2018-07810. 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 (“BOX”) Options Facility To Amend the Strategy QOO Order Fee ...

April 10, 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 March 28, 2018, 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.

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 amend the Fee Schedule [sic] 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 April 2, 2018. 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://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 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 a number of changes to the manual transaction fees for certain strategy Qualified Open Outcry (“QOO”) Orders under Section II.D. “Strategy QOO Order Fee Cap” of the BOX Fee Schedule. Specifically, the Exchange proposes to raise the fee cap for all reversal, conversion, jelly roll, and box spread strategies ^[5] executed on the same trading day from $700 to $1,000. Additionally, the Exchange proposes to include all strategies, regardless of option class, that execute in the same day to this proposed $1,000 fee cap. Lastly, the Exchange proposes to remove the $25,000 per month per Participant cap for QOO Order fees in combined strategies.

The intent of the above changes is to increase order flow to certain strategy QOO Orders on the BOX Trading Floor, which will benefit all market participants. The Exchange notes that these changes will apply equally to all Participants, regardless of Participant type or the size of the Participant.

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,^[6] 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 Exchange believes raising the fee cap to $1,000 for reversal, conversion, jelly roll, and box spread strategies executed on the same trading day is reasonable and appropriate. The fee cap is designed to incentivize order flow in certain QOO Strategy Orders, and the Exchange believes that the increased fee cap, coupled with the other changes discussed herein, will result in increased participation in these types of orders on the BOX Trading Floor. As such, the Exchange believes that increased participation on the Trading Floor will result in increased liquidity on the BOX Floor which will benefit all market participants. Further, the Exchange believes that the proposed fee cap is not unfairly discriminatory as all Participants are subject to the cap, regardless of account type.

The Exchange believes that subjecting all strategies, regardless of option class, to the proposed $1,000 daily fee cap is reasonable and appropriate. As stated above, the Strategy QOO Fee Cap is designed to incentivize order flow to the BOX Trading Floor. The Exchange believes that removing the “same options class” qualification will further result in increased participation and order flow in these types of orders. As such, the Exchange believes that the proposed change will result in increased liquidity on BOX which will benefit all market participants. Further, the Exchange believes the proposed change is not unfairly discriminatory because it will apply to all Participants, regardless of account type.

Lastly, the Exchange believes that eliminating the monthly cap of $25,000 per Participant is appropriate. The Exchange notes that once Participants are subject to the proposed daily fee cap of $1,000 regardless of option class, the current monthly fee cap of $25,000 is not necessary. For example, in the month of March, if a Participant traded the applicable strategies to achieve the proposed $1,000 daily fee cap on each trading day, the Participant would only be charged $21,000 total (21 trading days in March multiplied by the proposed $1,000 fee cap) and could never reach the $25,000 cap. As such, the Exchange believes that the $25,000 monthly fee cap for combined strategies is unnecessary and proposes to remove the monthly fee cap from the BOX Fee Schedule.

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 does not believe that the proposed change burdens competition and will instead help promote competition by continuing to provide incentives for market participants to submit strategy orders to the BOX Trading Floor. Further, the Exchange does not believe that the proposed changes will impose an undue burden on intra-market competition because all Floor Participants are subject to the proposed changes, regardless of account type.

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 ^[7] and Rule 19b-4(f)(2) thereunder,^[8] because it establishes or changes a due, or fee.

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 Comments

• Use the Commission's internet comment form (http://www.sec.gov/​rules/​sro.shtml); or
• Send an email to [e-mail]. Please include File Number SR-BOX-2018-11 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-2018-11. 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-2018-11, and should be submitted on or before May 7, 2018.

For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.⁹

Eduardo A. Aleman,

Assistant Secretary.

Footnotes

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).

5.  A “reversal strategy” is established by combining a short security position with a short put and a long call position that shares the same strike and expiration. A “conversion strategy” is established by combining a long position in the underlying security with a long put and a short call position that shares the same strike and expiration. A “jelly roll strategy” is created by entering into two separate positions simultaneously. One position involves buying a put and selling a call with the same strike price and expiration. The second position involves selling a put and buying a call, with the same strike price, but with a different expiration from the first position. A “box spread strategy” is a strategy that synthesizes long and short stock positions to create a profit. Specifically, a long call and short put at one strike is combined with a short call and long put at a different strike to create synthetic long and synthetic short stock positions, respectively. These definitions are identical to the terms defined in the Chicago Board Options Exchange, Inc. (“CBOE”) Fee Schedule; NYSE American Options Fee Schedule “(“NYSE”) and Phlx Pricing Schedule (“PHLX”), Strategy Caps on Multiply Listed Options Fees.

6.  15 U.S.C. 78f(b)(4) and (5).

7.  15 U.S.C. 78s(b)(3)(A)(ii).

8.  17 CFR 240.19b-4(f)(2).

9.  17 CFR 200.30-3(a)(12).