Orders and thus certain priority provisions applicable to QOO Orders
are not applicable to FOO Orders. Specifically, FOO Order priority
differs from QOO Order provisions related to the priority of orders
on the BOX Book. See BOX Rules 7600(c)-(e) and (h). The priority of
FOO Orders will be determined by proposed Rules 7605(i) and (k) and
BOX Rule 7610.
    \166\ See proposed Rule 5055(f)(3). See also proposed Rule
7605(d)(3). See Exchange Act Release Nos. 62321 (June 17, 2010), 75
FR 36130 (June 24, 2010) (SR-NYSEArca-2010-46) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Amending Commentary
.01 to Rule 5.32 To Permit Certain FLEX Options To Trade Under the
FLEX Trading Procedures for a Limited Time on a Closing Only Basis)
and 62870 (September 8, 2010), 75 FR 56147 (September 15, 2010) (SR-
CBOE-2010-078) (Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Permit Certain FLEX Options To Trade Under
the FLEX Trading Procedures for a Limited Time on a Closing Only
Basis).
    \167\ See proposed Rule 5055(f)(2). See Exchange Act Release
Nos. 59417 (February 18, 2009), 74 FR 8591 (February 25, 2009) (SR-
CBOE-2008-115) (Notice of Filing of Amendments No. 1 and 2 and Order
Granting Accelerated Approval to a Proposed Rule Change, as Modified
by Amendments No. 1 and 2 Thereto, Relating to FLEX Options
Expirations); 60548 (August 20, 2009), 74 FR 43191 (August 26, 2009)
(SR-NYSEAmex-2009-44) (Notice of Filing and Immediate Effectiveness
of Proposed Rule Change by NYSE AMEX LLC Amending the Permissible
Expiration Dates for Flexible Exchange Options); 60549 (August 20,
2009), 74 FR 44415 (August 28, 2009) (SR-NYSE-Arca-2009-75) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change by
NYSE Arca, Inc. Amending Permissible Expiration Dates for Flexible
Exchange Options); and 60549 (September 16, 2009), 74 FR 48619
(September 23, 2009) (SR-Phlx-2009-81) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change Relating to FLEX
Option Expirations).
    \168\ The Exchange notes that investors will be able to close
any such positions utilizing Non-FLEX Equity Option trading
procedures beginning the next trading day.
    \169\ See NYSE Arca Rule 5.32-O, Commentary .01.
---------------------------------------------------------------------------

    Further, the Exchange believes that allowing FLEX Equity Options to
trade in minimum increments of $0.01 \170\ perfects the mechanism of a
free and open market and a national market system because it provides
investors with increased ability to meet their specific investment
objectives and allows for increased opportunities for price improvement
through a finer trading increment. The Exchange notes that another
exchange currently trades FLEX Equity Options in minimum increments of
$0.01.\171\
---------------------------------------------------------------------------

    \170\ See proposed Rule 5055(g).
    \171\ See CBOE Rule 5.4(c)(4). The Exchange notes that minimum
increments in percentage terms are not part of this proposal.
---------------------------------------------------------------------------

    The Exchange further believes that subjecting FLEX Equity Options
to the exercise by exception provisions of Rule 805 of the OCC \172\
fosters cooperation and coordination with persons engaged in
regulating, clearing, settling, processing information with respect to,
and facilitating transactions in securities.\173\ Specifically, OCC
Rule 805 provides that, unless contrary instructions are given, option
contracts that are in-the-money by specified amounts shall be
automatically exercised. Application of Rule 805 to FLEX Equity Options
provides consistency with Non-FLEX Equity Options and prevents
confusion in the clearing process with respect to exercise
instructions. The Exchange notes that another exchange provides that
FLEX Equity Options shall be subject to the exercise by exception
provisions of OCC Rule 805.\174\
---------------------------------------------------------------------------

    \172\ See proposed Rule 5055(h).
    \173\ The Exchange notes that Rule 805 of the OCC currently
applies to Non-FLEX Equity Options on BOX. See BOX Rule 9000(b).
    \174\ See NYSE Arca Rule 5.32-O(f)(4).
---------------------------------------------------------------------------

Position Limits
    Position and exercise limits are designed to address potential
manipulative schemes and adverse market impacts surrounding the use of
options, such as disrupting the market in the security underlying the
options. While position and exercise limits should address and
discourage the potential for manipulative schemes and adverse market
impact, if such limits are set too low, participation in the options
market may be discouraged. The Exchange believes that any decision
regarding imposing position and exercise limits for FLEX Equity Options
must therefore be balanced between mitigating concerns of any potential
manipulation and the cost of inhibiting potential hedging activity that
could be used for legitimate economic purposes.\175\
---------------------------------------------------------------------------

    \175\ The Exchange notes that although no position limits are
proposed for FLEX Equity Options, there are several mitigating
factors, which include aggregation of FLEX Equity Option and Non-
FLEX Equity Option positions that expire on a third Friday-of-the-
month and subjecting those positions to position and exercise
limits, and daily monitoring of market activity.

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

    Similar to the other exchanges that trade FLEX Equity Options, the
Exchange believes that eliminating position and exercise limits for
FLEX Equity Options, while requiring positions in FLEX Equity Options
that expire on a third Friday-of-the-month to be aggregated with
positions in Non-FLEX Equity Options on the same underlying
security,\176\ removes impediments to and perfects the mechanism of a
free and open market and a national market system because it allows BOX
to create a product and market that is an improved but comparable
alternative to the OTC market in customized options. OTC transactions
occur through bilateral agreements, the terms of which are not publicly
disclosed to the marketplace. As such, OTC transactions do not
contribute to the price discovery process that exists on a public
exchange.
---------------------------------------------------------------------------

    \176\ See proposed Rules 5055(i) and (j). See also NYSE Arca
Rules 5.35-O(a)(iii), (b) and 5.36-O and CBOE Rules 8.35 and 8.42
and NYSE American Rules 906G and 907G and PHLX Rule Options 8,
Section 34(e) and (f).
---------------------------------------------------------------------------

    The Exchange believes that the proposed elimination of position and
exercise limits for FLEX Equity Options may encourage market
participants to transfer their liquidity demands from OTC markets to
exchanges and enable liquidity providers to provide additional
liquidity to BOX through transactions in FLEX Equity Options. The
Exchange notes that the Commission previously approved the elimination
of position and exercise limits for FLEX Equity Options, finding that
such elimination would allow exchanges ``to better compete with the
growing OTC market in customized equity options, thereby encouraging
fair competition among brokers and dealers and exchange markets.''
\177\ The Commission has also stated that the elimination of position
and exercise limits for FLEX Equity Options ``could potentially expand
the depth and liquidity of the FLEX equity market without significantly
increasing concerns regarding intermarket manipulations or disruptions
of the options or the underlying securities.'' \178\
---------------------------------------------------------------------------

    \177\ See Securities Exchange Act Release No. 42223 (December
10, 1999), 64 FR 71158, 71159 (December 20, 1999) (SR-Amex-99-40)
(SR-PCX-99-41) (SR-CBOE-99-59) (Order Granting Accelerated Approval
to Proposed Rule Change Relating to the Permanent Approval of the
Elimination of Position and Exercise Limits for FLEX Equity
Options).
    \178\ See id.
---------------------------------------------------------------------------

