80 FR 53213 - Self-Regulatory Organizations; BOX Options Exchange LLC; Order Granting Approval of a Proposed Rule Change To Implement the Governance Provisions of an Equity Rights Program
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 170 (September 2, 2015)
Federal Register Volume 80, Issue 170 (September 2, 2015)
| Page Range | 53213-53216 | |
| FR Document | 2015-21672 |
[Federal Register Volume 80, Number 170 (Wednesday, September 2, 2015)] [Notices] [Pages 53213-53216] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-21672] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75766; File No. SR-BOX-2015-22] Self-Regulatory Organizations; BOX Options Exchange LLC; Order Granting Approval of a Proposed Rule Change To Implement the Governance Provisions of an Equity Rights Program August 27, 2015. I. Introduction On June 25, 2015, BOX Options Exchange LLC (the ``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to implement the governance provisions of a volume performance rights program (the ``VPR Program''). The proposed rule change was published for comment in the Federal Register on July 13, 2015.\3\ The Commission received no comments on the proposal. This order approves the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 75374 (July 7, 2015), 80 FR 40100 (SR-BOX-2015-22) (``Notice''). --------------------------------------------------------------------------- II. Description Under the VPR Program, BOX \4\ Options Participants \5\ (``Participants'') that take part in the Program will have the right to acquire equity in, and receive distributions from, BOX Holdings Group LLC (``Holdings''), an affiliate of the Exchange and direct parent entity of BOX, in exchange for a nominal cash payment and the achievement of certain order flow volume commitments over a period of five years.\6\ Pursuant to the VPR Program, Volume Performance Rights (``VPRs'') were issued to Participants that elected to participate, met the eligibility criteria and made the initial cash payment (``Subscribers'').\7\ --------------------------------------------------------------------------- \4\ ``BOX'' means BOX Market LLC, an options trading facility of the Exchange. See BOX Rule 100(a)(7). \5\ ``Options Participant'' or ``Participant'' means a firm, or organization that is registered with the Exchange pursuant to the Rule 2000 Series for purposes of participating in options trading on BOX as an ``Order Flow Provider'' or ``Market Maker.'' See BOX Rule 100(a)(40). \6\ See Securities Exchange Act Release No. 74114 (January 22, 2015), 80 FR 4611 (January 28, 2015) (SR-BOX-2015-03) (the ``VPR Filing''). See also Securities Exchange Act Release No. 74171 (January 29, 2015), 80 FR 6153 (February 4, 2015) (SR-BOX-2015-05) (extending the deadline to participate in the VPR program until January 14, 2015) (the ``Second VPR Filing''). \7\ See Notice, supra note 3, at 40101. The VPRs were issued in tranches of twenty (20) VPRs (each, a ``Tranche'') with a minimum subscription of two (2) Tranches per Subscriber. According to the Exchange, twenty-seven (27) Tranches have been issued in connection with the VPR Program. See id. --------------------------------------------------------------------------- Each VPR is comprised of the right to receive 8.5 unvested new Class C Membership Units of Holdings (``Class C Units''), upon effectiveness of this proposed rule change. One VPR per Tranche will be eligible to vest each quarter of the five (5) year Program period, subject to the Subscriber meeting its volume commitment for that quarter. In addition, VPRs may be reallocated among Subscribers based upon exceeding or failing to meet Subscribers' volume commitments during the VPR Program period.\8\ --------------------------------------------------------------------------- \8\ See Notice, supra note 3, at 40101. --------------------------------------------------------------------------- A. Ownership Units As described in more detail in the Notice,\9\ in order to implement certain aspects of the VPR Program, Holdings would amend its existing Limited Liability Company Agreement (the ``Holdings LLC Agreement'') by adopting an Amended and Restated Limited Liability Company Agreement of Holdings (the ``Restated Holdings LLC Agreement''), to create Class C [[Page 53214]] Units.\10\ Once Class C Units are created, Holdings will admit the Subscribers as Class C Members.\11\ --------------------------------------------------------------------------- \9\ See id. \10\ See Notice, supra note 3 at, 40100. Currently, Holdings only has issued and outstanding Class A and Class B membership Units. See id. at 40101. \11\ See id. --------------------------------------------------------------------------- The existing limitations on the percentage ownership of Holdings by Participants will continue to apply. Specifically, in the event that a Member, or any Related Person \12\ of a Member, is a Participant, and the Member owns more than 20% of the Units,\13\ alone or together with any Related Person of the Member (Units owned in excess of 20% being referred to as ``Excess Units''), the Member and its designated Directors \14\ will have no voting rights with respect to the Excess Units on any action relating to Holdings nor will the Member or its designated Directors, if any, be entitled to give any proxy with respect to the Excess Units in relation to a vote of the Members; provided, however, that whether or not the Member or its designated Directors, if any, otherwise participates in a meeting in person or by proxy, the Member's Excess Units will be counted for quorum purposes and will be voted by the person presiding over quorum and vote matters in the same proportion as the Units held by the other Members are voted (including any abstentions from voting).