80 FR 62132 - Self-Regulatory Organizations; BOX Options Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market LLC Options Facility
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 199 (October 15, 2015)
Federal Register Volume 80, Issue 199 (October 15, 2015)
| Page Range | 62132-62136 | |
| FR Document | 2015-26148 |
[Federal Register Volume 80, Number 199 (Thursday, October 15, 2015)] [Notices] [Pages 62132-62136] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-26148] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-76115; File No. SR-BOX-2015-32] Self-Regulatory Organizations; BOX Options Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule on the BOX Market LLC Options Facility October 8, 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 September 30, 2015, BOX Options 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 to make changes to Section I.A., Exchange Fees for Non-Auction Transactions and Section II.B., Liquidity Fees and Credits for Facilitation and Solicitation transactions on the BOX Market LLC (``BOX'') options facility. While changes to the fee schedule pursuant to this proposal will be effective upon filing, the changes will become operative on October 1, 2015. 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 Exchange included statements [[Page 62133]] 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 make changes to Section I.A., Exchange Fees for Non-Auction Transactions and Section II.B., Liquidity Fees and Credits for Facilitation and Solicitation transactions. Non-Auction Transactions First, the Exchange proposes to raise certain fees for non-auction transactions in Non-Penny Pilot Classes which take liquidity from Public Customers. For all non-auction transactions, fees and credits are assessed depending upon three factors: (i) The account type of the Participant submitting the order; (ii) whether the Participant is a liquidity provider or liquidity taker; and (iii) the account type of the contra party. Non-Auction Transactions in Penny Pilot Classes are assessed different fees or credits than Non-Auction Transactions in Non-Penny Pilot Classes. The Exchange proposes to raise the fee assessed for Professional Customers and Broker Dealers taking liquidity from a Public Customer in a Non-Penny Pilot Class to $1.07 from $0.99. For Market Makers taking liquidity from a Public Customer in a Non- Penny Pilot Class, the Exchange proposes to raise the fee assessed to $1.03 from $0.90. The fees for Non-Auction Transactions will be as follows: ---------------------------------------------------------------------------------------------------------------- Penny pilot classes Non-Penny pilot classes --------------------------------------------------- Account type Contra party Maker fee/ Taker fee/ Maker fee/ Taker fee/ credit credit credit credit ---------------------------------------------------------------------------------------------------------------- Public Customer..................... Public Customer....... $0.00 $0.00 $0.00 $0.00 Professional Customer/ 0.00 0.00 0.00 0.00 Broker Dealer. Market Maker.......... 0.00 0.00 0.00 0.00 Professional Customer or Broker Public Customer....... 0.60 0.64 0.95 1.07 Dealer. Professional Customer/ 0.25 0.40 0.35 0.40 Broker Dealer. Market Maker.......... 0.25 0.44 0.35 0.44 Market Maker........................ Public Customer....... 0.51 0.55 0.85 1.03 Professional Customer/ 0.00 0.05 0.00 0.10 Broker Dealer. Market Maker.......... 0.00 0.29 0.00 0.29 ---------------------------------------------------------------------------------------------------------------- The Exchange then proposes to amend the structure of the Tiered Volume Rebates for Public Customers in Non-Auction Transactions (Section I.A.1.) and distinguish between whether the Public Customer is a liquidity provider or liquidity taker within the transaction. While a majority of the rebate levels will remain unchanged, at the highest volume tier (65,001 contracts or greater) in Non-Penny Pilot Classes the Exchange proposes to award transactions where the Public Customer is a liquidity maker a per contract rebate of $0.90. Transactions where the Public Customer is a liquidity taker will continue to be awarded a $0.70 rebate. The new per contract rebates for Public Customers in Non-Auction Transactions as set forth in Section I.A.1. of the BOX Fee Schedule will now be as follows: ---------------------------------------------------------------------------------------------------------------- Per contract rebate --------------------------------------------------- Public customer monthly ADV Penny pilot classes Non-Penny pilot classes --------------------------------------------------- Maker Taker Maker Taker ---------------------------------------------------------------------------------------------------------------- 65,001 contracts and greater................................ ($0.40) ($0.40) ($0.90) ($0.70) 40,001 contracts to 65,000 contracts........................ (0.25) (0.25) (0.50) (0.50) 15,001 contracts to 40,000 contracts........................ (0.15) (0.15) (0.40) (0.40) 1 contract to 15,000 contracts.............................. 0.00 0.00 0.00 0.00 ---------------------------------------------------------------------------------------------------------------- Liquidity Fees and Credits The Exchange then proposes to amend Section II.B of the BOX Fee Schedule, liquidity fees and credits for Facilitation and Solicitation Transactions. Specifically, the Exchange proposes to establish higher liquidity credits for both Facilitation and Solicitation transactions in Penny Pilot and Non-Penny Pilot Classes. The Exchange proposes to raise the credit for removing liquidity in Facilitation and Solicitation transactions to $1.00 from $0.95 in Non-Penny Pilot Classes, and to $0.45 from $0.40 in Penny Pilot Classes. The liquidity fees and credits for Facilitation and Solicitation transactions will be as follows: ------------------------------------------------------------------------ Credit for Fee for adding removing Facilitation and solicitation liquidity liquidity transactions (all account (all account types) types) ------------------------------------------------------------------------ Non-Penny Pilot Classes................. $0.95 ($1.00) [[Page 62134]] Penny Pilot Classes..................... 