    Additionally, the Exchange believes that requiring positions in
FLEX Equity Options that expire on a third Friday-of-the-month to be
aggregated with positions in Non-FLEX Equity Options on the same
underlying security subjects FLEX Equity Options and Non-FLEX Equity
Options to the same position and exercise limits on third Friday-of-
the-month expirations. These limitations are intended to serve as a
safeguard against potential adverse effects of large FLEX Equity Option
positions expiring on the same day as Non-FLEX Equity Option positions.
The Exchange notes that another exchange has the same requirement.\179\
---------------------------------------------------------------------------

    \179\ See NYSE Arca Rule 5.35-O(b)(i).
---------------------------------------------------------------------------

    The Exchange believes that any potential risk of manipulative
activity is mitigated by existing surveillance technologies,
procedures, and reporting requirements at the Exchange, which allows
the Exchange to properly identify disruptive and/or manipulative
trading activity. In addition to its own surveillance programs, the
Exchange also works with other SROs and exchanges on intermarket
surveillance related issues. Through its participation in the
Intermarket Surveillance Group (``ISG'') \180\ the Exchange shares
information and coordinates inquiries and investigations with other
exchanges designed to address potential intermarket manipulation and
trading abuses. The Exchange also notes that Financial Industry
Regulatory Authority, Inc. (``FINRA''), conducts cross-market
surveillances on behalf of the Exchange pursuant to a regulatory
services agreement.\181\ The Exchange also represents that it is
reviewing its procedures to detect potential manipulation in light of
any changes required for FLEX Equity Options to confirm appropriate
surveillance coverage. These procedures utilize daily monitoring of
market activity via automated surveillance techniques to identify
unusual activity in both options and their underlying securities and
are designed to protect investors and the public interest by ensuring
that the Exchange has an adequate surveillance program in place.
---------------------------------------------------------------------------

    \180\ ISG is an industry organization formed in 1983 to
coordinate intermarket surveillance among the SROs by cooperatively
sharing regulatory information pursuant to a written agreement
between the parties. The goal of the ISG's information sharing is to
coordinate regulatory efforts to address potential intermarket
trading abuses and manipulations.
    \181\ The Exchange notes that it is responsible for FINRA's
performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The Exchange believes that proposed Rule 5055(i)(1) further
mitigates concerns for potential market manipulation and/or disruption
in the underlying markets and thus protects investors and the public
interest because the Exchange may determine that a higher margin
requirement is necessary in light of the risks associated with a FLEX
Equity Option position in excess of the standard limit for Non-FLEX
Equity Options of the same class. The Exchange may, pursuant to its
authority under Rule 10130(b), impose additional margin upon the
account of any Participant, including a Participant maintaining a large
FLEX Equity Option position, as a safeguard against potential adverse
effects of large FLEX Equity Option positions. The Exchange notes that
the clearing firm carrying the account will be subject to capital
charges under SEC Rule 15c3-1 to the extent of any margin deficiency
resulting from the higher margin requirement. The Exchange also notes
that other exchanges currently trading FLEX options have similar
position and exercise limits.\182\ The Exchange also believes it is
consistent with the Act to not include a requirement relating to the
reporting of information on FLEX Equity Option positions in excess of
the standard position limit for Non-FLEX Equity Options because it will
remove an unnecessary administrative burden on Participants and the
Exchange, and the Exchange, along with the OCC and FINRA, will retain
the ability to monitor large FLEX Equity Options positions and have the
ability to increase margin requirements if necessary. The Exchange
further believes it is consistent with the Act to better tailor the
language in proposed Rule 5055(i) to the Exchange's existing authority
to impose higher margin requirements because this will ensure
consistency among Participants regarding the manner in which the
Exchange may impose additional margin requirements and will increase
clarity and accessibility with respect to the Exchange's Rules.
---------------------------------------------------------------------------

    \182\ See NYSE Arca Rules 5.35-O(a)(iii), (b), and 5.36-O and
CBOE Rules 8.35 and 8.42 and NYSE American Rules 906G and 907G and
PHLX Rule Options 8, Section 34(e) and (f).
---------------------------------------------------------------------------

Letters of Guarantee and Authorization
    Pursuant to proposed Rule 5055(k), the Exchange will require FLEX
Market Makers to provide a Letter of Guarantee issued by a clearing
member organization and filed with the Exchange specifically accepting
financial responsibility for all FLEX Equity Option transactions made
by such person as long as such letter has not been revoked under Rule
8070(c).\183\ Market Makers that are qualified by the Exchange and have
provided such a Letter of Guarantee will be permitted to trade FLEX
Equity Options on BOX.\184\

The Exchange believes that requiring a Letter of Guarantee specific to
FLEX Equity Options protects investors and the public interest because
it signifies that the clearing member has specifically accepted
financial responsibility for transactions in FLEX Equity Options
entered into by the Market Maker which will protect the counterparties
of those trades and such protections will flow to other clearing
members and ultimately to the OCC as the central counterparty and
guarantor of both FLEX Equity Option and Non-FLEX Equity Option
transactions. The Exchange notes that another exchange requires a
Letter of Guarantee for FLEX transactions.\185\
---------------------------------------------------------------------------

    \183\ See proposed Rule 5055(k).
    \184\ See proposed Rule 7605(c). The Exchange notes that Market
Makers are subject to the qualifications in Exchange rules including
net capital and financial requirements. See BOX Rule 8000 series.
    \185\ See NYSE Arca Rule 5.41-O(a).
---------------------------------------------------------------------------

    Pursuant to proposed Rule 5055(l), prior to effecting any
transaction in FLEX Equity Options, Floor Brokers are required to
provide a Letter of Authorization issued by a clearing member
organization and filed with the Exchange specifically accepting
financial responsibility for all FLEX Equity Option transactions made
by such person, and such letter remains in effect until a written
revocation is received by the Exchange.\186\ Floor Brokers that have
provided such a Letter of Authorization and are qualified by the
Exchange will be permitted to trade FLEX Equity Options on BOX.\187\
The Exchange believes that requiring a Letter of Authorization specific
to FLEX Equity Options protects investors and the public interest
because it signifies that the clearing member has accepted financial
responsibility for transactions in FLEX Equity Options entered into by
the Floor Broker which will protect the counterparties of those trades
and such protections will flow to other clearing members and ultimately
to the OCC as the central counterparty and guarantor of both FLEX
Equity Option and Non-FLEX Equity Option transactions. The Exchange
notes that another exchange requires a separate Letter of Authorization
for Floor Brokers to trade FLEX Equity Options.\188\
---------------------------------------------------------------------------

    \186\ See proposed Rules 5055(l) and 7605(b).
    \187\ The Exchange notes that Floor Brokers are subject to
registration requirements in Exchange rules including a Floor Broker
examination and other factors deemed appropriate by the Exchange.
See BOX Rule 7550.
    \188\ See NYSE Arca Rule 5.41-O(b).
---------------------------------------------------------------------------

