Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule Relating to BOX Connectivity Fees and Port Fees for Trading on the BOX Options Market LLC Facility, 90201-90205 [2024-26407]
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Federal Register / Vol. 89, No. 220 / Thursday, November 14, 2024 / Notices
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 25 and Rule 19b–
4(f)(6) thereunder.26
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) 27 permits
the Commission to designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. The Exchange has requested
that the Commission waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. According to the Exchange,
waiver of the operative delay will
ensure fair competition among the
exchanges by allowing the Exchange to
implement its proposal without delay,
thus creating competition among Short
Term Option Series throughout the
industry, which will ultimately benefit
investors. The proposed rule change
raises no novel legal or regulatory
issues. Thus, 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.28
At any time within 60 days of the
filing of such 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
25 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of 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.
27 17 CFR 240.19b–4(f)(6)(iii).
28 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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Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEAMER–2024–65 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–NYSEAMER–2024–65. 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–NYSEAMER–2024–65 and should
be submitted on or before December 5,
2024.
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90201
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–26415 Filed 11–13–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101536; File No. SR–BOX–
2024–26]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Fee
Schedule Relating to BOX Connectivity
Fees and Port Fees for Trading on the
BOX Options Market LLC Facility
November 7, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
24, 2024, BOX Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. The
Exchange filed the proposed rule change
pursuant to Section 19(b)(3)(A)(ii) of the
Act,3 and Rule 19b–4(f)(2) thereunder,4
which renders the proposal effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of the Substance
of the Proposed Rule Change
The Exchange is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend the Fee Schedule relating to
BOX Connectivity Fees and Port Fees 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.
29 17
CFR 200.30–3(a)(12), (59).
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).
1 15
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Federal Register / Vol. 89, No. 220 / Thursday, November 14, 2024 / Notices
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
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The Exchange proposes to amend the
Fee Schedule to increase Connectivity
Fees for 10 gigabit (‘‘Gb’’) Connections,
Non-10 Gb Connections, Financial
Information Exchange (‘‘FIX’’) Ports,
SOLA® Access Information Language
(‘‘SAIL’’) Ports, Drop Copy Ports, and
High Speed Vendor Feed (‘‘HSVF’’)
Ports (collectively ‘‘Connectivity and
Ports’’).5 Specifically, the Exchange
proposes a one-time 6 increase to its fees
for Connectivity and Ports in Sections
III.A.2 and III.B of the Fee Schedule.
By way of background, a physical
connection is utilized by a Participant
or non-Participant to connect to BOX at
the datacenters where BOX’s servers are
located. BOX currently assesses the
following physical connectivity fees for
Participants and non-Participants on a
monthly basis: $1,000 per connection
for a Non-10 Gb Connection and $5,000
per connection for a 10 Gb Connection.
The Exchange proposes to increase, on
a one-time basis, the monthly fee for
Non-10 Gb Connections from $1,000 to
$1,080 per connection and from $5,000
to $5,400 monthly fee for each 10 Gb
Connection. The Exchange notes the
proposed fee changes better enable BOX
to continue to maintain and improve its
market technology and services.
5 The Exchange initially filed the proposed
pricing change on June 3, 2024 (SR–BOX–2024–13).
On June 18, 2024, the Exchange withdrew that
filing and submitted SR–BOX–2024–16. On August
16, 2024, the Exchange withdrew SR–BOX–2024–16
and submitted SR–BOX–2024–19. On October 10,
2024, the Exchange withdrew SR–BOX–2024–19
and submitted SR–BOX–2024–24. The instant filing
replaces SR–BOX–2024–24, which was withdrawn
on October 24, 2024.
6 If the Exchange intends to increase or decrease
fees for Connectivity and Ports in the future, the
Exchange would be required to file a proposed rule
change with the Commission under Section 19(b) of
the Act to amend its Fee Schedule.
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Further, BOX currently provides four
types of ports, including: (i) the FIX
Port, which allows Participants to
electronically send orders in all
products traded on BOX; (ii) the SAIL
Port, which allows Market Makers to
submit electronic quotes and orders and
other Participants to submit orders to
BOX; (iii) the Drop Copy Port, which
provides a real-time feed containing
trade execution, trade correction, trade
cancellation and trade allocation for
regular and complex orders on BOX for
Participants; and (iv) the HSVF Port,
which provides a BOX market data feed
for both Participants and nonParticipants. The Exchange notes that
Participants must connect to a
minimum of one port via FIX or SAIL
and that there is no minimum or
maximum number of ports required for
the Drop Copy Port or the HSVF Port.
Current FIX Port fees are as follows:
FIX ports
BOX monthly port fees
1st FIX Port ....................
FIX Ports 2 through 5 .....
Additional FIX Ports over
5.
$500 per port per month.
$250 per port per month.
$150 per port per month.
Current SAIL Port fees are as follows:
SAIL ports
BOX monthly port fees
Market Making ................
$1,000 per month for all
Ports.
$500 per month per port
(1–5 Ports).
$150 per month for each
additional Port.
Order Entry .....................
The Exchange proposes to increase
FIX Port fees on a one-time basis as
follows:
FIX ports
BOX monthly port fees
1st FIX Port ....................
FIX Ports 2 through 5 .....
Additional FIX Ports over
5.
$540 per port per month.
$270 per port per month.
