[Federal Register Volume 85, Number 107 (Wednesday, June 3, 2020)]
[Notices]
[Pages 34251-34252]
[FR Doc No: 2020-11986]

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DEPARTMENT OF LABOR

Occupational Safety and Health Administration

[Docket No. OSHA-2010-0050]

The Anhydrous Ammonia Storage and Handling Standard; Extension of
the Office of Management and Budget's (OMB) Approval of Information
Collection (Paperwork) Requirements

AGENCY: Occupational Safety and Health Administration (OSHA), Labor.

ACTION: Request for public comments.

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SUMMARY: OSHA solicits public comments concerning the proposal to
extend the Office of Management and Budget's (OMB) approval of the
information collection requirements specified in the Anhydrous Ammonia
Storage and Handling Standard.

DATES: Comments must be submitted (postmarked, sent, or received) by
August 3, 2020.

ADDRESSES:
    Electronically: You may submit comments and attachments
electronically at http://www.regulations.gov, which is the Federal e-
Rulemaking Portal. Follow the instructions online for submitting
comments.
    Facsimile: If your comments, including attachments, are not longer
than 10 pages you may fax them to the OSHA Docket Office at (202) 693-
1648.
    Mail, hand delivery, express mail, messenger, or courier service:
When using this method, you must submit your comments and attachments
to the OSHA Docket Office, Docket No. OSHA-2010-0050, Occupational
Safety and Health Administration, U.S. Department of Labor, Room N-
3653, 200 Constitution Avenue NW, Washington, DC 20210. Deliveries
(hand, express mail, messenger, and courier service) are accepted
during the Docket Office's normal business hours, 10:00 a.m. to 3:00
p.m., ET.
    Instructions: All submissions must include the agency name and the
OSHA docket number (OSHA-2010-0050) for the Information Collection
Request (ICR). All comments, including any personal information you
provide, such as social security number and date of birth, are placed
in the public docket without change, and may be made available online
at http://www.regulations.gov. For further information on submitting
comments see the ``Public Participation'' heading in the section of
this notice titled SUPPLEMENTARY INFORMATION.
    Docket: To read or download comments or other material in the
docket, go to http://www.regulations.gov or the OSHA Docket Office at
the above address. All documents in the docket (including this Federal
Register notice) are listed in the http://www.regulations.gov index;
however, some information (e.g., copyrighted material) is not publicly
available to read or download from the website. All submissions,
including copyrighted material, are available for inspection and
copying at the OSHA Docket Office. You also may contact Theda Kenney at
the below phone number to obtain a copy of the ICR.

FOR FURTHER INFORMATION CONTACT: Theda Kenney or Seleda Perryman,
Directorate of Standards and Guidance, OSHA, U.S. Department of Labor;
telephone<PHONE_NUMBER>.

SUPPLEMENTARY INFORMATION:

I. Background

    The Department of Labor, as part of the continuing effort to reduce
paperwork and respondent (i.e., employer) burden, conducts a
preclearance consultation program to provide the public with an
opportunity to comment on proposed and continuing information
collection requirements in accordance with the Paperwork Reduction Act
(PRA) (44 U.S.C. 3506(c)(2)(A)). This program ensures that information
is in the desired format, reporting burden (time and costs) is minimal,
collection instruments are clearly understood, and OSHA's estimate of
the information collection burden is accurate. The Occupational Safety
and Health Act of 1970 (the OSH Act) (29 U.S.C. 651 et seq.) authorizes
information collection by employers as necessary or appropriate for
enforcement of the OSH Act or for developing information regarding the
causes and prevention of occupational injuries, illnesses, and
accidents (29 U.S.C. 657). The OSH Act also requires that OSHA obtain
such information with minimum burden upon employers, especially those
operating small businesses, and to reduce to the maximum extent
feasible unnecessary duplication of efforts in obtaining information
(29 U.S.C. 657).
    The Anhydrous Ammonia Storage and Handling Standard (29 CFR
1910.111) specifies a number of paperwork requirements. The following
is a brief description of the collection of information requirements
contained in the standard.
    Paragraph (b)(3) of the Standard specifies that systems have
nameplates if required, and that these nameplates ``be permanently
attached to the system (as specified by paragraph (b)(3)(i)) so as to
be readily accessible for inspection . . . .'' In addition, paragraph
(b)(3)(ii) requires that markings on containers and systems covered by
paragraphs (c) (``Systems utilizing stationary, non-refrigerated
storage containers''), (f) (``Tank motor vehicles for the
transportation of ammonia''), (g) (``Systems mounted on farm vehicles
other than for the application of ammonia''), and (h) (``Systems
mounted on farm vehicles for the application of ammonia'') provide
information regarding nine specific characteristics of the containers
and systems. Similarly, paragraph (b)(4) of the Standard specifies that
refrigerated containers be marked with a nameplate on the outer
covering in an accessible place that provides information regarding
eight specific characteristics of the container.
    The required markings ensure that employers use only properly
designed and tested containers and systems to store anhydrous ammonia,
thereby preventing accidental release of, and exposure of workers to,
this highly toxic and corrosive substance.

II. Special Issues for Comment

    OSHA has a particular interest in comments on the following issues:
     Whether the proposed information collection requirements
are necessary for the proper performance of the agency's functions,
including whether the information is useful;
     The accuracy of OSHA's estimate of the burden (time and
costs) of the information collection requirements, including the
validity of the methodology and assumptions used;
     The quality, utility, and clarity of the information
collected; and
     Ways to minimize the burden on employers who must comply;
for example, by using automated or other technological information
collection and transmission techniques.

III. Proposed Actions

    OSHA is requesting that OMB extend the approval of the collection
of information (paperwork) requirements contained in the Anhydrous
Ammonia Storage and Handling Standard. There is a slight adjustment
decrease in burden hours for this ICR. The burden hours have decreased
a total of 1 hour (from 337 to 336 hours).
    Type of Review: Extension of a currently approved collection.
    Title: Anhydrous Ammonia Storage and Handling Standard (29 CFR
1910.111).
    OMB Number: 1218-0208.
    Affected Public: Business or other for-profit; farms.
    Number of Respondents: 201,300.
    Frequency of Response: On occasion.
    Total Responses: 2,013.
    Average Time per Response: 10 minutes (10/60 hour) for a worker to
replace or revise markings on ammonia containers.
    Estimated Total Burden Hours: 336.
    Estimated Cost (Operation and Maintenance): $0.

IV. Public Participation--Submission of Comments on This Notice and
Internet Access to Comments and Submissions

    You may submit comments in response to this document as follows:
(1) Electronically at http://www.regulations.gov, which is the Federal
e-Rulemaking Portal; (2) by facsimile; or (3) by hard copy. All
comments, attachments, and other material must identify the agency name
and the OSHA docket number for this ICR (Docket No. OSHA-2010-0050).
You may supplement electronic submissions by uploading document files
electronically. If you wish to mail additional materials in reference
to an electronic or facsimile submission, you must submit them to the
OSHA Docket Office (see the section of this notice titled ADDRESSES).
The additional materials must clearly identify your electronic comments
by your name, date, and the docket number so the agency can attach them
to your comments.
    Because of security procedures, the use of regular mail may cause a
significant delay in the receipt of comments. For information about
security procedures concerning the delivery of materials by hand,
express delivery, messenger, or courier service, please contact the
OSHA Docket Office at<PHONE_NUMBER>, (TTY<PHONE_NUMBER>).
    Comments and submissions are posted without change at http://www.regulations.gov. Therefore, OSHA cautions commenters about
submitting personal information such as your social security number and
date of birth. Although all submissions are listed in the http://www.regulations.gov index, some information (e.g., copyrighted
material) is not publicly available to read or download from this
website. All submissions, including copyrighted material, are available
for inspection and copying at the OSHA Docket Office. Information on
using the http://www.regulations.gov website to submit comments and
access the docket is available at the website's ``User Tips'' link.
Contact the OSHA Docket Office for information about materials not
available from the website, and for assistance in using the internet to
locate docket submissions.

