Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BOX Rule 5050 (Series of Options Contracts Open for Trading), 83180-83184 [2023-26113]

Download as PDF 83180 Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: Matthew V. Curtin, Esq., IndexIQ Advisors, mcurtin@indexiq.com and Barry I. Pershkow, Chapman and Cutler LLP, pershkow@chapman.com. FOR FURTHER INFORMATION CONTACT: Trace W. Rakestraw, Senior Special Counsel, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: For Applicants’ representations, legal analysis, and conditions, please refer to Applicants’ application, dated October 12, 2023, which may be obtained via the Commission’s website by searching for the file number at the top of this document, or for an Applicant using the Company name search field on the SEC’s EDGAR system. The SEC’s EDGAR system may be searched at https://www.sec.gov/edgar/searchedgar/ legacy/companysearch.html. You may also call the SEC’s Public Reference Room at (202) 551–8090. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend BOX Rule amend BOX Rule 5050 (Series of Options Contracts Open for Trading). 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. For the Commission, by the Division of Investment Management, under delegated authority. J. Matthew DeLesDernier, Deputy Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2023–26118 Filed 11–27–23; 8:45 am] 1. Purpose BILLING CODE 8011–01–P The Exchange proposes to amend BOX Rule 5050 (Series of Options Contracts Open for Trading) to adopt IM–5050–12 to implement a new strike interval program for stocks that are priced less than $2.50 and have an average daily trading volume of at least 1,000,000 shares per day for the three (3) preceding calendar months. The Exchange also proposes to amend the table in IM–5050–11 to harmonize the table to the proposed change. This is a competitive filing that is based on a proposal recently submitted by Miami International Securities Exchange, LLC (‘‘MIAX’’) approved by the Commission.3 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99009; File No. SR–BOX– 2023–26] Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BOX Rule 5050 (Series of Options Contracts Open for Trading) November 21, 2023. lotter on DSK11XQN23PROD with NOTICES1 by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule from interested persons. 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 15, 2023, BOX Exchange LLC (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 17:19 Nov 27, 2023 Jkt 262001 Background Currently, BOX Rule 5050, Series of Options Contracts Open for Trading, describes the process and procedures for listing and trading series of options 4 on 3 See Securities Exchange Act Release No. 98917 (November 13, 2023) (Order Approving SR–MIAX– 2023–36). 4 The term ‘‘option contract’’ means a put or a call issued, or subject to issuance by the Clearing PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 the Exchange. IM–5050–3 provides for a $2.50 Strike Price Program, where the Exchange may select up to 60 option classes 5 on individual stocks for which the interval of strike prices will be $2.50 where the strike price is greater than $25.00 but less than $50.00.6 IM–5050– 2 also provides for a $1 Strike Price Interval Program, where the interval between strike prices of series of options 7 on individual stocks may be $1.00 or greater provided the strike price is $50.00 or less, but not less than $1.00.8 Additionally, Rule 5050 provides for a $0.50 Strike Program.9 The interval of strike prices of series of options on individual stocks may be $0.50 or greater beginning at $0.50 where the strike price is $5.50 or less, but only for options classes whose underlying security closed at or below $5.00 in its primary market on the previous trading day and which have national average daily volume that equals or exceeds 1,000 contracts per day as determined by The Options Clearing Corporation (‘‘OCC’’) during the preceding three calendar months. The listing of $0.50 strike prices is limited to options classes overlying no more than 20 individual stocks (the ‘‘$0.50 Strike Program’’) as specifically designated by the Exchange. The Exchange may list $0.50 strike prices on any other option classes if those classes are specifically designated by other securities exchanges that employ a similar $0.50 Strike Program under their respective rules. A stock shall remain in the $0.50 Strike Program until otherwise designated by the Exchange.10 Proposal At this time, the Exchange proposes to adopt a new strike interval program for stocks that are not in the aforementioned $0.50 Strike Program (or the Short Term Option Series Program) 11 and that close below $2.50 and have an average daily trading volume of at least 1,000,000 shares per day for the three (3) preceding calendar months. The $0.50 Strike Program considers stocks that have a closing price at or below $5.00 whereas the Exchange’s proposal will consider Corporation pursuant to the Rules of the Clearing Corporation. See BOX Rule 100(a)(38). 5 The terms ‘‘class of options’’ means all options contracts of the same type and style covering the same underlying security. See BOX Rule 100(a)(11). 6 See IM–5050–3. 7 The term ‘‘series of options’’ means all options contracts of the same class of options having the same exercise price and expiration date. See BOX Rule 100(a)(63). 8 See IM–5050–2. 9 See IM–5050–5. 10 Id. 11 See IM–5050–6. E:\FR\FM\28NON1.SGM 28NON1 Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices stocks that have a closing price below $2.50. Currently, there is a subset of stocks that are not included in the $0.50 Strike Program as a result of the limitations of that program which provides that the listing of $0.50 strike prices shall be limited to option classes overlying no more than 20 individual stocks as specifically designated by the Exchange and requires a national average daily volume that equals or exceeds 1,000 contracts per day as determined by the OCC during the preceding three calendar months.12 Therefore, the Exchange is proposing to implement a new strike interval program termed the ‘‘Low Priced Stock Strike Price Interval Program.’’ To be eligible for the inclusion in the Low Priced Stock Strike Price Interval Program, an underlying stock must (i) close below $2.50 in its primary market on the previous trading day; and (ii) have an average daily trading volume of at least 1,000,000 shares per day for the three (3) preceding calendar months. The Exchange notes that there is no limit to the number of classes that will be eligible for inclusion in the proposed program, provided, of course, that the underlying stocks satisfy both the price and average daily trading volume requirements of the proposed program. The Exchange also proposes that after a stock is added to the Low Priced Stock Strike Price Interval Program, the Exchange may list $0.50 strike price intervals from $0.50 up to $2.00.13 For the purpose of adding strikes under the Low Priced Stock Strike Price Interval Program, the ‘‘price of the underlying stock’’ shall be measured in the same way as ‘‘the price of the underlying security’’ as set forth in Rule 5050(b)(1).14 Further, no additional series in $0.50 intervals may be listed if the underlying stock closes at or above $2.50 in its primary market. Additional series in $0.50 intervals may not be added until the underlying stock again closes below $2.50. The Exchange’s proposal addresses a gap in strike coverage for low priced stocks. The $0.50 Strike Program considers stocks that close below $5.00 and limits the number of option classes listed to no more than 20 individual stocks (provided that the open interest criteria is also satisfied). Whereas, the lotter on DSK11XQN23PROD with NOTICES1 12 See IM–5050–5. the Exchange may list new strikes on underlying stocks that meet the eligibility requirements of the new program the Exchange will exercise its discretion and will not list strikes on underlying stocks the Exchange believes are subject to imminent delisting from their primary exchange. 