$162 per port per month.
The Exchange proposes to increase
SAIL Port fees on a one-time basis as
follows:
SAIL ports
BOX monthly port fees
Market Making ................
$1,080 per month for all
Ports.
$540 per month per port
(1–5 Ports).
$162 per month for each
additional Port.
Order Entry .....................
The Exchange also proposes to
increase Drop Copy Ports on a one-time
basis, currently $500 per port per
month, to $540 per port per month for
each month a Participant is credentialed
to use a Drop Copy Port. Drop Copy Port
fees will remain capped at $2,000 per
month.
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The Exchange proposes lastly to
increase HSVF Port fees on a one-time
basis, currently $1,500 per month, to
$1,620 per month for each month a
Participant or non-Participant is
credentialed to use the HSVF Port.
The Exchange notes that BOX
continuously invests in improvements
that enhance the value of its
Connectivity and Ports services. BOX
has expended, and will continue to
expend, resources to innovate and
modernize technology so that it may
benefit its Participants and continue to
compete among other options markets.
BOX regularly invests in efforts to
support and optimize its systems to
support system capacity, reliability, and
performance. Yet the Exchange has not
adjusted any of the fees included in this
proposal since 2018, to even partially
offset the costs of maintaining and
enhancing its Connectivity and Ports
services.7
As discussed below, the Exchange
proposes to adjust Connectivity and
Ports fees by an industry- and productspecific inflationary measure. It is
reasonable and consistent with the
Securities and Exchange Act of 1934
(the ‘‘Act’’) for BOX to recoup its
investments, at least in part, by
adjusting its fees. Continuing to operate
at fees frozen at 2018 levels impacts
BOX’s ability to enhance its services
and the interests of market participants.
The proposed fee increases are based on
an industry-specific Producer Price
Index (PPI), which is a tailored measure
of inflation.8 As a general matter, the
Producer Price Index is a family of
indexes that measures the average
change over time in selling prices
received by domestic producers of
goods and services. PPI measures price
7 The 10 Gb and Non-10 Gb Connection fees were
initially effective on July 19, 2018. See Securities
Exchange Act Release No. 83728 (July 27, 2018), 83
FR 37853 (August 2, 2018) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Amend the Fee Schedule on BOX Market LLC
(‘‘BOX’’) Options Facility To Establish BOX
Connectivity Fees for Participants and NonParticipants Who Connect to the BOX Network).
These fees were suspended on September 17, 2018
and became effective again on October 31, 2019.
HSVF port fees were increased on January 31, 2018.
See Securities Exchange Act Release No. 82654
(February 7, 2018), 83 FR 6284 (February 13, 2018)
(SR–BOX–2018–04) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
To Amend Section VI. (Technology Fees) of the
BOX Fee Schedule). SAIL, FIX, and Drop Copy port
fees were established on April 27, 2018. See
Securities Exchange Act Release No. 83197 (May 9,
2018), 83 FR 22567 (May 15, 2018) (SR–BOX–2018–
15) (Notice of Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend the Fee
Schedule on the BOX Market LLC (‘‘BOX’’) Options
Facility To Amend Connectivity Fees and Establish
Port Fees).
8 See https://fred.stlouisfed.org/series/
PCU51825182.
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change from the perspective of the
seller. This contrasts with other metrics,
such as the Consumer Price Index (CPI),
that measure price change from the
purchaser’s perspective.9 About 10,000
PPIs for individual products and groups
of products are tracked and released
each month.10 PPIs are available for the
output of nearly all industries in the
goods-producing sectors of the U.S.
economy—mining, manufacturing,
agriculture, fishing, and forestry—as
well as natural gas, electricity, and
construction, among others. The PPI
program covers approximately 69
percent of the service sector’s output, as
measured by revenue reported in the
2017 Economic Census. For purposes of
this proposal, the relevant industryspecific PPI is the Data Processing and
Related Services PPI (‘‘Data PPI’’),
which is an industry net-output PPI that
measures the average change in selling
prices received by companies that
provide data processing services. The
Data PPI was introduced in January
2002 by the Bureau of Labor Statistics
(BLS) as part of an ongoing effort to
expand Producer Price Index coverage
of the services sector of the U.S.
economy and is identified as NAICS–
518210 in the North American Industry
Classification System.11 According to
the BLS ‘‘[t]he primary output of NAICS
518210 is the provision of electronic
data processing services. In the broadest
sense, computer services companies
help their customers efficiently use
technology. The processing services
market consists of vendors who use
their own computer systems—often
utilizing proprietary software—to
process customers’ transactions and
data. Companies that offer processing
services collect, organize, and store a
customer’s transactions and other data
for record-keeping purposes. Price
movements for the NAICS 518210 index
are based on changes in the revenue
received by companies that provide data
processing services. Each month,
companies provide net transaction
prices for a specified service. The
transaction is an actual contract selected
by probability, where the pricedetermining characteristics are held
constant while the service is repriced.
The prices used in index calculation are
the actual prices billed for the selected
service contract.’’ 12 The Exchange
believes the Data PPI is an appropriate
9 See
https://www.bls.gov/ppi/overview.htm.
10 Id.
11 NAICS appears in the PPI Detailed Report and
is available at https://data.bls.gov/dataViewer/view/
timeseries/PCU5182--5182--.