V. Authority and Signature

    Loren Sweatt, Principal Deputy Assistant Secretary of Labor for
Occupational Safety and Health, directed the preparation of this
notice. The authority for this notice is the Paperwork Reduction Act of
1995 (44 U.S.C. 3506 et seq.) and Secretary of Labor's Order No. 1-2012
(77 FR 3912).

    Signed at Washington, DC, on May 28, 2020.
Loren Sweatt,
Principal Deputy Assistant Secretary of Labor for Occupational Safety
and Health.
[FR Doc. 2020-11986 Filed 6-2-20; 8:45 am]
 BILLING CODE 4510-26-P


SF 83 SUPPORTING STATEMENT ENVIRONMENTAL PROTECTION AGENCY STANDARDS OF PERFORMANCE New Source Performance Standards, Subpart XX, Bulk Gasoline Terminals 1. Identification of the Information Collection 1( a) Title of the Information Collection New Source Performance Standards, Subpart XX, Bulk Gasoline Terminals 1( b) Short Characterization/ Abstract The New Source Performance Standards ( NSPS) were proposed on December 17, 1980 and promulgated on August 18, 1983, and amended on December 22, 1983. These standards apply to the total of all loading racks at bulk gasoline terminals which deliver liquid product into gasoline tank trucks and for which construction, modification or reconstruction commenced after the date of proposal. A bulk gasoline terminal is any gasoline facility which receives gasoline by pipeline, ship or barge, and has a gasoline throughput greater than 75,700 liters per day. The affected facility includes the loading arms, pumps, meters, shutoff valves, relief valves, and other piping and valves necessary to fill delivery tank trucks. Volatile organic chemicals ( VOCs) are the pollutants regulated under this subpart.

Owners or operators of the affected facilities described must make the following on time only reports: notification of the date of construction or reconstruction; notification of the anticipated and actual dates of startup; notification of any physical or operational change to an existing facility which may increase the regulated pollutant emission rate; notification of the date of the initial performance test; and the results of the initial performance test. Owners or operators are also required to maintain records of the occurrence and duration of any startup, shutdown, or 2 malfunction in the operation of an affected facility, or any period during which the monitoring system is inoperative. These notifications, reports and records are required, in general, of all sources subject to NSPS.

Monitoring requirements specific to bulk gasoline terminals are listed in Section 60.505 of this subpart. These requirements consist mainly of identifying and documenting vapor tightness for each gasoline tank truck that is loaded at the affected facility, and notifying the owner or operator of each tank truck that is not vapor tight. The owner or operator must also perform a monthly visual inspection for liquid or vapor leaks, and maintain records of these inspections at the facility.

This information is being collected to assure compliance with 40 CFR Part 60 Subpart XX. Any owner or operator subject to the provisions of this part will maintain a file of these records, and retain the file for at least two years following the date of such records. The reporting requirements for this industry currently include only the initial notifications and initial performance test report listed above. All reports are sent to the delegated State or local authority.

In the event that there is no such delegated authority, the reports are sent directly to the EPA Regional Office.

Approximately 40 sources are currently subject to the standard. Due to consolidation of several industry refiners, no new facilities are expected to become subject to the standard over the next three years.

2. Need for and Use of the Collection 2( a) Need/ Authority for the Collection The EPA is charged under Section 111 of the Clean Air Act, as amended, to establish 3 standards of performance for new stationary sources that reflect:

. . . application of the best technological system of continuous emissions reduction which ( taking into consideration the cost of achieving such emissions reduction, or any non air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated [ Section 111( a)( l)].

The Agency refers to this charge as selecting the best demonstrated technology ( BDT).

Section 111 also requires that the Administrator review and, if appropriate, revise such standards every four years.

In addition, Section 114( a) States that:

. . . the Administrator may require any owner or operator subject to any requirement of this Act to ( A) establish and maintain such records, ( B) make such reports, ( C) install, use, and maintain such monitoring equipment or methods ( in accordance with such methods at such locations, at such intervals, and in such manner as the Administrator shall prescribe), and ( D) sample such emissions, ( E)

keep records on control equipment parameters, production variables or other indirect data when direct monitoring of emissions is impractical, ( F) submit compliance certifications, and ( G) provide such other information as he may reasonably require.

In the Administrator's judgment, volatile organic chemical ( VOC) emissions from NSPS Subpart XX, Bulk Gasoline Terminals cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare. Therefore, NSPS were promulgated for this source category at 40 CFR Part 60 subpart XX. 4 2( b) PRACTICAL UTILITY/ USERS OF THE DATA The control of emissions of volatile organic chemicals ( VOCs) from bulk gasoline terminals requires not only the installation of properly designed equipment, but also the operation and maintenance of that equipment. VOC emissions from bulk gasoline terminals are the result of loading liquid product into gasoline tank trucks. These standards rely on the reduction of VOC emissions through both a vapor collection system and securing the necessary documentation to assure that each gasoline tank truck loaded is vapor tight. The required notifications are used to inform the Agency or delegated authority when a source becomes subject to the standard. The reviewing authority may then inspect the source to check if the pollution control devices are properly installed and operated and the standard is being met. Performance test reports are needed as these are the Agency's record of a source's initial capability to comply with the emission standard, and serve as a record of the operating conditions under which compliance was achieved.

The information generated by the monitoring, recordkeeping and reporting requirements described in this ICR is used by the Agency to ensure that facilities affected by the NSPS continue to operate the control equipment and achieve compliance with the regulation. Adequate monitoring, recordkeeping, and reporting is necessary to ensure compliance with these standards,

as required by the Clean Air Act.

The information collected from recordkeeping and reporting requirements is also used for targeting inspections, and is of sufficient quality to be used as evidence in court.

3. Nonduplication, Consultations, and Other Collection Criteria 3( a) Nonduplication The recordkeeping and reporting requested is required under 40 CFR Part 60, 5 Subpart XX. If the standard has not been delegated, the information is sent to the appropriate EPA Regional Office. Otherwise, the information is sent directly to the delegated State or Local Agency. If a State or Local Agency has adopted their own similar regulation to implement NSPS Subpart XX, a copy of the report submitted to the State or Local agency can be sent to the Administrator in lieu of the report required by the Federal Standard. Therefore, no duplication exists.

3( b) Public Notice Required Prior to ICR Submission to OMB The first public notification for the renewal of this ICR was published in the Federal Register, Vol. 66, No. 209, page 54514 54521 on October 29, 2001.

3( c) Consultations No comments were received regarding the Federal Register Notice published on October 29, 2001.

3( d) Effects of Less Frequent Collection Less frequent information collection would decrease the margin of assurance that facilities are continuing to meet the required standards. Requirements for information gathering and recordkeeping are useful techniques to ensure that good operation and maintenance practices are applied and emission limitations are met. If the information required by these standards was collected less frequently, the likelihood of detecting poor operation and maintenance of control equipment and noncompliance would decrease.