14 The Exchange notes this is the same methodology used in the $1 Strike Price Interval Program. See IM–5050–2(b)(3). 13 While VerDate Sep<11>2014 17:19 Nov 27, 2023 Jkt 262001 Exchange’s proposal has a narrower focus, with respect to the underlying’s stock price, and is targeted on those stocks that close below $2.50 and does not limit the number of stocks that may participate in the program (provided that the average daily trading volume is also satisfied). The Exchange does not believe that any market disruptions will be encountered with the addition of these new strikes. The Exchange represents that it has the necessary capacity and surveillance programs in place to support and properly monitor trading in the proposed Low Priced Stock Strike Price Interval Program. The Exchange believes that its average daily trading volume requirement of 1,000,000 shares is a reasonable threshold to ensure adequate liquidity in eligible underlying stocks as it is substantially greater than the thresholds used for listing options on equities, American Depository Receipts, and broad-based indexes. Specifically, underlying securities with respect to which put or call option contracts are approved for listing and trading on the Exchange must meet certain criteria as determined by the Exchange. One of those requirements is that trading volume (in all markets in which the underlying security is traded) has been at least 2,400,000 shares in the preceding twelve (12) months.15 Rule 5020(f) provides the criteria for listing options on American Depositary Receipts (‘‘ADRs’’) if they meet certain criteria and guidelines set forth in Exchange Rule 5020. One of the requirements is that the average daily trading volume for the security in the U.S. markets over the three (3) months preceding the selection of the ADR for options trading is 100,000 or more shares.16 Finally, the Exchange may trade options on a broad-based index pursuant to Rule 19b–4(e) of the Securities Exchange Act of 1934 provided a number of conditions are satisfied. One of those conditions is that each component security that accounts for at least one percent (1%) of the weight of the index has an average daily trading volume of at least 90,000 shares during the last six month period.17 Additionally, the Exchange proposes to amend the table in IM–5050–11 to insert a new column to harmonize the Exchange’s proposal to the strike intervals for Short Term Options Series as described in IM–5050–12. The table in IM–5050–11 is intended to limit the intervals between strikes for multiply listed equity options within the Short 15 See Exchange Rule 5020(b)(2). Exchange Rule 5020(f)(3)(ii). 17 See Exchange Rule 6020(b)(7). 16 See PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 83181 Term Options Series program that have an expiration date more than twentyone days from the listing date. Specifically, the table defines the applicable strike intervals for options on underlying stocks given the closing price on the primary market on the last day of the calendar quarter, and a corresponding average daily volume of the total number of options contracts traded in a given security for the applicable calendar quarter divided by the number of trading days in the applicable calendar quarter.18 However, the lowest share price column is titled ‘‘less than $25.’’ The Exchange now proposes to insert a column titled ‘‘less than $2.50’’ and to set the strike interval at $0.50 for each average daily volume tier represented in the table. Also, the Exchange proposes to amend the heading of the column currently titled ‘‘less than $25,’’ to ‘‘$2.50 to less than $25’’ as a result of the adoption of the new proposed column, ‘‘less than $2.50.’’ The Exchange believes this change will remove any potential conflict between the strike intervals under the Short Term Options Series Program and those described herein under the Exchange’s proposal. Impact of Proposal The Exchange recognizes that its proposal will introduce new strikes in the marketplace and further acknowledges that there has been significant effort undertaken by the industry to curb strike proliferation. This initiative has been spearheaded by the Nasdaq BX who filed an initial proposal focused on the removal, and prevention of the listing, of strikes which are extraneous and do not add value to the marketplace (the ‘‘Strike Interval Proposal’’).19 The Strike Interval Proposal was intended to remove repetitive and unnecessary strike listings across the weekly expiries. Specifically, the Strike Interval Proposal aimed to reduce the density of strike intervals that would be listed in the later weeks, by creating limitations for intervals between strikes which have an expiration date more than twenty18 See Securities Exchange Release Act No. 91125 (February 21, 2021), 86 FR 10375 (February 19, 2021) (SR–BX–2020–032) (Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Options 4, Section 5, To Limit Short Term Options Series Intervals Between Strikes That Are Available for Quoting and Trading on BX). 19 See Securities Exchange Act No. 91225 (February 12, 2021), 86 FR 10375 (February 12, 2021) (SR–BX–2020–032) (BX Strike Approval Order); See also BX Options Strike Proliferation Proposal (February 25, 2021) available at: https:// www.nasdaq.com/solutions/bx-options-strikeproliferation-proposal). E:\FR\FM\28NON1.SGM 28NON1 83182 Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices lotter on DSK11XQN23PROD with NOTICES1 one days from the listing date.20 The Strike Interval Proposal took into account OCC customer-cleared volume, using it as an appropriate proxy for demand. The Strike Interval Proposal was designed to maintain strikes where there was customer demand and eliminate strikes where there wasn’t. At the time of its proposal Nasdaq BX estimated that the Strike Interval Proposal would reduce the number of strikes it listed by 81,000.21 The Exchange proposes to amend the table to define the strike interval at $0.50 for underlying stocks with a share price of less than $2.50. The Exchange believes this amendment will harmonize the Exchange’s proposal with the Strike Interval Proposal described above. The Exchange recognizes that its proposal will moderately increase the total number of option series available on the Exchange. However, the Exchange’s proposal is designed to only add strikes where there is investor demand 22 which will improve market quality. Under the requirements for the Low Priced Stock Strike Price Interval Program as described herein, the Exchange determined that as of August 9, 2023, 106 symbols met the proposed criteria. Of those symbols 36 are currently in the $1 Strike Price Interval Program with $1.00 and $2.00 strikes listed. Under the Exchange’s proposal the Exchange would add the $0.50 and $1.50 strikes for these symbols for the current expiration terms. The remaining 70 symbols eligible under the Exchange’s proposal would have $0.50, $1.00, $1.50 and $2.00 strikes added to their current expiration terms. Therefore, for the 106 symbols eligible for the Low Priced Stock Strike Price Interval Program a total of approximately 3,250 options would be added. As of August 9, 2023, the Exchange listed 1,106,550 options, therefore the additional options that would be listed under this proposal would represent a very minor increase of 0.294% in the number of options listed on the Exchange. The Exchange does not believe that its proposal contravenes the industry’s efforts to curtail unnecessary strikes. The Exchange’s proposal is targeted to only underlying stocks that close at less than $2.50 and that also meet the average daily trading volume 20 See Securities Exchange Act No. 91225 (February 12, 2021), 86 FR 10375 (February 12, 2021) (SR–BX–2020–032). 