81 FR 83322 - Self-Regulatory Organizations; BOX Options Exchange LLC; Order Approving a Proposed Rule Change To Amend the Treatment of Quotes To Provide That All Quotes on BOX Are Liquidity Adding Only

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 224 (November 21, 2016)

Page Range		83322-83323
FR Document		2016-27891
Federal Register, Volume 81 Issue 224 (Monday, November 21, 2016)
[Federal Register Volume 81, Number 224 (Monday, November 21, 2016)]
[Notices]
[Pages 83322-83323]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-27891]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79311; File No. SR-BOX-2016-45]


Self-Regulatory Organizations; BOX Options Exchange LLC; Order 
Approving a Proposed Rule Change To Amend the Treatment of Quotes To 
Provide That All Quotes on BOX Are Liquidity Adding Only

November 15, 2016.

I. Introduction

    On September 13, 2016, BOX Options Exchange LLC (``BOX'' or 
``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 amend the treatment of quotes to provide that 
all quotes on BOX are liquidity adding only. The proposed rule change 
was published for comment in the Federal Register on October 3, 
2016.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78946 (Septemeber 
27, 2016), 81 FR 68069 (October 3, 2016) (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to amend the treatment of incoming quotes to 
BOX so that they are only accepted if they are liquidity adding.\4\ 
Under the Exchange's proposed rule change, if an incoming quote or 
quote update is marketable because it would execute against a resting 
order or quote on the BOX Book,\5\ it will be rejected. The Exchange 
will not reject incoming quotes during the opening of the market.\6\ As 
is the case today, rejected quotes will not be considered when 
determining a Market Maker's quoting obligations.\7\
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    \4\ See Notice, supra note 3 (proposing a new IM-8050-3 to 
Exchange Rule 8050).
    \5\ The term ``Central Order Book'' or ``BOX Book'' means the 
electronic book of orders on each single option series maintained by 
the BOX Trading Host. See Exchange Rule 100(a)(10).
    \6\ Transactions occurring on the opening are deemed to neither 
add nor remove liquidity and therefore are exempt from the liquidity 
fees and credits on the Exchange. See Section II.C. of the BOX Fee 
Schedule.
    \7\ On a daily basis, a Market Maker must, during regular market 
hours, make markets and enter into any resulting transactions 
consistent with the applicable quoting requirements, such that on a 
daily basis a Market Maker must post valid quotes at least sixty 
percent (60%) of the time that the classes are open for trading. 
These obligations apply to all of the Market Maker's appointed 
classes collectively, rather than on a class-by-class basis. See 
Exchange Rule 8050(e); see also Exchange Rule 8040.
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    The Exchange also proposes to amend the treatment of incoming 
quotes after they interact with the Price Improvement Period 
(``PIP'').\8\ Currently, when an incoming quote is on the same side as 
a PIP Order, it may cause the PIP auction to end early, if, at the time 
of submission, the price of the incoming quote would cause an execution 
to occur prior to the end of the PIP.\9\ Under the proposal, the 
incoming quote will continue to cause the PIP auction to end early if 
the conditions of Rule 7150(i) exist. However, after the PIP auction is 
concluded, if the incoming quote is executable against resting orders 
or quotes on the BOX Book, it will be rejected. Additionally, 
currently, when an incoming quote on the opposite side of the PIP Order 
is received such that it would cause an execution to occur prior to the 
end of the PIP auction, the incoming quote will be immediately

[[Page 83323]]