FOO Orders
    The Exchange believes that the proposed rule change to adopt a new
order type \189\ for FLEX Equity Option transactions on the BOX Trading
Floor is consistent with the Act. The Exchange modeled its proposed
rule governing FOO Orders after Rule 7600 applicable to QOO Orders to
harmonize current procedures on BOX's Trading Floor, which the Exchange
believes will reduce investor confusion and thus remove impediments to
and perfect the mechanism of a free and open market and a national
market system.\190\ Specifically, the proposed elements of a FOO Order
are designed to aid Floor Brokers in their duties and to maintain order
and structure on the Trading Floor. For example, as with a QOO Order,
the rules applicable to FOO Orders will ensure that all FLEX Equity
Option transactions executed on the Trading Floor by Floor Brokers are
systematized before they are represented to the trading crowd and
provide an accurate timestamp of when the order was executed by the
Floor Broker.\191\ As described above, the main differences from QOO
Orders are that FOO Orders will not interact with the BOX Book or the
Complex Order Book and that Floor Brokers must allow Floor Participants
a minimum period of time to respond to FOO Orders.
---------------------------------------------------------------------------

    \189\ See proposed Rule 7605.
    \190\ See Securities Exchange Act Release No. 81292 (August 2,
2017), 82 FR 37144 (August 8, 2017) (Order Approving a Proposed Rule
Change, as Modified by Amendment Nos. 1 and 2, To Adopt Rules for an
Open-Outcry Trading Floor) (``After careful review and consideration
of the comments received, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1 and 2, is consistent
with the requirements of the Act and the rules and regulations
thereunder applicable to a national securities exchange.'').
    \191\ See proposed Rule 7605(e). The Exchange notes that in
order to execute a FOO Order on the Trading Floor, it must be sent
from a Floor Broker's system to the BOG. This requires that the
Floor Broker adequately systematized the FOO Order.
---------------------------------------------------------------------------

    Under this proposal, Floor Brokers will continue to allow a
reasonable amount of time for Floor Participants to participate in a
FOO Order. Additionally, the Exchange will establish and communicate
via Regulatory Notice a minimum time that Floor Brokers must provide
for Floor Participants to respond to FOO Orders, which amount of time
must be between three seconds and five minutes. While other exchanges
have adopted RFQ processes for FLEX Equity Options,\192\ the Exchange
has proposed to follow a similar approach for trading FLEX Equity
Options as CBOE, which does not have a different open outcry process
for FLEX Option transactions as compared to non-FLEX Option
transactions, but does establish a different order announcement process
that requires a reasonable amount of time for traders to respond to a
FLEX Order.\193\ In fact, the Exchange notes that CBOE recently changed
its process for FLEX Option transactions from conducting a RFQ process
to utilizing the same process as for a non-FLEX Option on its trading
floor.\194\ In its rule filing, CBOE stated that aligning the open
outcry process for FLEX Options with that of non-FLEX Options may
reduce confusion regarding how FLEX Orders may trade in open outcry and
encourage the submission of FLEX Orders for execution.\195\
---------------------------------------------------------------------------

    \192\ See NYSE Arca Rule 5.33-O and PHLX Rule Options 8, Section
34(c) and NYSE American Rule 904G.
    \193\ See CBOE Rule 5.72(d)(1) (providing that FLEX Traders have
a reasonable amount of time (which amount of time must be between
three seconds and five minutes) from the time a FLEX Trader requests
a quote in a FLEX Option series or represents a FLEX Order
(including announcing a crossing transaction pursuant to Rule 5.87)
to respond with bids and offers). The Exchange notes that PHLX has
also taken a similar approach to CBOE. See Securities Exchange Act
Release No. 97658 (June 7, 2023), 88 FR 38562 (June 13, 2023) (SR-
Phlx-2023-22) (Notice of Filing and Immediate Effectiveness of
Proposed Rule Change To Amend Various Options 8 Rules).
    \194\ See Securities Exchange Act Release No. 87235 (October 4,
2019), 84 FR 54671 (October 10, 2019) (SR-CBOE-2019-084) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Extend the Operation of its Flexible Exchange Options (``FLEX
Options'') Pilot Program Regarding Permissible Exercise Settlement
Values for FLEX Index Options).
    \195\ Id.
---------------------------------------------------------------------------

    The Exchange similarly proposes to align its open outcry process
for FLEX Equity Options with that of Non-FLEX Equity Options and to
establish a minimum time for responses to FOO Orders. The Exchange also
believes that, in addition to the required minimum time, it is
appropriate to continue to have Options Exchange Officials determine
whether Floor Participants have been provided a reasonable amount of
time to respond to a FOO Order, which is consistent with the current
procedure on the BOX Trading Floor for QOO Orders.\196\ The Options
Exchange Official will make this determination on a case-by-case basis
based on the current market conditions and trading activity on the
Trading Floor.\197\ Options Exchange Officials are employees of the
Exchange, reporting to the Chief Regulatory Officer, and are trained
and qualified to enforce the Exchange's rules. The Exchange believes
that Options Exchange Officials will ensure that FOO Orders follow the

Exchange's rules, including that FLEX Market Makers are provided a
reasonable amount of time to respond.\198\ FLEX Market Makers that do
not believe a reasonable amount of time to respond was provided may
appeal any related determination of an Options Exchange Official to the
Exchange's Chief Regulatory Officer.\199\ Additionally, Floor Brokers
have a general responsibility to use due diligence to cause orders to
be executed at the best price or prices available to them in accordance
with the Rules of the Exchange.\200\ Further, it shall be considered
conduct inconsistent with just and equitable principles of trade for
any Floor Broker to intentionally disrupt the open outcry process.\201\
Thus, the Exchange believes that the proposed process promotes just and
equitable principles of trade and removes impediments to and perfects
the mechanism of a free and open market and a national market system
because the proposed process provides substantially similar
opportunities for Floor Participants to respond to FOO Orders as an RFQ
process while maintaining consistency with existing Exchange processes
for transactions on the Trading Floor. As noted herein, the proposed
open outcry process is safeguarded by enforcement of the Exchange's
rules by Options Exchange Officials. The Exchange again notes that,
except for the inclusion of a minimum time period that a Floor Broker
must allow Floor Participants to respond to FOO Orders, the proposed
open outcry process for FOO Orders is similar to the current process
for QOO Orders. Therefore, the Exchange believes the proposal will
serve to avoid confusion and increase efficiency on the BOX Trading
Floor.
---------------------------------------------------------------------------

    \196\ See supra note 147 (describing that the minimum time
period, which must be between three seconds and five minutes, will
be established by the Exchange and communicated via Regulatory
Notice).
    \197\ The Exchange has a Minor Rule Violation Program (``MRVP'')
pursuant to Rule 12140 (Imposition of Fines for Minor Rule
Violations). The MRVP provides in part that improper vocalization of
a trade may result in sanction. See BOX Rule 12140.
    \198\ See supra note 147 (describing that the minimum time
period, which must be between three seconds and five minutes, will
be established by the Exchange and communicated via Regulatory
Notice).
    \199\ See BOX Rule 7640(e).
    \200\ See BOX Rule 7570.
    \201\ See BOX IM-7580-4.
---------------------------------------------------------------------------