3( e) General Guidelines None of the reporting or recordkeeping requirements contained in 40 CFR Part 60 Subpart XX or otherwise pertinent to this request violate any of the regulations established by 6 OMB in 5 CFR 1320.6.

3( f) Confidentiality The required information consists of emissions data and other information that have been determined not to be private. However, any information submitted to the Agency for which a claim of confidentiality is made will be safeguarded according to the Agency policies set forth in Title 40, Chapter 1, Part 2, Subpart B  Confidentiality of Business Information ( see 40 CFR 2; 41 FR 36902, September 1, 1976; amended by 43 FR 40000, September 8, 1978; 43 FR 42251,

September 20, 1978; 44 FR 17674, March 23, 1979).

3( g) Sensitive Questions None of the reporting or recordkeeping requirements contained in 40 CFR Part 60 Subpart XX or otherwise pertinent to this request contain sensitive questions.

4. The Respondents and the Information Requested 4( a) Respondents/ SIC Codes The respondents to the recordkeeping and reporting requirements are bulk gasoline terminals with an output in excess of 75,700 liters per day, and that commenced construction,

modification, or reconstruction after December 17, 1980. The SIC code for the respondents affected by the standards is SIC ( U. S. Standard Industrial Classification) 5171 which corresponds to the NAICS ( The North American Industry Classification System) 42271 for bulk gasoline terminals with an output in excess of 75,700 liters per day, and that commenced construction,

modification, or reconstruction after December 17, 1980. 7 Regulation SIC Codes NAICS Codes New Source Performance Standards, 40 CFR, Subpart XX, Bulk Gasoline Terminals 5171 42271 4( b) INFORMATION REQUESTED ( i) Data Items All data in this ICR that is recorded and/ or reported is required by 40 CFR Part 60,

Subpart XX Bulk Gasoline Terminals.

A source must make the following reports:

Reports for 40 CFR Part 60 Subpart XX Bulk Gasoline Terminals.

Notification of construction or reconstruction 40 CFR 60.7( a)( 1)

Notification of anticipated date of initial startup 40 CFR 60.7( a)( 2)

Notification of actual date of initial startup 40 CFR 60.7( a)( 3)

Notification of physical or operational change 40 CFR 60.7( a)( 4)

Maintain records of startups, shutdowns or malfunctions. 40 CFR 60.7( b)

Report of performance tests. 40 CFR 60.8( a)

Notification of performance test. 40 CFR 60.8( d)

Notify the owner or operator of each nonvapor tight gasoline truck loaded 40 CFR 60.502( e)( 4)

A source must maintain the following records:

Recordkeeping for 40 CFR Part 60 Subpart XX Bulk Gasoline Terminals Start ups, shutdowns, malfunctions, periods where the continuous monitoring system is inoperative. 40 CFR 60.7( b)

Record the tank identification number as each gasoline tank truck is loaded. 40 CFR 60.502( e)( 2) 8 Record each leak detected during each calendar month inspection of control equipment during loading operations. 40 CFR 60.502( j)

Record of documentation for tank truck vapor tightness  kept on permanent record. 40 CFR 60.505( a)

Record of monthly leak inspection required under 60.502( j) for 2 years. 40 CFR 60.505( c)

Record of notifications under 60.502( e)( 4) for 2 years. 40 CFR 60.505( d)

Records of replacement parts or additions for 3 years. 40 CFR 60.505( f)

Annual update of records of tank truck vapor tightness. 40 CFR 60.505( b)

( ii) Respondent Activities Read instructions Perform initial performance test, Reference Methods 2A, 2B, 21, 25A, 25B, and 27, and repeat performance tests if necessary Write the notifications and reports listed above Enter information required to be recorded above Submit the required reports developing, acquiring, installing, and utilizing technology and systems for the purpose of collecting, validating, and verifying information Developing, acquiring, installing, and utilizing technology and systems for the purpose of processing and maintaining information Developing, acquiring, installing, and utilizing technology and systems for the purpose of disclosing and providing information Adjusting the existing ways to comply with any previously applicable instructions and requirements Training personnel to be able to respond to a collection of information Transmitting, or otherwise disclosing the information 5. The Information Collected  Agency Activities, Collection Methodology, and 9 Information Management 5( a) Agency Activities EPA conducts the following activities in connection with the acquisition, analysis, storage,

and distribution of the information required under 40 CFR Part 60, Subpart XX:

Observes initial performance tests and repeat performance tests if necessary Reviews notifications and reports, including performance test reports, and excess emissions reports, required to be submitted by industry Audits facility records Inputs and maintains data in the Aerometric Information Retrieval System ( AIRS) database 5( b) Collection Methodology and Management Following notification of startup, the reviewing authority might inspect the source to determine whether the pollution control devices are properly installed and operated.

Performance test reports are used by the Agency to discern a source's initial capability to comply with the emission standard, and note the operating conditions ( gas flow volume, temperature and pressure measurements, gasoline tank truck vapor tightness documentation, etc.) under which compliance was achieved. Data obtained during periodic visits by Agency personnel from records maintained by the respondents are tabulated and published for internal Agency use in compliance and enforcement programs.

Information contained in the reports is entered into the Aerometric Information Retrieval System ( AIRS) Facility Subsystem ( AFS) which is operated and maintained by EPA's Office of Air Quality Planning and Standards. The AFS is EPA's database for the collection, maintenance,

and retrieval of compliance and annual emission inventory data for over 100,000 industrial and government owned facilities. The EPA uses AFS for tracking air pollution compliance and 10 enforcement by Local and State regulatory agencies, and EPA Regional Offices and Headquarters. EPA can edit, store, retrieve and analyze the data via PC terminals.

The records required by this NSPS must be retained by the owner or operator for two years.

5( c) Small Entity Flexibility There are no small businesses affected by this standard.

5( d) Collection Schedule The specific frequency for each information collection activity within this request is shown on Table 2.

6. Estimating the Burden and Cost of the Collection Table 2 documents the computation of individual burdens for each of the recordkeeping and reporting requirements applicable to the industry. The individual burdens are expressed under standardized headings believed to be consistent with the concept of burden under the Paperwork Reduction Act. Where appropriate, specific tasks and major assumptions have been identified.

Responses to this information collection are mandatory ( 40 CFR Part 60, Subpart XX). The Agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR Part 9.

6( a) Estimating Respondent Burden The average annual burden to industry over the next three years from these recordkeeping and reporting requirements is estimated at 11,420 person hours. These hours are based on Agency studies and background documents from the development of the standards or test 11 methods, Agency knowledge and experience with the NSPS program, the previously approved ICR, and any comments received.

6( b) Estimating Respondent Costs ( i) Estimating Labor Costs This ICR uses a Technical Labor Rate of $ 55.34 per hour. This rate is from the United States Department of Commerce Bureau of Labor Statistics, March 2000, " Table 10.

Private industry, by occupational and industry group." The rates are from column 1, " Total compensation." The wage rate has been increased by 110% to account for the benefit packages available to those employed by private industry.

( ii) Estimating Capital and Operations and Maintenance Costs The only type of industry cost associated with the information collection activity in the standards is labor cost. There are no capital or operations and maintenance costs.

( iii) Capital/ Start up vs. Operating and Maintenance ( O& M) Costs This section is not applicable because no continuous monitoring equipment is required by this subpart.

6( c) Estimating Agency Burden and Cost The only Federal costs are user costs associated with analysis of the reported information.