0.40 (0.45) ------------------------------------------------------------------------ 2. Statutory Basis The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act, in general, and Section 6(b)(4) and 6(b)(5)of the Act,\5\ in particular, in that it provides for the equitable allocation of reasonable dues, fees, and other charges among BOX Participants and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The proposed changes will allow the Exchange to be competitive with other exchanges and to apply fees and credits in a manner that is equitable among all BOX Participants. Further, the Exchange operates within a highly competitive market in which market participants can readily direct order flow to any other competing exchange if they determine fees at a particular exchange to be excessive. --------------------------------------------------------------------------- \5\ 15 U.S.C. 78f(b)(4) and (5). --------------------------------------------------------------------------- Non-Auction Transactions The Exchange believes it is equitable, reasonable and not unfairly discriminatory to assess fees according to the account type of the Participant originating the order and the contra party. This fee structure has been in place on the Exchange for the past year and the Exchange is simply adjusting certain fees within the structure. The result of this structure is that a Participant does not know the fee it will be charged when submitting certain orders. Therefore, the Participant must recognize that it could be charged the highest applicable fee on the Exchange's schedule, which may, instead, be lowered or changed to a credit depending upon how the order interacts. The Exchange believes raising the non-auction transaction fees for Professionals, Broker Dealers and Market Makers when taking liquidity from a Public Customer in a Non-Penny Pilot Class is reasonable, equitable and not unfairly discriminatory. The Exchange believes that participants taking liquidity from the BOX Book are willing to pay a higher fee for liquidity discovery in these less liquid names. Further, the Exchange believes the fees proposed are reasonable and in line with similar fees at a competing venue.\6\ --------------------------------------------------------------------------- \6\ See the NASDAQ Stock Market LLC (``NOM''), NYSE Arca, Inc (``Arca'') and International Securities Exchange (``ISE'') Fee Schedules. --------------------------------------------------------------------------- Raising these fees is intended to partially offset the higher Public Customer liquidity maker rebate also proposed within this filing. The Exchange believes it is reasonable, equitable and not unfairly discriminatory to give Public Customers a rebate and, accordingly, charge non-Public Customers a higher fee when their orders execute against a Public Customer. The securities markets generally, and BOX in particular, have historically aimed to improve markets for investors and develop various features within the market structure for public customer benefit. Similar to the payment for order flow and other pricing models that have been adopted by the Exchange and other exchanges to attract Public Customer order flow, the Exchange increases fees to non-Public Customers in order to provide incentives for Public Customers. The Exchange believes that providing additional incentives for Public Customers to make liquidity is reasonable and, ultimately, will benefit all Participants trading on the Exchange by attracting Public Customer order flow. The Exchange believes that charging Professional Customers and Broker Dealers $1.07 for taking liquidity against Public Customers in Non-Penny Pilot Classes is reasonable and comparable to similar fees at competing venues.\7\ Further, the Exchange notes that Participants are only charged these higher fees when the Participant takes liquidity from a Public Customer in a Non-Penny Pilot Class. The Exchange also believes that charging Professional Customers and Broker Dealers higher fees than Public Customers for all non-auction transactions is equitable and not unfairly discriminatory. Professional Customers, while Public Customers by virtue of not being Broker Dealers, generally engage in trading activity more similar to Broker Dealer proprietary trading accounts (submitting more than 390 standard orders per day on average). The Exchange believes the higher level of trading activity from these Participants will draw a greater amount of BOX system resources than that of non-professional, Public Customers. Because this higher level of trading activity will result in greater ongoing operational costs, the Exchange aims to recover its costs by assessing Professional Customers and Broker Dealers higher fees for transactions. --------------------------------------------------------------------------- \7\ Under the NOM and Arca Fee Schedules Broker Dealers and Professional Customers are charged $0.94 for removing liquidity in Non-Penny Pilot Classes. --------------------------------------------------------------------------- The Exchange believes that charging Market Makers $1.03 for taking liquidity against Public Customers in Non-Penny Pilot Classes is reasonable and comparable to similar fees at competing venues.\8\ Further, the Exchange notes that most Market Makers currently qualify for the Tiered Volume Rebate in Non-Auction transactions in Section I.A.1., which will result in a lower per contract fee for all the Participant's non-auction transactions. The Exchange also believes it is equitable and not unfairly discriminatory for BOX Market Makers to be assessed lower fees than Professional Customers and Broker Dealers for non-auction transactions because of the significant contributions to overall market quality that Market Makers provide. Specifically, Market Makers can provide higher volumes of liquidity, and lowering their fees will help attract a higher level of Market Maker order flow to the BOX Book and create liquidity, which the Exchange believes will ultimately benefit all Participants trading on BOX. --------------------------------------------------------------------------- \8\ Under the ISE Fee Schedule Market Makers are charged $0.95 ($0.25 exchange fee combined with a $0.70 Payment for Order Flow Fee) and under the NOM Fee Schedule they are charged $0.94. --------------------------------------------------------------------------- The Exchange believes amending the structure of the Tiered Volume Rebates for Public Customers in Non-Auction Transactions (Section I.A.1.) to distinguish whether the Public Customer is a liquidity provider or liquidity taker is reasonable, equitable and