\15\ --------------------------------------------------------------------------- \12\ The Exchange is not proposing to change the definition of ``Related Person.'' See Notice, supra note 3, at 40101, n.9. \13\ ``Units'' means Class A Membership Units, Class B Membership Units and Class C Units of Holdings. See proposed Restated Holdings LLC Agreement Section 1.1 (defining ``Units''). \14\ See proposed Restated Holdings LLC Agreement Section 4.1(a) (defining ``Directors''). \15\ See proposed Restated Holdings LLC Agreement Section 7.4(h). --------------------------------------------------------------------------- Upon completion of the VPR Program, all outstanding Class C Units associated with vested VPRs will be automatically converted into an equal number of Class A Units and all outstanding Class C Units associated with unvested VPRs will be automatically cancelled and be of no further effect. All rights related to Class C Units will terminate automatically upon cancellation or conversion and rights related to the converted Class A Units will remain, subject to the terms of the Restated Holdings LLC Agreement.\16\ --------------------------------------------------------------------------- \16\ See proposed Restated Holdings LLC Agreement Section 2.5(e). --------------------------------------------------------------------------- B. Voting Each Class C Member will have the right to vote its Class C Units that are associated with vested VPRs (``Voting Class C Units'') on matters submitted to a vote of all holders of Units. VPRs will vest in accordance with the vesting provisions of the VPR Program.\17\ Members holding Voting Class C Units will vote with Members holding all other classes of Units. Members holding Voting Units \18\ will be entitled to vote together, as a single class, each with one vote per Voting Unit so held.\19\ Issued and outstanding Class C Units that are not Voting Class C Units will not have voting rights. According to the Exchange, as a Subscriber meets or exceeds its volume commitments, its voting powers as a Class C Member of Holdings will increase.\20\ Similarly, if a Subscriber does not meet its volume commitment, its voting powers will decrease.\21\ --------------------------------------------------------------------------- \17\ See Notice, supra note 3. See also VPR Filing, supra note 6. \18\ ``Voting Unit'' means any Class A Unit, Class B Unit, or Voting Class C Unit. See proposed Restated Holdings LLC Agreement, Section 1.1. \19\ See proposed Restated Holdings LLC Agreement Section 4.13(a). \20\ See Notice, supra note 3, at 40102. \21\ See id. --------------------------------------------------------------------------- The Holdings LLC Agreement currently provides, and the Restated Holdings LLC Agreement will continue to provide, that any Director designated by either MX US 2, Inc. or IB Exchange Corp may effectively block certain actions of Holdings (the ``Major Action Veto''). Under the Restated Holdings LLC Agreement, upon vesting of VPRs associated with Class C Units equal to at least 25% of the total outstanding Units, the Major Action Veto will automatically expire and be of no further effect. In addition, when the 25% threshold is met, the Restated Holdings LLC Agreement provides that Holdings and its Members will take all necessary action to amend the Limited Liability Company Agreement of BOX to eliminate the Major Action Veto provisions therein that are applicable to BOX and inure to the benefit of MX US 2, Inc. and IB Exchange Corp and to provide that the executive committee of BOX will be constituted in the same manner as the Executive Committee of Holdings.\22\ --------------------------------------------------------------------------- \22\ See proposed Restated Holdings LLC Agreement Section 16.4. --------------------------------------------------------------------------- The Restated Holdings LLC Agreement includes a new supermajority voting requirement that Members holding at least 67% of all outstanding Voting Units must vote to approve certain actions (the ``Supermajority Actions'') by Holdings.