Publication and distribution of the information are part of the Aerometric Information Retrieval System ( AIRS) Facility Subsystem ( AFS) which is operated and maintained by the EPA's Office of Air Quality Planning Standards. Examination of records to be maintained by the respondents will occur as part of the periodic inspection of sources, which is part of EPA's overall compliance and enforcement program. 12 No new facilities are projected for the bulk gasoline terminal industry during the next three years. The only reports received by the Agency are for new sources, therefore, the average annual Agency cost during the next 3 years of the ICR is estimated to be $ 0. Details of this estimate appear in Table 1: Agency Burden.

6( d) Estimating the Respondent Universe and Total Burden and Costs The number of existing sources subject to NSPS Part 60, Subpart XX is 40 sources with no new sources expected due to no projected growth for the bulk gasoline terminal industry. The labor estimates used in Table 2 were derived from standard estimates based on EPA's experience with other standards. The average annual burden to the industry over the next three years from these recordkeeping and reporting requirements is estimated at 11,420 person hours. The respondent costs have been calculated on the basis of $ 55.34 per hour. The average annual burden to industry over the next three years of the ICR is estimated to be $ 631,983. Details of this estimate appear in Table 2: Industry Burden.

6( e) Bottom Line Burden Hours And Cost Tables The total annual burden hours and cost are summarized in Table 2. This ICR requires technical personnel.

6( f) Reasons for Change in Burden Burden hours remain unchanged. The increase in industry burden cost from the current ICR is due to higher hourly rate estimates obtained from the United States Department of Commerce Bureau of Labor Statistics, March 2000, " Table 10. Private industry, by occupational and industry group." The rate is from column 1, " Total compensation." The wage rate has been increased by 110% to $ 55.34 per hour to account for industry benefit packages. The capital/ startup costs in block number 14 are $ 0 because there are no new sources.

6( g) Burden Statement 13 Burden means the total time, effort, or financial resources expended by persons to generate, maintain, retain, or disclose or provide information to or for a Federal agency. This includes the time needed to review instructions; develop, acquire, install, and utilize technology and systems for the purposes of collecting, validating, and verifying information, processing and maintaining information, and disclosing and providing information; adjust the existing ways to comply with any previously applicable instructions and requirements; train personnel to be able to respond to a collection of information; search data sources; complete and review the collection of information; and transmit or otherwise disclose the information. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB control numbers for EPA's regulations are listed in 40 CFR Part 9 and 48 CFR Chapter 15.

Send comments on the Agency's need for this information, the accuracy of the provided burden estimates, and any suggested methods for minimizing respondent burdens, including through the use of automated collection techniques to Ms. Susan Auby, Collection Strategies Division ( Mail Code 2822T), Office of Environmental Information, United States Environmental Protection Agency, 1200 Pennsylvania Avenue, NW, Washington, D. C. 20460 0001; and to the Office of Information and Regulatory Affairs, Office of Management and Budget, 725 17th Street, NW, Washington, D. C. 20503, Attention: Desk Officer for EPA. Include the EPA ICR number 0664.07 and OMB control number 2060 0006 in any correspondence.

Part B of the Supporting Statement This part is not applicable because no statistical methods were used in collecting this information.


[Federal Register Volume 82, Number 43 (Tuesday, March 7, 2017)]
[Notices]
[Pages 12864-12869]
[FR Doc No: 2017-04350]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80134; File No. SR-BOX-2016-48]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice
of Filing of Amendment No. 1 and Order Instituting Proceedings To
Determine Whether To Approve or Disapprove a Proposed Rule Change, as
Modified by Amendment No. 1, To Adopt Rules for an Open-Outcry Trading
Floor

March 1, 2017.

I. Introduction

    On November 16, 2016, BOX Options Exchange LLC (the ``Exchange'' or
``BOX'') 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
proposal to adopt rules for an open-outcry trading floor. The proposed
rule change was published for comment in the Federal Register on
December 05, 2016.\3\ On January 10, 2017, the Commission extended the
time period within which to approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether to approve or disapprove the proposed rule change to
March 05, 2017.\4\ The Commission received three comment letters on the
proposed rule change \5\ and one response letter from BOX.\6\ On
February 21, 2017, the Exchange filed Amendment No. 1 to the proposed
rule change.\7\
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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. 79421 (November 29,
2016), 81 FR 87607 (December 5, 2016) (``Notice'').
    \4\ See Securities Exchange Act Release No. 79768 (January 10,
2017), 82 FR 4956 (January 17, 2017).
    \5\ See letters to Brent J. Fields, Secretary, Commission, from
Angelo Evangelou, Deputy General Counsel, The Chicago Board Options
Exchange, Inc., dated January 10, 2017 (``CBOE Letter''); Steve
Crutchfield, Head of Market Structure, CTC Trading Group, LLC, dated
December 31, 2016 (``CTC Letter''); and Joan C. Conley, Senior Vice
President and Corporate Secretary, The Nasdaq Stock Market LLC,
dated December 22, 2016 (``Nasdaq Letter'').
    \6\ See letter to Brent J. Fields, Secretary, Commission, from
Lisa J. Fall, President, BOX Options, received February 21, 2017
(``BOX Response Letter'').
    \7\ Amendment No. 1 partially amends the filing, SR-BOX-2016-48.
In Amendment No. 1, the Exchange removed proposed rule language
relating to its minor rule violation plan, proposed disciplinary
process for the trading floor, and proposed rules for split price
transactions. In addition, the Exchange clarified various aspects of
how orders will be handled on the trading floor, revised its
discussion of compliance with Section 11(a) of the Act, and made
other clarifying changes to the filing and proposed rule text.
Amendment No. 1 has been placed in the public comment file for SR-
BOX-2016-048 at https://www.sec.gov/comments/sr-box-2016-48/box201648.shtml and also is available on the Exchange's Web site at
http://lynxstorageaccount.blob.core.windows.net/boxvr/SE_resources/SR-BOX-2016-48_Amendment_1.pdf.
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    The Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1, from interested
persons and to institute proceedings under Section 19(b)(2)(B) of the
Act \8\ to determine whether to approve or disapprove the proposed rule
change, as modified by Amendment No. 1. The institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved, nor does it mean that the
Commission will ultimately disapprove the proposed rule change. Rather,
as described in Section V below, the Commission seeks and encourages
interested persons to provide additional comment on the proposed rule
change in order to inform the Commission's analysis of whether to
approve or disapprove the proposed

rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change, As Modified by Amendment
No. 1

    The Exchange proposes to adopt rules to establish an open-outcry
trading floor.\9\ Currently the Exchange only offers electronic
trading, and proposes to add a physical trading floor to create a
hybrid system that integrates both electronic and open-outcry
trading.\10\
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    \9\ See Notice, supra note 3, at 87607.
    \10\ See id. Other exchanges that currently offer a combination
of open-outcry and electronic trading are NYSE Arca, Inc. (``NYSE
Arca''), NASDAQ PHLX LLC (``PHLX''), Chicago Board Options Exchange,
Incorporated (``CBOE''), and NYSE MKT LLC (``NYSE MKT'').
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A. Proposed BOX Floor Procedure