12 See https://www.bls.gov/ppi/factsheets/
producer-price-index-for-the-data-processing-andrelated-services-industry-naics-518210.htm.
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measure to be considered in the context
of the proposed rule change to increase
the fees for BOX Connectivity and Ports
because BOX uses its ‘‘own computer
systems’’ and ‘‘proprietary software,’’
i.e., its own servers and proprietary
matching engine software, respectively,
to collect, organize, store and report
customers’ transactions on BOX’s
proprietary trading platform. In other
words, BOX is in the business of data
processing and related services.
For the period from July 2018 to
August 2024, the Data PPI had a starting
value of 107 in July 2018 and an ending
value of 116.022 in August 2024, an
8.43% increase.13 This indicates that
companies who are also in the data
storage and processing business have
generally increased prices for a
specified service covered under NAICS
518210 by an average of 8.43% during
this period. Based on that percentage
change, the Exchange proposes to make
a one-time fee increase of 8% for BOX
Connectivity and Ports, which reflects
an increase covering approximately the
period since the last adjustment was
made. The Exchange further believes the
Data PPI is an appropriate measure for
purposes of the proposed change on the
basis that it is a stable metric with
limited volatility, unlike other
consumer-side inflation metrics. In fact,
the Data PPI has not experienced a
greater than 2.16% increase for any one
calendar year period since Data PPI was
introduced into the PPI in January 2002.
The average calendar year change from
January 2002 to December 2023 was
.62%, with a cumulative increase of
15.67% over this 21-year period. The
Exchange believes the Data PPI is
considerably less volatile than other
inflation metrics such as CPI, which has
had individual calendar-year increases
of more than 6.5%, and a cumulative
increase of over 73% over the same
period.14 The Exchange believes the
Data PPI, and significant investments
into and enhanced performance of BOX,
support the reasonableness of the
proposed fee increases.15
13 The Exchange used July 2018 as a starting point
for measuring Data PPI because that is when the last
of the Connectivity and Ports fees were established.
See supra note 7.
14 See https://www.usinflationcalculator.com/
inflation/consumer-price-index-and-annualpercent-changes-from-1913-to-2008/.
15 See infra discussion of system performance
advancements. Additionally, other exchanges have
filed for increases in certain fees, based in part on
comparisons to inflation. See, e.g., Securities
Exchange Act Release Nos. 101017 (September 12,
2024), 89 FR 76545 (September 18, 2024) (SR–
CboeBYX–2024–032); 100513 (July 12, 2024), 89 FR
58460 (July 18, 2024) (SR–Phlx–2024–27).
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90203
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the ‘‘Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.16 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 17 requirements that the rules of
an exchange be 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 regulating, clearing, settling,
processing information with respect to,
and 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.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 18 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange also believes the
proposed rule change is consistent with
Section 6(b)(4) 19 of the Act, which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
Participants and other persons using its
facilities.
This belief is based on two factors.
First, the current fees do not properly
reflect the quality of the services and
products, as the fees for the services and
products in question have been static in
nominal terms, and therefore falling in
real terms due to inflation. Second, the
Exchange believes that investments
made in enhancing the capacity and
speed of BOX systems increase the
performance of the services and
products.
As noted above, the Exchange has not
increased any of the fees included in the
proposal since 2018. However, in the
years following the last fee increase
BOX has made significant investments
in upgrades to BOX systems, enhancing
the quality of its services, as measured
by, among other things, increased
throughput and faster processing
speeds. In other words, BOX customers
have greatly benefitted, while the BOX’s
ability to recoup its investments has
been hampered. Between 2018 and
2024, the inflation rate is 3.86% per
year, on average, producing a
16 15
17 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
18 Id.
19 15
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cumulative inflation rate of 25.50%.20
Using the more targeted inflation
number of Data PPI, the cumulative
inflation rate was 8.43% during an
approximately similar time period.21
The Exchange believes the Data PPI is
a reasonable metric to base this fee
increase on because it is targeted to
producer-side increases in the data
processing industry, which based on the
definition adopted by BLS would
include BOX’s Connectivity and Ports
services. Notwithstanding inflation, as
noted above, the Exchange has not
increased its fees at all for over six years
for the subject services. The proposed
fee changes represent a modest increase
from the current fees.
The Exchange believes the proposed
fee increase is reasonable in light of
BOX’s continued expenditure in
maintaining a robust technology
ecosystem. Furthermore, BOX continues
to invest in maintaining and enhancing
its Connectivity and Ports services—for
the benefit and often at the behest of its
Participants. Specifically, BOX has
recently replaced trading servers and
added additional servers to increase
performance and capacity, to increase
competitiveness, and to support growth.
For example, the rapid growth of trading
volumes from 2020 has increased the
number of servers, network devices, and
telecommunications lines required to
keep pace with the growth of trade,
order, and quote data. As part of another
recent change, BOX deployed additional
low latency network switches and
increased its datacenter space. As a
result of these initiatives, BOX
increased its overall hardware footprint
at the datacenters which directly results
in increased support costs at the
datacenter as well.