not unfairly discriminatory. The volume thresholds and applicable rebates are meant to incentivize Public Customers to direct order flow to the Exchange to obtain the benefit of the rebate, which will in turn benefit all market participants by increasing liquidity on the Exchange. Other exchanges employ similar incentive [[Page 62135]] programs \9\ and the Exchange believes that the proposed change to the rebate structure is reasonable and competitive when compared to incentive structures at other exchanges. --------------------------------------------------------------------------- \9\ See Section B of the NASDAQ OMX PHLX,(``PHLX'') Pricing Schedule entitled ``Customer Rebate Program;'' ISE Gemini, LLC (``Gemini'') Qualifying Tier Thresholds (page 6 of the ISE Gemini Fee Schedule); and Chicago Board Options Exchange, Inc. (``CBOE'') Volume Incentive Program (VIP). CBOE's Volume Incentive Program (``VIP'') pays certain tiered rebates to Trading Permit Holders for electronically executed multiply-listed option orders which include AIM orders. Note that some of these exchanges base these rebate programs on the percentage of total national Public Customer volume traded on their respective exchanges, which the Exchange is not proposing to do. --------------------------------------------------------------------------- The proposed structure is intended to attract Public Customer order flow to the Exchange by offering these Participants incentives to submit their Non-Auction orders to the Exchange. The practice of providing additional incentives to increase order flow is, and has been, a common practice in the options markets.\10\ Further, the Exchange believes it is appropriate to provide incentives for market participants which will result in greater liquidity and ultimately benefit all Participants trading on the Exchange. --------------------------------------------------------------------------- \10\ See BATS Exchange, Inc. (``BATS'') BATS Options Exchange Fee Schedule ``Standard Rates''; CBOE Fee Schedule ``Volume Incentive Program'' (page 4); Gemini Schedule of Fees, Section I. Regular Order Fees and Rebates ``Penny Symbols and SPY, and Non- Penny Symbols'' (page 4); Miami International Securities Exchange, LLC (``MIAX'') Fee Schedule Section I(a)(i) ``Market Maker Transaction Fees'' and ``Market Maker Sliding Scale'', and Section I(a)(iii) ``Priority Customer Rebate Program''; NASDAQ OMX BX, Inc. (``BX Options'') Chapter XV, Section 2 BX Options Market--Fees and Rebates; NASDAQ OMX PHLX,(``PHLX''), Pricing Schedule Section B, ``Customer Rebate Program''; NOM Chapter XV, Section 2 NASDAQ Options Market--Fees and Rebates; NYSE Amex, Inc. (``AMEX'') Fee Schedule Section I.C. NYSE Amex Options Market Maker Sliding Scale-- Electronic; and Arca Options Fees and Charges, ``Customer and Professional Customer Monthly Posting Credit Tiers and Qualifications for Executions in Penny Pilot Issues'' (page 4). --------------------------------------------------------------------------- The Exchange believes awarding a $0.90 rebate to those Public Customers who make liquidity in Non-Penny Pilot classes and achieve the highest volume tier during a month (65,001 contracts or greater) is reasonable, equitable and not unfairly discriminatory. As stated above, other exchanges employ similar incentive programs,\11\ and the Exchange believes that the $0.90 maker rebate for Non-Penny Pilot Classes is reasonable and competitive when compared to credits and rebates at other exchanges. The Exchange also believes it is equitable and not unfairly discriminatory to only offer the higher rebate to Public Customers that have an average daily volume of 65,001 contracts or greater during the month. The Exchange believes offering a $0.90 rebate at the highest volume tier will incentivize all Public Customers to increase their non-auction order flow in these classes to the Exchange to achieve the higher rebate, which will in turn benefit all participants trading on BOX. --------------------------------------------------------------------------- \11\ See supra, note 9. --------------------------------------------------------------------------- The Exchange continues to believe it is equitable and not unfairly discriminatory to offer these rebate structures to Public Customers in Non-Auction transactions. The practice of incentivizing increased Public Customer order flow is common in the options markets. The Exchange believes the proposed changes to the structure and per contract rebate for Public Customers who achieve the highest volume tier is equitable and not unfairly discriminatory as all Public Customers will benefit from the opportunity to obtain a greater rebate. The Exchange believes it is reasonable to offer a higher per contract rebate for transactions in Non-Penny Pilot Classes compared to Penny Pilot Classes because Non-Penny Pilot Classes are typically less actively traded and have wider spreads. The Exchange believes that offering a higher rebate will incentivize Public Customer order flow in Non-Penny Pilot issues on the Exchange, ultimately benefitting all Participants trading on BOX. Liquidity Fees and Credits BOX believes that the changes to Facilitation and Solicitation transaction liquidity credits are equitable and not unfairly discriminatory in that they apply to all categories of participants and across all account types. The Exchange notes that liquidity fees and credits on BOX are meant to offset one another in any particular transaction. The liquidity fees and credits do not directly result in revenue to BOX, but will simply allow BOX to provide the credit incentive to Participants to attract order flow. Raising the credits for removing liquidity will result in BOX crediting a Participant a higher amount for removing liquidity than it received from collecting the corresponding liquidity fee. The Exchange believes it is appropriate to provide incentives to market participants to use the Facilitation and Solicitation auction mechanisms, because doing so may result in greater liquidity on BOX which would benefit all market participants. The Exchange also believes the liquidity fees and credits are reasonable and competitive when compared to similar fees at competing venues.\12\ Under the proposed changes, Initiators to the Facilitation and Solicitation auctions will never pay a fee and will only receive a credit of $0.45 in Penny Pilot Classes and $1.00 in Non-Penny Pilot Classes for the portion of the order that interacts with a Responder. In comparison, under the ISE Fee Schedule all Initiators except Public Customers are charged a $.20 fee for Penny Pilot Classes and $0.20 to $0.25 fee for Non-Penny Pilot Classes.