\23\ The supermajority voting requirement, however, would not apply to certain of these Supermajority Actions,\24\ to the extent otherwise required by the Exchange to fulfill its regulatory functions or responsibilities or to oversee the BOX Market as determined by the board of the Exchange. --------------------------------------------------------------------------- \23\ See proposed Restated Holdings LLC Agreement Section 4.13(b). For further details on these actions, see Notice, supra note 3, at 40102-03. \24\ See, e.g., proposed Restated Holdings LLC Agreement Section 4.13(b)(vi)-(viii), (x), (xii), and (xiii). These provisions are: (1) The issuance, by Holdings, of any additional equity interests in, or any securities exchangeable for or convertible into equity securities of, Holdings, subject to specified exceptions; (2) the issuance, by BOX, of any additional equity interests in, or any securities exchangeable for or convertible into equity securities of, BOX, except as otherwise provided in the Facility Agreement; (3) permitting BOX to operate the BOX Market utilizing any other regulatory services provider other than the Exchange; (4) making a fundamental change to the business model of BOX to be other than a for-profit business; (5) altering the provisions relating to the designation of Directors set forth in Restated Holdings LLC Agreement; and (6) altering or amending any of the Supermajority Actions provisions as set forth in the Restated Holdings LLC Agreement. Id. --------------------------------------------------------------------------- C. Directors The Exchange proposes to amend the Holdings LLC Agreement with respect to the composition of the Holdings Board. Currently, MX US 2, Inc. has the right to designate up to five (5) Directors, IB Exchange Corp has the right to designate up to two (2) Directors and each other Member has the right to designate one (1) Director to the Holdings Board and the Holdings Board has the power to increase the size of the Holdings Board and to authorize new Members to designate Directors.\25\ --------------------------------------------------------------------------- \25\ See Notice, supra 3, at 40103. --------------------------------------------------------------------------- Under the Restated Holdings LLC Agreement, no Member may designate more than three (3) Directors and each Member may designate the maximum number of Directors permitted under any one (1) (but not more than one) of the following criteria: (i) Each Member, so long as it (together with its respective Affiliates) holds a combined total of Class A Units and Class B Units greater than two and one-half percent (2.5%) of all outstanding Voting Units, will be entitled to designate one (1) Director, (ii) each Member, so long as it (together with its respective Affiliates) holds a combined total of Voting Class C Units greater than four percent (4%) of all outstanding Voting Units, will be entitled to designate one (1) Director, (iii) each Member, so long as it (together with its respective Affiliates) holds a combined total of Voting Units greater than fourteen percent (14%) of all outstanding Voting Units, will be entitled to designate two (2) Directors, (iv) each Member, so long as it (together with its respective Affiliates) holds a combined total of Voting Units greater than twenty-eight percent (28%) of all [[Page 53215]] outstanding Voting Units, will be entitled to designate three (3) Directors, and (v) each other existing Member may designate one (1) Director.\26\ Directors serving on the Holdings Board may also serve on the board of directors of any subsidiary of Holdings. If a Member ceases to qualify for the right to designate a Director then serving, then that Director will then automatically be removed from the Holdings Board.\27\ --------------------------------------------------------------------------- \26\ See proposed Restated Holdings LLC Agreement Section 4.1(a)(i)-(vi). \27\ See proposed Restated Holdings LLC Agreement section 4.1(b). --------------------------------------------------------------------------- The Restated Holdings LLC Agreement also will amend the provisions governing the right of Members to designate members of the Executive Committee of Holdings (the ``Executive Committee''), if any.\28\ Currently, MX US 2, Inc. has the right to designate up to two (2) members of the Executive Committee (``EC Members'') and IB Exchange Corp has the right to designate one (1) EC Member. Under the Restated Holdings LLC Agreement, any Member with the right to designate three (3) Directors to the Holdings Board will have the right to designate up to two (2) EC Members and any Member with the right to designate two (2) Directors to the Holdings Board will have the right to designate one (1) EC Member.\29\ --------------------------------------------------------------------------- \28\ See Notice, supra note 3, at 40103. \29\ See proposed Restated Holdings LLC Agreement section 4.2(c). Other provisions relating to the composition of the Executive Committee will be unchanged. --------------------------------------------------------------------------- Subscribers will also have the right to designate one individual to a new Advisory Committee organized by Holdings, the purpose of which will be to advise and make recommendations to Holdings with respect to the Exchange's competitiveness in the marketplace.\30\ Only Subscribers will have the right to designate individuals to serve on the Advisory Committee.\31\ The Advisory Committee will be advisory only and will not have any powers, votes or fiduciary duties to Holdings.\32\ --------------------------------------------------------------------------- \30\ See Notice, supra note 3, at 40103. \31\ See VPR Filing, supra note 6, at 4613. \32\ See Notice, supra note 3, at 40103. --------------------------------------------------------------------------- D. Distributions The Restated Holdings LLC Agreement provides that, once per year, Holdings will make a distribution (an ``Annual Distribution'') to its Members to the extent funds are available for distribution.