83 FR 14304 - Self-Regulatory Organizations; BOX Options Exchange LLC; Order Approving a Proposed Rule Change To Adopt IM-8040-3 To Exchange Rule 8040 to Permit Directed Orders To Be Submitted With an Auction Only Designation

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 64 (April 3, 2018)

Page Range		14304-14305
FR Document		2018-06690
Federal Register, Volume 83 Issue 64 (Tuesday, April 3, 2018)
[Federal Register Volume 83, Number 64 (Tuesday, April 3, 2018)]
[Notices]
[Pages 14304-14305]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-06690]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82959; File No. SR-BOX-2018-06]


Self-Regulatory Organizations; BOX Options Exchange LLC; Order 
Approving a Proposed Rule Change To Adopt IM-8040-3 To Exchange Rule 
8040 to Permit Directed Orders To Be Submitted With an Auction Only 
Designation

March 28, 2018.

I. Introduction

    On February 5, 2018, 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 adopt IM-8040-3 to Exchange Rule 8040 to permit 
Directed Orders \3\ to be submitted with an Auction Only designation. 
The proposed rule change was published for comment in the Federal 
Register on February 16, 2018.\4\ The Commission received no comment 
letters on the proposed rule change. This order approves the proposed 
rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The term ``Directed Order'' means any Customer Order to buy 
or sell contracts on a single option series that has been directed 
to a particular market maker by an Order Flow Provider (``OFP''). 
See Exchange Rule 100(a)(19).
    \4\ See Securities Exchange Act Release No. 82690 (February 12, 
2018), 83 FR 7084 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to adopt IM-8040-3 to Exchange Rule 8040 to 
allow Options Participants \5\ to apply a new optional Auction Only 
designation to Directed Orders. A Directed Order with an Auction Only 
designation will be cancelled if it is not entered into the Price 
Improvement Period (``PIP'') \6\ by the Executing Participant 
(``EP'').\7\
---------------------------------------------------------------------------

    \5\ The term ``Options Participant'' or ``Participant'' means a 
firm, or organization that is registered with the Exchange pursuant 
to the BOX Rule 2000 Series for purposes of participating in options 
trading on BOX as an OFP or Market Maker. See Exchange Rule 
100(a)(41).
    \6\ See Exchange Rule 7150.
    \7\ An Executing Participant (``EP'') is a market maker that 
desires to accept Directed Orders. See Notice, supra note 4, at 7085 
n.4.
---------------------------------------------------------------------------

    Market Makers \8\ may receive and handle Directed Orders on an 
agency

[[Page 14305]]

basis, in accordance with the procedures set forth in Exchange Rule 
8040(d). Upon receipt of a Directed Order from an OFP,\9\ an EP must 
either submit the Directed Order to the PIP, or send the Directed Order 
to the BOX Book.\10\ In addition, the BOX Trading Host will send the 
Directed Order to the BOX Book: (i) If the EP has not taken action 
within one second of receipt of a Directed Order; \11\ (ii) if the 
Market Maker that the order is directed to has not systematically 
indicated that it is an EP; \12\ (iii) upon receipt of a subsequent 
Directed Order for the same EP for the same series and side of the 
market if a Guaranteed Directed Order (``GDO'') \13\ has been 
automatically generated and is pending; \14\ or (iv) if a Directed 
Order is modified once the BOX Trading Host has established a GDO.\15\
---------------------------------------------------------------------------

    \8\ The term ``Market Maker'' means an Options Participant 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in the BOX Rule 8000 Series. 
All Market Makers are designated as specialists on the Exchange for 
all purposes under the Act or Rules thereunder. See Exchange Rule 
100(a)(31).
    \9\ An OFP is an Options Participant representing as agent 
Customer Orders on the Exchange or a non-Market Maker Participant 
conducting proprietary trading. See Exchange Rule 100(a)(46).
    \10\ See Exchange Rule 8040(d)(3).
    \11\ See Exchange Rule 8040(d)(4).
    \12\ See Exchange Rule 8040(d)(1).
    \13\ If a Directed Order is executable against the current 
national best bid or offer (``NBBO'') and the EP is also quoting at 
such NBBO on the opposite side of the Directed Order, then the 
Trading Host will immediately upon receipt of the Directed Order 
take down the EP's quote and guarantee the EP's execution of the 
Directed Order for at least the price and size of the EP's quote. 
This guarantee is the GDO, and the EP's quote will not be 
reestablished until the Directed Order has been processed pursuant 
to Exchange Rule 8040(d). See Exchange Rule 8040(d)(2)(i).
    \14\ See Exchange Rule 8040(d)(2)(ii).
    \15\ See Exchange Rule 8040(d)(5).
---------------------------------------------------------------------------