executed.\10\ Under the proposal, any remaining balance of the incoming 
quote that did not execute against the PIP Order, and that would 
execute against a resting order or quote on the BOX Book, will be 
rejected.
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    \8\ Options Participants, both Order Flow Providers and Market 
Makers, executing agency orders may designate Market Orders and 
marketable limit Customer Orders for price improvement and 
submission to the PIP. Customer Orders designated for the PIP (``PIP 
Orders'') shall be submitted to BOX with a matching contra order 
equal to the full size of the PIP Order. See Exchange Rule 7150.
    \9\ Specifically, the submission to BOX of a Market Order on the 
same side as a PIP Order will prematurely terminate the PIP when, at 
the time of the submission of the Market Order, the best Improvement 
Order is equal to or better than the NBBO on the same side of the 
market as the best Improvement Order. The submission to BOX of an 
executable Limit Order or generation of an executable Legging Order 
on the same side as a PIP Order will prematurely terminate the PIP 
if at the time of submission: (1) The Buy (Sell) Limit Order or 
Legging Order price is equal to or higher (lower) than the National 
Best Offer (Bid) and either: (i) The BOX Best Offer (Bid) is equal 
to the National Best Offer (Bid); or (ii) the BOX Best Offer (Bid) 
is higher (lower) than the National Best Offer (Bid) and the price 
of the best Improvement Order is equal to or lower (higher) than the 
National Best Offer (Bid); or (2) the Buy (Sell) Limit Order or 
Legging Order price is lower (higher) than the National Best Offer 
(Bid) and its limit price equals or crosses the price of the best 
Improvement Order. See Exchange Rule 7150(i).
    \10\ Specifically, a Market Order on the opposite side of a PIP 
Order will immediately execute against the PIP Order when, at the 
time of the submission of the Market Order, the best Improvement 
Order does not cross the NBBO on the same side of the market as the 
PIP Order. The submission to BOX of an executable Limit Order or 
generation of an executable Legging Order on the opposite side of a 
PIP Order will immediately execute against a PIP Order when the Sell 
(Buy) Limit Order price is equal to or crosses the National Best Bid 
(Offer), and: (1) The BOX Best Bid (Offer) is equal to the National 
Best Bid (Offer); or (2) the BOX Best Bid (Offer) is lower (higher) 
than the National Best Bid (Offer) and neither the best Improvement 
Order nor BOX Best Offer (Bid) is equal to or crosses the National 
Best Bid (Offer). See Exchange Rule 7150(j).
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    The Exchange represents that it will provide BOX Participants with 
notice, via Information Circular, about the implementation date of the 
proposed rule change.

III. Discussion and Commission Findings

    After careful review, the Commission 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 
and, in particular, with Section 6(b) of the Act.\11\ Specifically, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\12\ which requires, among other things, 
that a national securities exchange have rules designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The Commission believes that 
the proposed rule change is designed to help Market Makers more 
efficiently submit quotes to provide liquidity on BOX, which could 
benefit investors. The Commission notes that Market Makers still will 
be able to take liquidity on BOX by submitting orders in or out of 
their appointed classes.\13\ In addition, according to the Exchange, 
the proposed rule change will not alter a Market Maker's obligations 
pursuant BOX Rules 8040 and 8050, including the obligation to provide 
continuous two-sided quotes on a daily basis.\14\ Further, the 
Commission notes that other options exchanges offer liquidity adding 
only order types.\15\
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    \11\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
    \14\ Id. at 68070-71.
    \15\ See id. (citing International Securities Exchange, LLC 
(``ISE'') Rule 715(n) and NYSE Arca Options, Inc. (``NYSE Arca'') 
Rule 6.62(t)).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the proposed rule change (SR-BOX-2016-45) be, and hereby 
is, approved.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-27891 Filed 11-18-16; 8:45 am]
 BILLING CODE 8011-01-P
83322 Federal Register / Vol. 81, No. 224 / Monday, November 21, 2016 / Notices

