March 28, 2018.
On February 5, 2018, BOX Options Exchange LLC (“BOX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) 
and Rule 19b-4 thereunder,
a proposed rule change to adopt IM-8040-3 to Exchange Rule 8040 to permit Directed Orders 
to be submitted with an Auction Only designation. The proposed rule change was published for comment in the Federal Register on February 16, 2018.
The Commission received no comment letters on the proposed rule change. This order approves the proposed rule change.
II. Description of the Proposed Rule Change
The Exchange proposes to adopt IM-8040-3 to Exchange Rule 8040 to allow Options Participants 
to apply a new optional Auction Only designation to Directed Orders. A Directed Order with an Auction Only designation will be cancelled if it is not entered into the Price Improvement Period (“PIP”) 
by the Executing Participant (“EP”).
Market Makers 
may receive and handle Directed Orders on an agency Start Printed Page 14305basis, in accordance with the procedures set forth in Exchange Rule 8040(d). Upon receipt of a Directed Order from an OFP,
an EP must either submit the Directed Order to the PIP, or send the Directed Order to the BOX Book.
In addition, the BOX Trading Host will send the Directed Order to the BOX Book: (i) If the EP has not taken action within one second of receipt of a Directed Order; 
(ii) if the Market Maker that the order is directed to has not systematically indicated that it is an EP; 
(iii) upon receipt of a subsequent Directed Order for the same EP for the same series and side of the market if a Guaranteed Directed Order (“GDO”) 
has been automatically generated and is pending; 
or (iv) if a Directed Order is modified once the BOX Trading Host has established a GDO.
As noted above, BOX proposes that if a Directed Order with an Auction Only designation would be sent to the BOX Book for any reason, it will instead be cancelled back to the OFP that submitted the Directed Order.
The Exchange notes that, under the proposal, the Auction Only designation will be automatically applied by the system, and the designation will not be disclosed to the EP.
The Exchange represents that it will provide at least two weeks' notice to Participants via Circular prior to the launch of the proposed change, which the Exchange anticipates will be during the second quarter of 2018.
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,
which requires, among other things, that the rules of a national securities exchange be designed to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Commission also finds that the proposed rule change is consistent with Section 6(b)(8) of the Act,
which requires that the rules of an exchange not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
The Commission believes that the Auction Only designation will provide OFPs with greater control over how their Directed Orders are handled by the EP, as OFPs will have certainty that their Directed Orders with the Auction Only designation will either be executed in the PIP or cancelled.
In addition, should the Directed Order be entered into the PIP, the Directed Order will receive the opportunity for price improvement.
Moreover, the Commission notes that an EP will not be notified whether a Directed Order was submitted with the Auction Only designation,
and current restrictions on an EP's behavior with respect to Directed Orders will continue to apply.
Accordingly, the Commission believes that the Exchange's proposal is consistent with the Act.
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-BOX-2018-06) be, and hereby is, approved.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
[FR Doc. 2018-06690 Filed 4-2-18; 8:45 am]
BILLING CODE 8011-01-P