\33\ In determining the amount of each Annual Distribution, the Holdings Board will first provide for any regulatory needs of BOX and the Exchange, as determined by the Exchange Board, and any Annual Distribution amounts will be calculated after taking into account all financial and regulatory needs of the Exchange, as determined by the Exchange.\34\ The Annual Distribution will be equal to 80% of Free Cash Flow,\35\ except as limited by applicable law, including for regulatory and compliance purposes. In addition, another 15% of Free Cash Flow will be included in the distribution, except to the extent the Holdings Board determines that any portion thereof is (i) required for the operations of Holdings and its subsidiaries, which will be reflected on the annual budget for the next year, (ii) required for payment of liabilities or expenses of Holdings, or (iii) required as a reserve to make reasonable provision to pay other claims and obligations then known to, or reasonably anticipated by, BOX or Holdings. When, as and if declared by the Holdings Board, Holdings will make the cash distribution to each Member pro rata in accordance with the number of Units held by each Member, which will be determined by multiplying the aggregate Annual Distribution amount by each Member's Percentage Interest \36\ on the record date. Distributions to Class C Members may be adjusted as provided in the Members Agreement.\37\ --------------------------------------------------------------------------- \33\ See proposed Restated Holdings LLC Agreement section 8.1. Distributions on Class C Units will not be paid until this proposed rule change is effective. Distributions payable on Class C Units that accrue before such effectiveness will be held in a segregated account until such effectiveness. If this rule filing does not become effective by July 1, 2016, a Subscriber may terminate its involvement in the VPR Program and any and all distributions with respect to Class C Units payable to that Subscriber held in the segregated account will be released back to Holdings and distributed to existing Members in accordance with the terms of the Holdings LLC Agreement. See Notice, supra note 3, at 40104, n.21. See also VPR Filing, supra note 6, at 4612, n.15. \34\ See proposed Restated Holdings LLC Agreement Section 8.1. \35\ ``Free Cash Flow'' means consolidated net income, plus depreciation, less capital expenditures (in each case calculated in accordance with generally accepted accounting principles in the United States, as in effect from time to time) of Holdings and BOX, for the calendar year. See proposed Restated Holdings LLC Agreement Section 1.1. \36\ ``Percentage Interest'' with respect to a Member means the ratio of the number of Units held by the Member to the total of all of the issued Units, expressed as a percentage and determined with respect to each class of Units, whenever applicable. \37\ See proposed Restated Holdings LLC Agreement Section 8.1 and see VPR Filing supra, note 6. --------------------------------------------------------------------------- III. Discussion The Commission has reviewed carefully the proposed rule change and finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.\38\ In particular, the Commission finds that the proposed rule change is consistent with sections 6(b)(1) of the Act,\39\ which, among other things, requires a national securities exchange to be so organized and have the capacity to be able to carry out the purposes of the Act, and to enforce compliance by its members and persons associated with its members with the provisions of the Act, the rules and regulations thereunder, and the rules of the exchange. The Commission also finds that the proposal is consistent with section 6(b)(5) of the Act,\40\ which requires that the rules of the exchange be designed to promote just and equitable principles of trade, 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. --------------------------------------------------------------------------- \38\ In approving the proposed rule changes, the Commission has considered their impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). \39\ 15 U.S.C. 78f(b)(1). \40\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- Although Holdings does not carry out any regulatory functions, all of its activities must be consistent with the Act. Holdings is the sole owner of BOX, which owns and operates the BOX options trading platform as a facility of the Exchange. As a facility of a national securities exchange, the options trading platform is not solely a commercial enterprise, but is an integral part of an SRO that is registered pursuant to the Act and therefore subject to obligations imposed by the Act. The Commission believes that the Restated Holdings LLC Agreement is reasonably designed to enable Holdings to operate in a manner that is consistent with this principle. In this regard, the Commission believes that the proposed changes related to the VPR Program will not impact provisions of Holding's corporate governance documents that were designed to enable the Exchange and BOX to operate in a manner that complies with the federal securities laws, and were intended to assist the Exchange in fulfilling its self-regulatory obligations and administering and complying with the requirements of the Act.