\13\ --------------------------------------------------------------------------- \12\ See ISE Schedules of Fees. \13\ The ISE uses the term ``Crossing Order'' for orders executed on the Exchange's Facilitation and Solicitation mechanisms. --------------------------------------------------------------------------- The Exchange believes that the proposed difference between what an Initiator will pay compared to what a Responder will pay is reasonable, equitable and not unfairly discriminatory. Specifically, the difference is in line with the credits and fees at the ISE.\14\ While Initiators on the ISE are assessed a fee, the ISE then uses volume based incentives that can greatly reduce the fees these Participants are charged. All Facilitation and Solicitation fees are subject to a fee cap of $75,000,\15\ allowing Participants who use these auctions to potentially reduce their per contract fee to a much lower rate. In addition, depending on their overall monthly volume, Initiators can receive a rebate of $0.05 to $0.11 per contract for their orders.\16\ Finally, if the order executes against a responder within one of these mechanisms the Initiator will receive an additional rebate of $0.15 for Penny Pilot Classes. For Non-Penny Pilot Classes, the Initiator will typically receive a proportional PFOF credit to their pool which they can allocate as they so choose.\17\ --------------------------------------------------------------------------- \14\ While it is difficult to exactly equate these two fee structures at the ISE, depending on volume Initiators could receive a credit per contract for all Facilitation and Solicitation orders, and an additional $0.15 break up credit (Penny Pilot Classes) or PFOF credit (Non-Penny Pilot Classes) .14 [sic] In comparison under the BOX proposal Initiators would only receive a credit for the portion of the order that interacted with a Response, and the credit would be $0.45 (Penny Pilot Classes) or $1.00 (Non-Penny Pilot Classes). \15\ See Section IV.H of the ISE Fee Schedule. \16\ See Section IV.A of the ISE Fee Schedule. \17\ Under Section IV.D of the ISE Fee Schedule the fee for PFOF is $0.70 and the fee will be rebated proportionally to the members that paid the fee on a monthly basis. --------------------------------------------------------------------------- In conclusion, the Exchange believes the proposed Facilitation and Solicitation credits are reasonable when compared to fees and credits for similar mechanisms at the ISE. While it is difficult to exactly equate these two fee structures, most Responders on ISE (Market Makers interacting with Customer Orders) will pay $0.47 (Penny Pilot Classes) and $1.17 (Non-Penny Pilot Classes) while most Responders on [[Page 62136]] BOX (Market Makers interacting with Customer Orders) will pay $0.60 (Penny Pilot Classes) and $1.15 (Non-Penny Pilot Classes). At the ISE, depending on volume, Initiators in this scenario could receive a credit per contract for all Facilitation and Solicitation orders, and an additional $0.15 break up credit (Penny Pilot Classes) or PFOF credit (Non-Penny Pilot Classes).\18\ In comparison, under the BOX proposal, Initiators would only receive a credit for the portion of the order that interacted with a Response, and the credit would be $0.40 [sic] (Penny Pilot Classes) or $0.95 [sic] (Non-Penny Pilot Classes). --------------------------------------------------------------------------- \18\ The Exchange notes that the language used in the ISE Fee Schedule states that there will be a proportional credit put into the monthly pool that the Initiator can then allocate. With this discretion the PFOF credit for these orders could be higher than $0.70. --------------------------------------------------------------------------- Finally, the Exchange believes it is reasonable to establish different fees and credits for Facilitation and Solicitation transactions in Penny Pilot Classes compared to transactions in Non- Penny Pilot Classes. The Exchange makes this distinction throughout the BOX Fee Schedule, including the liquidity fees and credits for PIP and COPIP Transactions. The Exchange believes it is reasonable to establish higher fees and credits for Non-Penny Pilot Classes because these Classes are typically less actively traded and have wider spreads. The Exchange believes that offering a higher rebate will incentivize order flow in Non-Penny Pilot issues on the Exchange, ultimately benefitting all Participants trading on BOX. 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 Exchange believes that the proposed adjustments to fees and rebates in the Non-Auction Transactions fee structure will not impose a burden on competition among various Exchange Participants. The Exchange believes that a fee structure that is determined according to whether the order removes or adds liquidity, the account type of the Participant submitting the order, and the contra party will result in Participants being charged appropriately for these transactions is designed to enhance competition in Non-Auction transactions on BOX. Submitting an order is entirely voluntary and Participants can determine which type of order they wish to submit, if any, to the Exchange. Further, the Exchange believes that this proposal will enhance competition between exchanges because it is designed to allow the Exchange to better compete with other exchanges for order flow. The Exchange does not believe that the proposed liquidity credits will burden competition by creating such a disparity between the fees an Initiating Participant in the Facilitation and Solicitation auction pays and the fees a competitive responder pays that would result in certain Participants being unable to compete with initiators. In fact, the Exchange believes that these changes will not impair these Participants from adding liquidity and competing in Facilitation and Solicitation auction transactions and will help promote competition by providing incentives for market participants to submit customer order flow to BOX and thus, create a greater opportunity for customers to receive additional price improvement. The Exchange also believes that this proposal will enhance competition between exchanges because it is designed to allow the Exchange to better compete with other exchanges for Facilitation and Solicitation auction order flow. 