The goal of the initiatives discussed
above, among other things, is to provide
faster and more consistent order
handling and matching performance for
options, while ensuring quicker
processing time and supporting
increasing volumes. Accordingly, BOX
continuously invests in improvements
that enhance the value of its
Connectivity and Ports services. As
discussed above, BOX expended, and
will continue to expend, resources to
innovate and modernize technology so
that it may benefit its Participants and
continue to compete among other
options markets. BOX regularly invests
in efforts to support and optimize its
20 See https://www.officialdata.org/us/inflation/
2018?amount=1.
21 The general CPI inflation rate was measured
from the beginning of 2018 through October 24,
2024, while the Data PPI was measured from July
2018 through August 2024.
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systems to support system capacity,
reliability, and performance.
Further, the Exchange notes that
Participants and non-Participants will
continue to choose the method of
connectivity based on their specific
needs and no broker-dealer is required
to become a Participant of, let alone
connect directly to, BOX. Moreover,
direct connectivity is not a requirement
to participate on BOX. Participants may
choose to connect indirectly to BOX via
a third-party reseller of connectivity.
This indirect connectivity is a viable
alternative for market participants to
consume market data from BOX without
connecting directly to BOX (and thus
not pay BOX’s connectivity fees), which
alternative is already being used by both
Participants and non-Participants.
The Exchange believes that the
proposed fee changes are equitably
allocated and not unfairly
discriminatory because the fee increase
would be applied uniformly across all
market participants that voluntarily
subscribe to or purchase connectivity or
ports. The Exchange also believes that
the proposal represents an equitable
allocation of reasonable dues, fees and
other charges because Exchange fees
have fallen in real terms during the
relevant period. Finally, the Exchange
believes that the proposed fee changes
are not unfairly discriminatory because
the fees would be assessed uniformly
across all market participants, that
voluntarily purchase connectivity or
ports, in the same manner they are
today. The Exchange also notes that its
Connectivity and Ports services remain
available for purchase by 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
proposed fee changes will not impact
intramarket competition because it will
apply to all similarly situated
Participants and non-Participants
equally (i.e., all market participants that
choose to purchase connectivity or
ports).22 As such, the Exchange believes
that the proposed fees do not put any
market participants at a relative
disadvantage compared to other market
participants. As noted above, the fee
schedule would continue to apply to all
market participants that choose to
connect to BOX in the same manner as
22 The Exchange notes that only Participants may
purchase FIX Ports, SAIL Ports, and Drop Copy
Ports.
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it does today albeit at inflation-adjusted
rates for certain fees, and market
participants may choose whether to
connect directly to BOX at all. The
Exchange also believes that the level of
the proposed fees neither favor nor
penalize one or more categories of
market participants in a manner that
would impose an undue burden on
competition.
The Exchange believes that the
proposed fees do not impose a burden
on intermarket competition that is not
necessary or appropriate. In determining
the proposed fees, the Exchange utilized
an objective and stable metric with
limited volatility. Utilizing Data PPI
over a specified period of time is a
reasonable means of recouping BOX’s
investment in maintaining and
enhancing its Connectivity and Ports
services. The Exchange believes
utilizing Data PPI, a tailored measure of
inflation, to increase certain fees for
BOX connectivity to recoup BOX’s
investment in maintaining and
enhancing its Connectivity and Ports
services would not impose a burden on
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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action Effectiveness
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act 23
and Rule 19b–4(f)(2) thereunder,24
because it establishes or changes a due,
or fee.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend the rule change if
it appears to the Commission that the
action is necessary or appropriate in the
public interest, for the protection of
investors, or would otherwise further
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
23 15
24 17
E:\FR\FM\14NON1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
14NON1
Federal Register / Vol. 89, No. 220 / Thursday, November 14, 2024 / Notices
Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–101571; File No. SR–ISE–
2024–35]
• 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–2024–26 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.
ddrumheller on DSK120RN23PROD with NOTICES1
All submissions should refer to file
number SR–BOX–2024–26. 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–2024–26 and should be
submitted on or before December 5,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–26407 Filed 11–13–24; 8:45 am]
BILLING CODE 8011–01–P
25 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
20:16 Nov 13, 2024
Jkt 265001
Self-Regulatory Organizations; Nasdaq
ISE, LLC; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To List and Trade
Options on the iShares Ethereum Trust
November 8, 2024.
I. Introduction
On July 22, 2024, Nasdaq ISE, LLC
(‘‘ISE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to allow the listing and trading
of options on iShares Ethereum Trust
(‘‘Trust’’).3 The proposed rule change
was published for comment in the
Federal Register on August 12, 2024.4
The Commission has received no
comments regarding the proposal.
On September 30, 2024, pursuant to
Section 19(b)(2) of the Exchange Act,5
the Commission designated a longer
period within which to approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether to
disapprove the proposed rule change.6
This order institutes proceedings under
Section 19(b)(2)(B) of the Act 7 to
determine whether to approve or
disapprove the proposed rule change.
II. Description of the Proposed Rule
Change
As described more fully in the
Notice,8 the Exchange proposes to
amend Options 4, Section 3(h)(iv), to
add the Trust to the list of ExchangeTraded Fund Shares (‘‘Exchange-Traded
Funds Shares’’ or ‘‘ETFs’’) that are
appropriate for options trading.9 The
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The Commission approved proposals by several
exchanges to list and trade shares of trusts that hold
Ether, including the Trust. See Securities Exchange
Act Release No. 100224 (May 23, 2024), 89 FR
46937 (May 30, 2024).