\41\ The Commission also believes [[Page 53216]] that the proposed rule change will allow the Commission to continue to exercise its plenary regulatory authority over the Exchange and continue to provide the Commission and the Exchange with access to necessary information that will allow the Exchange to comply, and enforce compliance, with the Act. --------------------------------------------------------------------------- \41\ See Securities Exchange Act Release No. 66871 (April 27, 2012), 77 FR 26323, 26329-30 (May 3, 2012) (describing provisions in governing documents designed to help maintain the independence of the regulatory functions of the Exchange, including, but not limited to, section 4.12(a) of the proposed Restated Holdings LLC Agreement, which provides that each of the Members, Directors, Officers, employees and agents of Holdings shall give due regard to the preservation of the independence of the self-regulatory function of the Exchange and to its obligations to investors and the general public and shall not take actions which would interfere with the effectuation of decisions by the board of directors of the Exchange relating to its regulatory functions (including disciplinary matters) or which would interfere with the Exchange's ability to carry out its responsibilities under the Exchange Act, and section 4.12(b), which provides that Holdings and its Members shall comply with the federal securities laws and the rules and regulations thereunder and shall cooperate with the Commission and the Exchange pursuant to and to the extent of their respective regulatory authority). --------------------------------------------------------------------------- With respect to the Annual Distributions, the Commission notes the Exchange represents that before making any distribution to its Members, the Holdings Board will first provide for any regulatory needs of BOX and the Exchange (as determined by the Exchange Board).\42\ The Commission believes that the requirement to first provide for the regulatory needs of BOX and the Exchange is designed to facilitate the ability of the Exchange to fulfill its regulatory obligations under the Act and help to ensure that the proposed provisions regarding distributions maintain the independence of the Exchange's regulatory function and would not be made in violation of the Exchange's legal and regulatory responsibilities. The Commission therefore believes that the proposed provisions in the Restated Holdings LLC Agreement related to distributions are consistent with the Act. --------------------------------------------------------------------------- \42\ See Notice, supra note 3, at 40103 (``In determining the amount of each Annual Distribution, the Holdings Board will first provide for any regulatory needs of BOX and the Exchange, as determined by the Exchange Board, and any Annual Distribution amounts will be calculated after taking into account all financial and regulatory needs of the Exchange, as determined by the Exchange.''). --------------------------------------------------------------------------- IV. Conclusion For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange. IT IS THEREFORE ORDERED, pursuant to section 19(b)(2) of the Act \43\ that the proposed rule change (SR--BOX-2015-22) is approved. --------------------------------------------------------------------------- \43\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\44\ --------------------------------------------------------------------------- \44\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-21672 Filed 9-1-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 170 / Wednesday, September 2, 2015 / Notices 53213
investors and the public interest and Washington, DC 20549 on official II. Description
hereby designates the proposal business days between the hours of
operative upon filing.14 10:00 a.m. and 3:00 p.m. Copies of such Under the VPR Program, BOX 4
At any time within 60 days of the filing also will be available for Options Participants 5 (‘‘Participants’’)
filing of the proposed rule change, the inspection and copying at the principal that take part in the Program will have
Commission summarily may offices of the Exchange. All comments the right to acquire equity in, and
temporarily suspend such rule change if received will be posted without change; receive distributions from, BOX
it appears to the Commission that such the Commission does not edit personal Holdings Group LLC (‘‘Holdings’’), an
action is necessary or appropriate in the identifying information from affiliate of the Exchange and direct
public interest, for the protection of submissions. You should submit only parent entity of BOX, in exchange for a
investors, or otherwise in furtherance of information that you wish to make nominal cash payment and the
the purposes of the Act. If the achievement of certain order flow
available publicly. All submissions
Commission takes such action, the volume commitments over a period of
should refer to File Number SR–Phlx–
Commission shall institute proceedings five years.6 Pursuant to the VPR
2015–73, and should be submitted on or
to determine whether the proposed rule Program, Volume Performance Rights
change should be approved or before September 23, 2015.