21 See id. 22 See proposed IM–5050–12 which requires that an underlying stock have an average daily trading volume of 1,000,000 shares for the three (3) preceding months to be eligible for inclusion in the Low Priced Stock Strike Price Interval Program. VerDate Sep<11>2014 17:19 Nov 27, 2023 Jkt 262001 requirement. Additionally, because the strike increment is $0.50 there are only a total of four strikes that may be listed under the program ($0.50, $1.00, $1.50, and $2.00) for an eligible underlying stock. Finally, if an eligible underlying stock is in another program (e.g., the $0.50 Strike Program or the $1 Strike Price Interval Program) the number of strikes that may be added is further reduced if there are pre-existing strikes as part of another strike listing program. Therefore, the Exchange does not believe that it will list any unnecessary or repetitive strikes as part of its program, and that the strikes that will be listed will improve market quality and satisfy investor demand. The Exchange further believes that the Options Price Reporting Authority (‘‘OPRA’’), has the necessary systems capacity to handle any additional messaging traffic associated with this proposed rule change. The Exchange also believes that Participants 23 will not have a capacity issue as a result of the proposed rule change. Finally, the Exchange believes that the additional options will serve to increase liquidity, provide additional trading and hedging opportunities for all market participants, and improve market quality. Implementation The Exchange will issue a notice to Participants via Regulatory Notice with appropriate advanced notice announcing the implementation date of the proposed rule change. 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act,24 in general, and Section 6(b)(5) of the Act,25 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. In particular, the Exchange believes its proposal promotes just and equitable principles of trade and removes impediments to and 23 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’’. See Exchange Rule 100. 24 15 U.S.C. 78f(b). 25 15 U.S.C. 78f(b)(5). PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 perfects the mechanisms of a free and open market and a national market system as the Exchange has identified a subset of stocks that are trading under $2.50 and do not have meaningful strikes available. For example, on August 9, 2023, symbol SOND closed at $0.50 and had open interest of over 44,000 contracts and an average daily trading volume in the underlying stock of over 1,900,000 shares for the three preceding calendar months.26 Currently the lowest strike listed is for $2.50, making the lowest strike 400% away from the closing stock price. Another symbol, CTXR, closed at $0.92 on August 9, 2023, and had open interest of over 63,000 contracts and an average daily trading volume in the underlying stock of over 1,900,000 shares for the three preceding calendar months.27 Similarly, the lowest strike listed is for $2.50, making the lowest strike more than 170% away from the closing stock price. Currently, such products have no at-the-money options, as well as no inthe-money calls or out-of-the-money puts. The Exchange’s proposal will provide additional strikes in $0.50 increments from $0.50 up to $2.00 to provide more meaningful trading and hedging opportunities for this subset of stocks. Given the increased granularity of strikes as proposed under the Exchange’s proposal out-of-the-money puts and in-the-money calls will be created. The Exchange believes this will allow market participants to tailor their investment and hedging needs more effectively. The Exchange believes its proposal promotes just and equitable principles of trade and removes impediments to and perfects the mechanisms of a free and open market and a national market system and, in general, protects investors and the public interest by adding strikes that improves market quality and satisfies investor demand. The Exchange does not believe that the number of strikes that will be added under the program will negatively impact the market. Additionally, the proposal does not run counter to the efforts undertaken by the industry to curb strike proliferation as that effort focused on the removal and prevention of extraneous strikes where there was no investor demand. The Exchange’s proposal requires the satisfaction of an average daily trading volume threshold in addition to the underlying stock closing at a price below $2.50 to be 26 See Yahoo! Finance, https:// finance.yahoo.com/quote/SOND/history?p=SOND (last visited August 10, 2023). 27 See Yahoo! Finance, https:// finance.yahoo.com/quote/CTXR/history?p=CTXR (last visited August 10, 2023). E:\FR\FM\28NON1.SGM 28NON1 lotter on DSK11XQN23PROD with NOTICES1 Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices eligible for the program. The Exchange believes that the average daily trading volume threshold of the program ensures that only strikes with investor demand will be listed and fills a gap in strike interval coverage as described above. Further, being that the strike interval is $0.50, there are only a maximum of four strikes that may be added ($0.50, $1.00, $1.50, and $2.00). Therefore, the Exchange does not believe that its proposal will undermine the industry’s efforts to eliminate repetitive and unnecessary strikes in any fashion. The Exchange believes that its average daily trading volume threshold promotes just and equitable principles of trade and removes impediments to and perfects the mechanisms of a free and open market and a national market system and, in general, protects investors and the public interest as it is designed to permit only those stocks with demonstrably high levels of trading activity to participate in the program. The Exchange notes that its average daily trading volume requirement is substantially greater that the average daily trading requirement currently in place on the Exchange for options on equity underlyings,28 ADRs,29 and broad-based indexes.30 The Exchange believes that the proposed rule change is consistent with Section 6(b)(1) of the Act, which provides that the Exchange be organized and have the capacity to be able to carry out the purposes of the Act and the rules and regulations thereunder, and the rules of the Exchange. The proposed rule change allows the Exchange to respond to customer demand to provide meaningful strikes for low priced stocks. The Exchange does not believe that the proposed rule would create any capacity issue or negatively affect market functionality. Additionally, the Exchange represents that it has the necessary systems capacity to support the new options series and handle additional messaging traffic associated with this proposed rule change. The Exchange also believes that its Participants will not experience any capacity issues as a result of this proposal. In addition, the Exchange represents that it believes that additional strikes for low priced stocks will serve to increase liquidity available as well and improve price efficiency by providing more trading opportunities for all market participants. The Exchange believes that the proposed rule change will benefit investors by supra note 15. supra note 16. 