    As noted above, BOX proposes that if a Directed Order with an 
Auction Only designation would be sent to the BOX Book for any reason, 
it will instead be cancelled back to the OFP that submitted the 
Directed Order.\16\ The Exchange notes that, under the proposal, the 
Auction Only designation will be automatically applied by the system, 
and the designation will not be disclosed to the EP.\17\
---------------------------------------------------------------------------

    \16\ The Exchange notes that interest on the BOX Book may still 
interact with a Directed Order that has an Auction Only designation 
via the PIP allocation. See Exchange Rule 7150(g).
    \17\ The Exchange notes that existing restrictions on an EP's 
behavior will continue to apply. Specifically, an EP shall not 
submit to the Exchange a contra order to the Directed Order for its 
proprietary account during the one second following submission of 
the Directed Order to the Exchange. See Exchange Rule 8040(d)(6)(i).
---------------------------------------------------------------------------

    The Exchange represents that it will provide at least two weeks' 
notice to Participants via Circular prior to the launch of the proposed 
change, which the Exchange anticipates will be during the second 
quarter of 2018.\18\
---------------------------------------------------------------------------

    \18\ See Notice, supra note 4, at 7085.
---------------------------------------------------------------------------

III. Discussion and Commission's 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.\19\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\20\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to promote just and equitable principles of trade, 
to foster cooperation and coordination with persons engaged in 
regulating 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, 
and not be designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers. The Commission also finds that the 
proposed rule change is consistent with Section 6(b)(8) of the Act,\21\ 
which requires that the rules of an exchange not impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
---------------------------------------------------------------------------

    \19\ 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).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Commission believes that the Auction Only designation will 
provide OFPs with greater control over how their Directed Orders are 
handled by the EP, as OFPs will have certainty that their Directed 
Orders with the Auction Only designation will either be executed in the 
PIP or cancelled.\22\ In addition, should the Directed Order be entered 
into the PIP, the Directed Order will receive the opportunity for price 
improvement.\23\ Moreover, the Commission notes that an EP will not be 
notified whether a Directed Order was submitted with the Auction Only 
designation,\24\ and current restrictions on an EP's behavior with 
respect to Directed Orders will continue to apply.\25\ Accordingly, the 
Commission believes that the Exchange's proposal is consistent with the 
Act.
---------------------------------------------------------------------------

    \22\ The Exchange notes that, pursuant to Exchange Rule 7150(f), 
a customer order that is submitted to the PIP must be submitted with 
a matching contra side order equal to the full size of the customer 
order and as such, the order is guaranteed to be fully executed. See 
Notice, supra note 4, at 7085 n.13.
    \23\ See Exchange Rule 7150.
    \24\ See proposed IM-8040-3 to Exchange Rule 8040.
    \25\ See supra note 17.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-BOX-2018-06) be, and hereby 
is, approved.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill Peterson,
Assistant Secretary.
[FR Doc. 2018-06690 Filed 4-2-18; 8:45 am]
 BILLING CODE 8011-01-P
14304 Federal Register / Vol. 83, No. 64 / Tuesday, April 3, 2018 / Notices

