Daily Rules, Proposed Rules, and Notices of the Federal Government
BOX Options Exchange LLC (the "Exchange") proposes to amend Rule 7250 (Quote Mitigation) and refine the current quote mitigation strategy for its options trading facility, BOX Market LLC ("BOX") by replacing the current quote mitigation rule with a "holdback timer" mechanism. The text of the proposed rule change is available from the principal office of the Exchange, on the Exchange's Internet Web site at
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.
The Exchange proposes to refine the BOX quote mitigation strategy. Specifically, the Exchange proposes to amend Rule 7250 (Quote Mitigation) and replace the current rule with a mechanism that systemically limits the dissemination of quotations and other changes to the BOX best bid and offer according to prescribed time criteria (a "holdback timer"). For instance, if there is a change in the price of a security underlying an option, multiple market participants may adjust the price or size of their quotes. Rather than disseminating each individual change, the holdback timer permits BOX to wait until multiple Participants have adjusted their quotes and then disseminates a new quotation. This mechanism will help to prevent the "flickering" of quotations.
The Exchange believes the proposed modification to its holdback timer mechanism within the overall BOX quote mitigation strategy will allow the Exchange to more effectively monitor quotation traffic and mitigate as needed. BOX's current Quote Mitigation mechanism was adopted as a response to the implementation of Penny Pilot Program
The Exchange believes that replacing the current mechanism with a holdback timer will allow BOX to more efficiently reduce quotation traffic when necessary instead of bundling all order updates that meet the restrictive criteria set forth in the current rule. The Exchange believes that the holdback timer mechanism taken together with the other tools it currently employs as part of the overall BOX quote mitigation strategy will allow BOX to continue to effectively mitigate quote message traffic.
The other tools in place are:
* Monitoring. BOX actively monitors the quotation activity of its market makers. When the Exchange detects that a market maker is disseminating an unusual number of quotes, the Exchange contacts that market maker and alerts it to such activity. Such monitoring frequently reveals that the market maker may have internal system issues or has incorrectly set system parameters that were not immediately apparent. Alerting a market maker to possible excessive quoting usually leads the market maker to take steps to reduce the number of its quotes.
* Delisting. BOX has a policy of withdrawing approval of underlying securities with low trading volume, thereby eliminating the quotation traffic attendant to such listings.
Further, BOX notes that the holdback timer mechanism is currently part of the quote mitigation strategies of the International Securities Exchange's ("ISE"), C2 Options Exchange ("C2"), and the Chicago Board Options Exchange ("CBOE")
BOX will utilize a holdback timer that delays quotation updates to OPRA for no longer than one (1) second. BOX may vary the holdback timer by option class. BOX does not intend to disclose the length of the holdback timer to its Participants or non-Participants. BOX notes that the holdback timer addresses the dissemination to OPRA of quotation updates and other changes to BOX's best bid and offer, and not the execution of orders.
The Exchange believes that the proposal is consistent with the requirements of Section 6(b) of the Act,
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.
No written comments were either solicited or received.
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
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.
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:
* Use the Commission's Internet comment form (
* Send an email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
The Commission will post all comments on the Commission's Internet Web site (
All submissions should refer to File Number SR-BOX-2012-016 and should be submitted on or before November 29, 2012.