30 See supra note 17. giving them increased opportunities to execute their investment and hedging decisions. Finally, the Exchange believes its proposal is designed to prevent fraudulent and manipulative acts and practices as options may only be listed on underlyings that satisfy the listing requirements of the Exchange as described in Exchange Rule 5020, Criteria for Underlying Securities. Specifically, Rule 5020 requires that underlying securities for which put or call option contracts are approved for listing and trading on the Exchange must meet the following criteria: (1) the security must be registered and be an ‘‘NMS stock’’ as defined in Rule 600 of Regulation NMS under the Exchange Act; (2) the security shall be characterized by a substantial number of outstanding shares that are widely held and actively traded.31 Additionally, Rule 5020 provides that absent exceptional circumstances, an underlying security will not be selected for options transactions unless: (1) there are a minimum of seven (7) million shares of the underlying security which are owned by persons other than those required to report their stock holdings under Section 16(a) of the Exchange Act; (2) there are a minimum of 2,000 holders of the underlying security; (3) the issuer is in compliance with any applicable requirements of the Exchange Act; and (4) trading volume (in all markets in which the underlying security is traded) has been at least 2,400,000 shares in the preceding twelve (12) months.32 The Exchange’s proposal does not impact the eligibility of an underlying stock to have options listed on it, but rather addresses only the listing of new additional option classes on an underlying listed on the Exchange in accordance to the Exchange’s listings rules. As such, the Exchange believes that the listing requirements described in Exchange Rule 5020 address potential concerns regarding possible manipulation. Additionally, in conjunction with the proposed Average Daily Volume requirement described herein, the Exchange believes any possible market manipulation is further mitigated. 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 28 See 29 See VerDate Sep<11>2014 17:19 Nov 27, 2023 31 See 32 See Jkt 262001 PO 00000 Exchange Rule 5020(a)(1) and (2). Exchange Rule 5020(b)(1),(2),(3) and (4). Frm 00111 Fmt 4703 Sfmt 4703 83183 notes that the rule change is being proposed as a competitive response to a filing submitted by MIAX that was recently approved by the Commission.33 The Exchange does not believe that its proposed rule change will impose any burden on intra-market competition as the Rules of the Exchange apply equally to all Participants of the Exchange and all Participants may trade the new proposed strikes if they so choose. Specifically, the Exchange believes that investors and market participants will significantly benefit from the availability of finer strike price intervals for stocks priced below $2.50, which will allow them to tailor their investment and hedging needs more effectively. The Exchange does not believe that its proposed rule change will impose any burden on inter-market competition, as nothing prevents other options exchanges from proposing similar rules to list and trade options on low priced stocks. Rather the Exchange believes that its proposal will promote intermarket competition, as the Exchange’s proposal will result in additional opportunities for investors to achieve their investment and trading objectives, to the benefit of investors, market participants, and the marketplace in general. 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 Pursuant to Section 19(b)(3)(A) of the Act 34 and Rule 19b–4(f)(6) 35 thereunder, the Exchange has designated this proposal as one that effects a change that: (i) does not significantly affect the protection of investors or the public interest; (ii) does not impose any significant burden on competition; and (iii) 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.36 33 See supra note 3. U.S.C. 78s(b)(3)(A). 35 17 CFR 240.19b–4(f)(6). 36 In addition, Rule 19b–4(f)(6) requires a selfregulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such 34 15 E:\FR\FM\28NON1.SGM Continued 28NON1 83184 Federal Register / Vol. 88, No. 227 / Tuesday, November 28, 2023 / Notices A proposed rule change filed pursuant to Rule 19b–4(f)(6) under the Act normally does not become operative for 30 days after the date of its filing. However, Rule 19b–4(f)(6)(iii) 37 permits the Commission to designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange requested that the Commission waive the 30-day operative delay so that the proposal may become operative immediately upon filing. The Commission notes it has approved a proposed rule change substantially identical to the one proposed by the Exchange.38 The proposed change raises no novel legal or regulatory issues. Therefore, the Commission believes that waiver of the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission hereby waives the 30-day operative delay and designates the proposed rule change operative upon filing.39 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: Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–BOX–2023–26. 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–2023–26 and should be submitted on or before December 19, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.40 Christina Z. Milnor, Assistant Secretary. Electronic Comments [FR Doc. 2023–26113 Filed 11–27–23; 8:45 am] • 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–2023–26 on the subject line. BILLING CODE 8011–01–P Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 35056; 812–15506] Meketa Infrastructure Fund and Meketa Capital, LLC lotter on DSK11XQN23PROD with NOTICES1 November 21, 2023. shorter time as designated by the Commission. The Exchange has satisfied this requirement. 37 17 CFR 240.19b–4(f)(6)(iii). 38 See supra note 3. 39 For purposes only of waiving the 30-day operative delay, the Commission has also considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 17:19 Nov 27, 2023 Jkt 262001 Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’). ACTION: Notice. AGENCY: Notice of an application under section 6(c) of the Investment Company Act of 40 17 PO 00000 CFR 200.30–3(a)(12), (59). Frm 00112 Fmt 4703 Sfmt 4703 1940 (the ‘‘Act’’) for an exemption from sections 18(a)(2), 18(c) and 18(i) of the Act, under sections 6(c) and 23(c) of the Act for an exemption from rule 23c–3 under the Act, and for an order pursuant to section 17(d) of the Act and rule 17d– 1 under the Act. SUMMARY OF APPLICATION: Applicants request an order to permit certain registered closed-end investment companies to issue multiple classes of shares and to impose early withdrawal charges and asset-based distribution and/or service fees. APPLICANTS: Meketa Infrastructure Fund and Meketa Capital, LLC. FILING DATES: The application was filed on September 14, 2023, and amended on October 17, 2023. HEARING OR NOTIFICATION OF HEARING: An order granting the requested relief will be issued unless the Commission orders a hearing. Interested persons may request a hearing on any application by emailing the SEC’s Secretary at Secretarys-Office@sec.gov and serving the Applicants with a copy of the request by email, if an email address is listed for the relevant Applicant below, or personally or by mail, if a physical address is listed for the relevant Applicant below. Hearing requests should be received by the Commission by 5:30 p.m. on December 18, 2023, and should be accompanied by proof of service on the Applicants, in the form of an affidavit, or, for lawyers, a certificate of service. Pursuant to rule 0– 5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by emailing the Commission’s Secretary. ADDRESSES: The Commission: Secretarys-Office@sec.gov. Applicants: Chelsea Childs, Esq., Ropes & Gray LLP, Chelsea.Childs@ropesgray.com. FOR FURTHER INFORMATION CONTACT: Trace W. Rakestraw, Senior Special Counsel, at (202) 551–6825 (Division of Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: For Applicants’ representations, legal analysis, and conditions, please refer to Applicants’ application, dated October 17, 2023, which may be obtained via the Commission’s website by searching for the file number at the top of this document, or for an Applicant using the Company name search field on the SEC’s EDGAR system. The SEC’s EDGAR system may be searched at https://www.sec.gov/edgar/searchedgar/ E:\FR\FM\28NON1.SGM 28NON1