become operative for 30 days after the Electronic Comments SECURITIES AND EXCHANGE
date of the filing. However, Rule 19b– COMMISSION
4(f)(6)(iii) 8 permits the Commission to • Use the Commission’s internet
comment form (http://www.sec.gov/ [Release No. 34–82959; File No. SR–BOX–
designate a shorter time if such action 2018–06]
is consistent with the protection of rules/sro.shtml); or
investors and the public interest. In its • Send an email to rule-comments@ Self-Regulatory Organizations; BOX
filing, ISE requests that the Commission sec.gov. Please include File Number SR– Options Exchange LLC; Order
waive the 30-day operative delay to ISE–2018–21 on the subject line. Approving a Proposed Rule Change To
allow the proposed one-year extension Adopt IM–8040–3 To Exchange Rule
Paper Comments
of the time for re-introducing the legging 8040 to Permit Directed Orders To Be
functionality for Stock-Option Orders to • Send paper comments in triplicate Submitted With an Auction Only
begin at the conclusion of the current to Secretary, Securities and Exchange Designation
delay period, which was scheduled to Commission, 100 F Street NE, March 28, 2018.
end on March 21, 2018. As noted above, Washington, DC 20549–1090.
ISE states that extending the delay for I. Introduction
re-introducing the legging functionality All submissions should refer to File
On February 5, 2018, BOX Options
for Stock-Option Orders will provide Number SR–ISE–2018–21. This file
Exchange LLC (‘‘BOX’’ or ‘‘Exchange’’)
ISE with additional time to develop and number should be included on the filed with the Securities and Exchange
test the legging functionality on INET. subject line if email is used. To help the Commission (‘‘Commission’’) pursuant
ISE further states that no Members have Commission process and review your to Section 19(b)(1) of the Securities
notified ISE of a significant impact on comments more efficiently, please use Exchange Act of 1934 (‘‘Act’’) 1 and Rule
execution quality as a result of the only one method. The Commission will 19b–4 thereunder,2 a proposed rule
delayed implementation of the legging post all comments on the Commission’s change to adopt IM–8040–3 to Exchange
functionality for Stock-Option Orders internet website (http://www.sec.gov/ Rule 8040 to permit Directed Orders 3 to
and, accordingly, the Exchange does not rules/sro.shtml). Copies of the be submitted with an Auction Only
believe that extending the delay will submission, all subsequent designation. The proposed rule change
have a significant impact on market amendments, all written statements was published for comment in the
participants. The Commission believes with respect to the proposed rule Federal Register on February 16, 2018.4
that waiving the operative delay is change that are filed with the The Commission received no comment
consistent with the protection of Commission, and all written letters on the proposed rule change.
investors and the public interest communications relating to the This order approves the proposed rule
because it will provide ISE with proposed rule change between the change.
additional time to develop and test the Commission and any person, other than II. Description of the Proposed Rule
legging functionality for Stock-Option those that may be withheld from the Change
Orders. Accordingly, the Commission public in accordance with the
The Exchange proposes to adopt IM–
waives the 30-day operative delay and provisions of 5 U.S.C. 552, will be
8040–3 to Exchange Rule 8040 to allow
designates the proposed rule change available for website viewing and
Options Participants 5 to apply a new
operative upon filing.9 printing in the Commission’s Public
optional Auction Only designation to
At any time within 60 days of the Reference Room, 100 F Street NE, Directed Orders. A Directed Order with
filing of the proposed rule change, the Washington, DC 20549, on official an Auction Only designation will be
Commission summarily may business days between the hours of cancelled if it is not entered into the
temporarily suspend such rule change if 10:00 a.m. and 3:00 p.m. Copies of the Price Improvement Period (‘‘PIP’’) 6 by
it appears to the Commission that such filing also will be available for the Executing Participant (‘‘EP’’).7
action is: (i) Necessary or appropriate in inspection and copying at the principal Market Makers 8 may receive and
the public interest; (ii) for the protection office of the Exchange. All comments handle Directed Orders on an agency
of investors; or (iii) otherwise in received will be posted without change.
furtherance of the purposes of the Act. Persons submitting comments are 1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
If the Commission takes such action, the cautioned that we do not redact or edit
3 The term ‘‘Directed Order’’ means any Customer
Commission shall institute proceedings personal identifying information from Order to buy or sell contracts on a single option
to determine whether the proposed rule comment submissions. You should series that has been directed to a particular market
should be approved or disapproved. submit only information that you wish maker by an Order Flow Provider (‘‘OFP’’). See
to make available publicly. All Exchange Rule 100(a)(19).
IV. Solicitation of Comments 4 See Securities Exchange Act Release No. 82690
submissions should refer to File (February 12, 2018), 83 FR 7084 (‘‘Notice’’).
Interested persons are invited to Number SR–ISE–2018–21, and should 5 The term ‘‘Options Participant’’ or ‘‘Participant’’

submit written data, views, and be submitted on or before April 24, means a firm, or organization that is registered with
2018. the Exchange pursuant to the BOX Rule 2000 Series
arguments concerning the foregoing, for purposes of participating in options trading on
including whether the proposed rule For the Commission, by the Division of BOX as an OFP or Market Maker. See Exchange
change is consistent with the Act. Trading and Markets, pursuant to delegated Rule 100(a)(41).
6 See Exchange Rule 7150.
Comments may be submitted by any of authority.10
7 An Executing Participant (‘‘EP’’) is a market
amozie on DSK30RV082PROD with NOTICES