    Proposed Rule 7605(b) states that FOO Orders will be limited solely
to the Trading Floor. The Exchange believes that limiting FOO Orders to
the Trading Floor is consistent with the Act because, due to their
unique and customizable nature, FLEX Equity Option transactions are
well suited for a trading floor environment where the terms of such
options can be effectively negotiated. The Exchange notes that other
exchanges limit FLEX Equity Options trading to their respective trading
floors.\202\ To the extent the Exchange determines to adopt an
electronic mechanism for the trading of FLEX Equity Options, it will
file a subsequent proposed rule change with the Commission.
---------------------------------------------------------------------------

    \202\ See NYSE American Rule 904G and NYSE Arca Rule 5.33-O and
PHLX Rule Options 8, Section 34(c).
---------------------------------------------------------------------------

    Proposed Rule 7605(c) provides that FLEX Market Makers must be
registered under Rule 8000 and must be Floor Market Makers in good
standing under Rule 8500, which protects investors and the public
interest by ensuring that Market Makers are qualified to perform their
duties, including filing an application, demonstrating knowledge of
FLEX Equity Options, and providing additional information as the
Exchange may consider necessary. The Exchange shall qualify at least
three FLEX Market Makers in accordance with a FLEX-specific
qualification process prescribed by the Exchange to provide competition
for FOO Orders and reasonable opportunities for Participants to get
quotes on FLEX Equity Options. The requirement to qualify at least
three FLEX Market Makers is designed to remove impediments to and
perfect the mechanism of a free and open market and a national market
system. Similarly to Floor Market Makers, FLEX Market Makers will also
be subject to Rule 8510, including provisions for the course and
conduct of dealings, class assignments, and option priority and parity,
unless otherwise specified in proposed Rule 7605.\203\ Specifically,
Rule 8510 provides that transactions of a Floor Market Maker should
constitute a course of dealings reasonably calculated to contribute to
the maintenance of a fair and orderly market, quoting obligations,
restrictions on trading in certain circumstances, and restrictions on
conduct related to the allocation of trades. These rules are designed
to protect investors and the public interest and are therefore
consistent with the Act.
---------------------------------------------------------------------------

    \203\ Pursuant to proposed Rule 7605(h), FLEX Market Makers have
an obligation to quote a FLEX Equity Option in response to any
request for quote by a Floor Broker or Options Exchange Official and
must provide a two-sided market.
---------------------------------------------------------------------------

    Proposed Rule 7605(d) states that FOO Orders may be Complex FOO
Orders or Multi-Leg FOO Orders, including as tied hedge orders, and
that these orders may be crossed.\204\ However, the priority provisions
of Rules 7240(b)(2) and (3) do not apply to Complex FOO Orders or
Multi-Leg FOO Orders because there will be no pre-established series
and no electronic trading.\205\ Further, only FLEX Equity Options on
the same underlying and of the same exercise style (American or
European) may be part of a Complex FOO Order or Multi-Leg FOO Order.
Additionally, if a Non-FLEX Equity Option series is added intra-day for
a component leg(s) of a Complex FOO Order or Multi-Leg FOO Order, the
holder or writer of a FLEX Equity Option position in the component
leg(s) resulting from such Complex FOO Order or Multi-Leg FOO Order
would be permitted to close its position(s) pursuant to Rule
5055(f)(3). If a Non-FLEX Equity Option series is added for a component
leg(s) of a Complex FOO Order or Multi-Leg FOO Order on a trading day
after the position is established, the holder or writer of a FLEX
Equity Option position in the component leg(s) resulting from such
Complex FOO Order or Multi-Leg FOO Order would be required to execute
separate FLEX and non-FLEX transactions consistent with the
requirements of Rule 5055(f)(2) for each of the component leg(s) of the
Complex FOO Order or Multi-Leg FOO Order to close its position(s).
These proposed rules are designed to maintain order and structure, to
detail the operation of Complex FOO Order and Multi-Leg FOO Order
trading on the Trading Floor, and are similar to BOX's current Rule
7600(a)(4). The Exchange is proposing to use similar procedures for the
trading of Complex QOO Orders, multi-leg QOO Orders, Complex FOO
Orders, and Multi-Leg FOO Orders on the BOX Trading Floor because it
will reduce investor confusion and increase efficiency. Additionally,
offering order functionality such as Complex FOO Orders, Multi-Leg FOO
Orders, and tied hedge orders provides investors with the flexibility
and capability to meet their investment and hedging objectives. For
these reasons, the Exchange believes that allowing Complex FOO Orders,
Multi-Leg FOO Orders, and tied hedge orders removes impediments to and
perfects the mechanism of a free and open market and a national market
system and is therefore consistent with the Act. The Exchange notes
that another exchange allows complex

orders and tied hedge orders for FLEX Equity Options.\206\
---------------------------------------------------------------------------

    \204\ See proposed Rule 7605(d), proposed IM-7605-2(d) and
current IM-7600-2.
    \205\ BOX Rules 7240(b)(2) and (3) provide priority provisions
for Complex Orders that take into consideration the prices of orders
on the BOX Book and the Complex Order Book. Because there will be no
BOX Book or Complex Book for Complex FOO Orders, there is no
priority of orders on the BOX Book or Complex Book applicable to
Complex FOO Orders. This is a distinction from Rule 7600(c), which,
for purposes of QOO Orders, excludes the priority rules for Complex
Orders contained in Rules 7240(b)(2) and (3) only from multi-leg QOO
Orders that are not Complex Orders.
    \206\ See CBOE Rules 5.70(b) and 1.1 (definition of, ``Complex
Order'') (providing that the term ``complex order'' means an order
involving the concurrent execution of two or more different series
in the same underlying security or index (the ``legs'' or
``components'' of the complex order), for the same account,
occurring at or near the same time and for the purpose of executing
a particular investment strategy with no more than the applicable
number of legs (which number CBOE determines on a class-by-class
basis)). The Exchange notes that the term ``complex order'' on CBOE
includes both Complex Orders and Multi-Leg Orders, as those terms
are defined on BOX. See also CBOE Rule 5.87 Interpretations and
Policies .07 and Securities Exchange Act Release No. 93122
(September 24, 2021), 86 FR 54269 (September 30, 2021) (Order
Granting Approval of SR-CBOE-2021-041).
---------------------------------------------------------------------------

    Another provision designed to maintain order and structure on the
Trading Floor is the Exchange's proposal that FOO Orders entrusted to a
Floor Broker will be considered a Not Held Order, unless otherwise
specified by a Floor Broker's client.\207\ In particular, considering
orders as Not Held will aid Floor Brokers in their duties on the
Trading Floor because it provides clarity to both Floor Brokers and
their clients regarding how each order is to be handled. Additionally,
this rule is consistent with the current handling of QOO Orders on the
BOX Trading Floor which will avoid confusion, increase efficiency, and
ensure consistent treatment of orders on the Trading Floor. The
Exchange further believes that this proposed rule protects investors
and the public interest by clarifying order handling duties and
expectations between Floor Brokers and Participants.
---------------------------------------------------------------------------

