Exchange notes that other exchanges
provide programs to incentivize
customer order flow and that the
proposed changes to the volume
thresholds remain competitive when
compared to incentive structures at
other exchanges.17 For the reasons
described above, the Exchange believes
that the proposed rule change will
encourage intermarket competition.
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.
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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
16 See
supra note 7.
supra note 8.
18 15 U.S.C. 78s(b)(3)(A)(ii).
19 17 CFR 240.19b–4(f)(2).
17 See
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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.
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–2023–25 and should be
submitted on or before December 8,
2023.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
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:
[FR Doc. 2023–25379 Filed 11–16–23; 8:45 am]
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–2023–25 on the subject line.
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Order Approving a
Proposed Rule Change To Adopt
Monthly Options Series
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–2023–25. 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
a.m. and 3 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;
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98915; File No. SR–CBOE–
2023–049]
November 13, 2023.
I. Introduction
On September 27, 2023, Cboe
Exchange, Inc. (‘‘Exchange’’ or ‘‘Cboe
Options’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend its rules
to accommodate the listing of option
series that would expire at the close of
business on the last business day of a
calendar month (‘‘Monthly Option
Series’’). The proposed rule change was
published for comment in the Federal
Register on October 4, 2023.3 The
Commission did not receive any
comment letters and is approving the
proposed rule change.
II. Description of the Proposal
Cboe Options proposes to amend its
rules to adopt the listing and trading of
Monthly Options Series. The proposed
rule change will allow Cboe Options to
open for trading Monthly Option Series
that would expire at the close of
business on the last business day of a
calendar month.4 The Exchange may list
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 98593
(September 28, 2023), 88 FR 68833 (‘‘Notice’’).
4 The Exchange also proposes to make a
nonsubstantive change to Rules 4.5(d) and
4.13(a)(2)(A) to change current references to
‘‘monthly options series’’ to ‘‘standard expiration
1 15
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]]>Agencies
[Federal Register Volume 88, Number 221 (Friday, November 17, 2023)]
[Notices]
[Pages 80353-80356]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-25379]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98906; File No. SR-BOX-2023-25]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee
Schedule for Trading on the BOX Options Market LLC Facility To Amend
Sections IV.A (Non-Auction Transactions) and IV.A.1 (Tiered Volume
Rebate for Non-Auction Transactions)
November 13, 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 November 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 19(b)(3)(A)(ii) of the Act,\3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposal effective upon filing
with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend Section IV.A (Non-
Auction Transactions) and Section IV.A.1 (Tiered Volume Rebate for Non-
Auction Transactions) of the Fee Schedule 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 Section IV.A (Non-Auction
Transactions) and Section IV.A.1 (Tiered Volume Rebate for Non-Auction
Transactions) of the BOX Fee Schedule. First, the Exchange proposes to
increase Public Customer taker fees on transactions for options
overlying the Standard and Poor's Depositary Receipts Trust (``SPY'')
in Section IV.A.\5\ Next, the Exchange proposes to reduce Tier 4
rebates and establish a new Tier 5 in the Tiered Volume Rebate for Non-
Auction Transactions for Percentage National Customer Volume in
Multiply-Listed Options Classes.
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\5\ Options overlying Standard and Poor's Depositary Receipts/
SPDRs (``SPY'') are based on the SPDR exchange-traded fund
(``ETF''), which is designed to track the performance of the S&P 500
Index.
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Non-Auction Transactions
In Section IV.A of the BOX Fee Schedule, fees and credits for
Electronic Non-Auction Transactions are assessed depending on three
factors: (i) the account type of the Participant submitting the order;
(ii) whether the Participant is a liquidity provider or liquidity
taker; and (iii) the account type of the contra party. Currently, when
a Public Customer SPY order is a liquidity taker contra to a
Professional Customer, Broker Dealer, or a Market Maker, the Public
Customer is assessed no fee. The Exchange now proposes to increase
Public Customer taker fees on SPY Non-Auction Transactions.
Accordingly, when a Public Customer SPY order is a liquidity taker
contra to a Professional Customer, Broker Dealer, or a Market Maker,
the Public Customer will be assessed a fee of $0.10.