At any time within 60 days of the submissions. You should submit only the opening of the market.6 As is the
filing of the proposed rule change, the information that you wish to make case today, rejected quotes will not be
Commission summarily may available publicly. All submissions considered when determining a Market
temporarily suspend such rule change if should refer to File No. SR–BatsBZX– Maker’s quoting obligations.7
it appears to the Commission that such 2016–75 and should be submitted on or The Exchange also proposes to amend
action is: (1) Necessary or appropriate in before December 12, 2016. the treatment of incoming quotes after
the public interest; (2) for the protection For the Commission, by the Division of they interact with the Price
of investors; or (3) otherwise in Trading and Markets, pursuant to delegated Improvement Period (‘‘PIP’’).8
furtherance of the purposes of the Act. authority.24
Currently, when an incoming quote is
IV. Solicitation of Comments Brent J. Fields, on the same side as a PIP Order, it may
Secretary. cause the PIP auction to end early, if, at
Interested persons are invited to
[FR Doc. 2016–27892 Filed 11–18–16; 8:45 am] the time of submission, the price of the
submit written data, views and
arguments concerning the foregoing, BILLING CODE 8011–01–P incoming quote would cause an
including whether the proposal is execution to occur prior to the end of
consistent with the Act. Comments may the PIP.9 Under the proposal, the
SECURITIES AND EXCHANGE incoming quote will continue to cause
be submitted by any of the following
COMMISSION the PIP auction to end early if the
methods:
[Release No. 34–79311; File No. SR–BOX– conditions of Rule 7150(i) exist.
Electronic Comments
2016–45] However, after the PIP auction is
• Use the Commission’s Internet concluded, if the incoming quote is
comment form (http://www.sec.gov/ Self-Regulatory Organizations; BOX executable against resting orders or
rules/sro.shtml); or Options Exchange LLC; Order quotes on the BOX Book, it will be
• Send an email to rule- Approving a Proposed Rule Change To rejected. Additionally, currently, when
comments@sec.gov. Please include File Amend the Treatment of Quotes To an incoming quote on the opposite side
No. SR–BatsBZX–2016–75 on the Provide That All Quotes on BOX Are of the PIP Order is received such that it
subject line. Liquidity Adding Only would cause an execution to occur prior
Paper Comments November 15, 2016. to the end of the PIP auction, the
• Send paper comments in triplicate incoming quote will be immediately
I. Introduction
to Secretary, Securities and Exchange
Commission, 100 F Street NE., On September 13, 2016, BOX Options 6 Transactions occurring on the opening are

Exchange LLC (‘‘BOX’’ or ‘‘Exchange’’) deemed to neither add nor remove liquidity and
Washington, DC 20549–1090. therefore are exempt from the liquidity fees and
All submissions should refer to File No. filed with the Securities and Exchange credits on the Exchange. See Section II.C. of the
SR–BatsBZX–2016–75. This file number Commission (‘‘Commission’’), pursuant BOX Fee Schedule.
should be included on the subject line to Section 19(b)(1) of the Securities 7 On a daily basis, a Market Maker must, during

if email is used. To help the Exchange Act of 1934 (‘‘Act’’) 1 and Rule regular market hours, make markets and enter into
19b–4 thereunder,2 a proposed rule any resulting transactions consistent with the
Commission process and review your applicable quoting requirements, such that on a
comments more efficiently, please use change to amend the treatment of quotes daily basis a Market Maker must post valid quotes
only one method. The Commission will to provide that all quotes on BOX are at least sixty percent (60%) of the time that the
post all comments on the Commission’s liquidity adding only. The proposed classes are open for trading. These obligations apply
rule change was published for comment to all of the Market Maker’s appointed classes
Internet Web site (http://www.sec.gov/ collectively, rather than on a class-by-class basis.
rules/sro.shtml). Copies of the in the Federal Register on October 3, See Exchange Rule 8050(e); see also Exchange Rule
submission, all subsequent 2016.3 The Commission received no 8040.
amendments, all written statements comments on the proposal. This order 8 Options Participants, both Order Flow Providers

approves the proposed rule change. and Market Makers, executing agency orders may
with respect to the proposed rule designate Market Orders and marketable limit
change that are filed with the II. Description of the Proposal Customer Orders for price improvement and
Commission, and all written submission to the PIP. Customer Orders designated
The Exchange proposes to amend the for the PIP (‘‘PIP Orders’’) shall be submitted to
communications relating to the
treatment of incoming quotes to BOX so BOX with a matching contra order equal to the full
proposed rule change between the size of the PIP Order. See Exchange Rule 7150.
that they are only accepted if they are
Commission and any person, other than 9 Specifically, the submission to BOX of a Market
liquidity adding.4 Under the Exchange’s
those that may be withheld from the Order on the same side as a PIP Order will
proposed rule change, if an incoming prematurely terminate the PIP when, at the time of
public in accordance with the
quote or quote update is marketable the submission of the Market Order, the best
provisions of 5 U.S.C. 552, will be Improvement Order is equal to or better than the
because it would execute against a
available for Web site viewing and NBBO on the same side of the market as the best
resting order or quote on the BOX
printing in the Commission’s Public Improvement Order. The submission to BOX of an
Book,5 it will be rejected. The Exchange executable Limit Order or generation of an
Reference Room, 100 F Street NE.,
will not reject incoming quotes during executable Legging Order on the same side as a PIP
Washington, DC 20549, on official Order will prematurely terminate the PIP if at the
business days between the hours of 24 17 CFR 200.30–3(a)(12). time of submission: (1) The Buy (Sell) Limit Order
10:00 a.m. and 3:00 p.m. Copies of such 1 15 U.S.C. 78s(b)(1).
or Legging Order price is equal to or higher (lower)
asabaliauskas on DSK3SPTVN1PROD with NOTICES