    \207\ See proposed Rule 7605(l). See also NYSE Arca Rules 5.34-O
and 6.62-O(f).
---------------------------------------------------------------------------

    Additionally, the requirement, in proposed IM-7605-2, that
Participants disclose Public Customer Orders subject to crossing with
an order that is not a Public Customer Order and all securities that
are components of the Public Customer Order is designed to maintain
order and structure on the Trading Floor.\208\ The rule also clarifies
that Complex FOO Orders, Multi-Leg FOO Orders, or tied hedge orders on
opposite sides of the market may be crossed subject to
limitations.\209\ The Exchange believes that providing clarity will
remove impediments to and perfect the mechanism of a free and open
market and a national market system and that full disclosure will
prevent fraudulent and manipulative acts and practices by providing
complete information to Participants which may prompt them to improve
upon the Floor Broker's proposed crossing price. Additionally, rules
governing how long a response is in effect and the effect of an
established market on priority create order and structure on the
Trading Floor.\210\ The Exchange believes that such order and structure
protects investors and the public and notes that the same rules apply
to QOO Orders.\211\
---------------------------------------------------------------------------

    \208\ See proposed IM-7605-2(a) and (e).
    \209\ See proposed IM-7605(d).
    \210\ See proposed IM-7600-2(b) and (c).
    \211\ See BOX IM-7600-1. The Exchanges notes that the portion of
IM-7600-1 that references BOX Book Priority is not included in
proposed IM-7605-2 because, as discussed, the BOX Book is not
available for transactions in FLEX Equity Options.
---------------------------------------------------------------------------

    Proposed Rule 7605(e) is designed to aid Floor Brokers in their
duties and to maintain structure and order on the Trading Floor. For
example, by providing that a FOO Order is not executed until it is
processed by the Trading Host,\212\ the Exchange is providing an
accurate timestamp of when the order was actually executed by the Floor
Broker and not just when it was submitted to the Exchange.\213\
Additionally, the process whereby Floor Brokers are required to
systematize orders in their systems is designed to provide a complete
and accurate audit trail and minimize the occurrence of disputes and
regulatory violations.\214\ After systematization, a Floor Broker's
system will then be required to send an order to the BOG. Further,
Floor Brokers are responsible for providing the correct allocations of
the initiating side of the FOO Order to an Options Exchange Official or
his or her designee, if necessary, after order execution.\215\ Floor
Brokers will also be required to ascertain that at least one FLEX
Market Maker is present in the Crowd Area prior to announcing a FOO
Order for execution, which is designed to increase competition for FLEX
Equity Option interest on the Trading Floor.\216\ The Exchange notes
that these rules are substantially similar to those currently in place
for QOO Orders on the BOX Trading Floor.\217\ The Exchange believes
that having substantially similar rules for all orders on the BOX
Trading Floor will avoid any potential confusion and increase
efficiency on the BOX Trading Floor, which will further the objectives
and goals of the Act by helping to prevent fraudulent and manipulative
acts and practices, promoting just and equitable principles of trade,
and removing impediments to and perfecting the mechanisms of a free and
open market and a national market system.
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    \212\ See proposed Rule 7605(e)(2).
    \213\ FOO Orders will be submitted by Floor Brokers to the BOG,
which is a component of the Trading Host. A Floor Broker will have a
connection to the BOG giving the Floor Broker the ability to submit
FOO Orders to the Trading Host.
    \214\ In order to execute a FOO Order on the Trading Floor, it
must be sent from a Floor Broker's system to the BOG. This requires
that the Floor Broker adequately systematized the FOO Order prior to
announcing the FOO Order to the trading crowd. See proposed Rule
7605(b).
    \215\ See proposed Rule 7605(j).
    \216\ See proposed Rule 7605(e)(3).
    \217\ See BOX Rule 7600(d)(4). See also BOX Rule 7580(a).
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FLEX Market Maker Requirements
    The Exchange believes that the proposed rules applicable to FLEX
Market Makers are reasonable and will foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, promote just and equitable principles of trade, and remove
impediments to and perfect the mechanism of a free and open market and
a national market system. Specifically, proposed Rules 7605(f), (g) and
(h) state: (1) that the minimum size for FLEX Equity Option
transactions and quotations shall be 1 contract; (2) that there are no
maximum bid to ask spread differentials for FLEX Equity Option quotes;
and (3) that FLEX Market Makers have an obligation to quote a FLEX
Equity Option in response to any request for quote by a Floor Broker or
Options Exchange Official and must provide a two-sided market.\218\ The
Exchange believes that these rules reflect the unique nature of FLEX
Equity Option trading which occurs relatively infrequently and with
option premiums that can vary widely because any exercise price (in
minimum increments of $0.01) and any expiration date on a business day
within 15 years of trade date may be traded.\219\ The Exchange believes
that these requirements strike a balance between the complexity of
quoting customized options and the need to ensure that Floor Brokers
are able to get a quote for any FLEX Equity Option selected by their
clients. Further, these requirements remove impediments to and perfect
the mechanism of a free and open market and a national market system by
ensuring that there is a procedure in place to receive a two-sided
quote for each FOO Order brought to the BOX Trading Floor. The Exchange
notes that these requirements are similar to those currently in place
at BOX and another options exchange.\220\
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    \218\ See proposed Rules 7605(f)-(h).
    \219\ See proposed Rule 5055(e).
    \220\ See NYSE Arca Rules 5.32-O(b)(7) and 5.37-O(d) and BOX
Rule 8510(c)(2).
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Priority of Orders and Allocation of Trades
    The Exchange believes that the proposed rule to provide a Floor
Broker with a guarantee or entitlement to cross