Tiered Volume Rebate for Non-Auction Transactions
The Exchange also proposes to amend Section IV.A.1 of the Fee
Schedule. Specifically, the Exchange proposes to add a Tier and to
adjust the Percentage Thresholds of National Customer Volume in
Multiply-Listed Options Classes. Currently, Public Customers
[[Page 80354]]
receive a per contract rebate for electronic Non-Auction Transactions
according to the Tier achieved by the Public Customer as provided in
the Percentage Thresholds of National Customer Volume in Multiply-
Listed Options Classes table in Section IV.A.1 of the BOX Fee
Schedule.\6\ Percentage thresholds are calculated on a monthly basis by
totaling the Public Customer's executed Auction and Non-Auction
transaction volume on BOX, relative to the total national customer
volume in multiply-listed options classes.
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\6\ The Exchange notes that Public Customers do not initiate
transactions on BOX directly. BOX Participants initiate Electronic
Non-Auction Transactions on the behalf of Public Customers and are
assessed fees or provided rebates by the Exchange.
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The Exchange notes that Non-Auction Transactions where a Public
Customer order interacts with another Public Customer order are exempt
from a per contract rebate. However, these transactions still count
toward the Public Customer's monthly volume on BOX. The current
thresholds and rebates are as follows:
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Percentage Per contract rebate
thresholds of -----------------------------------------------------------------------------
national customer Penny interval classes Non-penny interval SPY
Tier volume in -------------------------- classes -------------------------
multiply-listed --------------------------
options classes Maker Taker Maker Taker
(monthly) Maker Taker
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1.............. 0.000-0.249...... $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
2.............. 0.250-0.499...... (0.05) (0.15) (0.15) (0.27) (0.05) 0.00
3.............. 0.500-0.749...... (0.10) (0.20) (0.30) (0.32) (0.10) 0.00
4.............. 0.750 and Above.. (0.27) (0.27) (0.60) (0.40) (0.27) 0.00
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The Exchange proposes to modify Tier 4 from 0.750% and Above to
0.750%-0.999% and to establish Tier 5 which will be 1.000% and Above.
The Exchange also proposes to reduce Tier 4 rebates to $0.20 and $0.22
for Maker and Taker respectively in Penny Interval Classes, $0.45 and
$0.35 for Maker and Taker respectively in Non-Penny Interval Classes,
and $0.20 and $0.00 for Maker and Taker respectively in SPY. Finally,
the Exchange proposes to establish Tier 5 rebates of $0.27 and $0.27
for Maker and Taker respectively in Penny Interval Classes, $0.60 and
$0.40 for Maker and Taker respectively in Non-Penny Interval Classes,
and $0.27 and $0.11 for Maker and Taker respectively in SPY. The
proposed rebate structure is as follows:
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Percentage Per contract rebate
thresholds of -----------------------------------------------------------------------------
national customer Penny interval classes Non-penny interval SPY
Tier volume in -------------------------- classes -------------------------
multiply-listed --------------------------
options classes Maker Taker Maker Taker
(monthly) Maker Taker
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1.............. 0.000-0.249...... $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
2.............. 0.250-0.499...... (0.05) (0.15) (0.15) (0.27) (0.05) 0.00
3.............. 0.500-0.749...... (0.10) (0.20) (0.30) (0.32) (0.10) 0.00
4.............. 0.750-0.999...... (0.20) (0.22) (0.45) (0.35) (0.20) 0.00
5.............. 1.000 and Above.. (0.27) (0.27) (0.60) (0.40) (0.27) (0.11)
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The Exchange notes that the proposed SPY taker fees are lower than
comparable taker fees at several other exchanges.\7\ The Exchange notes
further that other exchanges employ similar incentive programs; and the
Exchange believes that the proposed changes are reasonable and
competitive when compared to incentive structures at other
exchanges.\8\
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\7\ See e.g., Nasdaq PHLX LLC, Options 7, Section 3 Part A.
(``Simple Order'' Customer fee for removing SPY liquidity of $0.41);
Cboe C2 Exchange, Inc. Fee Schedule (``Transaction Fees'' applicable
to SPY for Public Customer Remove rates of $0.37); MIAX PEARL, LLC
Fee Schedule (``Transaction Rebates/Fees'' for Priority Customer SPY
Taker in Tier 1 of $0.46).