Agencies

[Federal Register Volume 88, Number 227 (Tuesday, November 28, 2023)]
[Notices]
[Pages 83180-83184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26113]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99009; File No. SR-BOX-2023-26]


Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Amend BOX Rule 
5050 (Series of Options Contracts Open for Trading)

November 21, 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 15, 2023, BOX Exchange LLC (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission'') the proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the self-regulatory organization. The Commission is 
publishing this notice to solicit comments on the proposed rule from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend BOX Rule amend BOX Rule 5050 (Series 
of Options Contracts Open for Trading). 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 5050 (Series of Options 
Contracts Open for Trading) to adopt IM-5050-12 to implement a new 
strike interval program for stocks that are priced less than $2.50 and 
have an average daily trading volume of at least 1,000,000 shares per 
day for the three (3) preceding calendar months. The Exchange also 
proposes to amend the table in IM-5050-11 to harmonize the table to the 
proposed change. This is a competitive filing that is based on a 
proposal recently submitted by Miami International Securities Exchange, 
LLC (``MIAX'') approved by the Commission.\3\
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    \3\ See Securities Exchange Act Release No. 98917 (November 13, 
2023) (Order Approving SR-MIAX-2023-36).
---------------------------------------------------------------------------

Background

    Currently, BOX Rule 5050, Series of Options Contracts Open for 
Trading, describes the process and procedures for listing and trading 
series of options \4\ on the Exchange. IM-5050-3 provides for a $2.50 
Strike Price Program, where the Exchange may select up to 60 option 
classes \5\ on individual stocks for which the interval of strike 
prices will be $2.50 where the strike price is greater than $25.00 but 
less than $50.00.\6\ IM-5050-2 also provides for a $1 Strike Price 
Interval Program, where the interval between strike prices of series of 
options \7\ on individual stocks may be $1.00 or greater provided the 
strike price is $50.00 or less, but not less than $1.00.\8\ 
Additionally, Rule 5050 provides for a $0.50 Strike Program.\9\ The 
interval of strike prices of series of options on individual stocks may 
be $0.50 or greater beginning at $0.50 where the strike price is $5.50 
or less, but only for options classes whose underlying security closed 
at or below $5.00 in its primary market on the previous trading day and 
which have national average daily volume that equals or exceeds 1,000 
contracts per day as determined by The Options Clearing Corporation 
(``OCC'') during the preceding three calendar months. The listing of 
$0.50 strike prices is limited to options classes overlying no more 
than 20 individual stocks (the ``$0.50 Strike Program'') as 
specifically designated by the Exchange. The Exchange may list $0.50 
strike prices on any other option classes if those classes are 
specifically designated by other securities exchanges that employ a 
similar $0.50 Strike Program under their respective rules. A stock 
shall remain in the $0.50 Strike Program until otherwise designated by 
the Exchange.\10\
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    \4\ The term ``option contract'' means a put or a call issued, 
or subject to issuance by the Clearing Corporation pursuant to the 
Rules of the Clearing Corporation. See BOX Rule 100(a)(38).
    \5\ The terms ``class of options'' means all options contracts 
of the same type and style covering the same underlying security. 
See BOX Rule 100(a)(11).
    \6\ See IM-5050-3.
    \7\ The term ``series of options'' means all options contracts 
of the same class of options having the same exercise price and 
expiration date. See BOX Rule 100(a)(63).
    \8\ See IM-5050-2.
    \9\ See IM-5050-5.
    \10\ Id.
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Proposal
    At this time, the Exchange proposes to adopt a new strike interval 
program for stocks that are not in the aforementioned $0.50 Strike 
Program (or the Short Term Option Series Program) \11\ and that close 
below $2.50 and have an average daily trading volume of at least 
1,000,000 shares per day for the three (3) preceding calendar months. 
The $0.50 Strike Program considers stocks that have a closing price at 
or below $5.00 whereas the Exchange's proposal will consider

[[Page 83181]]

stocks that have a closing price below $2.50. Currently, there is a 
subset of stocks that are not included in the $0.50 Strike Program as a 
result of the limitations of that program which provides that the 
listing of $0.50 strike prices shall be limited to option classes 
overlying no more than 20 individual stocks as specifically designated 
by the Exchange and requires a national average daily volume that 
equals or exceeds 1,000 contracts per day as determined by the OCC 
during the preceding three calendar months.\12\ Therefore, the Exchange 
is proposing to implement a new strike interval program termed the 
``Low Priced Stock Strike Price Interval Program.''
---------------------------------------------------------------------------

    \11\ See IM-5050-6.
    \12\ See IM-5050-5.
---------------------------------------------------------------------------

    To be eligible for the inclusion in the Low Priced Stock Strike 
Price Interval Program, an underlying stock must (i) close below $2.50 
in its primary market on the previous trading day; and (ii) have an 
average daily trading volume of at least 1,000,000 shares per day for 
the three (3) preceding calendar months. The Exchange notes that there 
is no limit to the number of classes that will be eligible for 
inclusion in the proposed program, provided, of course, that the 
underlying stocks satisfy both the price and average daily trading 
volume requirements of the proposed program.
    The Exchange also proposes that after a stock is added to the Low 
Priced Stock Strike Price Interval Program, the Exchange may list $0.50 
strike price intervals from $0.50 up to $2.00.\13\ For the purpose of 
adding strikes under the Low Priced Stock Strike Price Interval 
Program, the ``price of the underlying stock'' shall be measured in the 
same way as ``the price of the underlying security'' as set forth in 
Rule 5050(b)(1).\14\ Further, no additional series in $0.50 intervals 
may be listed if the underlying stock closes at or above $2.50 in its 
primary market. Additional series in $0.50 intervals may not be added 
until the underlying stock again closes below $2.50.
---------------------------------------------------------------------------

