80 FR 13932 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Regarding the Transfer of Ownership Interest in the Exchange

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 13932-13934]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-06020]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74477; File No. SR-BOX-2015-14]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Regarding the Transfer of Ownership Interest in the Exchange

March 11, 2015.
    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 February 26, 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 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 Substance 
of the Proposed Rule Change

    The Exchange proposes to repurchase the ownership interest in the 
Exchange held by Strategic Investments II Inc. (``SI'') and BOX 
Holdings Group LLC, an affiliate of the Exchange (``BOX Holdings''), 
proposes to repurchase the ownership interest in BOX Holdings held by 
SI. 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 is a limited liability company, organized under the 
laws of the State of Delaware on August 26, 2010. The Exchange's 
charter is a Limited Liability Company Agreement, dated as of May 10, 
2012 (the ``Exchange LLC Agreement''). SI became a Member of the 
Exchange on May 10, 2012.
    BOX Holdings is a limited liability company, organized under the 
laws of the State of Delaware on August 26, 2010. BOX Holdings is the 
sole owner of BOX Market LLC, a facility of the Exchange (``BOX 
Market''). The BOX Holdings charter is a Limited Liability Company 
Agreement, dated as of May 10, 2012 (the ``Holdings LLC Agreement''). 
SI became a Member of BOX Holdings on May 10, 2012. 6,445 Economic 
Units and 4,990 Voting Units represent SI's ownership interest in the 
Exchange, comprising 6.455% of all outstanding interests and 4.99% of 
all outstanding voting interests of the Exchange, respectively (the 
``Exchange Units''). 500 Class A Units represent SI's ownership 
interest in BOX Holdings, comprising 4.203% of all outstanding 
ownership interests of BOX Holdings (the ``Holdings Units'' and, 
together with the Exchange Units, the ``SI Units'').
    Each of the Exchange and BOX Holdings has agreed with SI to 
purchase the SI Units. Accordingly, it is proposed that SI transfer all 
of the Exchange Units to the Exchange and all of the Holdings Units to 
BOX Holdings (the ``Transfer''). After the Transfer, the SI Units will 
no longer be outstanding, references to SI in each of the Exchange LLC 
Agreement and the Holdings LLC Agreement will be removed, and SI will 
have no remaining rights under the Exchange LLC Agreement or the 
Holdings LLC Agreement.
    As provided in Section 7.3(f) of the Exchange LLC Agreement, ``no 
Person, alone or together with any Related Persons, shall own, directly 
or indirectly, of record or beneficially, an aggregate Economic 
Percentage Interest greater than 40% (or 20% if such Person is a BOX 
Options Participant) (the ``Economic Ownership Limit'').'' Accordingly, 
because the total number of outstanding Economic Units of the Exchange 
are reduced in the Transfer, outstanding Economic Units held by any 
remaining Members of the Exchange will be cancelled to the extent 
necessary to ensure compliance with the Economic Ownership Limit.

[[Page 13933]]