4 See Securities Exchange Act Release No. 100661
(Aug. 6, 2024), 89 FR 65690 (‘‘Notice’’).
5 15 U.S.C. 78s(b)(2).
6 See Securities Exchange Act Release No.
1001154 (Sept. 24, 2024) 89 FR 79664 (designating
November 10, 2024, as the date by which the
Commission shall either approve, disapprove, or
institute proceedings to determine whether to
disapprove the proposed rule change).
7 15 U.S.C. 78s(b)(2)(B).
8 See supra note 4.
9 See Notice, 89 FR at 65691. The Exchange states
that the Trust is not an investment company
2 17
PO 00000
Frm 00259
Fmt 4703
Sfmt 4703
90205
Exchange states that the investment
objective of the Trust is to reflect
generally the performance of the price of
ether before payment of the Trust’s
expenses and liabilities. The Exchange
states that shares of the Trust are
intended to constitute a simple means of
making an investment similar to an
investment in ether through the public
securities market rather than by
acquiring, holding, and trading ether
directly on a peer-to-peer or other basis
or via a digital asset platform.10 The
Exchange further states that shares of
the Trust have been designed to remove
the obstacles represented by the
complexities and operational burdens
involved in a direct investment in ether,
while at the same time having an
intrinsic value that reflects, at any given
time, the investment exposure to the
ether owned by the Trust at such time,
less the Trust’s expenses and
liabilities.11 The Exchange states that
although shares in the Trust are not the
exact equivalent of a direct investment
in ether, they provide investors with an
alternative method of achieving
investment exposure to ether through
the public securities market, which may
be more familiar to them.12 The
Exchange states that offering options on
the Trust will benefit investors by
providing them with an additional,
relatively lower cost investing tool to
gain exposure to spot ether as well as a
hedging vehicle to meet their
investment needs in connection with
ether products and positions.13 In
addition, the Exchange states that,
similar to other commodity ETFs in
which options may be listed on ISE (e.g.
SPDR® Gold Trust, the iShares COMEX
Gold Trust, the iShares Silver Trust, or
the ETFS Gold Trust), the proposed ETF
is a trust that essentially offers the same
objectives and benefits to investors.14
The Exchange states that options on
the Trust will trade in the same manner
as options on other ETFs on the
Exchange, and that Exchange rules that
currently apply to the listing and
trading of all options on ETFs on the
Exchange, including, for example, rules
that govern listing criteria, expirations,
exercise prices, minimum increments,
position and exercise limits, margin
requirements, customer accounts and
trading halt procedures, will apply to
the listing and trading of options on the
registered under the Investment Company Act of
1940, as amended. See id.
10 See id.
11 See id.
12 See id.
13 See id.
14 See id. at 65691–2 and ISE Options 4, Section
3(h)(iv).
E:\FR\FM\14NON1.SGM
14NON1
]]>Agencies
[Federal Register Volume 89, Number 220 (Thursday, November 14, 2024)]
[Notices]
[Pages 90201-90205]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26407]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101536; File No. SR-BOX-2024-26]
Self-Regulatory Organizations; BOX Exchange LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee
Schedule Relating to BOX Connectivity Fees and Port Fees for Trading on
the BOX Options Market LLC Facility
November 7, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on October 24, 2024, BOX Exchange LLC (the ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III, below, which
Items have been prepared 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the Fee Schedule
relating to BOX Connectivity Fees and Port Fees 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.
[[Page 90202]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to increase
Connectivity Fees for 10 gigabit (``Gb'') Connections, Non-10 Gb
Connections, Financial Information Exchange (``FIX'') Ports,
SOLA[supreg] Access Information Language (``SAIL'') Ports, Drop Copy
Ports, and High Speed Vendor Feed (``HSVF'') Ports (collectively
``Connectivity and Ports'').\5\ Specifically, the Exchange proposes a
one-time \6\ increase to its fees for Connectivity and Ports in
Sections III.A.2 and III.B of the Fee Schedule.
---------------------------------------------------------------------------
\5\ The Exchange initially filed the proposed pricing change on
June 3, 2024 (SR-BOX-2024-13). On June 18, 2024, the Exchange
withdrew that filing and submitted SR-BOX-2024-16. On August 16,
2024, the Exchange withdrew SR-BOX-2024-16 and submitted SR-BOX-
2024-19. On October 10, 2024, the Exchange withdrew SR-BOX-2024-19
and submitted SR-BOX-2024-24. The instant filing replaces SR-BOX-
2024-24, which was withdrawn on October 24, 2024.
\6\ If the Exchange intends to increase or decrease fees for
Connectivity and Ports in the future, the Exchange would be required
to file a proposed rule change with the Commission under Section
19(b) of the Act to amend its Fee Schedule.
---------------------------------------------------------------------------
By way of background, a physical connection is utilized by a
Participant or non-Participant to connect to BOX at the datacenters
where BOX's servers are located. BOX currently assesses the following
physical connectivity fees for Participants and non-Participants on a
monthly basis: $1,000 per connection for a Non-10 Gb Connection and
$5,000 per connection for a 10 Gb Connection. The Exchange proposes to
increase, on a one-time basis, the monthly fee for Non-10 Gb
Connections from $1,000 to $1,080 per connection and from $5,000 to
$5,400 monthly fee for each 10 Gb Connection. The Exchange notes the
proposed fee changes better enable BOX to continue to maintain and
improve its market technology and services.