    \13\ While the Exchange may list new strikes on underlying 
stocks that meet the eligibility requirements of the new program the 
Exchange will exercise its discretion and will not list strikes on 
underlying stocks the Exchange believes are subject to imminent 
delisting from their primary exchange.
    \14\ The Exchange notes this is the same methodology used in the 
$1 Strike Price Interval Program. See IM-5050-2(b)(3).
---------------------------------------------------------------------------

    The Exchange's proposal addresses a gap in strike coverage for low 
priced stocks. The $0.50 Strike Program considers stocks that close 
below $5.00 and limits the number of option classes listed to no more 
than 20 individual stocks (provided that the open interest criteria is 
also satisfied). Whereas, the Exchange's proposal has a narrower focus, 
with respect to the underlying's stock price, and is targeted on those 
stocks that close below $2.50 and does not limit the number of stocks 
that may participate in the program (provided that the average daily 
trading volume is also satisfied). The Exchange does not believe that 
any market disruptions will be encountered with the addition of these 
new strikes. The Exchange represents that it has the necessary capacity 
and surveillance programs in place to support and properly monitor 
trading in the proposed Low Priced Stock Strike Price Interval Program.
    The Exchange believes that its average daily trading volume 
requirement of 1,000,000 shares is a reasonable threshold to ensure 
adequate liquidity in eligible underlying stocks as it is substantially 
greater than the thresholds used for listing options on equities, 
American Depository Receipts, and broad-based indexes. Specifically, 
underlying securities with respect to which put or call option 
contracts are approved for listing and trading on the Exchange must 
meet certain criteria as determined by the Exchange. One of those 
requirements is that trading volume (in all markets in which the 
underlying security is traded) has been at least 2,400,000 shares in 
the preceding twelve (12) months.\15\ Rule 5020(f) provides the 
criteria for listing options on American Depositary Receipts (``ADRs'') 
if they meet certain criteria and guidelines set forth in Exchange Rule 
5020. One of the requirements is that the average daily trading volume 
for the security in the U.S. markets over the three (3) months 
preceding the selection of the ADR for options trading is 100,000 or 
more shares.\16\ Finally, the Exchange may trade options on a broad-
based index pursuant to Rule 19b-4(e) of the Securities Exchange Act of 
1934 provided a number of conditions are satisfied. One of those 
conditions is that each component security that accounts for at least 
one percent (1%) of the weight of the index has an average daily 
trading volume of at least 90,000 shares during the last six month 
period.\17\
---------------------------------------------------------------------------

    \15\ See Exchange Rule 5020(b)(2).
    \16\ See Exchange Rule 5020(f)(3)(ii).
    \17\ See Exchange Rule 6020(b)(7).
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to amend the table in IM-5050-
11 to insert a new column to harmonize the Exchange's proposal to the 
strike intervals for Short Term Options Series as described in IM-5050-
12. The table in IM-5050-11 is intended to limit the intervals between 
strikes for multiply listed equity options within the Short Term 
Options Series program that have an expiration date more than twenty-
one days from the listing date. Specifically, the table defines the 
applicable strike intervals for options on underlying stocks given the 
closing price on the primary market on the last day of the calendar 
quarter, and a corresponding average daily volume of the total number 
of options contracts traded in a given security for the applicable 
calendar quarter divided by the number of trading days in the 
applicable calendar quarter.\18\ However, the lowest share price column 
is titled ``less than $25.'' The Exchange now proposes to insert a 
column titled ``less than $2.50'' and to set the strike interval at 
$0.50 for each average daily volume tier represented in the table. 
Also, the Exchange proposes to amend the heading of the column 
currently titled ``less than $25,'' to ``$2.50 to less than $25'' as a 
result of the adoption of the new proposed column, ``less than $2.50.'' 
The Exchange believes this change will remove any potential conflict 
between the strike intervals under the Short Term Options Series 
Program and those described herein under the Exchange's proposal.
---------------------------------------------------------------------------

    \18\ See Securities Exchange Release Act No. 91125 (February 21, 
2021), 86 FR 10375 (February 19, 2021) (SR-BX-2020-032) (Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 1, To Amend Options 4, Section 5, To Limit Short 
Term Options Series Intervals Between Strikes That Are Available for 
Quoting and Trading on BX).
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Impact of Proposal
    The Exchange recognizes that its proposal will introduce new 
strikes in the marketplace and further acknowledges that there has been 
significant effort undertaken by the industry to curb strike 
proliferation. This initiative has been spearheaded by the Nasdaq BX 
who filed an initial proposal focused on the removal, and prevention of 
the listing, of strikes which are extraneous and do not add value to 
the marketplace (the ``Strike Interval Proposal'').\19\ The Strike 
Interval Proposal was intended to remove repetitive and unnecessary 
strike listings across the weekly expiries. Specifically, the Strike 
Interval Proposal aimed to reduce the density of strike intervals that 
would be listed in the later weeks, by creating limitations for 
intervals between strikes which have an expiration date more than 
twenty-

[[Page 83182]]

one days from the listing date.\20\ The Strike Interval Proposal took 
into account OCC customer-cleared volume, using it as an appropriate 
proxy for demand. The Strike Interval Proposal was designed to maintain 
strikes where there was customer demand and eliminate strikes where 
there wasn't. At the time of its proposal Nasdaq BX estimated that the 
Strike Interval Proposal would reduce the number of strikes it listed 
by 81,000.\21\ The Exchange proposes to amend the table to define the 
strike interval at $0.50 for underlying stocks with a share price of 
less than $2.50. The Exchange believes this amendment will harmonize 
the Exchange's proposal with the Strike Interval Proposal described 
above.
---------------------------------------------------------------------------