the following methods: Jill Peterson, maker that desires to accept Directed Orders. See
Assistant Secretary. Notice, supra note 4, at 7085 n.4.
8 17 CFR 240.19b–4(f)(6)(iii). 8 The term ‘‘Market Maker’’ means an Options
9 For
[FR Doc. 2018–06692 Filed 4–2–18; 8:45 am]
purposes only of waiving the 30-day Participant registered with the Exchange for the
operative delay, the Commission has also BILLING CODE 8011–01–P purpose of making markets in options contracts
considered the proposed rule’s impact on traded on the Exchange and that is vested with the
efficiency, competition, and capital formation. See rights and responsibilities specified in the BOX
15 U.S.C. 78c(f). 10 17 CFR 200.30–3(a)(12) and (59). Rule 8000 Series. All Market Makers are designated

VerDate Sep<11>2014 16:47 Apr 02, 2018 Jkt 244001 PO 00000 Frm 00067 Fmt 4703 Sfmt 4703 E:\FR\FM\03APN1.SGM 03APN1
Federal Register / Vol. 83, No. 64 / Tuesday, April 3, 2018 / Notices 14305

basis, in accordance with the III. Discussion and Commission’s IV. Conclusion
procedures set forth in Exchange Rule Findings It is therefore ordered, pursuant to
8040(d). Upon receipt of a Directed Section 19(b)(2) of the Act,26 that the
Order from an OFP,9 an EP must either After careful review, the Commission
finds that the proposed rule change is proposed rule change (SR–BOX–2018–
submit the Directed Order to the PIP, or 06) be, and hereby is, approved.
send the Directed Order to the BOX consistent with the requirements of the
Book.10 In addition, the BOX Trading Act and the rules and regulations For the Commission, by the Division of
Host will send the Directed Order to the thereunder applicable to a national Trading and Markets, pursuant to delegated
BOX Book: (i) If the EP has not taken securities exchange.19 In particular, the authority.27
action within one second of receipt of Commission finds that the proposed Jill Peterson,
a Directed Order; 11 (ii) if the Market rule change is consistent with Section Assistant Secretary.
Maker that the order is directed to has 6(b)(5) of the Act,20 which requires, [FR Doc. 2018–06690 Filed 4–2–18; 8:45 am]
not systematically indicated that it is an among other things, that the rules of a BILLING CODE 8011–01–P
EP; 12 (iii) upon receipt of a subsequent national securities exchange be
Directed Order for the same EP for the designed to promote just and equitable
same series and side of the market if a principles of trade, to foster cooperation SMALL BUSINESS ADMINISTRATION
Guaranteed Directed Order (‘‘GDO’’) 13 and coordination with persons engaged
in regulating transactions in securities, [Disaster Declaration #15460 and #15461;
has been automatically generated and is
to remove impediments to and perfect PENNSYLVANIA Disaster Number PA–
pending; 14 or (iv) if a Directed Order is 00083]
modified once the BOX Trading Host the mechanism of a free and open
has established a GDO.15 market and a national market system
Administrative Declaration of a
As noted above, BOX proposes that if and, in general, to protect investors and
Disaster for the Commonwealth of
a Directed Order with an Auction Only the public interest, and not be designed
Pennsylvania
designation would be sent to the BOX to permit unfair discrimination between
Book for any reason, it will instead be customers, issuers, brokers, or dealers. AGENCY: U.S. Small Business
cancelled back to the OFP that The Commission also finds that the Administration.
submitted the Directed Order.16 The proposed rule change is consistent with ACTION: Notice.
Exchange notes that, under the Section 6(b)(8) of the Act,21 which
proposal, the Auction Only designation requires that the rules of an exchange SUMMARY: This is a notice of an
will be automatically applied by the not impose any burden on competition Administrative declaration of a disaster
system, and the designation will not be that is not necessary or appropriate in for the Commonwealth of Pennsylvania
disclosed to the EP.17 furtherance of the purposes of the Act. dated 03/27/2018.
The Exchange represents that it will The Commission believes that the Incident: Severe Storms and
provide at least two weeks’ notice to Auction Only designation will provide Tornadoes.
Participants via Circular prior to the OFPs with greater control over how Incident Period: 02/15/2018 through