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 The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Exchange Act \19\ and Rule 19b-4(f)(2) thereunder,\20\ because it establishes or changes a due, or fee. --------------------------------------------------------------------------- \19\ 15 U.S.C. 78s(b)(3)(A)(ii). \20\ 17 CFR 240.19b-4(f)(2). --------------------------------------------------------------------------- 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. Comments may be submitted by any of the following methods: Electronic CommentsUse 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-2015-32 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-2015-32. 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-2015-32, and should be submitted on or before November 5, 2015. --------------------------------------------------------------------------- \21\ 17 CFR 200.30-3(a)(12). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\21\ Robert W. Errett, Deputy Secretary. [FR Doc. 2015-26148 Filed 10-14-15; 8:45 am] BILLING CODE 8011-01-P
![62132 Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices
including by attracting additional • Send an email to rule-comments@ SECURITIES AND EXCHANGE
liquidity to the Exchange, which will sec.gov. Please include File Number SR– COMMISSION
make the Exchange a more competitive NYSEArca–2015–89 on the subject line.
[Release No. 34–76115; File No. SR–BOX–
venue for, among other things, order 2015–32]
execution and price discovery. The Paper Comments
Exchange notes that it operates in a • Send paper comments in triplicate Self-Regulatory Organizations; BOX
highly competitive market in which to Secretary, Securities and Exchange Options Exchange, LLC; Notice of
market participants can readily favor Filing and Immediate Effectiveness of
Commission, 100 F Street NE.,
competing venues. In such an a Proposed Rule Change To Amend
Washington, DC 20549–1090.
environment, the Exchange must the Fee Schedule on the BOX Market
continually review, and consider All submissions should refer to File LLC Options Facility
adjusting, its fees and credits to remain Number SR–NYSEArca–2015–89. This
competitive with other exchanges. For file number should be included on the October 8, 2015.
the reasons described above, the subject line if email is used. To help the Pursuant to Section 19(b)(1) of the
Exchange believes that the proposed Commission process and review your Securities Exchange Act of 1934 (the
rule change promotes a competitive comments more efficiently, please use ‘‘Act’’),1 and Rule 19b–4 thereunder,2
environment. only one method. The Commission will notice is hereby given that on
post all comments on the Commission’s September 30, 2015, BOX Options
C. Self-Regulatory Organization’s Exchange LLC (the ‘‘Exchange’’) filed
Statement on Comments on the Internet Web site (http://www.sec.gov/
with the Securities and Exchange
Proposed Rule Change Received From rules/sro.shtml). Copies of the
Commission (‘‘Commission’’) the
Members, Participants, or Others submission, all subsequent proposed rule change as described in
No written comments were solicited amendments, all written statements Items I, II, and III below, which Items
or received with respect to the proposed with respect to the proposed rule have been prepared by the Exchange.
rule change. change that are filed with the The Exchange filed the proposed rule
Commission, and all written change pursuant to Section
III. Date of Effectiveness of the communications relating to the 19(b)(3)(A)(ii) of the Act,3 and Rule
Proposed Rule Change and Timing for proposed rule change between the 19b–4(f)(2) thereunder,4 which renders
Commission Action Commission and any person, other than the proposal effective upon filing with
The foregoing rule change is effective those that may be withheld from the the Commission. The Commission is
upon filing pursuant to Section public in accordance with the publishing this notice to solicit
19(b)(3)(A) 10 of the Act and provisions of 5 U.S.C. 552, will be comments on the proposed rule change
subparagraph (f)(2) of Rule 19b–4 11 available for Web site viewing and from interested persons.
thereunder, because it establishes a due, printing in the Commission’s Public
fee, or other charge imposed by the I. Self-Regulatory Organization’s
Reference Room, 100 F Street NE., Statement of the Terms of the Substance
Exchange. Washington, DC 20549, on official
At any time within 60 days of the of the Proposed Rule Change
business days between the hours of
filing of such proposed rule change, the 10:00 a.m. and 3:00 p.m. Copies of the The Exchange is filing with the
Commission summarily may filing also will be available for Securities and Exchange Commission
temporarily suspend such rule change if inspection and copying at the principal (‘‘Commission’’) a proposed rule change
it appears to the Commission that such to amend the Fee Schedule to make
office of the Exchange. All comments
action is necessary or appropriate in the changes to Section I.A., Exchange Fees
received will be posted without change;
public interest, for the protection of for Non-Auction Transactions and
investors, or otherwise in furtherance of the Commission does not edit personal Section II.B., Liquidity Fees and Credits
the purposes of the Act. If the identifying information from for Facilitation and Solicitation
Commission takes such action, the submissions. You should submit only transactions on the BOX Market LLC
Commission shall institute proceedings information that you wish to make (‘‘BOX’’) options facility. While changes
under Section 19(b)(2)(B) 12 of the Act to available publicly. All submissions to the fee schedule pursuant to this
determine whether the proposed rule should refer to File Number SR– proposal will be effective upon filing,
change should be approved or NYSEArca–2015–89 and should be the changes will become operative on
disapproved. submitted on or before November 5, October 1, 2015. The text of the
2015. proposed rule change is available from
IV. Solicitation of Comments
For the Commission, by the Division of the principal office of the Exchange, at
Interested persons are invited to Trading and Markets, pursuant to delegated the Commission’s Public Reference
submit written data, views and authority.13 Room and also on the Exchange’s
arguments concerning the foregoing, Internet Web site at http://
Robert W. Errett,
including whether the proposed rule boxexchange.com.