40% of the remaining contracts of the original order, after all bids or
offers at better prices are filled, with other orders that he is
holding,\221\ is reasonable and is consistent with the Act.
Specifically, proposed Rules 7605(i) and (k) will reward Floor Brokers
who bring orders of an eligible size determined by the Exchange but not
less than 50 contracts to the Exchange by guaranteeing them the ability
to cross 40% of the remaining contracts of those orders after any
better priced interest has been filled. The Exchange believes that
establishing an eligible size for such guarantee for at least 50
contracts will encourage larger negotiated transactions while providing
Floor Participants with a reasonable opportunity to participate. The
Exchange notes that other options exchanges provide a guarantee for
FLEX Equity Options on their trading floors.\222\ Additionally, the
Exchange currently provides a similar guarantee with respect to QOO
Orders executed on the BOX Trading Floor.\223\ Allowing a similar
guarantee for QOO Orders and FOO Orders is intended to maintain
consistency and increase efficiency for the different order types
offered on the BOX Trading Floor. The Exchange believes that allowing a
guarantee will promote just and equitable principles of trade and
remove impediments to and perfect the mechanism of a free and open
market and a national market system by encouraging Floor Brokers to
bring orders to the Trading Floor while maintaining the ability of
other Floor Participants to participate in floor transactions and
compete for such orders.
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    \221\ See proposed Rules 7605(i) and (k).
    \222\ See NYSE American Rule 904G(e)(iii) (providing that ``[i]n
the case of FLEX Equity Options only and notwithstanding [Rules
904G(e)(i) and (ii)], whenever the Submitting Member has indicated
an intention to cross or act as principal on the trade and has
matched or improved the BBO during the BBO Improvement Interval, the
Submitting Member will be permitted to execute the contra side of
the trade that is the subject of the Request for Quotes, to the
extent of at least 40% of the trade'') and PHLX Rule Options 8,
Section 34(c)(5) (``In the case of FLEX equity options only and
notwithstanding [Section 34(c)(4)], whenever the Requesting Member
has indicated an intention to cross or act as principal on the trade
and has matched or improved the BBO during the BBO Improvement
Interval, the Requesting Member will be permitted to execute the
contra side of the trade that is the subject of the RFQs, to the
extent of at least 40% of the trade, provided the order is a Public
Customer order or an order respecting the Requesting Member's firm
proprietary account.''). See also NYSE American Rule 904G(f) (``A
Submitting Member may effect crossing transactions only on public
customer orders or orders respecting the Submitting Member's firm
proprietary account.''). The Exchange notes differences between the
guarantees on NYSE American and PHLX and the guarantee on BOX.
First, neither PHLX nor NYSE American set an eligible order size and
BOX proposes an eligible order size, determined by the Exchange, of
50 or more contracts. Further, both NYSE American and PHLX require
the contra side of a crossing order subject to the 40% guaranteed
allocation to be either a Public Customer order or an order
respecting the submitting firm's proprietary account whereas BOX
does not impose such limitations. The Exchange believes that not
limiting contra side participant types is consistent with the Act
because it is consistent with current BOX rules for QOO Orders and
removes impediments to and perfects the mechanism of a free and open
market and a national market system by allowing more participant
types on the contra side of crossing orders which may increase the
number of eligible contra-side participants and may result in more
transactions on the BOX Trading Floor.
    \223\ See BOX Rule 7600(f).
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    The Exchange believes that, after the allocation of any bids and
offers at better prices and any eligible Floor Broker guarantee,
allocating FLEX Equity Option trades between Floor Participants
pursuant to the priority provisions of Rule 7610 is reasonable and
promotes just and equitable principles of trade. The Exchange notes
that, pursuant to Rule 7610, bids and offers are considered in order of
the highest bid/lowest offer and priority shall be afforded to such
bids and offers in the sequence in which they are made. In situations
where the sequence cannot be determined, Floor Participants are treated
on an equal basis and receive an equal number of contracts to the
extent mathematically possible.\224\ The Exchange believes that Rule
7610 is designed to be a fair and impartial method of trade allocation,
to promote competition between Floor Participants, and to encourage
quick responses of bids and offers at the best available prices.
Additionally, consistent and objective trade allocation on the BOX
Trading Floor may encourage FLEX Market Makers to provide liquidity
which may improve the quality of responses to FOO Orders. The Exchange
notes that Rule 7610 is currently applicable to QOO Orders on the BOX
Trading Floor \225\ and that other exchanges use a similar
procedure.\226\ Further, if interest remains after Floor Participants
that responded with interest receive their allocation, the remaining
quantity of the initiating side of the FOO Order will be allocated to
the executing Floor Broker. This allocation is designed to further
incentivize Floor Brokers after first allowing Floor Participants an
opportunity to participate in the trade.
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    \224\ See BOX Rule 7610.
    \225\ The Exchange notes that split-price priority applicable to
QOO Orders is not applicable to FOO Orders. Split-price priority
allows a Participant effecting a trade that betters the market to
have priority on the balance of that trade at the next pricing
increment, even if there are orders in the book at the same price.
BOX Book will not be applicable to FOO Orders and thus there is no
need for split-price priority. Accordingly, the Exchange does not
propose to adopt provisions analogous to Rule 7600(i), IM-7600-6, or
IM-7600-7 in proposed Rule 7605.
    \226\ CBOE Rule 5.72(d)(2) provides that FLEX Orders are
allocated only to responses from the trading crowd pursuant to Rule
5.85(a)(1) and (2)(C). Rule 5.85(a)(1) provides that bids and offers
with the highest bid and lowest offer have priority and (2)(C)
establishes priority between in-crowd market participants at the
same price. The Exchange believes that these rules are similar to
BOX Rule 7610 and are appropriate for FLEX Equity Option trading.
But see NYSE Arca Rules 5.30-O(d) (providing that priority and order
allocation procedures for open outcry do not apply to FLEX Equity
Options) and 5.33-O (providing a RFQ procedure for FLEX transactions
including priority provisions that provide priority in certain
instances to FLEX Qualified Market Makers and limited priority to
the submitting firm if it has matched or improved the market on NYSE
Arca). As discussed herein, the Exchange does not believe that a RFQ
procedure is necessary for FLEX Equity Option trading on BOX.
Similarly, CBOE does not have a specific open outcry procedure for
FLEX transactions. See CBOE Rule 5.72(d) (providing that a
submitting FLEX Trader may represent and execute a FLEX Order on the
Exchange's trading floor in the same manner as a Trading Permit
Holder may represent and execute an order for a non-FLEX Option).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change to add certain
proposed rules as eligible for a minor rule fine disposition under its
MRVP will assist the Exchange in preventing fraudulent and manipulative
acts and practices and promoting just and equitable principles of
trade, and will serve to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, protect investors and the public interest. The Exchange
believes violations of proposed Rules 7605 and 7605(h) to be minor in
nature and therefore proposes to add them to the list of rules in Rule
12140(e) eligible for a minor rule fine disposition. Further, the
Exchange will be able to carry out its regulatory responsibility more
quickly and efficiently by incorporating these violations into the
MRVP. The Exchange notes that these violations are consistent with
violations at other options exchanges.\227\ The Exchange also notes
that the proposed additional violations are similar to minor rule
violations already designated in the Exchange's MRVP for activities
related to the Trading Floor.
---------------------------------------------------------------------------

    \227\ See, e.g., NYSE Arca Rule 10.12 and CBOE Rule 13.15.
---------------------------------------------------------------------------

    The Exchange believes that amending Rule 7620 and IM-7620-1 to
exclude FLEX Equity Options is consistent with proposed Rule 5055(c)
which provides that Rule 7620 shall not apply to transactions in FLEX
Equity Options. The amendment is designed to provide clarity by adding
FLEX Equity Options to the exclusion list in Rule 7620 and IM-7620-1 to
clarify that neither

Cabinet orders nor Sub-Penny Cabinet orders will be available for FLEX
Equity Options. The Exchange believes further that this amendment will
protect investors and the public interest by removing potential
ambiguity between Rule 7620 and proposed Rules 5055 and 7605 and is
therefore consistent with the Act.
    Lastly, the amendment of Rule 100(b)(3) to remove specific rule
references is designed to clarify that all Exchange options
transactions shall be executed automatically by the Trading Host as
provided in applicable Exchange Rules. The Exchange believes that this
amendment will protect investors and the public interest by removing
potential ambiguity created by a list of specific rule references that
may not be complete and is therefore consistent with the Act.
    The Exchange reiterates that FLEX Equity Options are currently
traded on four other options exchanges currently conducting options
trading.\228\ Therefore, the proposed rules perfect the mechanism of a
free and open market and protect investors and the public interest by
establishing FLEX Equity Options and FOO Orders on the BOX Trading
Floor, which would provide market participants an additional execution
venue to provide and seek liquidity for their customized orders,
thereby increasing the opportunities to execute such orders to the
benefit of all market participants.
---------------------------------------------------------------------------