(‘‘VPRs’’) were issued to Participants
disapproved. For the Commission, by the Division of that elected to participate, met the
Trading and Markets, pursuant to delegated eligibility criteria and made the initial
IV. Solicitation of Comments authority.15 cash payment (‘‘Subscribers’’).7
Interested persons are invited to Robert W. Errett,
submit written data, views, and Each VPR is comprised of the right to
Deputy Secretary. receive 8.5 unvested new Class C
arguments concerning the foregoing,
[FR Doc. 2015–21665 Filed 9–1–15; 8:45 am] Membership Units of Holdings (‘‘Class C
including whether the proposed rule
change is consistent with the Act. BILLING CODE 8011–01–P Units’’), upon effectiveness of this
Comments may be submitted by any of proposed rule change. One VPR per
the following methods: Tranche will be eligible to vest each
SECURITIES AND EXCHANGE quarter of the five (5) year Program
Electronic Comments COMMISSION period, subject to the Subscriber
• Use the Commission’s Internet meeting its volume commitment for that
comment form (http://www.sec.gov/ [Release No. 34–75766; File No. SR–BOX– quarter. In addition, VPRs may be
rules/sro.shtml); or 2015–22] reallocated among Subscribers based
• Send an email to rule-comments@ upon exceeding or failing to meet
sec.gov. Please include File Number SR– Self-Regulatory Organizations; BOX Subscribers’ volume commitments
Phlx–2015–73 on the subject line. Options Exchange LLC; Order during the VPR Program period.8
Granting Approval of a Proposed Rule
Paper Comments Change To Implement the Governance A. Ownership Units
• Send paper comments in triplicate Provisions of an Equity Rights
As described in more detail in the
to Secretary, Securities and Exchange Program Notice,9 in order to implement certain
Commission, 100 F Street NE.,
Washington, DC 20549–1090. August 27, 2015. aspects of the VPR Program, Holdings
would amend its existing Limited
All submissions should refer to File I. Introduction Liability Company Agreement (the
Number SR–Phlx–2015–73. This file ‘‘Holdings LLC Agreement’’) by
number should be included on the On June 25, 2015, BOX Options
adopting an Amended and Restated
subject line if email is used. To help the Exchange LLC (the ‘‘Exchange’’) filed
Limited Liability Company Agreement
Commission process and review your with the Securities and Exchange
of Holdings (the ‘‘Restated Holdings
comments more efficiently, please use Commission (‘‘Commission’’), pursuant
LLC Agreement’’), to create Class C
only one method. The Commission will to section 19(b)(1) of the Securities
post all comments on the Commission’s Exchange Act of 1934 (‘‘Act’’),1 and 4 ‘‘BOX’’ means BOX Market LLC, an options
Internet Web site (http://www.sec.gov/ Rule 19b–4 thereunder,2 a proposed rule trading facility of the Exchange. See BOX Rule
rules/sro.shtml). Copies of the change to implement the governance 100(a)(7).
submission, all subsequent provisions of a volume performance 5 ‘‘Options Participant’’ or ‘‘Participant’’ means a
amendments, all written statements rights program (the ‘‘VPR Program’’). firm, or organization that is registered with the
with respect to the proposed rule Exchange pursuant to the Rule 2000 Series for
The proposed rule change was purposes of participating in options trading on BOX
change that are filed with the published for comment in the Federal as an ‘‘Order Flow Provider’’ or ‘‘Market Maker.’’
