Proposed Rule Change to Adopt Rules Governing the Trading of Equity Securities Through the Boston Security Token Exchange

Summary

SIFMA provided comments on the above-referenced proposed rule change filed by BOX Exchange LLC (“BOX” or “Exchange”) with the SEC under Section 19(b)(1) of the Securities Exchange Act of 1934. In the filing, BOX is proposing to adopt rules governing the listing and trading of a new type of equity security on a facility of the exchange known as the Boston Security Token Exchange LLC (“BSTX”).

Excerpt

June 23, 2020

Ms. Vanessa Countryman

Secretary

Securities and Exchange Commission

100 F Street NE., Washington, DC 20549

Re: Notice of Filing of Proposed Rule Change to Adopt Rules Governing the Trading of Equity Securities on the Exchange Through a Facility of the Exchange Known as the Boston Security Token Exchange LLC (File No. SRBOX-2020-14)

Dear Ms. Countryman:

The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to comment on the above-referenced proposed rule change filed by BOX Exchange LLC (“BOX” or “Exchange”) with the Securities and Exchange Commission (“Commission”) under Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”). In the filing, BOX is proposing to adopt rules governing the listing and trading of a new type of equity security on a facility of the exchange known as the Boston Security Token Exchange LLC (“BSTX”).2

SIFMA notes that this filing, File No. SR-BOX-2020-14 (“BSTX 2”), appears to be identical to Amendment No. 2 to File No. SR-BOX-2019-19 (“BSTX 1”).3 SIFMA further notes that BOX withdrew BSTX 1 on May 12, 2020 after a lengthy review period by the Commission and before the June 14, 2020 date by which the Commission was to determine whether to approve or disapprove the filing.

As BSTX 2 appears to be identical to BSTX 1, SIFMA’s April 22, 2020 comment letter (“April Comment Letter”) on BSTX 1, as well as the other comment letters submitted on that filing, continue to apply to BSTX 2. SIFMA notes that while BOX responded to SIFMA’s April Comment Letter, SIFMA believes that the Exchange did not adequately address the points raised in our comment letter. For instance, BOX does not address why an equity security that does not settle on a regular way basis (i.e., T+2) should qualify for Regulation NMS.5 In responding to SIFMA’s comment in this regard, BOX notes that parties to a stock trade have long had the

ability to agree to a shorter settlement cycle than T+2 under Rule 15c6-1 and have done so.

BOX’s comment completely misses the point, as SIFMA is not disputing this but rather pointing out that trade-through protection under Regulation NMS applies to orders in stocks that settle on a regular way basis, which the BSTX security tokens do not. In other words, it is unclear as to why the security tokens should be covered by Regulation NMS as they do not seem to qualify for trade-through protection under the regulation. Similarly, BOX does not address at all the burdens and risks firms would face to create one-off systems to handle the T+1 settlement that is mandated by BSTX rules and the ancillary recordkeeping that is required to track ownership.

Accordingly, SIFMA is again providing those comments on BSTX 2 and is providing for reference the following link to those comments (https://www.sec.gov/comments/sr-box-2019-19/srbox201919-7105488-215831.pdf).

Accordingly, SIFMA does not believe that the Commission should approve BSTX 2 for the reasons described in our April Comment Letter (and further noted above) as well as the reasons described by other comment letters on BSTX 1

SIFMA greatly appreciates the Commission’s consideration of the issues raised above and would be pleased to discuss these comments in greater detail. If you have any questions or need any additional information, please contact Ellen Greene (212-313-1287 or [email protected]) or Thomas Price (212-313-1260 or [email protected]).

Sincerely,

Ellen Greene

Managing Director

Equities & Options Market Structure

Thomas F. Price

Managing Director

Operations, Technology, Cyber & BC

cc: The Honorable Jay Clayton, Chairman

The Honorable Hester M. Peirce, Commissioner

The Honorable Elad L. Roisman, Commissioner

The Honorable Allison Herren Lee, Commissioner

Brett Redfearn, Director, Division of Trading and Markets