    Under the proposed rules, upon receipt of an order, a Floor Broker
\11\ wishing to execute an order on the floor would be required to
record specific information regarding the order into the Floor Broker's
order entry mechanism.\12\ All orders executed on the trading floor
would be Qualified Open Outcry orders (``QOO Orders''),\13\ which must
be entered as a two-sided order. Each two-sided order contains an
initiating side (``agency order''), which must be filled in its
entirety, and a ``contra-side,'' which must guarantee the full size of
the initiating side of the QOO Order.\14\ A Floor Broker may, but is
not required to, provide a ``book sweep size'' for the contra-side of
the QOO Order, which is the number of contracts, if any, of the contra-
side order that the Floor Broker is willing to relinquish to orders and
quotes on the BOX Book that have priority pursuant to proposed BOX Rule
7600(c).\15\
---------------------------------------------------------------------------

    \11\ See proposed BOX Rule 7540. A Floor Broker is an individual
who is registered with the Exchange for the purpose, while on the
trading floor, of accepting and handling options orders. Id.
Proposed BOX Rule 7550 provides that the Exchange shall review
applications for registration as a Floor Broker on such form or
forms as the Exchange may prescribe, and that the Exchange shall
consider an applicant's ability as demonstrated by his passing a
Floor Broker's examination, if prescribed by the Exchange, and such
other factors as the Exchange deems appropriate.
    \12\ See proposed BOX Rule 7580(e). The specific information
required includes: (i) The order type (i.e., customer, firm, broker-
dealer, professional, or Market Maker) and order receipt time; (ii)
the option symbol; (iii) buy, sell, cross or cancel; (iv) call, put,
complex (i.e., spread, straddle), or contingency order; (v) number
of contracts; (vi) limit price or market order or, in the case of a
multi-leg order, net debit or credit, if applicable; (vii) whether
the transaction is to open or close a position; and (viii) the
Options Clearing Corporation clearing number of the broker-dealer
that submitted the order. See id.
    \13\ See proposed BOX Rule 7600(a)(1). QOO Orders may be multi-
leg orders, including Complex Orders, as defined in BOX Rule
7240(a)(5) and tied to hedge orders as defined in IM-7600-2.
    \14\ See proposed BOX Rule 7600(a)(1).
    \15\ See proposed BOX Rule 7600(h).
---------------------------------------------------------------------------

    Prior to execution, the Floor Broker would be required to represent
the order in the specific Crowd Area \16\ designated for trading that
particular options class in a process called the ``market probe'' (also
known as ``open outcry'').\17\ The proposed BOX floor would consist of
at least one ``Crowd Area,'' each marked with specific visible
boundaries, as determined by the Exchange.\18\ All series for a
particular option class would be allocated to the same Crowd Area.\19\
During the market probe, Floor Market Makers \20\ physically located in
the specific Crowd Area would be considered participants in the crowd
and would be able to express interest in trading against the agency
order. The Floor Broker would be responsible for determining the
sequence in which bids or offers are vocalized on the trading floor in
response to the Floor Broker's bid, offer, or call for a market.\21\
---------------------------------------------------------------------------

    \16\ BOX's proposed trading floor will consist of at least one
``Crowd Area'' or ``Pit.'' See proposed BOX Rule 100(a)(67).
    \17\ See proposed BOX Rule 7600(b). Under the proposed rules, an
Options Exchange Official would be required to certify that the
Floor Broker adequately represented the QOO Order to the trading
crowd. See id.
    \18\ See proposed BOX Rule 100(a)(67).
    \19\ See id.
    \20\ See proposed BOX Rule 8510(b).
    \21\ See proposed BOX Rule 7600(d)(1). Any disputes regarding a
Floor Broker's determination of time priority sequence will be
resolved by the Options Exchange Official. See id.
---------------------------------------------------------------------------

    After the market probe, the Floor Broker would submit the QOO Order
through the BOX Order Gateway (``BOG'').\22\ Once an order is received
by the BOG, it would be immediately sent to the Trading Host \23\ for
execution.\24\ The QOO Order would not be deemed executed until it is
received and processed by the Trading Host.\25\ For a non-complex QOO
Order, the execution price must be equal to or better than the
NBBO.\26\ Additionally, the following BOX Book interest would have
priority over the contra-side of the QOO Order: (i) Any equal or better
priced Public Customer \27\ bids or offers on the BOX Book; (ii) any
non-Public Customer bids or offers on the BOX Book that are ranked
ahead of such equal or better priced Public Customer bids or offers;
and (iii) any non-Public Customer bids or offers on the BOX Book that
are priced better than the proposed execution price.\28\ If the number
of contracts on the BOX Book that have priority over the contra-side of
the QOO Order is greater than the book sweep size set by the Floor
Broker, then the QOO Order will be rejected.\29\ Otherwise, after
priority interest on the BOX Book, if any, is executed, the remaining
balance will be matched against the contra-side of the QOO Order,
regardless of whether the contra-side order submitted by the Floor
Broker is ultimately entitled to receive an allocation.\30\
---------------------------------------------------------------------------

    \22\ See proposed BOX Rule 100(b)(2). All transactions occurring
on the trading floor would be required to be processed through the
BOG. See proposed BOX Floor Rule 7580(e)(1).
    \23\ ``Trading Host'' means the automated trading system used by
BOX for the trading of options contracts. See BOX Rule 100(a)(66).
    \24\ See proposed BOX Rule 7580(e)(1). Under the proposal,
orders on the trading floor would not route to an away exchange. See
proposed BOX Rule 7580(e)(2).
    \25\ See proposed Rule 7600(c).
    \26\ See proposed BOX Rule 7600(c). The relevant priority BOX
Book interest for complex QOO Orders is described in proposed BOX
Rule 7600(c).
    \27\ ``Public Customer'' means a person that is not a broker or
dealer in securities. See BOX Rule 100(a)(51).
    \28\ See proposed Rule 7600(c).
    \29\ See proposed Rule 7600(h). The Exchange believes that the
book sweep size feature will assist Floor Brokers in executing
orders when there are bids or offers on the BOX Book that have
priority over the QOO Order, which BOX believes will result in a
greater number of executions. See Notice, supra note 3, at 87612.
    \30\ See proposed BOX Rule 7600(d).
---------------------------------------------------------------------------

    The executing Floor Broker would also be responsible for ensuring
that any Floor Participant \31\ that responded with interest during the
market probe receives their allocation, and if interest was discovered
during the market probe, the Floor Broker is required to enter the
correct allocations into the Exchange's system where the trade will be
recorded.\32\ If the QOO Order is a certain size, determined by the
Exchange on an option by option basis (at a size that may not be less
than 500 contracts), the Floor Broker would be entitled to cross, after
all equal or better priced Public Customer bids or offers on the BOX
Book and any non-Public Customer bids or offers that are ranked ahead
of such Public Customer bids or offers are filled, 40% of the remaining
contracts in the order.\33\ The Floor Broker is permitted to trade more
than their percentage entitlement if other Floor Participants in the
trading crowd do not choose to trade the remaining portion of the
order.\34\ Additionally, Floor Brokers would be responsible for
handling all orders in accordance with

the Exchange's priority and trade-through rules.\35\
---------------------------------------------------------------------------

    \31\ The term ``Floor Participant'' means Floor Brokers as
defined in Rule 7540 and Floor Market Makers as defined in Rule
8510(b). See proposed BOX Rule 100(a)(26).
    \32\ See proposed BOX Rule 7600(d).
    \33\ See proposed BOX Rule 7600(f).
    \34\ See proposed BOX Rule 7600(f)(4).
    \35\ See proposed BOX Rule 7580(e)(2).
---------------------------------------------------------------------------