Commission, and all written Register on July 13, 2015.3 The See BOX Rule 100(a)(40).
communications relating to the Commission received no comments on
6 See Securities Exchange Act Release No. 74114
proposed rule change between the (January 22, 2015), 80 FR 4611 (January 28, 2015)
the proposal. This order approves the (SR–BOX–2015–03) (the ‘‘VPR Filing’’). See also
Commission and any person, other than
proposed rule change. Securities Exchange Act Release No. 74171 (January
those that may be withheld from the 29, 2015), 80 FR 6153 (February 4, 2015) (SR–BOX–
public in accordance with the 2015–05) (extending the deadline to participate in
provisions of 5 U.S.C. 552, will be the VPR program until January 14, 2015) (the
mstockstill on DSK4VPTVN1PROD with NOTICES
‘‘Second VPR Filing’’).
available for Web site viewing and 7 See Notice, supra note 3, at 40101. The VPRs
printing in the Commission’s Public 15 17 were issued in tranches of twenty (20) VPRs (each,
CFR 200.30–3(a)(12), (59).
Reference Room, 100 F Street NE., 1 15
a ‘‘Tranche’’) with a minimum subscription of two
U.S.C. 78s(b)(1). (2) Tranches per Subscriber. According to the
2 17 CFR 240.19b–4.
14 For purposes only of waiving the 30-day Exchange, twenty-seven (27) Tranches have been
operative delay, the Commission has considered the 3 See Securities Exchange Act Release No. 75374 issued in connection with the VPR Program. See id.
(July 7, 2015), 80 FR 40100 (SR–BOX–2015–22) 8 See Notice, supra note 3, at 40101.
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f). (‘‘Notice’’). 9 See id.
VerDate Sep<11>2014 19:04 Sep 01, 2015 Jkt 235001 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 E:\FR\FM\02SEN1.SGM 02SEN1](https://thefederalregister.org/doc/80_FR_53383/page/1.svg)
![53216 Federal Register / Vol. 80, No. 170 / Wednesday, September 2, 2015 / Notices
that the proposed rule change will allow For the Commission, by the Division of II. Self-Regulatory Organization’s
the Commission to continue to exercise Trading and Markets, pursuant to delegated Statement of the Purpose of, and
its plenary regulatory authority over the authority.44 Statutory Basis for, the Proposed Rule
Exchange and continue to provide the Robert W. Errett, Change
Commission and the Exchange with Deputy Secretary. In its filing with the Commission, the
access to necessary information that will [FR Doc. 2015–21672 Filed 9–1–15; 8:45 am] Exchange included statements
allow the Exchange to comply, and BILLING CODE 8011–01–P concerning the purpose of and basis for
enforce compliance, with the Act. the proposed rule change and discussed
With respect to the Annual any comments it received on the
Distributions, the Commission notes the SECURITIES AND EXCHANGE proposed rule change. The text of these
Exchange represents that before making COMMISSION statements may be examined at the
any distribution to its Members, the places specified in Item IV below. The
Holdings Board will first provide for [Release No. 34–75770; File No. SR–BYX– Exchange has prepared summaries, set
any regulatory needs of BOX and the 2015–37] forth in Sections A, B, and C below, of
Exchange (as determined by the the most significant parts of such
Exchange Board).42 The Commission Self-Regulatory Organizations; BATS statements.