    \19\ See Securities Exchange Act No. 91225 (February 12, 2021), 
86 FR 10375 (February 12, 2021) (SR-BX-2020-032) (BX Strike Approval 
Order); See also BX Options Strike Proliferation Proposal (February 
25, 2021) available at: https://www.nasdaq.com/solutions/bx-options-strike-proliferation-proposal).
    \20\ See Securities Exchange Act No. 91225 (February 12, 2021), 
86 FR 10375 (February 12, 2021) (SR-BX-2020-032).
    \21\ See id.
---------------------------------------------------------------------------

    The Exchange recognizes that its proposal will moderately increase 
the total number of option series available on the Exchange. However, 
the Exchange's proposal is designed to only add strikes where there is 
investor demand \22\ which will improve market quality. Under the 
requirements for the Low Priced Stock Strike Price Interval Program as 
described herein, the Exchange determined that as of August 9, 2023, 
106 symbols met the proposed criteria. Of those symbols 36 are 
currently in the $1 Strike Price Interval Program with $1.00 and $2.00 
strikes listed. Under the Exchange's proposal the Exchange would add 
the $0.50 and $1.50 strikes for these symbols for the current 
expiration terms. The remaining 70 symbols eligible under the 
Exchange's proposal would have $0.50, $1.00, $1.50 and $2.00 strikes 
added to their current expiration terms. Therefore, for the 106 symbols 
eligible for the Low Priced Stock Strike Price Interval Program a total 
of approximately 3,250 options would be added. As of August 9, 2023, 
the Exchange listed 1,106,550 options, therefore the additional options 
that would be listed under this proposal would represent a very minor 
increase of 0.294% in the number of options listed on the Exchange.
---------------------------------------------------------------------------

    \22\ See proposed IM-5050-12 which requires that an underlying 
stock have an average daily trading volume of 1,000,000 shares for 
the three (3) preceding months to be eligible for inclusion in the 
Low Priced Stock Strike Price Interval Program.
---------------------------------------------------------------------------

    The Exchange does not believe that its proposal contravenes the 
industry's efforts to curtail unnecessary strikes. The Exchange's 
proposal is targeted to only underlying stocks that close at less than 
$2.50 and that also meet the average daily trading volume requirement. 
Additionally, because the strike increment is $0.50 there are only a 
total of four strikes that may be listed under the program ($0.50, 
$1.00, $1.50, and $2.00) for an eligible underlying stock. Finally, if 
an eligible underlying stock is in another program (e.g., the $0.50 
Strike Program or the $1 Strike Price Interval Program) the number of 
strikes that may be added is further reduced if there are pre-existing 
strikes as part of another strike listing program. Therefore, the 
Exchange does not believe that it will list any unnecessary or 
repetitive strikes as part of its program, and that the strikes that 
will be listed will improve market quality and satisfy investor demand.
    The Exchange further believes that the Options Price Reporting 
Authority (``OPRA''), has the necessary systems capacity to handle any 
additional messaging traffic associated with this proposed rule change. 
The Exchange also believes that Participants \23\ will not have a 
capacity issue as a result of the proposed rule change. Finally, the 
Exchange believes that the additional options will serve to increase 
liquidity, provide additional trading and hedging opportunities for all 
market participants, and improve market quality.
---------------------------------------------------------------------------

    \23\ 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''. See Exchange Rule 100.
---------------------------------------------------------------------------

Implementation
    The Exchange will issue a notice to Participants via Regulatory 
Notice with appropriate advanced notice announcing the implementation 
date of the proposed rule change.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act,\24\ in general, and Section 
6(b)(5) of the Act,\25\ 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. In particular, the Exchange 
believes its proposal promotes just and equitable principles of trade 
and removes impediments to and perfects the mechanisms of a free and 
open market and a national market system as the Exchange has identified 
a subset of stocks that are trading under $2.50 and do not have 
meaningful strikes available. For example, on August 9, 2023, symbol 
SOND closed at $0.50 and had open interest of over 44,000 contracts and 
an average daily trading volume in the underlying stock of over 
1,900,000 shares for the three preceding calendar months.\26\ Currently 
the lowest strike listed is for $2.50, making the lowest strike 400% 
away from the closing stock price. Another symbol, CTXR, closed at 
$0.92 on August 9, 2023, and had open interest of over 63,000 contracts 
and an average daily trading volume in the underlying stock of over 
1,900,000 shares for the three preceding calendar months.\27\ 
Similarly, the lowest strike listed is for $2.50, making the lowest 
strike more than 170% away from the closing stock price. Currently, 
such products have no at-the-money options, as well as no in-the-money 
calls or out-of-the-money puts. The Exchange's proposal will provide 
additional strikes in $0.50 increments from $0.50 up to $2.00 to 
provide more meaningful trading and hedging opportunities for this 
subset of stocks. Given the increased granularity of strikes as 
proposed under the Exchange's proposal out-of-the-money puts and in-
the-money calls will be created. The Exchange believes this will allow 
market participants to tailor their investment and hedging needs more 
effectively.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b).
    \25\ 15 U.S.C. 78f(b)(5).
    \26\ See Yahoo! Finance, https://finance.yahoo.com/quote/SOND/history?p=SOND (last visited August 10, 2023).
    \27\ See Yahoo! Finance, https://finance.yahoo.com/quote/CTXR/history?p=CTXR (last visited August 10, 2023).
---------------------------------------------------------------------------

    The Exchange believes its proposal promotes just and equitable 
principles of trade and removes impediments to and perfects the 
mechanisms of a free and open market and a national market system and, 
in general, protects investors and the public interest by adding 
strikes that improves market quality and satisfies investor demand. The 
Exchange does not believe that the number of strikes that will be added 
under the program will negatively impact the market. Additionally, the 
proposal does not run counter to the efforts undertaken by the industry 
to curb strike proliferation as that effort focused on the removal and 
prevention of extraneous strikes where there was no investor demand. 
The Exchange's proposal requires the satisfaction of an average daily 
trading volume threshold in addition to the underlying stock closing at 
a price below $2.50 to be