\8\ See Nasdaq PHLX LLC (``Nasdaq PHLX'') Options 7, Section 2
(Customer Rebate Program) and Cboe Exchange, Inc. (``CBOE'') Fee
Schedule (Volume Incentive Program). The Exchange notes that these
programs use different tier structures, volume calculations, and
rebate amounts, however, their rebate programs operate similarly to
BOX's in that they are driven by volume and designed to incentivize
Public Customer order flow.
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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,\9\ in particular, in that it provides
for the equitable allocation of reasonable dues, fees, and other
charges among BOX Participants and other persons using its facilities
and does not unfairly discriminate between customers, issuers, brokers
or dealers.
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\9\ 15 U.S.C. 78f(b)(4) and (5).
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The Exchange notes that it operates in a highly competitive
environment. Indeed, there are currently 17 registered options
exchanges that trade options. Based on publicly available information,
no single options exchange has more than 21% of the market share and
currently the Exchange represents only approximately 7% of the market
share.\10\ 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.'' \11\ 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 Public Customer
electronic non-auction order flow to BOX.
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\10\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (September 29, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
\11\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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[[Page 80355]]
Non-Auction Transactions
The Exchange believes the proposed electronic Non-Auction
transaction taker fees for Public Customer SPY transactions are
reasonable as the proposed taker fees are lower than similar
transaction fees assessed at other exchanges.\12\ The Exchange further
believes that the proposed SPY taker fee for electronic Non-Auction
Public Customer transactions will not disincentivize Public Customer
order flow because BOX's electronic Non-Auction Transactions fee
structure is designed to attract competitive quotes and orders, which
results in liquid markets that Public Customers may find attractive.
Specifically, the Exchange assesses no fees for Public Customers that
make liquidity in SPY and, no fees for Market Makers that make
liquidity in SPY, which incentivizes competitive quotes and resting
orders. The Exchange believes that Public Customers may be willing to
pay a nominal taker fee of $0.10 to access such competitive markets.
The Exchange notes that other exchanges assess fees between $0.37 and
$0.46 for customer transactions taking liquidity in SPY.\13\
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\12\ See supra note 7.
\13\ See supra note 7.
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The Exchange believes that assessing Public Customers a taker fee
of $0.10 for SPY electronic Non-Auction Transactions is equitable and
not unfairly discriminatory. The Exchange notes that Professional
Customer, Broker Dealer, and Market Maker taker fees for SPY electronic
Non-Auction Transactions are $0.50. The securities markets generally,
and BOX in particular, have historically aimed to improve markets for
investors and develop various features within the market structure for
Public Customer benefit. Accordingly, the Exchange believes that
charging a lower taker fee for Public Customers for their SPY
transactions compared to other account types on BOX is appropriate and
not unfairly discriminatory.
Tiered Volume Rebate for Non-Auction Transactions
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to adjust certain percentage thresholds in the volume-
based thresholds for Public Customers in electronic Non-Auction
Transactions. The volume-based thresholds and applicable rebates are
designed to continue to incentivize Public Customers to direct order
flow to BOX to obtain the benefit of the rebate, which may in turn
benefit all market participants by increasing liquidity on BOX. The
Exchange proposes to amend Tier 4, which was 0.750% and Above, to
0.750%-0.999%, and to add Tier 5 with a threshold of 1.000% and Above.
This fee structure is designed to incentivize Public Customers to send
their order flow to BOX, which may result in increased trading
opportunities and executions on BOX.\14\ Further, the Exchange notes
that the proposed amendment to the percentage thresholds in the volume-
based thresholds for Public Customers in electronic Non-Auction
Transactions is not designed to benefit one firm in particular, but, as
discussed herein, is designed to further incentivize order flow to BOX.
While the Exchange proposes to decrease Tier 4 rebates, the Exchange
believes that Public Customers will still benefit from the opportunity
to obtain a rebate for their executions on BOX. The Exchange notes that
other exchanges employ similar incentive programs; and the Exchange
believes that the proposed changes are reasonable and competitive when
compared to incentive structures at other exchanges.\15\
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\14\ The Exchange notes that BOX Participants collect rebates on
behalf of Public Customers and have independent fee arrangements
with such Public Customers.
