83 FR 2692 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend BOX Rule 3030 To Establish Rules Related to the Use of Floor Broker Error Accounts

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 12 (January 18, 2018)

[Federal Register Volume 83, Number 12 (Thursday, January 18, 2018)]
[Notices]
[Pages 2692-2694]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-00725]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82491; File No. SR-BOX-2018-01]


Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend BOX Rule 3030 To Establish Rules Related to the Use of Floor 
Broker Error Accounts

January 11, 2018.
    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 January 2, 2018, BOX Options Exchange LLC (the ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend BOX Rule 3030 to establish rules 
related to the use of Floor Broker error accounts. 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 website at http://boxoptions.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
has prepared summaries, set forth in Sections A, B, and C below, of the 
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend BOX Rule 3030 to establish rules 
related to the use of Floor Broker error accounts. First, the Exchange 
proposes that each Participant who conducts a business as a Floor 
Broker on the Exchange and who is not self-clearing must establish and 
maintain an account with a clearing Participant of the Exchange, for 
the sole purpose of carrying positions resulting from bona fide errors 
made in the course of its floor brokerage business.\3\ Further, with 
respect to Floor Brokers only, such an account for option transactions 
must be maintained with an entity that is also a member of the Options 
Clearing Corporation.
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    \3\ A ``Bona fide Error'' is defined as (i) the inaccurate 
conveyance or execution of any term of an order including, but not 
limited to, price, number of shares or other unit of trading; 
identification of the security; identification of the account for 
which securities are purchased or sold; lost or otherwise misplaced 
order tickets; short sales that were instead sold long or vice 
versa; or the execution of an order on the wrong side of a market; 
(ii) the unauthorized or unintended purchase, sale, or allocation of 
securities, or the failure to follow specific client instructions; 
(iii) the incorrect entry of data into relevant systems, including 
reliance on incorrect cash positions, withdrawals, or securities 
positions reflected in an account; or (iv) a delay, outage, or 
failure of a communication system used to transmit market data 
prices or to facilitate the delivery or execution of an order. See 
Securities Exchange Act Release No. 55884 (June 8, 2007), 72 FR 
32926 (June 14, 2007) (Order Exempting Certain Error Correction 
Transactions from Rule 611 of Regulation NMS under the Securities 
Exchange Act of 1934).
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    In practice, a Floor Broker will remedy a bona fide error by 
entering a subsequent trade on behalf of the customer on the correct 
terms of the original order. These types of transactions are 
transactions which broker-dealers place to remedy the execution of 
customer orders that have been placed in error or mishandled due to an 
error involving any term of an order, including but not limited to, for 
example, price, number of contracts, identification of security, or 
execution of a transaction on the wrong side of the market.
    Next, the Exchange proposes that each Participant which conducts 
business as a Floor Broker must make available to the Exchange, upon 
request, accurate and complete records of all trades cleared in such 
Participant's error account. These records must include the following 
audit trail data elements: (1) Name or identifying symbol of the 
security; (2) number of shares or quantity of security; (3) transaction 
price; (4) time of trade execution; (5) executing Floor Broker badge 
number, or alpha symbol as may be used from time to time, in regard to 
its side of the contract; (6) executing Floor Broker badge number, or 
alpha symbol as may be used from time to time, of the contra side to 
the contract; (7) clearing firm number, or alpha symbol as may be used 
from time to time, in regard to its side of the contract; (8) clearing 
firm number, or alpha symbol as may be used from time to time, in 
regard to the contra side of the contract; (9) designation of whether 
the account for which the order was executed was that of a Participant; 
(10) the nature and amount of the error; (11) the Participant that 
cleared the error trade on the Participant's behalf; (12) an 
explanation of the means by which the Participant resolved the error; 
(13) the aggregate amount of liability that the Participant

[[Page 2693]]

incurred and: (i) Had outstanding as of the time each such error trade 
entry was recorded or (ii) had cleared by other Participant. The 
Exchange believes that it is important for the Participant to provide 
the above information because it will aid the Exchange in the 
surveillance of error account activity. The Exchange notes that the 
proposed change is substantially similar to rules at another options 
exchange with an open outcry trading floor.\4\
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    \4\ See NYSE Arca, Inc. (``NYSE Arca'') Rule 11.17.
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2. Statutory Basis
    The Exchange believes that the proposal is consistent with the 
requirements of Section 6(b) of the Securities Exchange Act of 1934 
(the ``Act''),\5\ in general, and Section 6(b)(5) of the Act,\6\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general to protect investors and the 
public interest. Additionally, the Exchange believes that the proposed 
rule is consistent with the Act because it does not unfairly 
discriminate between Public Customers, Professional Customers, Broker 
Dealers and Market Makers as the rule applies to all Participants 
equally. The Exchange believes that the proposal allows Floor Brokers 
the flexibility to execute orders that correct bona fide errors out of 
the Floor Broker's error account, ensuring that customer orders (which 
were previously entered in error) are executed, thereby protecting 
investors and the public interest by ensuring that customer orders are 
executed properly. Further, the Exchange believes the proposed rule 
promotes just and equitable principles of trade by ensuring customer 
orders are not harmed for order entry errors. The Exchange does not 
believe the proposed rule is unfairly discriminatory toward customers, 
issuers, or brokers because the proposed rule simply sets forth the 
process for floor brokers to correct certain bona fide errors. As 
discussed above, the Exchange believes that the proposed change is 
appropriate as it is similar to rules in place at another options 
exchange with an open outcry trading floor.\7\
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ See supra note 4.
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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. More specifically, the Exchange 
does not believe that the proposed rule change will impose any burden 
on intramarket competition because it will be applicable to all Floor 
Brokers. In addition, the Exchange does not believe that the proposed 
change will impose any burden on intermarket competition because 
proposed Rule 3030 simply provides a mechanism for correcting errors. 
Further, the Exchange believes that the proposed change does not impose 
a burden on competition because it simply sets forth the process for 
Floor Brokers to correct bone fide errors on the Trading Floor.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.\8\
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    \8\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BOX-2018-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BOX-2018-01. 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 website (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 website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-BOX-2018-01, and should be submitted on 
or before February 8, 2018.


[[Page 2694]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00725 Filed 1-17-18; 8:45 am]
 BILLING CODE 8011-01-P