believes that the requirement to first Y-Exchange, Inc.; Notice of Filing and
(A) Self-Regulatory Organization’s
provide for the regulatory needs of BOX Immediate Effectiveness of a Proposed
Statement of the Purpose of, and
Rule Change To Amend Rule 11.26
and the Exchange is designed to Statutory Basis for, the Proposed Rule
Relating to the Reactivation of NSX
facilitate the ability of the Exchange to Change
fulfill its regulatory obligations under August 27, 2015. 1. Purpose
the Act and help to ensure that the
Pursuant to Section 19(b)(1) of the
proposed provisions regarding The Exchange proposes to update
Securities Exchange Act of 1934 (the
distributions maintain the Rule 11.26(a) regarding the public
‘‘Act’’),1 and Rule 19b–4 thereunder,2
independence of the Exchange’s disclosure of the sources of data that the
notice is hereby given that on August Exchange utilizes when performing: (i)
regulatory function and would not be 18, 2015, BATS Y-Exchange, Inc. (the
made in violation of the Exchange’s Order handling; (ii) order routing; and
‘‘Exchange’’ or ‘‘BYX’’) filed with the (iii) related compliance processes to
legal and regulatory responsibilities. Securities and Exchange Commission
The Commission therefore believes that reflect reactivation of the NSX on or
(‘‘Commission’’) the proposed rule about August 31, 2015. The NSX
the proposed provisions in the Restated change as described in Items I and II
Holdings LLC Agreement related to informed the UTP Securities
below, which Items have been prepared Information Processor (‘‘UTP SIP’’) that,
distributions are consistent with the by the Exchange. The Exchange has
Act. subject to regulatory approval, it is
designated this proposal as a ‘‘non- projecting to reactivate its status as an
IV. Conclusion controversial’’ proposed rule change operating participant for quotation and
pursuant to Section 19(b)(3)(A) of the trading of Nasdaq-listed securities under
For the foregoing reasons, the Act 3 and Rule 19b–4(f)(6)(iii) the Unlisted Trading Privileges (‘‘UTP’’)
Commission finds that the proposed thereunder,4 which renders it effective Plan on or about August 31, 2015.
rule change is consistent with the Act upon filing with the Commission. The Specifically, the Exchange proposes to
and the rules and regulations Commission is publishing this notice to amend Rule 11.26(a) to include the NSX
thereunder applicable to a national solicit comments on the proposed rule by stating it will utilize NSX market
securities exchange. change from interested persons. data from the CQS/UQDF for purposes
IT IS THEREFORE ORDERED, I. Self-Regulatory Organization’s of order handling, routing, and related
pursuant to section 19(b)(2) of the Act 43 Statement of the Terms of Substance of compliance processes.
that the proposed rule change (SR— the Proposed Rule Change 2. Statutory Basis
BOX–2015–22) is approved.
The Exchange filed a proposal to The Exchange believes that the
obligations to investors and the general public and
amend Rule 11.26(a) regarding the proposed rule change is consistent with
shall not take actions which would interfere with public disclosure of the sources of data Section 6(b) of the Act,5 in general, and
the effectuation of decisions by the board of that the Exchange utilizes when furthers the objectives of Section 6(b)(5)
directors of the Exchange relating to its regulatory performing: (i) Order handling; (ii) order of the Act,6 in particular, in that it is
functions (including disciplinary matters) or which routing; and (iii) related compliance designed to prevent fraudulent and
would interfere with the Exchange’s ability to carry
processes to reflect reactivation of the manipulative acts and practices, to
out its responsibilities under the Exchange Act, and
section 4.12(b), which provides that Holdings and National Stock Exchange, Inc. (‘‘NSX’’) promote just and equitable principles of
its Members shall comply with the federal on or about August 31, 2015. trade, to foster cooperation and
securities laws and the rules and regulations The text of the proposed rule change coordination with persons engaged in
thereunder and shall cooperate with the regulating, clearing, settling, processing
Commission and the Exchange pursuant to and to is available at the Exchange’s Web site
at www.batstrading.com, at the information with respect to, and
the extent of their respective regulatory authority).
42 See Notice, supra note 3, at 40103 (‘‘In principal office of the Exchange, and at facilitating transactions in securities, to
mstockstill on DSK4VPTVN1PROD with NOTICES
determining the amount of each Annual the Commission’s Public Reference remove impediments to and perfect the
Distribution, the Holdings Board will first provide Room. mechanism of a free and open market
for any regulatory needs of BOX and the Exchange, and a national market system, and, in
as determined by the Exchange Board, and any general, to protect investors and the
44 17 CFR 200.30–3(a)(12).
Annual Distribution amounts will be calculated
after taking into account all financial and regulatory 1 15 U.S.C. 78s(b)(1). public interest.
needs of the Exchange, as determined by the 2 17 CFR 240.19b–4.
Exchange.’’). 3 15 U.S.C. 78s(b)(3)(A). 5 15 U.S.C. 78f.
43 15 U.S.C. 78s(b)(2). 4 17 CFR 240.19b–4(f)(6)(iii). 6 15 U.S.C. 78f(b)(5).
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Document Created: 2018-02-26 10:10:38
Document Modified: 2018-02-26 10:10:38
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 53213 |
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