Further, BOX currently provides four types of ports, including: (i)
the FIX Port, which allows Participants to electronically send orders
in all products traded on BOX; (ii) the SAIL Port, which allows Market
Makers to submit electronic quotes and orders and other Participants to
submit orders to BOX; (iii) the Drop Copy Port, which provides a real-
time feed containing trade execution, trade correction, trade
cancellation and trade allocation for regular and complex orders on BOX
for Participants; and (iv) the HSVF Port, which provides a BOX market
data feed for both Participants and non-Participants. The Exchange
notes that Participants must connect to a minimum of one port via FIX
or SAIL and that there is no minimum or maximum number of ports
required for the Drop Copy Port or the HSVF Port.
Current FIX Port fees are as follows:
------------------------------------------------------------------------
FIX ports BOX monthly port fees
------------------------------------------------------------------------
1st FIX Port.............................. $500 per port per month.
FIX Ports 2 through 5..................... $250 per port per month.
Additional FIX Ports over 5............... $150 per port per month.
------------------------------------------------------------------------
Current SAIL Port fees are as follows:
------------------------------------------------------------------------
SAIL ports BOX monthly port fees
------------------------------------------------------------------------
Market Making............................. $1,000 per month for all
Ports.
Order Entry............................... $500 per month per port (1-5
Ports).
$150 per month for each
additional Port.
------------------------------------------------------------------------
The Exchange proposes to increase FIX Port fees on a one-time basis
as follows:
------------------------------------------------------------------------
FIX ports BOX monthly port fees
------------------------------------------------------------------------
1st FIX Port.............................. $540 per port per month.
FIX Ports 2 through 5..................... $270 per port per month.
Additional FIX Ports over 5............... $162 per port per month.
------------------------------------------------------------------------
The Exchange proposes to increase SAIL Port fees on a one-time
basis as follows:
------------------------------------------------------------------------
SAIL ports BOX monthly port fees
------------------------------------------------------------------------
Market Making............................. $1,080 per month for all
Ports.
Order Entry............................... $540 per month per port (1-5
Ports).
$162 per month for each
additional Port.
------------------------------------------------------------------------
The Exchange also proposes to increase Drop Copy Ports on a one-
time basis, currently $500 per port per month, to $540 per port per
month for each month a Participant is credentialed to use a Drop Copy
Port. Drop Copy Port fees will remain capped at $2,000 per month.
The Exchange proposes lastly to increase HSVF Port fees on a one-
time basis, currently $1,500 per month, to $1,620 per month for each
month a Participant or non-Participant is credentialed to use the HSVF
Port.
The Exchange notes that BOX continuously invests in improvements
that enhance the value of its Connectivity and Ports services. BOX has
expended, and will continue to expend, resources to innovate and
modernize technology so that it may benefit its Participants and
continue to compete among other options markets. BOX regularly invests
in efforts to support and optimize its systems to support system
capacity, reliability, and performance. Yet the Exchange has not
adjusted any of the fees included in this proposal since 2018, to even
partially offset the costs of maintaining and enhancing its
Connectivity and Ports services.\7\
---------------------------------------------------------------------------
\7\ The 10 Gb and Non-10 Gb Connection fees were initially
effective on July 19, 2018. See Securities Exchange Act Release No.
83728 (July 27, 2018), 83 FR 37853 (August 2, 2018) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule on BOX Market LLC (``BOX'') Options Facility
To Establish BOX Connectivity Fees for Participants and Non-
Participants Who Connect to the BOX Network). These fees were
suspended on September 17, 2018 and became effective again on
October 31, 2019. HSVF port fees were increased on January 31, 2018.
See Securities Exchange Act Release No. 82654 (February 7, 2018), 83
FR 6284 (February 13, 2018) (SR-BOX-2018-04) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Section
VI. (Technology Fees) of the BOX Fee Schedule). SAIL, FIX, and Drop
Copy port fees were established on April 27, 2018. See Securities
Exchange Act Release No. 83197 (May 9, 2018), 83 FR 22567 (May 15,
2018) (SR-BOX-2018-15) (Notice of Filing and Immediate Effectiveness
of a Proposed Rule Change To Amend the Fee Schedule on the BOX
Market LLC (``BOX'') Options Facility To Amend Connectivity Fees and
Establish Port Fees).