change is consistent with the Act. Deputy Secretary.
Comments may be submitted by any of [FR Doc. 2015–26149 Filed 10–14–15; 8:45 am] II. Self-Regulatory Organization’s
the following methods: BILLING CODE 8011–01–P
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Electronic Comments
mstockstill on DSK4VPTVN1PROD with NOTICES
Change
• Use the Commission’s Internet In its filing with the Commission, the
comment form (http://www.sec.gov/ Exchange included statements
rules/sro.shtml); or
1 15 U.S.C. 78s(b)(1).
10 15 U.S.C. 78s(b)(3)(A). 2 17 CFR 240.19b–4.
11 17 CFR 240.19b–4(f)(2). 3 15 U.S.C. 78s(b)(3)(A)(ii).
12 15 U.S.C. 78s(b)(2)(B). 13 17 CFR 200.30–3(a)(12). 4 17 CFR 240.19b–4(f)(2).
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![Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices 62135
programs 9 and the Exchange believes contracts or greater during the month. to the Facilitation and Solicitation
that the proposed change to the rebate The Exchange believes offering a $0.90 auctions will never pay a fee and will
structure is reasonable and competitive rebate at the highest volume tier will only receive a credit of $0.45 in Penny
when compared to incentive structures incentivize all Public Customers to Pilot Classes and $1.00 in Non-Penny
at other exchanges. increase their non-auction order flow in Pilot Classes for the portion of the order
The proposed structure is intended to these classes to the Exchange to achieve that interacts with a Responder. In
attract Public Customer order flow to the higher rebate, which will in turn comparison, under the ISE Fee Schedule
the Exchange by offering these benefit all participants trading on BOX. all Initiators except Public Customers
Participants incentives to submit their The Exchange continues to believe it are charged a $.20 fee for Penny Pilot
Non-Auction orders to the Exchange. is equitable and not unfairly Classes and $0.20 to $0.25 fee for Non-
The practice of providing additional discriminatory to offer these rebate Penny Pilot Classes.13
incentives to increase order flow is, and structures to Public Customers in Non- The Exchange believes that the
has been, a common practice in the Auction transactions. The practice of proposed difference between what an
options markets.10 Further, the incentivizing increased Public Customer Initiator will pay compared to what a
Exchange believes it is appropriate to order flow is common in the options Responder will pay is reasonable,
provide incentives for market markets. The Exchange believes the equitable and not unfairly
participants which will result in greater proposed changes to the structure and discriminatory. Specifically, the
liquidity and ultimately benefit all per contract rebate for Public Customers difference is in line with the credits and
Participants trading on the Exchange. who achieve the highest volume tier is fees at the ISE.14 While Initiators on the
The Exchange believes awarding a equitable and not unfairly ISE are assessed a fee, the ISE then uses
$0.90 rebate to those Public Customers discriminatory as all Public Customers volume based incentives that can greatly
who make liquidity in Non-Penny Pilot will benefit from the opportunity to reduce the fees these Participants are
classes and achieve the highest volume obtain a greater rebate. charged. All Facilitation and
tier during a month (65,001 contracts or The Exchange believes it is reasonable Solicitation fees are subject to a fee cap
greater) is reasonable, equitable and not to offer a higher per contract rebate for of $75,000,15 allowing Participants who
unfairly discriminatory. As stated transactions in Non-Penny Pilot Classes use these auctions to potentially reduce
above, other exchanges employ similar compared to Penny Pilot Classes their per contract fee to a much lower
incentive programs,11 and the Exchange because Non-Penny Pilot Classes are rate. In addition, depending on their
believes that the $0.90 maker rebate for typically less actively traded and have overall monthly volume, Initiators can
Non-Penny Pilot Classes is reasonable wider spreads. The Exchange believes receive a rebate of $0.05 to $0.11 per
and competitive when compared to that offering a higher rebate will contract for their orders.16 Finally, if the
credits and rebates at other exchanges. incentivize Public Customer order flow order executes against a responder
The Exchange also believes it is in Non-Penny Pilot issues on the within one of these mechanisms the
equitable and not unfairly Exchange, ultimately benefitting all Initiator will receive an additional
discriminatory to only offer the higher Participants trading on BOX. rebate of $0.15 for Penny Pilot Classes.