filing will also be available for 2 17 CFR 240.19b–4.
than the National Best Offer (Bid) and either: (i) The
BOX Best Offer (Bid) is equal to the National Best
inspection and copying at the principal 3 See Securities Exchange Act Release No. 78946
Offer (Bid); or (ii) the BOX Best Offer (Bid) is higher
office of the Exchange. All comments (Septemeber 27, 2016), 81 FR 68069 (October 3, (lower) than the National Best Offer (Bid) and the
received will be posted without change; 2016) (‘‘Notice’’). price of the best Improvement Order is equal to or
4 See Notice, supra note 3 (proposing a new IM–
the Commission does not edit personal lower (higher) than the National Best Offer (Bid); or
8050–3 to Exchange Rule 8050). (2) the Buy (Sell) Limit Order or Legging Order
identifying information from 5 The term ‘‘Central Order Book’’ or ‘‘BOX Book’’ price is lower (higher) than the National Best Offer
means the electronic book of orders on each single (Bid) and its limit price equals or crosses the price
efficiency, competition, and capital formation. See option series maintained by the BOX Trading Host. of the best Improvement Order. See Exchange Rule
15 U.S.C. 78c(f). See Exchange Rule 100(a)(10). 7150(i).

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Federal Register / Vol. 81, No. 224 / Monday, November 21, 2016 / Notices 83323

executed.10 Under the proposal, any proposed rule change will not alter a publication of this notice to the
remaining balance of the incoming Market Maker’s obligations pursuant Selective Service System, Reports
quote that did not execute against the BOX Rules 8040 and 8050, including Clearance Officer, 1515 Wilson
PIP Order, and that would execute the obligation to provide continuous Boulevard, Arlington, Virginia 22209–
against a resting order or quote on the two-sided quotes on a daily basis.14 2425.
BOX Book, will be rejected. Further, the Commission notes that A copy of the comments should be
The Exchange represents that it will other options exchanges offer liquidity sent to the Office of Information and
provide BOX Participants with notice, adding only order types.15 Regulatory Affairs, Attention: Desk
via Information Circular, about the Officer, Selective Service System, Office
implementation date of the proposed IV. Conclusion
of Management and Budget, New
rule change. It is therefore ordered, pursuant to Executive Office Building, Room 3235,
Section 19(b)(2) of the Act,16 that the Washington, DC 20503.
III. Discussion and Commission
proposed rule change (SR–BOX–2016–
Findings Dated: November 9, 2016.
45) be, and hereby is, approved.
After careful review, the Commission Lawrence Romo,
For the Commission, by the Division of
finds that the proposed rule change is Trading and Markets, pursuant to delegated
Director.
consistent with the requirements of the authority.17 [FR Doc. 2016–27921 Filed 11–18–16; 8:45 am]
Act and the rules and regulations Brent J. Fields, BILLING CODE 8015–01–P
thereunder applicable to a national
Secretary.
securities exchange and, in particular,
with Section 6(b) of the Act.11 [FR Doc. 2016–27891 Filed 11–18–16; 8:45 am] SELECTIVE SERVICE SYSTEM
Specifically, the Commission finds that BILLING CODE 8011–01–P