\15\ See supra note 8.
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The Exchange believes that the proposed changes to the thresholds
in Tiers 4 and 5 are equitable and not unfairly discriminatory as they
are available to all Public Customers, and Public Customers may choose
whether or not to take advantage of the percentage thresholds and their
applicable rebates. The securities markets generally, and BOX in
particular, have historically aimed to improve markets for investors
and develop various features within the market structure for Public
Customer benefit. Accordingly, the Exchange believes that providing a
rebate structure for Public Customers is appropriate and not unfairly
discriminatory. Based on its review of competitor exchanges, the
Exchange believes that lowering Tier 4 rebates, and adding more
difficult to obtain Tier 5 rebates, will not disincentivize Public
Customer order flow. Rather, the Exchange believes that the proposed
rebates will continue to help attract a high level of Public Customer
order flow to the BOX, which will ultimately benefit all Participants
trading on BOX.
The Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow and 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 changes are a reasonable attempt to effectively compete
for electronic Non-Auction Public Customer orders. The Exchange
believes that the proposed change may incentivize Public Customer order
flow and, in turn, may make BOX a more competitive venue for order
execution to the benefit of all Participants. Finally, the Exchange
believes the proposed changes are consistent with the Act because, to
the extent the modifications permit the Exchange to continue to attract
greater volume and liquidity, the proposed changes would improve BOX's
overall competitiveness and strengthen market quality for all market
participants.
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 Exchange believes the proposed changes to Public Customer SPY
taker fees in the electronic Non-Auction Transactions fee structure
will not impose a burden on intramarket competition as BOX believes
that the changes will result in Public Customers being charged
appropriately for their SPY taker transactions. The proposed change
would apply to all similarly situated market participants and,
accordingly, the proposed change would not impose a disparate burden on
competition among Participants on BOX. The proposed change is designed
to assess Public Customers a nominal taker fee for Electronic SPY Non-
Auction Transactions. The Exchange notes that Public Customer taker
fees remain lower than Professional Customer, Broker Dealer, and Market
Maker taker fees because BOX has historically aimed to improve markets
for investors and develop various features within the market structure
for Public Customer benefit.
The Exchange believes further the proposed changes to Public
Customer SPY taker fees in the Electronic Non-Auction Transactions fee
structure will not impose a burden on intermarket competition. The
Exchange notes that the Non-Auction Transaction fee structure as a
whole, including the proposed change, is designed to be competitive
with other options
[[Page 80356]]
exchanges and to attract order flow. The Exchange believes the
electronic Non-Auction Transactions fee structure, including the
proposed change, will remain competitive with other options exchanges
and will continue to assess lower Public Customer taker fees than
several other exchanges.\16\
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\16\ See supra note 7.
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The Exchange believes the proposed changes to Tier 4 and the
addition of Tier 5 in Section IV.A.1 will not impose a burden on
competition among various BOX Participants. The Exchange believes that
the proposed changes will result in Public Customers being rebated
appropriately for their transactions. The Exchange believes further
that the proposed rebates will continue to attract Public Customer
order flow to the BOX, which will ultimately benefit all Participants
trading on BOX.
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 rebates to remain
competitive with other exchanges. Because competitors are free to
modify their own fees and rebates in response, and because market
participants may readily adjust their order routing practices, the
Exchange believes that the degree to which fee or rebate changes in
this market may impose any burden on competition is extremely limited.
The Exchange notes that other exchanges provide programs to incentivize
customer order flow and that the proposed changes to the volume
thresholds remain competitive when compared to incentive structures at
other exchanges.\17\ For the reasons described above, the Exchange
believes that the proposed rule change will encourage intermarket
competition.
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\17\ See supra note 8.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A)(ii) of the Exchange Act \18\ and Rule 19b-4(f)(2)
thereunder,\19\ because it establishes or changes a due, or fee.
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\18\ 15 U.S.C. 78s(b)(3)(A)(ii).
\19\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-BOX-2023-25 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-2023-25. 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
a.m. and 3 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-BOX-2023-25 and should be
submitted on or before December 8, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-25379 Filed 11-16-23; 8:45 am]
BILLING CODE 8011-01-P