[[Page 83183]]

eligible for the program. The Exchange believes that the average daily 
trading volume threshold of the program ensures that only strikes with 
investor demand will be listed and fills a gap in strike interval 
coverage as described above. Further, being that the strike interval is 
$0.50, there are only a maximum of four strikes that may be added 
($0.50, $1.00, $1.50, and $2.00). Therefore, the Exchange does not 
believe that its proposal will undermine the industry's efforts to 
eliminate repetitive and unnecessary strikes in any fashion.
    The Exchange believes that its average daily trading volume 
threshold promotes just and equitable principles of trade and removes 
impediments to and perfects the mechanisms of a free and open market 
and a national market system and, in general, protects investors and 
the public interest as it is designed to permit only those stocks with 
demonstrably high levels of trading activity to participate in the 
program. The Exchange notes that its average daily trading volume 
requirement is substantially greater that the average daily trading 
requirement currently in place on the Exchange for options on equity 
underlyings,\28\ ADRs,\29\ and broad-based indexes.\30\
---------------------------------------------------------------------------

    \28\ See supra note 15.
    \29\ See supra note 16.
    \30\ See supra note 17.
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(1) of the Act, which provides that the Exchange be 
organized and have the capacity to be able to carry out the purposes of 
the Act and the rules and regulations thereunder, and the rules of the 
Exchange. The proposed rule change allows the Exchange to respond to 
customer demand to provide meaningful strikes for low priced stocks. 
The Exchange does not believe that the proposed rule would create any 
capacity issue or negatively affect market functionality. Additionally, 
the Exchange represents that it has the necessary systems capacity to 
support the new options series and handle additional messaging traffic 
associated with this proposed rule change. The Exchange also believes 
that its Participants will not experience any capacity issues as a 
result of this proposal. In addition, the Exchange represents that it 
believes that additional strikes for low priced stocks will serve to 
increase liquidity available as well and improve price efficiency by 
providing more trading opportunities for all market participants. The 
Exchange believes that the proposed rule change will benefit investors 
by giving them increased opportunities to execute their investment and 
hedging decisions.
    Finally, the Exchange believes its proposal is designed to prevent 
fraudulent and manipulative acts and practices as options may only be 
listed on underlyings that satisfy the listing requirements of the 
Exchange as described in Exchange Rule 5020, Criteria for Underlying 
Securities. Specifically, Rule 5020 requires that underlying securities 
for which put or call option contracts are approved for listing and 
trading on the Exchange must meet the following criteria: (1) the 
security must be registered and be an ``NMS stock'' as defined in Rule 
600 of Regulation NMS under the Exchange Act; (2) the security shall be 
characterized by a substantial number of outstanding shares that are 
widely held and actively traded.\31\ Additionally, Rule 5020 provides 
that absent exceptional circumstances, an underlying security will not 
be selected for options transactions unless: (1) there are a minimum of 
seven (7) million shares of the underlying security which are owned by 
persons other than those required to report their stock holdings under 
Section 16(a) of the Exchange Act; (2) there are a minimum of 2,000 
holders of the underlying security; (3) the issuer is in compliance 
with any applicable requirements of the Exchange Act; and (4) trading 
volume (in all markets in which the underlying security is traded) has 
been at least 2,400,000 shares in the preceding twelve (12) months.\32\ 
The Exchange's proposal does not impact the eligibility of an 
underlying stock to have options listed on it, but rather addresses 
only the listing of new additional option classes on an underlying 
listed on the Exchange in accordance to the Exchange's listings rules. 
As such, the Exchange believes that the listing requirements described 
in Exchange Rule 5020 address potential concerns regarding possible 
manipulation. Additionally, in conjunction with the proposed Average 
Daily Volume requirement described herein, the Exchange believes any 
possible market manipulation is further mitigated.
---------------------------------------------------------------------------

    \31\ See Exchange Rule 5020(a)(1) and (2).
    \32\ See Exchange Rule 5020(b)(1),(2),(3) and (4).
---------------------------------------------------------------------------

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 as a 
competitive response to a filing submitted by MIAX that was recently 
approved by the Commission.\33\
---------------------------------------------------------------------------

    \33\ See supra note 3.
---------------------------------------------------------------------------

    The Exchange does not believe that its proposed rule change will 
impose any burden on intra-market competition as the Rules of the 
Exchange apply equally to all Participants of the Exchange and all 
Participants may trade the new proposed strikes if they so choose. 
Specifically, the Exchange believes that investors and market 
participants will significantly benefit from the availability of finer 
strike price intervals for stocks priced below $2.50, which will allow 
them to tailor their investment and hedging needs more effectively.
    The Exchange does not believe that its proposed rule change will 
impose any burden on inter-market competition, as nothing prevents 
other options exchanges from proposing similar rules to list and trade 
options on low priced stocks. Rather the Exchange believes that its 
proposal will promote inter-market competition, as the Exchange's 
proposal will result in additional opportunities for investors to 
achieve their investment and trading objectives, to the benefit of 
investors, market participants, and the marketplace in general.

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

    Pursuant to Section 19(b)(3)(A) of the Act \34\ and Rule 19b-
4(f)(6) \35\ thereunder, the Exchange has designated this proposal as 
one that effects a change that: (i) does not significantly affect the 
protection of investors or the public interest; (ii) does not impose 
any significant burden on competition; and (iii) 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.\36\
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(3)(A).
    \35\ 17 CFR 240.19b-4(f)(6).
    \36\ In addition, Rule 19b-4(f)(6) requires a self-regulatory 
organization to give the Commission written notice of its intent to 
file the proposed rule change at least five business days prior to 
the date of filing of the proposed rule change, or such shorter time 
as designated by the Commission. The Exchange has satisfied this 
requirement.

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[[Page 83184]]

    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act normally does not become operative for 30 days after the date of 
its filing. However, Rule 19b-4(f)(6)(iii) \37\ permits the Commission 
to designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange requested 
that the Commission waive the 30-day operative delay so that the 
proposal may become operative immediately upon filing. The Commission 
notes it has approved a proposed rule change substantially identical to 
the one proposed by the Exchange.\38\ The proposed change raises no 
novel legal or regulatory issues. Therefore, the Commission believes 
that waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission hereby waives the 30-day operative delay and designates the 
proposed rule change operative upon filing.\39\
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    \37\ 17 CFR 240.19b-4(f)(6)(iii).
    \38\ See supra note 3.
    \39\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-BOX-2023-26 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-2023-26. 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-2023-26 and should be 
submitted on or before December 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\40\
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    \40\ 17 CFR 200.30-3(a)(12), (59).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26113 Filed 11-27-23; 8:45 am]
BILLING CODE 8011-01-P
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