80 FR 28738 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adjust the Preferred Market Maker Quoting Obligations

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 96 (May 19, 2015)

[Federal Register Volume 80, Number 96 (Tuesday, May 19, 2015)]
[Notices]
[Pages 28738-28739]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-12029]



[[Page 28738]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74952; File No. SR-BOX-2015-19]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Adjust the Preferred Market Maker Quoting Obligations

May 13, 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 May 5, 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 7300 (Preferenced Orders) 
to adjust the Preferred Market Maker quoting obligations. 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 7300 (Preferenced Orders) 
to revise the quoting obligations for Preferred Market Makers. 
Specifically, the Exchange proposes to (i) decrease the percentage of 
time a Preferred Market Maker is required to continuously quote from 
99% to 90%; (ii) decrease the percentage of series the Preferred Market 
Maker is required to continuously quote; and (iii) modify the series 
the continuous quoting obligations apply to for Preferred Market 
Makers. Each of these changes, which are described in detail below, 
will make BOX's Preferred Market Maker obligations more consistent with 
the comparable market maker obligations at other options exchanges.\3\
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    \3\ See MIAX Rule 514 and 604(e)(2); CBOE Rule 1.1(ccc); Phlx 
Rule 1014(b)(ii)(D)(1); and ISE Rule 804(e)(2)(iii).
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    BOX Rule 7300 currently provides that during trading hours, a 
Preferred Market Maker \4\ must maintain a continuous two-sided market, 
pursuant to Rule 8050(c)(1), throughout the trading day, in option 
classes for which it accepts Preferenced Orders, for 99% of the time 
the Exchange is open for trading in each such option class; provided, 
however, that for purposes of this requirement, a Preferred Market 
Maker is not required to quote in intra-day add-on series or series 
that have a time to expiration of nine months or more in the classes 
for which it receives Preferenced Orders and a Market Maker may still 
be a Preferred Market Maker in any such series if the Market Maker 
otherwise complies with Rule 7300(a)(2).
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    \4\ The term ``Preferred Market Maker'' means a Market Maker 
designated as such by a Participant with respect to an order 
submitted by such Participant to BOX. See BOX Rule 7300.
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    The rule also provides that if a technical failure or limitation of 
a system of the Exchange prevents a Preferred Market Maker from 
maintaining, or prevents a Preferred Market Maker from communicating to 
the Exchange, timely and accurate electronic quotes in an option class, 
the duration of such failure will be disregarded in determining whether 
the Preferred Market Maker has satisfied this requirement. The Exchange 
may also consider other exceptions to this obligation based on a 
demonstrated legal or regulatory requirement or other mitigating 
circumstances.
    The Exchange first proposes to reduce the percentage of time which 
a Preferred Market Maker is required to provide continuous quotes in an 
appointed options class to 90% of the time. The Exchange then proposes 
to amend the continuous quoting obligation for Preferred Market Makers 
from 100% to 99% of the options series of each class for which it 
accepts Preferenced Orders. Finally, the Exchange proposes to add the 
language ``non-adjusted options series'' to indicate that Preferred 
Market Maker will not be obligated to maintain continuous quotes in 
adjusted options series and to define the term adjusted options series. 
Compliance with the Preferred Market Maker's continuous quoting 
requirement will still be determined on a monthly basis; and this does 
not relieve a Preferred Market Maker from meeting this quoting 
requirement on a daily basis, nor does it prohibit the Exchange from 
taking disciplinary action against a Preferred Market Maker for failing 
to meet this requirement each trading day.
    The Exchange does not believe that the proposed rule change will 
adversely affect the quality of the Exchange's market or lead to a 
material decrease in liquidity. Rather, the Exchange believes that 
lowering the continuous quoting requirements may increase liquidity by 
attracting more Preferred Market Makers to the Exchange. Preferred 
Market Makers will still have to meet heightened quoting requirements 
when compared to the quoting requirements of Market Makers on the 
Exchange.\5\ Additionally, the Exchange Rules will continue to impose a 
number of other obligations on Preferred Market Makers to ensure that 
they create and maintain a fair and orderly market in the option 
classes to which they are assigned.\6\
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    \5\ Under BOX Rule 8050(e) on a daily basis a Market Maker must 
post valid quotes at least sixty percent (60%) of the time that the 
classes are open for trading.
    \6\ For example, in order to receive the allocation preference 
the Preferred Market Maker must also be quoting at the NBBO at the 
time the Preferenced Order was received.
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    The Exchange believes this proposal will make the quoting 
requirements of Preferred Market Makers more comparable to those at 
other options exchanges and is therefore essential for competitive 
purposes.\7\
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    \7\ See supra, note 3.
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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''), in general, and Section 6(b)(5) of the Act, 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

[[Page 28739]]

general to protect investors and the public interest. In particular, 
the proposed rule change removes impediments to and perfects the 
mechanisms of a free and open market and a national market system 
because it is similar with the continuous quoting standards in place on 
other options exchanges. The Exchange believes the proposed rule change 
will not diminish, and in fact may increase market making activity and 
liquidity on the Exchange by establishing a quoting compliance standard 
that is reasonable and is similar to those already in place on other 
options exchanges. Specifically, the Exchange believes that the 
proposed quoting requirements will encourage greater participation by 
Market Makers to provide quotes on the Exchange as Preferred Market 
Makers. These additional responses should encourage greater competition 
on the Exchange, which should, in turn, benefit and protect investors 
and the public interest through the potential for greater volume of 
orders and executions.

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 rule change 
applies to all Preferred Market Makers. Additionally, the proposed rule 
change is substantially similar to the rules in place at other options 
exchanges,\8\ which the exchange believes may enhance, rather than 
burden, competition among the options exchanges.
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    \8\ See supra, note 3.
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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 \9\ and Rule 19b-4(f)(6) 
thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). 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
     Send an email to [email protected]. Please include 
File Number SR-BOX-2015-19 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-2015-19. 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-2015-19, and should be 
submitted on or before June 9, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12029 Filed 5-18-15; 8:45 am]
 BILLING CODE 8011-01-P