rebate to Public Customers that have an For Non-Penny Pilot Classes, the
Liquidity Fees and Credits
average daily volume of 65,001 Initiator will typically receive a
BOX believes that the changes to proportional PFOF credit to their pool
9 See Section B of the NASDAQ OMX Facilitation and Solicitation transaction which they can allocate as they so
PHLX,(‘‘PHLX’’) Pricing Schedule entitled liquidity credits are equitable and not choose.17
‘‘Customer Rebate Program;’’ ISE Gemini, LLC unfairly discriminatory in that they
(‘‘Gemini’’) Qualifying Tier Thresholds (page 6 of In conclusion, the Exchange believes
the ISE Gemini Fee Schedule); and Chicago Board apply to all categories of participants the proposed Facilitation and
Options Exchange, Inc. (‘‘CBOE’’) Volume Incentive and across all account types. The Solicitation credits are reasonable when
Program (VIP). CBOE’s Volume Incentive Program Exchange notes that liquidity fees and compared to fees and credits for similar
(‘‘VIP’’) pays certain tiered rebates to Trading credits on BOX are meant to offset one
Permit Holders for electronically executed mechanisms at the ISE. While it is
multiply-listed option orders which include AIM another in any particular transaction. difficult to exactly equate these two fee
orders. Note that some of these exchanges base The liquidity fees and credits do not structures, most Responders on ISE
these rebate programs on the percentage of total directly result in revenue to BOX, but (Market Makers interacting with
national Public Customer volume traded on their will simply allow BOX to provide the
respective exchanges, which the Exchange is not Customer Orders) will pay $0.47 (Penny
proposing to do. credit incentive to Participants to attract Pilot Classes) and $1.17 (Non-Penny
10 See BATS Exchange, Inc. (‘‘BATS’’) BATS order flow. Raising the credits for Pilot Classes) while most Responders on
Options Exchange Fee Schedule ‘‘Standard Rates’’; removing liquidity will result in BOX
CBOE Fee Schedule ‘‘Volume Incentive Program’’ crediting a Participant a higher amount 13 The ISE uses the term ‘‘Crossing Order’’ for
(page 4); Gemini Schedule of Fees, Section I.
Regular Order Fees and Rebates ‘‘Penny Symbols
for removing liquidity than it received orders executed on the Exchange’s Facilitation and
and SPY, and Non-Penny Symbols’’ (page 4); Miami from collecting the corresponding Solicitation mechanisms.
14 While it is difficult to exactly equate these two
International Securities Exchange, LLC (‘‘MIAX’’) liquidity fee. The Exchange believes it is
Fee Schedule Section I(a)(i) ‘‘Market Maker fee structures at the ISE, depending on volume
appropriate to provide incentives to Initiators could receive a credit per contract for all
Transaction Fees’’ and ‘‘Market Maker Sliding
Scale’’, and Section I(a)(iii) ‘‘Priority Customer
market participants to use the Facilitation and Solicitation orders, and an
Rebate Program’’; NASDAQ OMX BX, Inc. (‘‘BX Facilitation and Solicitation auction additional $0.15 break up credit (Penny Pilot
Options’’) Chapter XV, Section 2 BX Options mechanisms, because doing so may Classes) or PFOF credit (Non-Penny Pilot Classes)
Market—Fees and Rebates; NASDAQ OMX .14 [sic] In comparison under the BOX proposal
result in greater liquidity on BOX which Initiators would only receive a credit for the portion
PHLX,(‘‘PHLX’’), Pricing Schedule Section B,
mstockstill on DSK4VPTVN1PROD with NOTICES
‘‘Customer Rebate Program’’; NOM Chapter XV,
would benefit all market participants. of the order that interacted with a Response, and
Section 2 NASDAQ Options Market—Fees and The Exchange also believes the the credit would be $0.45 (Penny Pilot Classes) or
Rebates; NYSE Amex, Inc. (‘‘AMEX’’) Fee Schedule liquidity fees and credits are reasonable $1.00 (Non-Penny Pilot Classes).
15 See Section IV.H of the ISE Fee Schedule.
Section I.C. NYSE Amex Options Market Maker and competitive when compared to
Sliding Scale—Electronic; and Arca Options Fees 16 See Section IV.A of the ISE Fee Schedule.
and Charges, ‘‘Customer and Professional Customer
similar fees at competing venues.12 17 Under Section IV.D of the ISE Fee Schedule the
Monthly Posting Credit Tiers and Qualifications for Under the proposed changes, Initiators fee for PFOF is $0.70 and the fee will be rebated
Executions in Penny Pilot Issues’’ (page 4). proportionally to the members that paid the fee on
11 See supra, note 9. 12 See ISE Schedules of Fees. a monthly basis.
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![62136 Federal Register / Vol. 80, No. 199 / Thursday, October 15, 2015 / Notices
BOX (Market Makers interacting with competition between exchanges because including whether the proposed rule
Customer Orders) will pay $0.60 (Penny it is designed to allow the Exchange to change is consistent with the Act.