B. Floor Market Makers

    Proposed BOX Rule 8500(a) would require market makers on the BOX
Floor to also be registered with BOX as a market maker on its
electronic trading platform. As market makers on BOX's electronic
trading platform, Floor Market Makers would have a continuous
electronic quoting obligation pursuant to proposed BOX Rule 8510(c)(1),
which would require Floor Market Makers to quote electronically in all
classes that they quote on the trading floor.\36\ The Exchange believes
that these electronic quoting requirements will preserve liquidity in
BOX's electronic marketplace, which might otherwise decrease with the
launch of BOX's trading floor.\37\ The Exchange also notes that the
electronic quoting requirements are already in place on BOX's
electronic book, and would be uniformly applied to all BOX market
makers, both floor and electronic.\38\
---------------------------------------------------------------------------

    \36\ See proposed BOX Rule 8510(c)(1).
    \37\ See Notice, supra note 3, at 87627.
    \38\ See id. at 87627-28.
---------------------------------------------------------------------------

    In addition, proposed BOX Rule 100(b)(5) would require a Floor
Market Maker to be considered ``in'' on a bid or offer only if the
Floor Market Maker makes an affirmative assertion that he is ``in.''
\39\ Specifically, the proposed rule states that a Floor Market Maker
``shall be considered `out' on a bid or offer if he does not respond to
the Floor Broker who is announcing the order.'' \40\ The Exchange
believes that requiring an affirmative response from Floor Market
Makers will enhance the efficiency of order execution on the trading
floor because it will prevent unnecessary delays associated with
requiring every Floor Market Maker to affirmatively opt ``out'' of an
order before it is executed.\41\
---------------------------------------------------------------------------

    \39\ See proposed BOX Rule 100(b)(5).
    \40\ See id.
    \41\ See Notice, supra note 3, at 87608, n.9.
---------------------------------------------------------------------------

    The BOX proposal would not impose a requirement on market makers to
be present in the trading crowd before a Floor Broker may represent an
order to the trading crowd.\42\ The Exchange notes that even if a Floor
Market Maker is not present, any orders executed by a Floor Broker
without exposure to participants in the trading crowd will still have
to respect priority interest on the BOX Book, and that all classes
listed on BOX must have at least one Market Maker quoting
electronically. Therefore, the Exchange believes that there will be
electronic quotes in the particular class even if no Floor Market Maker
is present when the QOO Order is announced. Additionally, the Exchange
notes that all orders executed on the trading floor must trade at a
price equal to or better than the NBBO regardless of whether a Floor
Market Maker is present in the Crowd Area when the order is announced.
The Exchange further states that the robust electronic quoting of
options that will be traded on the trading floor ``eliminates any
concerns of not having a Floor Market Maker present when the order is
executed by the Floor Broker due to the fact that there are other
Market Makers providing electronic quotations.'' \43\
---------------------------------------------------------------------------

    \42\ See id. at 87610, n.32.
    \43\ See Notice, supra note 3, at 87625.
---------------------------------------------------------------------------

III. Summary of Comments

    As previously noted, the Commission received three comment letters
on the proposed rule change, and one response letter from BOX. All
three commenters raised specific concerns with respect to the proposed
rule change,\44\ and two of the three commenters raised concerns about
issues relating to options trading floors in general.\45\ No commenter
expressed support for the proposed rule change.
---------------------------------------------------------------------------

    \44\ See CBOE Letter, CTC Letter, and Nasdaq Letter, supra note
5.
    \45\ See CTC Letter and Nasdaq Letter, supra note 5. The
Commission notes that these commenters expressed concerns about
options floors in general and requested Commission action on certain
issues related to existing options trading floors that are beyond
the scope of the BOX proposal.
---------------------------------------------------------------------------

    Commenters raised concerns about the following aspects of the
proposal, each of which is discussed in greater detail below: (1)
Whether the proposal would impede opportunities for price improvement;
(2) the requirement that Floor Market Makers quote electronically in
all classes offered on the proposed BOX trading floor; (3) the ability
for a Floor Broker to execute a trade in the absence of any Floor
Market Maker; (4) the restriction of Floor Market Makers to a ``single
crowd area at a time;'' (5) the book sweep size feature; (6) the lack
of clarity regarding compliance with trade-through and priority rules;
(7) the lack of a single-sided order type on the proposed floor; and
(8) the potential impact on options market structure.

A. Opportunities for Price Improvement

    Two commenters expressed concern that the proposed rule change
would negatively impact opportunities for orders to receive price
improvement.\46\ Specifically, one commenter stated that the proposed
rule change is ``structured to minimize the ability of market maker and
public customer trading interest to interact with, and provide price
improvement to, orders being crossed on the BOX floor.'' \47\ This
commenter claimed that the proposed rule change ``is simply offering a
frictionless crossing mechanism, which can be utilized to the detriment
of customers.'' \48\ Another commenter stated that the proposed rule
change will not ensure robust market maker participation on the
proposed BOX floor, and this would provide a way for internalizers to
avoid exposure to market makers who might otherwise provide price
improvement.\49\
---------------------------------------------------------------------------

    \46\ See CBOE Letter and CTC Letter, supra note 5.
    \47\ See CBOE Letter, supra note 5, at 1-2.
    \48\ See id. at 2.
    \49\ See CTC Letter, supra note 5, at 4-5.
---------------------------------------------------------------------------

B. Requirement for Floor Market Makers To Quote Electronically in All
Classes Offered on the Proposed BOX Floor

    Two commenters expressed concern with the proposed requirement that
Floor Market Makers would have to quote electronically in all classes
offered on the proposed trading floor.\50\ One commenter stated that
the ``imposition'' of an electronic quoting requirement could limit
potential market maker price improvement.\51\ Another commenter
suggested that the proposed requirement appears to ``be a means to
impose a costly and unprofitable burden on would-be Market Makers,
thereby discouraging them from establishing a presence on the BOX floor
and preserving the value of the proposed floor as a crossing venue
devoid of meaningful order exposure or price improvement.'' \52\ This
commenter further argued that the proposed rule change would discourage
competitive market maker participation on the proposed BOX floor.\53\
---------------------------------------------------------------------------

    \50\ See CBOE Letter and CTC Letter, supra note 5.
    \51\ See CBOE Letter, supra note 5, at 2, n.2.
    \52\ See CTC Letter, supra note 5, at 5.
    \53\ See id. at 5.
---------------------------------------------------------------------------

    In response to the commenter's suggestion that the requirement to
quote electronically would discourage market makers from establishing a
presence on the BOX floor, BOX stated that to the contrary, it believes
the proposed rule change will ensure that electronic quoting keeps pace
with the robust level of activity anticipated on the trading floor.\54\
In this regard, BOX further stated that the requirement to quote
electronically can help ensure that market making activity on the
trading

floor does not diminish electronic quoting on BOX.\55\
---------------------------------------------------------------------------

    \54\ See BOX Response Letter, supra note 6, at 3. BOX also noted
its belief that commenter's concerns about the finite resources
available to firms to staff another physical trading floor are
beyond the scope of this proposal. See id. at 4.
    \55\ See id. at 3.
---------------------------------------------------------------------------

C. Ability To Execute a Trade in the Absence of a Floor Market Maker

    One commenter expressed concern that the proposed rule change would
allow a Floor Broker to execute crossing orders on the BOX Floor when
no Floor Market Makers are present.\56\ The commenter argued that
existing options trading floors grew from crowded equities or futures
floors and so were certain to have robust and active market maker
populations.\57\ The commenter further stated that the lack of rules to
ensure robust market maker participation on the proposed BOX floor
would provide a way for internalizers to avoid exposure to market
makers, and would act directly counter to investor protection and the
public interest.\58\
---------------------------------------------------------------------------

