80 FR 13930 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule 7170 To Provide for New Procedures To Account for Erroneous Trades Occurring From Disruptions and/or Malfunctions of Exchange Systems

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 51 (March 17, 2015)

[Federal Register Volume 80, Number 51 (Tuesday, March 17, 2015)]
[Notices]
[Pages 13930-13932]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-06017]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74474; File No. SR-BOX-2015-15]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend BOX Rule 7170 To Provide for New Procedures To Account for 
Erroneous Trades Occurring From Disruptions and/or Malfunctions of 
Exchange Systems

March 11, 2015.
    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 March 2, 2015, BOX Options Exchange LLC (the ``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 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend BOX Rule 7170 (Obvious and 
Catastrophic Errors) to provide for new procedures to account for 
erroneous trades occurring from disruptions and/or malfunctions of 
Exchange systems. 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 Web site at http://boxexchange.com.

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 7170 to provide for new 
procedures to account for erroneous trades occurring from disruptions 
and/or malfunctions of Exchange systems. This is a competitive filing 
that is based on the rules of NYSE MKT LLC (``NYSE MKT'').\3\
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    \3\ See NYSE MKT Rule 975NY. The proposed rule change is also 
substantially similar to NYSE Arca, Inc. (``NYSE Arca'') Rule 6.89, 
Chicago Board Options Exchange, Inc. (``CBOE'') Rule 6.25 and is 
similar to NASDAQ OMX PHLX, LLC (``Phlx'') Rule 1092(c)(ii)(A).
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    Proposed new Rule 7170(m) would provide that any transactions that 
arise

[[Page 13931]]

out of a ``verifiable systems disruption or malfunction'' in the use or 
operation of an Exchange automated quotation, dissemination, execution, 
or communication system may either be nullified or adjusted by the 
Exchange. In addition, the proposed rule would provide that 
transactions that qualify for price adjustment will be adjusted to a 
Theoretical Price, as defined in paragraph (d) of Rule 7170. The 
Exchange notes that proposed Rule 7170(m) is virtually identical to 
NYSE MKT Rule 975NY(a)(9) and similar to rules in effect at other 
options exchanges that allow for the nullification or modification of 
transactions that resulted from verifiable disruptions and/or 
malfunctions of Exchanges [sic] systems.\4\
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    \4\ Id.
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    The proposed rule change would provide the Exchange with the same 
authority to nullify or adjust trades in the event of a ``verifiable 
disruption or malfunction'' in the use or operation of its systems as 
other exchanges have. The Exchange believes that it is appropriate to 
provide the flexibility and authority provided for in proposed Rule 
7170(m) so as not to limit the Exchange's ability to plan for and 
respond to unforeseen systems problems or malfunctions. For this 
reason, the Exchange believes that, in the interest of maintaining a 
fair and orderly market and for the protection of investors, authority 
to nullify trades in these circumstances, consistent with the authority 
on other exchanges, is warranted.
    The Exchange further proposes that, similar to NYSE MKT Rule 
975NY(b)(3), the Exchange may, on its own motion, review any 
transaction occurring on the Exchange that is believed to be a result 
of a verifiable disruption or malfunction of Exchange systems. The 
Exchange, when determining whether to review a transaction on its own 
motion pursuant to proposed Rule 7170(m), shall act as soon as possible 
after receiving notification of the transaction, and ordinarily would 
be expected to act on the same day as the transaction occurred. In no 
event shall the Exchange act later than 9:30 a.m. (ET) on the next 
trading day following the date of the transaction in question. The 
Exchange further notes that when acting under its own motion to nullify 
or adjust trades pursuant to proposed Rule 7170(m), the Exchange must 
consider whether taking such action would be in the interest of 
maintaining a fair and orderly market and for the protection of 
investors.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\5\ in general, and Section 6(b)(5) of the Act,\6\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change would remove 
impediments to and perfect the mechanism of a free and open market and 
national market system and promote a fair and orderly market because it 
would provide authority for the Exchange to nullify or adjust trades 
that may have resulted from a verifiable systems disruption or 
malfunction. The Exchange believes that it is appropriate to provide 
the flexibility and authority provided for in proposed Rule 7170(m) so 
as not to limit the Exchange's ability to plan for and respond to 
unforeseen systems problems or malfunctions that may result in harm to 
the public. Allowing for the nullification or modification of 
transactions that result from verifiable disruptions and/or 
malfunctions of Exchange systems will offer market participants on the 
Exchange a level of relief presently not available. The Exchange 
further notes that when acting under its own motion to nullify or 
adjust trades pursuant to proposed Rule 7170(m), the Exchange must 
consider whether taking such action would be in the interest of 
maintaining a fair and orderly market and for the protection of 
investors. The Exchange notes that the proposed rule change is based on 
the rules of NYSE MKT and is similar to the rules of other markets.\7\
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    \7\ See supra, note 3.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, the Exchange 
believes that the proposed rule change is pro-competitive because it 
will better align the Exchange's rules with the rules of other markets, 
including NYSE MKT, CBOE, NYSE Arca, and Phlx. By adopting proposed 
Rule 7170(m), the Exchange will be in a position to treat transactions 
that are a result of a verifiable systems issue or malfunction in a 
manner similar to other exchanges.

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

    Because the 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 if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \8\ and Rule 19b-
4(f)(6)(iii) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6)(iii). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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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 (http://www.sec.gov/rules/sro.shtml); or

[[Page 13932]]

     Send an email to [email protected]. Please include 
File Number SR-BOX-2015-15 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BOX-2015-15. 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 Web site (http://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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-2015-15, and should be 
submitted on or before April 7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-06017 Filed 3-16-15; 8:45 am]
 BILLING CODE 8011-01-P