Pilot Classes) and $1.15 (Non-Penny better compete with other exchanges for Comments may be submitted by any of
Pilot Classes). At the ISE, depending on order flow. the following methods:
volume, Initiators in this scenario could The Exchange does not believe that
receive a credit per contract for all the proposed liquidity credits will Electronic Comments
Facilitation and Solicitation orders, and burden competition by creating such a • Use the Commission’s Internet
an additional $0.15 break up credit disparity between the fees an Initiating comment form (http://www.sec.gov/
(Penny Pilot Classes) or PFOF credit Participant in the Facilitation and rules/sro.shtml); or
(Non-Penny Pilot Classes).18 In Solicitation auction pays and the fees a
comparison, under the BOX proposal, competitive responder pays that would • Send an email to rule-comments@
Initiators would only receive a credit for result in certain Participants being sec.gov. Please include File Number SR–
the portion of the order that interacted unable to compete with initiators. In BOX–2015–32 on the subject line.
with a Response, and the credit would fact, the Exchange believes that these Paper Comments
be $0.40 [sic] (Penny Pilot Classes) or changes will not impair these
$0.95 [sic] (Non-Penny Pilot Classes). Participants from adding liquidity and • Send paper comments in triplicate
Finally, the Exchange believes it is competing in Facilitation and to Secretary, Securities and Exchange
reasonable to establish different fees and Solicitation auction transactions and Commission, 100 F Street NE.,
credits for Facilitation and Solicitation will help promote competition by Washington, DC 20549–1090.
transactions in Penny Pilot Classes providing incentives for market
compared to transactions in Non-Penny All submissions should refer to File
participants to submit customer order Number SR–BOX–2015–32. This file
Pilot Classes. The Exchange makes this flow to BOX and thus, create a greater
distinction throughout the BOX Fee number should be included on the
opportunity for customers to receive subject line if email is used. To help the
Schedule, including the liquidity fees additional price improvement.
and credits for PIP and COPIP Commission process and review your
The Exchange also believes that this
Transactions. The Exchange believes it comments more efficiently, please use
proposal will enhance competition
is reasonable to establish higher fees only one method. The Commission will
between exchanges because it is
and credits for Non-Penny Pilot Classes post all comments on the Commission’s
designed to allow the Exchange to better
because these Classes are typically less Internet Web site (http://www.sec.gov/
compete with other exchanges for
actively traded and have wider spreads. rules/sro.shtml). Copies of the
Facilitation and Solicitation auction
The Exchange believes that offering a submission, all subsequent
order flow.
higher rebate will incentivize order flow amendments, all written statements
in Non-Penny Pilot issues on the C. Self-Regulatory Organization’s with respect to the proposed rule
Exchange, ultimately benefitting all Statement on Comments on the change that are filed with the
Participants trading on BOX. Proposed Rule Change Received From Commission, and all written
Members, Participants, or Others communications relating to the
B. Self-Regulatory Organization’s proposed rule change between the
Statement on Burden on Competition No written comments were either
solicited or received. Commission and any person, other than
The Exchange does not believe that those that may be withheld from the
the proposed rule change will impose III. Date of Effectiveness of the public in accordance with the
any burden on competition not Proposed Rule Change and Timing for provisions of 5 U.S.C. 552, will be
necessary or appropriate in furtherance Commission Action available for Web site viewing and
of the purposes of the Act. The foregoing rule change has become printing in the Commission’s Public
The Exchange believes that the effective pursuant to Section Reference Room, 100 F Street NE.,
proposed adjustments to fees and 19(b)(3)(A)(ii) of the Exchange Act 19 Washington, DC 20549 on official
rebates in the Non-Auction Transactions and Rule 19b–4(f)(2) thereunder,20 business days between the hours of
fee structure will not impose a burden because it establishes or changes a due, 10:00 a.m. and 3:00 p.m. Copies of such
on competition among various Exchange or fee. filing also will be available for
Participants. The Exchange believes that At any time within 60 days of the inspection and copying at the principal
a fee structure that is determined filing of the proposed rule change, the office of the Exchange. All comments
according to whether the order removes Commission summarily may received will be posted without change;
or adds liquidity, the account type of temporarily suspend the rule change if the Commission does not edit personal
the Participant submitting the order, it appears to the Commission that the identifying information from
and the contra party will result in action is necessary or appropriate in the submissions. You should submit only
Participants being charged appropriately public interest, for the protection of information that you wish to make
for these transactions is designed to investors, or would otherwise further available publicly. All submissions
enhance competition in Non-Auction the purposes of the Act. If the should refer to File Number SR–BOX–
transactions on BOX. Submitting an Commission takes such action, the 2015–32, and should be submitted on or
order is entirely voluntary and Commission shall institute proceedings before November 5, 2015.
Participants can determine which type to determine whether the proposed rule For the Commission, by the Division of
of order they wish to submit, if any, to should be approved or disapproved. Trading and Markets, pursuant to delegated
mstockstill on DSK4VPTVN1PROD with NOTICES
the Exchange. Further, the Exchange authority.21
believes that this proposal will enhance IV. Solicitation of Comments
Robert W. Errett,
Interested persons are invited to
18 The Exchange notes that the language used in Deputy Secretary.
submit written data, views, and
the ISE Fee Schedule states that there will be a [FR Doc. 2015–26148 Filed 10–14–15; 8:45 am]
proportional credit put into the monthly pool that
arguments concerning the foregoing,
BILLING CODE 8011–01–P
the Initiator can then allocate. With this discretion
19 15 U.S.C. 78s(b)(3)(A)(ii).
the PFOF credit for these orders could be higher
than $0.70. 20 17 CFR 240.19b–4(f)(2). 21 17 CFR 200.30–3(a)(12).
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Document Created: 2018-02-27 08:52:43
Document Modified: 2018-02-27 08:52:43
| 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 62132 |
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