    \228\ FLEX options are currently traded on CBOE, NYSE American,
NYSE Arca, and PHLX.
---------------------------------------------------------------------------

Section 11(a) Analysis
    The proposed rule change is consistent with Section 11(a) of the
Act and the rules thereunder. Section 11(a)(1) of the Act \229\
prohibits a member of a national securities exchange from effecting
transactions on that exchange for its own account, the account of an
associated person, or an account over which it or its associated person
exercises investment discretion (collectively, ``covered accounts''),
unless an exception applies. Sections 11(a)(1)(A)-(I) of the Act \230\
and the rules thereunder provide certain exemptions from this general
prohibition, including the exemption set forth in Rule 11a2-2(T) under
the Act.\231\ The proposed rule change would not limit in any way the
obligation of a Participant, while acting as a Floor Broker or
otherwise, to comply with Section 11(a) of the Act or the rules
thereunder.\232\
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    \229\ 15 U.S.C. 78k(a)(1).
    \230\ 15 U.S.C. 78k(a)(1)(A)-(I).
    \231\ 17 CFR 240.11a2-2(T).
    \232\ A Floor Broker may utilize the Trading Floor to effect a
transaction for a covered account only pursuant to Rule 7540 and for
purposes of liquidating error positions.
---------------------------------------------------------------------------

    As described above, the Exchange proposes to apply existing IM-
7600-5 to FLEX Equity Options,\233\ which states that a Participant
shall not utilize the Trading Floor to effect any transaction for a
covered account by relying on the G Exemption.\234\ Because no covered
account transactions utilizing the Trading Floor may rely on the G
Exemption, Participants utilizing the Trading Floor to effect
transactions for covered accounts may only rely upon other exemptions
to the Section 11(a)(1) prohibition.\235\
---------------------------------------------------------------------------

    \233\ See proposed Rule 5055(c) (stating that IM-7600-5 shall
apply to FLEX Equity Options).
    \234\ 15 U.S.C. 78k(a)(1)(G). Section 11(a)(1)(G) of the Act
provides an exemption from the general prohibition in Section
11(a)(1) of the Act for any transaction for a member's own account,
provided that: (i) such member is primarily engaged in the business
of underwriting and distributing securities issued by other persons,
selling securities to customers, and acting as broker, or any one or
more of such activities, and whose gross income normally is derived
principally from such business and related activities; and (ii) such
transaction is effected in compliance with rules of the Commission
which, as a minimum, assure that the transaction is not inconsistent
with the maintenance of fair and orderly markets and yields
priority, parity, and precedence in execution to orders for the
account of persons who are not members or associated with members of
the exchange. See also 17 CFR 240.11a1-1(T) (setting forth
requirements for relying on the G Exemption).
    \235\ Section 11(a) of the Act and the rules thereunder provide
other exemptions to the Section 11(a)(1) prohibition, including, for
example, the ``effect versus execute'' exemption (as discussed
below), the exemption for transactions by a dealer acting in the
capacity of a market maker, and the exemption for transactions to
offset a transaction made in error.
---------------------------------------------------------------------------

    In addition to statutory exemptions, Rule 11a2-2(T) under the
Act,\236\ known as the ``effect versus execute'' rule, provides
Participants with an exemption from the Section 11(a)(1) prohibition.
Rule 11a2-2(T) permits a Participant, subject to certain conditions, to
effect transactions for covered accounts by arranging for an
unaffiliated Participant, acting as a Floor Broker, to execute
transactions on the Exchange. To comply with Rule 11a2-2(T)'s
conditions, the initiating Participant: (i) must transmit the order
from off the Trading Floor; (ii) may not participate in the execution
of the transaction once the order has been transmitted to the
Participant performing the execution; \237\ (iii) may not be affiliated
with the executing Participant; and (iv) with respect to an account
over which the Participant or an associated person has investment
discretion, neither the Participant nor an associated person may retain
any compensation in connection with effecting the transaction except as
provided in the Rule. For the reasons set forth below, the Exchange
believes that Participants utilizing FOO Orders on the Trading Floor
may comply with the conditions of Rule 11a2-2(T) under the Act.\238\
---------------------------------------------------------------------------

    \236\ 17 CFR 240.11a2-2(T).
    \237\ This prohibition also applies to associated persons of the
initiating Participant. The Participant may, however, participate in
clearing and settling the transaction.
    \238\ The Commission has previously found that the all-
electronic transactions effected through the Trading Host are
consistent with the requirements of Section 11(a) of the Act and
Rule 11a2-2(T) thereunder. See, e.g., Securities Exchange Act
Release Nos. 72848 (August 14, 2014), 79 FR 49361 (August 20, 2014)
(SR-BOX-2014-16) (order approving the Exchange's proposal to adopt
new trade allocation algorithms for matching trades at the
conclusion of the PIP and the COPIP); and 66871 (April 27, 2012), 77
FR 26323 (May 3, 2012) (order granting the Exchange's application
for registration as a national securities exchange). The Commission
has also found that transactions effected by Participants through
the Trading Floor are consistent with the requirements of Section
11(a) of the Act and Rule 11a2-2(T) thereunder. See Securities
Exchange Act Release No. 81292 (August 2, 2017), 82 FR 37144 (August
8, 2017) (SR-BOX-2016-48) (order approving the Exchange's proposal
to adopt rules for an open-outcry Trading Floor).
---------------------------------------------------------------------------

    Rule 11a2-2(T)'s first requirement is that orders for covered
accounts be transmitted from off the Trading Floor. The Commission has
found that the off-floor transmission requirement is met if a covered
account order is transmitted from a remote location directly to an
exchange's floor by electronic means.\239\ Floor Brokers will receive
matched or unmatched orders either via telephone, or electronically to
the Floor Broker's order entry mechanism. A Participant could submit an
order for a covered account from off the Trading Floor to an
unaffiliated Floor Broker for representation on the Trading Floor and
use the ``effect versus execute'' exemption (assuming the other
conditions of the rule are satisfied). A Participant that submits a FOO
Order for a covered account utilizing the Trading Floor, and who wishes
to rely on the ``effect versus execute'' exemption, must submit the
order from off the Trading Floor.
---------------------------------------------------------------------------

    \239\ See, e.g., Securities Exchange Act Release Nos. 15533
(January 29, 1979), 44 FR 6084 (January 31, 1979); and 14563 (March
14, 1978), 43 FR 11542 (March 17, 1978) (``1978 Release'').
---------------------------------------------------------------------------

    Second, Rule 11a2-2(T) requires that neither the initiating
Participant nor an associated person of the initiating Participant
participate in the execution of the transaction at any time after the
order for the transaction has been transmitted. At no time following
the submission of a FOO Order utilizing the Trading Floor will the
submitting