the proposed rule change is consistent Forms Submitted to the Office of
with Section 6(b)(5) of the Act,12 which Management and Budget for Extension
requires, among other things, that a SELECTIVE SERVICE SYSTEM of Clearance
national securities exchange have rules
Forms Submitted to the Office of AGENCY: Selective Service System.
designed to prevent fraudulent and
manipulative acts and practices, to Management and Budget for Extension ACTION: Notice.
promote just and equitable principles of of Clearance
The following forms have been
trade, to foster cooperation and AGENCY: Selective Service System. submitted to the Office of Management
coordination with persons engaged in ACTION: Notice. and Budget (OMB) for extension of
regulating, clearing, settling, processing
clearance in compliance with the
information with respect to, and The following forms have been
Paperwork Reduction Act (44 U.S.C.
facilitating transactions in securities, to submitted to the Office of Management
Chapter 35):
remove impediments to and perfect the and Budget (OMB) for extension of
mechanism of a free and open market clearance in compliance with the SSS Form—404
and a national market system, and, in Paperwork Reduction Act (44 U.S.C. Title: Potential Board Member
general, to protect investors and the Chapter 35): Information.
public interest. The Commission
SSS Form—402 Purpose: Is used to identify
believes that the proposed rule change
Title: Uncompensated Registrar individuals willing to serve as members
is designed to help Market Makers more
Appointment Form. of local, appeal or review boards in the
efficiently submit quotes to provide
Purpose: Is used to verify the official Selective Service System.
liquidity on BOX, which could benefit
status of applicants for the position of Respondents: Potential Board
investors. The Commission notes that
Uncompensated Registrars and to Members.
Market Makers still will be able to take
establish authority for those appointed Burden: A burden of 15 minutes or
liquidity on BOX by submitting orders
to perform as Selective Service System less on the individual respondent.
in or out of their appointed classes.13 In
addition, according to the Exchange, the Registrars. Copies of the above identified form
Respondents: United States citizens can be obtained upon written request to
10 Specifically, a Market Order on the opposite over the age of 18. the Selective Service System, Reports
side of a PIP Order will immediately execute Frequency: One time. Clearance Officer, 1515 Wilson
against the PIP Order when, at the time of the Burden: The reporting burden is three Boulevard, Arlington, Virginia 22209–
submission of the Market Order, the best minutes or less per respondent. 2425.
Improvement Order does not cross the NBBO on the Copies of the above identified form
same side of the market as the PIP Order. The Written comments and
submission to BOX of an executable Limit Order or can be obtained upon written request to recommendations for the proposed
generation of an executable Legging Order on the the Selective Service System, Reports extension of clearance of the form
opposite side of a PIP Order will immediately Clearance Officer, 1515 Wilson should be sent within 60 days of the
execute against a PIP Order when the Sell (Buy) Boulevard, Arlington, Virginia 22209–
Limit Order price is equal to or crosses the National publication of this notice to the
Best Bid (Offer), and: (1) The BOX Best Bid (Offer) 2425. Selective Service System, Reports
is equal to the National Best Bid (Offer); or (2) the Written comments and Clearance Officer, 1515 Wilson
BOX Best Bid (Offer) is lower (higher) than the recommendations for the proposed Boulevard, Arlington, Virginia 22209–
asabaliauskas on DSK3SPTVN1PROD with NOTICES

National Best Bid (Offer) and neither the best extension of clearance of the form
Improvement Order nor BOX Best Offer (Bid) is 2425.
equal to or crosses the National Best Bid (Offer). See should be sent within 60 days of the A copy of the comments should be
Exchange Rule 7150(j). sent to the Office of Information and
11 15 U.S.C. 78f(b). In approving this proposed 14 Id.at 68070–71. Regulatory Affairs, Attention: Desk
rule change, the Commission has considered the 15 See id. (citing International Securities
proposed rule’s impact on efficiency, competition, Exchange, LLC (‘‘ISE’’) Rule 715(n) and NYSE Arca
Officer, Selective Service System, Office
and capital formation. See 15 U.S.C. 78c(f). Options, Inc. (‘‘NYSE Arca’’) Rule 6.62(t)). of Management and Budget, New
12 15 U.S.C. 78f(b)(5). 16 15 U.S.C. 78s(b)(2). Executive Office Building, Room 3235,
13 Id. 17 17 CFR 200.30–3(a)(12). Washington, DC 20503.

VerDate Sep<11>2014 18:09 Nov 18, 2016 Jkt 241001 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 E:\FR\FM\21NON1.SGM 21NON1
Document Created: 2018-02-14 08:33:59
Document Modified: 2018-02-14 08:33:59
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		81 FR 83322