    As provided in Section 7.3(g) of the Exchange LLC Agreement, ``no 
Person, alone or together with any Related Persons, shall own, directly 
or indirectly, of record or beneficially, an aggregate Voting 
Percentage Interest of greater than 20% (the ``Voting Ownership 
Limit'').'' Further, Section 7.3(g) of the Exchange LLC Agreement 
provides that, upon any change in economic ownership, the number of 
Voting Units held by each Member of the Exchange shall be adjusted to 
maintain compliance with the Voting Ownership Limit. Accordingly, 
because the number of Economic Units held by Members of the Exchange 
are reduced in the Transfer, the number of outstanding Voting Units of 
the Exchange, and the number of Voting Units held by each of the 
remaining Members of the Exchange, will be adjusted to the extent 
necessary to ensure compliance with the Economic Ownership Limit.
    As discussed above, all ownership limits relating to the Exchange 
will continue to be strictly respected. The Transfer will not result in 
any Member of the Exchange exceeding its applicable Economic Ownership 
Percentage or Voting Ownership Percentage (collectively, its 
``Ownership Percentages''). Prior to the Transfer, some Members of the 
Exchange already held the maximum Ownership Percentages allowed under 
the Exchange LLC Agreement. The Ownership Percentages held by these 
Members will remain completely unchanged after giving effect to the 
Transfer. For other Members of the Exchange, adjustments to Ownership 
Percentages resulting from the Transfer will be insubstantial, such 
that no Member of the Exchange will have its Ownership Percentage 
adjusted by more than 2.2% of the Exchange's ownership. After giving 
effect to the Transfer, no Member will hold more than 40% Economic 
Ownership Percentage, no Participant will hold more than 20% Economic 
Ownership Percentage, and no Member will hold more than 20% Voting 
Ownership Percentage in the Exchange.
    The Board of Directors of the Exchange will remain unaffected by 
the Transfer. The makeup of the Board will still be comprised of a 
majority of Directors that are Non-industry Directors, at least 20% 
that are Participant Directors and one (1) Director that is also an 
officer or director of BOX Holdings.\3\
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    \3\ See Sec.  4.02 of the BOX Options Exchange LLC Bylaws.
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    Further, Section 7.4(f) of the Holdings LLC Agreement provides that 
a rule filing pursuant to Section 19 of the Exchange Act is required 
with respect to certain transactions that result in the acquisition and 
holding by a person of an aggregate ownership interest in BOX Holdings 
which meets or crosses the threshold level of 20% or any successive 5% 
level. Although MX US 2, Inc., a wholly-owned subsidiary of TMX Group 
Limited (``MXUS2''), is not acquiring any additional ownership Units of 
BOX Holdings in the Transfer, the reduction of the total number of 
outstanding ownership Units of BOX Holdings in the Transfer will result 
in a corresponding increase in the ownership interest held by MXUS2 
from 53.83% to 56.19% and thereby crossing a 5% level of fifty-five 
percent.
    This change in MXUS2's ownership percentage by less than 2.4% of 
the overall ownership of BOX Holdings is insubstantial and will not 
materially alter the ownership or voting power of MXUS2 in BOX 
Holdings. Even though the MXUS2's ownership percentage will experience 
this small increase, no additional power or control will accrue to 
MXUS2 as a result. For example, as the current holder of a majority of 
the outstanding ownership interests in BOX Holdings, MXUS2 has the 
ability to control any vote of the Members or the Board of Directors of 
BOX Holdings that requires a simple majority vote. After giving effect 
to the Transfer, MXUS2 will still control such votes. Further, MXUS2 
currently has the power to appoint up to five (5) representatives to 
the BOX Holdings Board of Directors. After giving effect to the 
Transfer, MXUS2 will still have the power to appoint the same number of 
Directors of BOX Holdings. As a 56.19% owner, MXUS2 would have no 
additional voting or veto rights and no other ability to exercise power 
over the operations of BOX Holdings or its subsidiary, BOX Market. No 
other Member of BOX Holdings will have its ownership percentage in BOX 
Holdings adjusted by more than 0.9% of the total BOX Holdings ownership 
as a result of the Transfer.
    The consideration paid to SI by BOX Holdings and the Exchange in 
connection with the Transfer was paid almost entirely by BOX Holdings 
with only a de minimis amount paid by the Exchange. The Exchange 
continues to reserve sufficient assets to operate and fulfill its 
regulatory responsibilities with respect to itself and the BOX Market. 
The Exchange Board of Directors remains committed to ensuring the 
Exchange is sufficiently capitalized to meet its obligations. The 
Exchange and BOX Market continue to be subject to a written agreement 
which provides that the Exchange receives and retains all assets deemed 
to be necessary for regulatory purposes by the Exchange. Accordingly, 
payments made to consummate the Transfer will not have any negative 
effect on the Exchange's ability to carry out its duties and 
obligations as an SRO.
2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Act, in general, and furthers the 
objectives of Section 6(b)(1), in particular, in that it enables the 
Exchange to be so organized so as to have the capacity to be able to 
carry out the purposes of the Act and to comply, and to enforce 
compliance by its exchange members and persons associated with its 
exchange members, with the provisions of the Act, the rules and 
regulations thereunder, and the rules of the Exchange. The Exchange 
also believes that this filing furthers the objectives of Section 
6(b)(5) of the Act in that it is designed to facilitate transactions in 
securities, 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.

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.

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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \4\ and Rule 19b-4(f)(6) thereunder.\5\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of

[[Page 13934]]

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, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\6\
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    \4\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \5\ 17 CFR 240.19b-4(f)(6).
    \6\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's 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 Commission has waived the 5-day 
prefiling requirement in this case.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) 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 asked the Commission to waive the 
30-day operative delay because the Transfer is intended to be completed 
in less than 30 days. The Commission believes that an earlier operative 
date will ensure that the filing is effective prior to the intended 
completion of the Transfer in less than 30 days. Based on the 
foregoing, the Commission believes that waiving the 30-day operative 
delay is consistent with the protection of investors and the public 
interest.\7\ The Commission hereby grants the Exchange's request and 
designates the proposal operative upon filing.
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    \7\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-SR-BOX-2015-14 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-2015-14. 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 the 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-2015-14 and should be 
submitted on or before April 7, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-06020 Filed 3-16-15; 8:45 am]
BILLING CODE 8011-01-P