    \56\ See CTC Letter, supra note 5, at 4.
    \57\ See id.
    \58\ See id. at 5.
---------------------------------------------------------------------------

    In response to the commenter's concern regarding the absence of a
requirement that Floor Market Makers be present when an order is
represented, BOX stated that allowing a Floor Broker to execute an
order when no Floor Market Maker is present is ``simply a safeguard to
ensure that the trading floor operates efficiently and without undue
delays or interruptions.'' \59\ BOX further stated that there are other
protections in place even if a pit may not have a Market Maker present
when a Floor Broker crosses an order.\60\ According to BOX, these
protections include a requirement that orders must not trade at a price
worse than the NBBO, orders must respect the BOX Book, and orders
represented to the trading crowd must be certified by an options
exchange official as being adequately represented to the crowd.\61\
Additionally, BOX noted that Floor Brokers may not violate priority and
trade-through rules and must honor their obligations to their
customers, including their best execution obligations.
---------------------------------------------------------------------------

    \59\ See BOX Response Letter, supra note 6, at 3.
    \60\ See id.
    \61\ See id.
---------------------------------------------------------------------------

D. Restriction of Floor Market Makers to a Single Crowd Area

    Two commenters expressed concern regarding the proposed rule
change's description and application of physical boundary
requirements.\62\ One commenter suggested that ``physical boundary
requirements'' in the proposed rule change would limit potential
opportunities for market maker price improvement.\63\ Another commenter
suggested that the proposal to allow a Floor Market Maker to
participate in a crowd only if he or she is physically located in a
specific Crowd Area ``at the time the order is represented in the
crowd'' is designed to discourage Floor Market Makers from providing
liquidity.\64\ The commenter suggested that the Exchange could open a
trading floor comprised of a single Crowd Area with rules permitting
all Floor Market Makers to trade all issues as a means to help ensure
opportunities for price improvement.\65\
---------------------------------------------------------------------------

    \62\ See CBOE Letter and CTC Letter, supra note 5.
    \63\ See CBOE Letter, supra note 5, at 2, n.2.
    \64\ See CTC Letter, supra note 5, at 6.
    \65\ See id. at 6.
---------------------------------------------------------------------------

    In response, BOX stated that the ability to divide the trading
floor into multiple pits or crowd areas would aid BOX in monitoring
trading activity and ensuring the trading floor operates in an orderly
manner.\66\ BOX also noted that trading floors on other exchanges also
have multiple crowd areas or pits.\67\
---------------------------------------------------------------------------

    \66\ See BOX Response Letter, supra note 6, at 2.
    \67\ See id. at 2. BOX noted its belief that CBOE, PHLX, and
NYSE Arca all have multiple crowd areas or pits on their respective
trading floors. See id. at 2, n.11.
---------------------------------------------------------------------------

E. Book Sweep Size Mechanism

    One commenter expressed concern about the proposed ``book sweep
size'' mechanism in the proposed rule change.\68\ This commenter
suggested that the book sweep size would be a feature that ``explicitly
prevents executions of orders on the BOX Book.'' \69\ The commenter
further stated that the book sweep mechanism could prevent orders from
executing in circumstances where there are orders on the BOX Book that
could fill the order, possibly at a better price, and thus the
mechanism ``puts its participants' compliance with best-execution
obligations at risk and unfairly discriminates against investors with
executable orders resting in the BOX Book.'' \70\
---------------------------------------------------------------------------

    \68\ See CTC Letter, supra note 5, at 7.
    \69\ See id. at 7.
    \70\ See id. at 7-8.
---------------------------------------------------------------------------

    In response to the commenter's concerns regarding the book sweep
size aspect of the proposal, BOX stated that the book sweep size is a
tool that will aid Floor Brokers in satisfying duties owed to their
customers, such as best execution.\71\ For example, according to BOX,
when a Floor Broker needs an order to be executed immediately, the
broker could opt either to provide a book sweep size equal to the
entire size of the order, which provides liquidity to the BOX Book, or
to provide an execution price that is better than the current best
price on BOX, which presents an opportunity for potential price
improvement.\72\ BOX also noted that it believes functionality similar
to the book sweep size mechanism is available on at least one other
trading floor, so the book sweep size aspect of its proposal is not
unique.\73\
---------------------------------------------------------------------------

    \71\ See BOX Response Letter, supra note 6, at 3-4.
    \72\ See id. at 4.
    \73\ See id. at 4. BOX states that the book sweep size mechanism
is comparable to the PHLX Floor Broker Management System.
---------------------------------------------------------------------------

F. Compliance With Trade-Through and Priority Rules

    One commenter stated that the proposed rule change is unclear
regarding whether or not the proposed BOG trading system would
systematically prevent violations of priority and trade-through
requirements.\74\ This commenter further stated that it is unclear
whether exposure in the trading crowd is required and whether the
market against which trades are validated differs depending on the
method of execution.\75\ Specifically, the commenter claimed that the
proposed rule change ``does not describe the process for validation of
trades and whether validation occurs at the time of the Verbal
Agreement or Reported Trade.'' \76\ Additionally, this commenter stated
that the proposed rule change does not discuss the specific manner in
which surveillance reviews transactions for violations of Exchange
rules or the manner in which the BOG or the Exchange enforces
compliance for on-floor transactions.\77\
---------------------------------------------------------------------------

    \74\ See Nasdaq Letter, supra note 5, at 2.
    \75\ See id.
    \76\ See id.
    \77\ See id. at 3.
---------------------------------------------------------------------------

    In response to the commenter's concern that the proposed rule
change is unclear about whether the BOG would systematically prevent
violations of priority and trade-through requirements, BOX stated that
the method by which trades are received and processed by the Trading
Host serves as a safeguard to prevent violations of the priority and
trade-through requirements.\78\ BOX further stated that it ``has
specifically designed the Proposal to prevent trade-through violations
and protect priority interest on the BOX Book.\79\ In response to the
commenter's suggestion that the proposed rule change does not
adequately discuss surveillance, BOX stated it has ``robust
surveillance procedures in place to monitor

compliance with the Exchange's rules.'' \80\ BOX further stated that
their surveillance procedures will be used to monitor transactions
occurring on the trading floor.
---------------------------------------------------------------------------

    \78\ See BOX Response Letter, supra note 6, at 1.
    \79\ See id. at 2.
    \80\ See id.
---------------------------------------------------------------------------

G. Lack of Single-Sided Floor Order Type

    One commenter raised concerns about the inability of floor
participants to represent single sided orders on the proposed BOX
Floor.\81\ In response to the commenter's concern about floor
participants not being able to represent a single-sided order on the
proposed BOX Floor, BOX stated that a Floor Broker may bring any
unmatched order to the trading floor to seek liquidity, and then enter
the order into the BOX system using the QOO order type.\82\ BOX noted
that Floor Brokers also may enter single-sided orders into the BOX Book
using BOX's electronic interface.\83\
---------------------------------------------------------------------------

    \81\ See CBOE Letter, supra note 5, at 2, n.2.
    \82\ See BOX Response Letter, supra note 6, at 4.
    \83\ See id. at 4.
---------------------------------------------------------------------------