---------------------------------------------------------------------------
As discussed below, the Exchange proposes to adjust Connectivity
and Ports fees by an industry- and product-specific inflationary
measure. It is reasonable and consistent with the Securities and
Exchange Act of 1934 (the ``Act'') for BOX to recoup its investments,
at least in part, by adjusting its fees. Continuing to operate at fees
frozen at 2018 levels impacts BOX's ability to enhance its services and
the interests of market participants. The proposed fee increases are
based on an industry-specific Producer Price Index (PPI), which is a
tailored measure of inflation.\8\ As a general matter, the Producer
Price Index is a family of indexes that measures the average change
over time in selling prices received by domestic producers of goods and
services. PPI measures price
[[Page 90203]]
change from the perspective of the seller. This contrasts with other
metrics, such as the Consumer Price Index (CPI), that measure price
change from the purchaser's perspective.\9\ About 10,000 PPIs for
individual products and groups of products are tracked and released
each month.\10\ PPIs are available for the output of nearly all
industries in the goods-producing sectors of the U.S. economy--mining,
manufacturing, agriculture, fishing, and forestry--as well as natural
gas, electricity, and construction, among others. The PPI program
covers approximately 69 percent of the service sector's output, as
measured by revenue reported in the 2017 Economic Census. For purposes
of this proposal, the relevant industry-specific PPI is the Data
Processing and Related Services PPI (``Data PPI''), which is an
industry net-output PPI that measures the average change in selling
prices received by companies that provide data processing services. The
Data PPI was introduced in January 2002 by the Bureau of Labor
Statistics (BLS) as part of an ongoing effort to expand Producer Price
Index coverage of the services sector of the U.S. economy and is
identified as NAICS-518210 in the North American Industry
Classification System.\11\ According to the BLS ``[t]he primary output
of NAICS 518210 is the provision of electronic data processing
services. In the broadest sense, computer services companies help their
customers efficiently use technology. The processing services market
consists of vendors who use their own computer systems--often utilizing
proprietary software--to process customers' transactions and data.
Companies that offer processing services collect, organize, and store a
customer's transactions and other data for record-keeping purposes.
Price movements for the NAICS 518210 index are based on changes in the
revenue received by companies that provide data processing services.
Each month, companies provide net transaction prices for a specified
service. The transaction is an actual contract selected by probability,
where the price-determining characteristics are held constant while the
service is repriced. The prices used in index calculation are the
actual prices billed for the selected service contract.'' \12\ The
Exchange believes the Data PPI is an appropriate measure to be
considered in the context of the proposed rule change to increase the
fees for BOX Connectivity and Ports because BOX uses its ``own computer
systems'' and ``proprietary software,'' i.e., its own servers and
proprietary matching engine software, respectively, to collect,
organize, store and report customers' transactions on BOX's proprietary
trading platform. In other words, BOX is in the business of data
processing and related services.
---------------------------------------------------------------------------
\8\ See https://fred.stlouisfed.org/series/PCU51825182.
\9\ See https://www.bls.gov/ppi/overview.htm.
\10\ Id.
\11\ NAICS appears in the PPI Detailed Report and is available
at https://data.bls.gov/dataViewer/view/timeseries/PCU5182--5182--.
\12\ See https://www.bls.gov/ppi/factsheets/producer-price-index-for-the-data-processing-and-related-services-industry-naics-518210.htm.
---------------------------------------------------------------------------
For the period from July 2018 to August 2024, the Data PPI had a
starting value of 107 in July 2018 and an ending value of 116.022 in
August 2024, an 8.43% increase.\13\ This indicates that companies who
are also in the data storage and processing business have generally
increased prices for a specified service covered under NAICS 518210 by
an average of 8.43% during this period. Based on that percentage
change, the Exchange proposes to make a one-time fee increase of 8% for
BOX Connectivity and Ports, which reflects an increase covering
approximately the period since the last adjustment was made. The
Exchange further believes the Data PPI is an appropriate measure for
purposes of the proposed change on the basis that it is a stable metric
with limited volatility, unlike other consumer-side inflation metrics.
In fact, the Data PPI has not experienced a greater than 2.16% increase
for any one calendar year period since Data PPI was introduced into the
PPI in January 2002. The average calendar year change from January 2002
to December 2023 was .62%, with a cumulative increase of 15.67% over
this 21-year period. The Exchange believes the Data PPI is considerably
less volatile than other inflation metrics such as CPI, which has had
individual calendar-year increases of more than 6.5%, and a cumulative
increase of over 73% over the same period.\14\ The Exchange believes
the Data PPI, and significant investments into and enhanced performance
of BOX, support the reasonableness of the proposed fee increases.\15\
---------------------------------------------------------------------------
\13\ The Exchange used July 2018 as a starting point for
measuring Data PPI because that is when the last of the Connectivity
and Ports fees were established. See supra note 7.
\14\ See https://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/.
\15\ See infra discussion of system performance advancements.
Additionally, other exchanges have filed for increases in certain
fees, based in part on comparisons to inflation. See, e.g.,
Securities Exchange Act Release Nos. 101017 (September 12, 2024), 89
FR 76545 (September 18, 2024) (SR-CboeBYX-2024-032); 100513 (July
12, 2024), 89 FR 58460 (July 18, 2024) (SR-Phlx-2024-27).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the ``Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\16\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \17\ requirements that the rules
of an exchange be 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 regulating,
clearing, settling, processing information with respect to, and
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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \18\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. The Exchange also believes the
proposed rule change is consistent with Section 6(b)(4) \19\ of the
Act, which requires that Exchange rules provide for the equitable
allocation of reasonable dues, fees, and other charges among its
Participants and other persons using its facilities.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
\18\ Id.
\19\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
This belief is based on two factors. First, the current fees do not
properly reflect the quality of the services and products, as the fees
for the services and products in question have been static in nominal
terms, and therefore falling in real terms due to inflation. Second,
the Exchange believes that investments made in enhancing the capacity
and speed of BOX systems increase the performance of the services and
products.
As noted above, the Exchange has not increased any of the fees
included in the proposal since 2018. However, in the years following
the last fee increase BOX has made significant investments in upgrades
to BOX systems, enhancing the quality of its services, as measured by,
among other things, increased throughput and faster processing speeds.