Participant or any associated person of such Participant acquire
control or influence over the result or timing of the order's
execution.\240\ In addition, once a Floor Broker submits a FOO order to
the BOG for execution, neither the Floor Broker nor anyone else may
alter the terms of the order.\241\ Moreover, when a Floor Broker
submits a FOO Order for execution, the order will be executed in
accordance with Exchange rules and based on market conditions of when
the order is received by the Trading Host.\242\ Accordingly, a
Participant and its associated persons would not participate in the
execution of a FOO Order submitted for execution utilizing the Trading
Floor.
---------------------------------------------------------------------------

    \240\ A Participant may cancel or modify the FOO Order, or
modify the instructions for executing the FOO Order. The Commission
has stated that the nonparticipation requirement is satisfied under
such circumstances so long as the modifications or cancellations are
also transmitted from off the floor. See 1978 Release, supra note
239, at 11547 (stating that the ``non-participation requirement does
not prevent initiating members from canceling of modifying orders
(or the instructions pursuant to which the initiating member wishes
orders to be executed) after the orders have been transmitted to the
executing member, provided that any such instructions are also
transmitted from off the floor'').
    \241\ See proposed Rule 7600(c).
    \242\ See proposed Rule 7600(a).
---------------------------------------------------------------------------

    Third, Rule 11a2-2(T) requires that the order be executed by a
Participant that is not associated with the Participant initiating the
order. To rely on the exemption in Rule 11a2-2(T), a Participant could
submit a FOO Order for a covered account from off the Trading Floor to
an unaffiliated Floor Broker. A Participant relying on Rule 11a2-2(T)
could not submit a FOO Order for a covered account to its ``house''
Floor Broker on the Trading Floor for execution. If a Participant sends
its FOO Order from off the floor to an affiliated Participant that is
on the floor, who then directs the order into the Trading Host for
execution, the off-floor Participant may not rely on the exemption in
Rule 11a2-2(T).
    Fourth, in the case of a transaction effected for an account with
respect to which the initiating Participant or an associated person
thereof exercises investment discretion, neither the initiating
Participant nor any associated person may retain any compensation in
connection with effecting the transaction, unless the person authorized
to transact business for the account has expressly provided otherwise
by written contract referring to Section 11(a) of the Act and Rule
11a2-2(T) thereunder.\243\ Participants and their associated persons
trading for covered accounts over which they exercise investment
discretion must comply with this condition in order to rely on the
rule's exemption.
---------------------------------------------------------------------------

    \243\ In addition, Rule 11a2-2(T)(d) requires that, if a
Participant or associated person is authorized by written contract
to retain compensation in connection with effecting transactions for
covered accounts over which the Participant or associated person
thereof exercises investment discretion, the Participant or
associated person must furnish at least annually to the person
authorized to transact business for the account a statement setting
forth the total amount of compensation retained by the Participant
or any associated person thereof in connection with effecting
transactions for the account during the period covered by the
statement. See 17 CFR 240.11a2-2(T)(d). See also 1978 Release, supra
note 239, at 11548 (stating that ``[t]he contractual and disclosure
requirements are designed to assure that accounts electing to permit
transaction-related compensation do so only after deciding that such
arrangements are suitable to their interests'').
---------------------------------------------------------------------------

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 notes that other
exchanges currently offer FLEX option trading on their respective
trading floors. The Exchange believes that the proposed rules will
allow BOX to compete with these other exchanges and provide an
additional execution venue for these transactions for market
participants. Thus, the proposed rules will promote intermarket
competition by increasing the number of exchanges where FLEX Equity
Options can be traded. The proposal also promotes intermarket
competition by providing another alternative, exchange markets, to
bilateral OTC trading of options with flexible terms. Exchange markets,
in contrast with bilateral OTC trading, are centralized, transparent,
and have the guarantee of the OCC for options traded.
    Additionally, the Exchange believes that this proposal does not
impose an undue burden on intramarket competition because Participants
are not required to trade FLEX Equity Options and those that choose to
trade FLEX Equity Options may do so on the same terms and pursuant to
the same rules. To the extent that the proposed rules differ for FLEX
Market Makers and Floor Brokers, these differences are based on the
unique roles and obligations of Floor Brokers (e.g., systemization,
announcement, and allocation of orders) and FLEX Market Makers (e.g.,
quoting in response to orders). Additionally, any burden on intramarket
competition imposed by providing Floor Brokers with a guaranteed trade
allocation on certain trades is mitigated by the facts that FLEX Market
Maker quotes at better prices are allocated first and FLEX Market
Makers may still participate after the Floor Broker's guarantee at the
same price. Further, the Exchange notes that Floor Brokers source
liquidity for the contra side of a two-sided order that may otherwise
be unavailable on the Trading Floor due to the size and complexity of
the order. The proposed guarantee provides greater opportunity for the
contra-side to participate in the trade which facilitates Floor Brokers
in their generation of contra-side interest and increases the
likelihood of securing sufficient contra-side interest. FLEX Market
Makers do not construct two-sided orders and thus are not provided a
guarantee. However, FLEX Market Makers may benefit from the Floor
Broker guarantee as the guarantee is designed to incentivize Floor
Brokers to bring their FLEX orders to the BOX Trading Floor where FLEX
Market Makers have the ability to interact with these orders. The
Exchange also does not believe the proposed rule change imposes any
undue burden on intramarket competition between Participants that trade
FLEX Equity Options and those that trade Non-FLEX Equity Options. As
described above, the Exchange has proposed to use substantially similar
procedures for the trading of QOO Orders and FOO Orders, with any
modifications designed to reflect the unique nature of customizable
FLEX Equity Options. The Exchange notes further that proposed Rule
5055(f) would prevent any FLEX Equity Options and Non-FLEX Equity
Options with the same terms from trading concurrently on the Exchange,
with a narrow exception for closing only orders.\244\
---------------------------------------------------------------------------

    \244\ See supra note 48.
---------------------------------------------------------------------------

    Lastly, the proposed MRVP changes are not intended to address
competitive issues but rather are concerned solely with updating the
Exchange's MRVP in connection with the proposed rules eligible for a
minor rule fine disposition. Further, the proposal relates to the
Exchange's role and responsibilities as a self-regulatory organization
and the manner in which it disciplines its Participants and associated
persons for violations of its rules. The Exchange believes the proposed
MRVP changes, overall, will strengthen the Exchange's ability to carry
out its oversight and enforcement functions and deter potential
violative conduct.
    Based on the foregoing, the Exchange believes that the proposed
rule changes discussed herein do not impose any burden on competition
not necessary or

appropriate in furtherance of the purposes of the Act.

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

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

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission shall: (a) by order approve
or disapprove such proposed rule change, or (b) institute proceedings
to determine whether the proposed rule change should be 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
file number SR-BOX-2023-20 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-2023-20. 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 (https://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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-BOX-2023-20 and should be
submitted on or before October 10, 2023.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\245\
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    \245\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20171 Filed 9-18-23; 8:45 am]
BILLING CODE 8011-01-P


Comment Info: =================

General Comment:Single- and multiple-dose pharmacokinetics of methylphenidate administered as methylphenidate transdermal system or osmotic-release system methylphenidate to children and adolescents with Attention-Deficit Hyperactivity Disorder.