H. Potential Impact on Options Market Structure

    Two commenters expressed concern that the proposed rule change
would increase fragmentation of the options market.\84\ One commenter
stated that ``[f]ragmentation is a growing concern in the U.S.
securities markets,'' and that the proposed BOX floor would ``add[] yet
another trading venue that must be staffed by firms with finite
resources and liquidity without offering anything unique or beneficial
to customers.'' \85\ Another commenter stated that opening a new
trading floor will exacerbate the practice of ``venue shopping,'' and
noted that the ``number of market making firms is limited,'' and that
``market making firms lack infinite resources to staff an arbitrary
number of physical trading floors with dedicated personnel.'' \86\ This
commenter further suggested that the proposed rule could ``open the
floodgates'' for new options trading floors, ``engendering serious
fragmentation of liquidity, imposing significant new costs on market
making firms by obliging them to staff every floor or incur large
opportunity costs.'' \87\
---------------------------------------------------------------------------

    \84\ See CBOE Letter and CTC Letter, supra note 5.
    \85\ See CBOE Letter, supra note 5, at 1.
    \86\ See CTC Letter, supra note 5, at 3.
    \87\ See CTC Letter, supra note 5, at 4.
---------------------------------------------------------------------------

    In response, BOX argued that concerns about the general success of
options trading floors is beyond the scope of its proposal.\88\ BOX
further asserted that commenters' general concerns about options
trading floors lack merit or are an attempt to delay the approval of
its proposal.\89\
---------------------------------------------------------------------------

    \88\ See BOX Response Letter, supra note 6, at 4.
    \89\ See id.
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove SR-BOX-
2016-48 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act,\90\ to determine whether the proposed rule
change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposed rule
change. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described in greater detail below, the
Commission seeks and encourages interested persons to comment on the
proposed rule change to inform the Commission's analysis of whether to
approve or disapprove the proposed rule change, as modified by
Amendment No. 1.
---------------------------------------------------------------------------

    \90\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\91\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings because the proposal raises
important issues that warrant further public comment and Commission
consideration. The Commission is instituting proceedings to allow for
additional analysis of, and input from commenters with respect to, the
proposed rule change's consistency with Section 6(b)(5) of the Act,\92\
which requires that the rules of a national securities exchange be
designed, among other things, to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
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. In
addition, the Commission is instituting proceedings to allow for
additional analysis of, and input from commenters with respect to,
whether or not the proposed rule change is consistent with Section
6(b)(8) of the Act, which requires the rules a national securities
exchange not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\93\
---------------------------------------------------------------------------

    \91\ Id. Section 19(b)(2)(B) of the Act provides that
proceedings to determine whether to disapprove a proposed rule
change must be concluded within 180 days of the date of publication
of the notice of the filing of the proposed rule change. The time
for conclusion of the proceedings may be extended for up to 60 days
if the Commission finds good cause for such extension and publishes
its reasons for so finding. See id.
    \92\ 15 U.S.C. 78f(b)(5).
    \93\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    Specifically, the Commission notes that aspects of the proposed
rule change may not be consistent with Section 6(b)(5) of the Act in
that they could effectively limit the exposure of floor orders to a
bona fide open outcry auction process, which could lead to, among other
things, inefficient pricing for crossing transactions executed on the
proposed BOX floor. In addition, the Commission notes that the
impediments to becoming, and restrictions on, Floor Market Makers may
impose a burden on competition that is inconsistent with 6(b)(8) of the
Act. The Commission also notes that the proposed rule change raises
questions regarding the ability of the Exchange and participants on the
BOX trading floor to comply with the Act, Commission and/or Exchange
rules regarding intramarket priority and intermarket trade-through.
    Finally, under the Commission's rules of procedure, a self-
regulatory organization that proposes to amend its rules bears the
burden of demonstrating that its proposal is consistent with the
Act.\94\ In this regard:
---------------------------------------------------------------------------

    \94\ Rule 700(b)(3), 17 CFR 201.700(b)(3).

the description of the proposed rule change, its purpose and
operation, its effect, and a legal analysis of its consistency with
the applicable requirements must all be sufficiently detailed and
specific to support an affirmative Commission finding. Any failure
of the self-regulatory organization to provide the information
elicited by Form 19b-4 may result in the Commission not having a
sufficient basis to make an affirmative finding that a proposed rule
change is consistent with the Exchange Act and the rules and
regulations thereunder that are applicable to the self-regulation
organization.\95\
---------------------------------------------------------------------------

    \95\ Id.

V. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
concerns identified above, as well as any other concerns they may have
with the proposal, as modified by Amendment No. 1. In particular, the
Commission invites the written views of interested persons concerning
whether the proposal, as modified by Amendment No. 1, is consistent
with Sections

6(b)(5) \96\ and 6(b)(8),\97\ or any other provision of the Act, or the
rules and regulations thereunder. Although there do not appear to be
any issues relevant to approval or disapproval which would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\98\ In particular, the
Commission seeks comment on the following:
---------------------------------------------------------------------------

    \96\ 15 U.S.C. 78f(b)(5).
    \97\ 15 U.S.C. 78f(b)(8).
    \98\ Section 19(b)(2) of the Act, as amended by the Securities
Acts Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Reps. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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     Commenters' views on the proposed requirement that a Floor
Market Maker may only quote in classes on the trading floor which the
market maker is already quoting electronically; \99\
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    \99\ See proposed BOX Rule 8500(a).
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     Commenters' views on the aspect of the proposal that would
allow a BOX Floor Broker to execute a crossing transaction without
first exposing the order to any other Floor Participant;
     Commenters' views on whether a minimum number of Floor
Market Makers should be required to be present when an order is
represented to the trading crowd, and if so, how many Floor Market
Makers in each class should be required;
     Commenters' views on the proposed book sweep size feature;
\100\
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    \100\ See proposed BOX Rule 7600(h).
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     Commenters' views on the aspect of the proposal that would
require a Floor Market Maker to be physically located in a specific
Crowd Area to be deemed participating in the crowd; \101\
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    \101\ See proposed BOX Rule IM-8510-2.
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     Commenters' views on the Exchange's argument that
requiring ``an affirmative response by a Floor Market Maker will allow
for a more efficient process for executing orders on the Trading
Floor'' and that requiring a Floor Market Maker to affirmatively be
``out'' on every order ``will lead to unnecessary delays on the Trading
Floor and has the potential to cause disruptions.'' \102\
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    \102\ See Notice, supra note 3, at 87608, n.9.
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     Commenters' views on whether the provision allowing the
Exchange the discretion to determine whether a Floor Broker examination
could be required as a prerequisite to becoming a Floor Broker is
consistent with the Act; \103\
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    \103\ See proposed BOX Rule 7550.
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     Whether the Exchange adequately describes how it will
validate a trade for purposes of compliance with trade-through,
priority and other Exchange rules; and
     Whether the Exchange adequately describes the mechanics of
how orders will be received and executed on the proposed BOX trading
floor.
    Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 1 and regarding whether the proposed
rule change, as modified by Amendment No. 1, should be approved or
disapproved by March 28, 2017. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by April 11,
2017.
    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_ADDRESS>Please include
File Number SR-BOX-2016-48 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-2016-48. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the accommodation proposal that are
filed with the Commission, and all written communications relating to
the accommodation proposal 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 Web site 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 filings also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-BOX-2016-48 and should be
submitted on or before March 28, 2017. Rebuttal comments should be
submitted by April 11, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\104\
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    \104\ 17 CFR 200.30-3(a)(57).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-04350 Filed 3-6-17; 8:45 am]
 BILLING CODE 8011-01-P