In other words, BOX customers have greatly benefitted, while the BOX's
ability to recoup its investments has been hampered. Between 2018 and
2024, the inflation rate is 3.86% per year, on average, producing a
[[Page 90204]]
cumulative inflation rate of 25.50%.\20\ Using the more targeted
inflation number of Data PPI, the cumulative inflation rate was 8.43%
during an approximately similar time period.\21\ The Exchange believes
the Data PPI is a reasonable metric to base this fee increase on
because it is targeted to producer-side increases in the data
processing industry, which based on the definition adopted by BLS would
include BOX's Connectivity and Ports services. Notwithstanding
inflation, as noted above, the Exchange has not increased its fees at
all for over six years for the subject services. The proposed fee
changes represent a modest increase from the current fees.
---------------------------------------------------------------------------
\20\ See https://www.officialdata.org/us/inflation/2018?amount=1.
\21\ The general CPI inflation rate was measured from the
beginning of 2018 through October 24, 2024, while the Data PPI was
measured from July 2018 through August 2024.
---------------------------------------------------------------------------
The Exchange believes the proposed fee increase is reasonable in
light of BOX's continued expenditure in maintaining a robust technology
ecosystem. Furthermore, BOX continues to invest in maintaining and
enhancing its Connectivity and Ports services--for the benefit and
often at the behest of its Participants. Specifically, BOX has recently
replaced trading servers and added additional servers to increase
performance and capacity, to increase competitiveness, and to support
growth. For example, the rapid growth of trading volumes from 2020 has
increased the number of servers, network devices, and
telecommunications lines required to keep pace with the growth of
trade, order, and quote data. As part of another recent change, BOX
deployed additional low latency network switches and increased its
datacenter space. As a result of these initiatives, BOX increased its
overall hardware footprint at the datacenters which directly results in
increased support costs at the datacenter as well.
The goal of the initiatives discussed above, among other things, is
to provide faster and more consistent order handling and matching
performance for options, while ensuring quicker processing time and
supporting increasing volumes. Accordingly, BOX continuously invests in
improvements that enhance the value of its Connectivity and Ports
services. As discussed above, BOX expended, and will continue to
expend, resources to innovate and modernize technology so that it may
benefit its Participants and continue to compete among other options
markets. BOX regularly invests in efforts to support and optimize its
systems to support system capacity, reliability, and performance.
Further, the Exchange notes that Participants and non-Participants
will continue to choose the method of connectivity based on their
specific needs and no broker-dealer is required to become a Participant
of, let alone connect directly to, BOX. Moreover, direct connectivity
is not a requirement to participate on BOX. Participants may choose to
connect indirectly to BOX via a third-party reseller of connectivity.
This indirect connectivity is a viable alternative for market
participants to consume market data from BOX without connecting
directly to BOX (and thus not pay BOX's connectivity fees), which
alternative is already being used by both Participants and non-
Participants.
The Exchange believes that the proposed fee changes are equitably
allocated and not unfairly discriminatory because the fee increase
would be applied uniformly across all market participants that
voluntarily subscribe to or purchase connectivity or ports. The
Exchange also believes that the proposal represents an equitable
allocation of reasonable dues, fees and other charges because Exchange
fees have fallen in real terms during the relevant period. Finally, the
Exchange believes that the proposed fee changes are not unfairly
discriminatory because the fees would be assessed uniformly across all
market participants, that voluntarily purchase connectivity or ports,
in the same manner they are today. The Exchange also notes that its
Connectivity and Ports services remain available for purchase by 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 proposed fee changes will
not impact intramarket competition because it will apply to all
similarly situated Participants and non-Participants equally (i.e., all
market participants that choose to purchase connectivity or ports).\22\
As such, the Exchange believes that the proposed fees do not put any
market participants at a relative disadvantage compared to other market
participants. As noted above, the fee schedule would continue to apply
to all market participants that choose to connect to BOX in the same
manner as it does today albeit at inflation-adjusted rates for certain
fees, and market participants may choose whether to connect directly to
BOX at all. The Exchange also believes that the level of the proposed
fees neither favor nor penalize one or more categories of market
participants in a manner that would impose an undue burden on
competition.
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\22\ The Exchange notes that only Participants may purchase FIX
Ports, SAIL Ports, and Drop Copy Ports.
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The Exchange believes that the proposed fees do not impose a burden
on intermarket competition that is not necessary or appropriate. In
determining the proposed fees, the Exchange utilized an objective and
stable metric with limited volatility. Utilizing Data PPI over a
specified period of time is a reasonable means of recouping BOX's
investment in maintaining and enhancing its Connectivity and Ports
services. The Exchange believes utilizing Data PPI, a tailored measure
of inflation, to increase certain fees for BOX connectivity to recoup
BOX's investment in maintaining and enhancing its Connectivity and
Ports services would not impose a burden on 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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action Effectiveness
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Exchange Act \23\ and Rule 19b-4(f)(2)
thereunder,\24\ because it establishes or changes a due, or fee.
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\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
\24\ 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.
[[Page 90205]]
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-2024-26 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-2024-26. 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-2024-26 and should be
submitted on or before December 5, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26407 Filed 11-13-24; 8:45 am]
BILLING CODE 8011-01-P