launch of the proposed change, which their Directed Orders are handled by the 02/17/2018.
the Exchange anticipates will be during EP, as OFPs will have certainty that DATES: Issued on 03/27/2018.
the second quarter of 2018.18 their Directed Orders with the Auction Physical Loan Application Deadline
Only designation will either be executed Date: 05/29/2018.
as specialists on the Exchange for all purposes in the PIP or cancelled.22 In addition, Economic Injury (EIDL) Loan
under the Act or Rules thereunder. See Exchange
Rule 100(a)(31). should the Directed Order be entered Application Deadline Date: 12/27/2018.
9 An OFP is an Options Participant representing into the PIP, the Directed Order will ADDRESSES: Submit completed loan
as agent Customer Orders on the Exchange or a non- receive the opportunity for price applications to: U.S. Small Business
Market Maker Participant conducting proprietary improvement.23 Moreover, the Administration, Processing and
trading. See Exchange Rule 100(a)(46).
10 See Exchange Rule 8040(d)(3).
Commission notes that an EP will not be Disbursement Center, 14925 Kingsport
11 See Exchange Rule 8040(d)(4). notified whether a Directed Order was Road, Fort Worth, TX 76155.
12 See Exchange Rule 8040(d)(1). submitted with the Auction Only FOR FURTHER INFORMATION CONTACT: A.
13 If a Directed Order is executable against the designation,24 and current restrictions Escobar, Office of Disaster Assistance,
current national best bid or offer (‘‘NBBO’’) and the on an EP’s behavior with respect to U.S. Small Business Administration,
EP is also quoting at such NBBO on the opposite Directed Orders will continue to
side of the Directed Order, then the Trading Host 409 3rd Street SW, Suite 6050,
will immediately upon receipt of the Directed Order apply.25 Accordingly, the Commission Washington, DC 20416, (202) 205–6734.
take down the EP’s quote and guarantee the EP’s believes that the Exchange’s proposal is
SUPPLEMENTARY INFORMATION: Notice is
execution of the Directed Order for at least the price consistent with the Act.
and size of the EP’s quote. This guarantee is the hereby given that as a result of the
GDO, and the EP’s quote will not be reestablished
19 In approving this proposed rule change, the
Administrator’s disaster declaration,
until the Directed Order has been processed applications for disaster loans may be
pursuant to Exchange Rule 8040(d). See Exchange Commission has considered the proposed rule’s
Rule 8040(d)(2)(i). impact on efficiency, competition, and capital filed at the address listed above or other
14 See Exchange Rule 8040(d)(2)(ii). formation. See 15 U.S.C. 78c(f). locally announced locations.
15 See Exchange Rule 8040(d)(5). 20 15 U.S.C. 78f(b)(5).
The following areas have been
21 15 U.S.C. 78f(b)(8).
16 The Exchange notes that interest on the BOX determined to be adversely affected by
22 The Exchange notes that, pursuant to Exchange
Book may still interact with a Directed Order that the disaster:
has an Auction Only designation via the PIP Rule 7150(f), a customer order that is submitted to
allocation. See Exchange Rule 7150(g). the PIP must be submitted with a matching contra Primary Counties: Fayette
amozie on DSK30RV082PROD with NOTICES

17 The Exchange notes that existing restrictions on side order equal to the full size of the customer Contiguous Counties:
an EP’s behavior will continue to apply. order and as such, the order is guaranteed to be Pennsylvania: Greene, Somerset,
Specifically, an EP shall not submit to the Exchange fully executed. See Notice, supra note 4, at 7085
n.13. Washington, Westmoreland
a contra order to the Directed Order for its
proprietary account during the one second 23 See Exchange Rule 7150. Maryland: Garrett
following submission of the Directed Order to the 24 See proposed IM–8040–3 to Exchange Rule

Exchange. See Exchange Rule 8040(d)(6)(i). 8040. 26 15 U.S.C. 78s(b)(2).
18 See Notice, supra note 4, at 7085. 25 See supra note 17. 27 17 CFR 200.30–3(a)(12).

VerDate Sep<11>2014 16:47 Apr 02, 2018 Jkt 244001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\03APN1.SGM 03APN1
Document Created: 2018-04-03 00:50:44
Document Modified: 2018-04-03 00:50:44
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		83 FR 14304