[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Notices]
[Pages 76882-76884]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30180]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71077; File No. SR-Topaz-2013-14]
Self-Regulatory Organizations; Topaz Exchange, LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
Schedule of Fees
December 13, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 2, 2013, the Topaz Exchange, LLC (d/b/a ISE Gemini)
(the ``Exchange'' or ``Topaz'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
Topaz is proposing to amend its Schedule of Fees to decrease
Priority Customer taker fees for affiliated Members that achieve the
ADV threshold for Tiers 2, 3, or 4. The proposed rule change is
available on the Exchange's Internet Web site at http://www.ise.com, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of, and basis for, the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The self-regulatory organization has prepared summaries,
set forth in Sections A, B and C below, of the most significant aspects
of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to decrease Priority Customer \3\ taker fees
for affiliated Members that achieve the average daily volume (``ADV'')
threshold for Tiers 2, 3, or 4 as described below. The fee changes
discussed apply to both Standard Options and Mini Options traded on the
Exchange. The Exchange's Schedule of Fees has separate tables for fees
applicable to Standard Options and Mini Options. The Exchange notes
that while the discussion below relates to fees for Standard Options,
the fees for Mini Options, which are not discussed below, are and shall
continue to be 1/10th of the fees for Standard Options.
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\3\ A Priority Customer is a person or entity that is not a
broker/dealer in securities, and does not place more than 390 orders
in listed options per day on average during a calendar month for its
own beneficial account(s).
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On September 3, 2013 the Exchange filed with the Commission an
immediately effective rule filing that established volume-based tiered
rebates for adding liquidity on the Exchange.\4\ Under the framework
proposed in that rule filing, the Exchange established four qualifying
tiers based on a Member's ADV in a given month. The Exchange is now
proposing to also apply tiers--which currently only apply to rebates
for adding liquidity--to Priority Customer fees for removing liquidity.
In order to qualify for the lower Priority Customer taker fee being
proposed in this filing a Member would, at a minimum, have to qualify
for Tier 2 by executing (i) a Total Affiliated Member ADV of 65,000 or
more contracts, (ii) a Priority Customer Maker ADV of at least 20,000
contracts, or (iii) a Total Affiliated Member ADV of 40,000 contracts
with a Minimum Priority Customer Maker ADV of 15,000 contracts.
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\4\ See Securities Exchange Act Release No. 70426 (September 17,
2013), 78 FR 58359 (September 23, 2013) (Topaz-2013-04).
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Currently all Members pay a Priority Customer taker fee of $0.45
per contract in Penny Symbols and SPY, and $0.82 per contract in non-
Penny Symbols. Under the proposed rule change, Members that qualify for
Tier 2 or higher will instead be charged taker fees for Priority
Customer orders that are $0.01 per contract less than the taker fees
currently charged on the Exchange. In particular, Members that have
[[Page 76883]]
achieved Tier 2 or higher will pay a taker fee of $0.44 per contract in
Penny Symbols and SPY, and $0.81 per contract in non-Penny Symbols, for
Priority Customer orders. The Exchange believes that lowering the taker
fee for Priority Customer orders for Members that achieve higher volume
tiers will incentivize Members to bring more order flow to Topaz,
including a higher volume of Priority Customer orders, to the benefit
of all market participants that trade on the Exchange. The Exchange is
not proposing to modify the fees charged to any other market
participants.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\5\ in general, and Section
6(b)(4) of the Act,\6\ in particular, in that it is designed to provide
for the equitable allocation of reasonable dues, fees, and other
charges among its members and other persons using its facilities.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed Priority Customer taker fees for
Priority Customers that achieve Tiers 2, 3, or 4 are reasonable and
equitably allocated because Topaz has already established volume-based
pricing, and is merely proposing to adopt taker fees in line with such
pricing in order to further incentivize Members to send additional
order flow to the Exchange. The Exchange believes that charging lower
taker fees to Priority Customer orders, and in particular Priority
Customer orders from Members that have achieved specified volume
thresholds, attracts that order flow to Topaz and thereby creates
liquidity to the benefit of all market participants who trade on the
Exchange. Moreover, the proposed fees are within the range of fees
currently charged by other maker/taker options exchange such as NYSE
Arca Options (``Arca''), which charges a customer fee for taking
liquidity of $0.45 per contract in penny pilot names, and $0.82 per
contract in non-penny pilot names.\7\
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\7\ See Arca Fees and Charges, Trade-Related Charges for
Standard Options.
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The Exchange further believes that it is equitable and not unfairly
discriminatory to lower the fees only for Priority Customer orders in
order to attract that order flow to the Exchange. A Priority Customer
is by definition not a broker or dealer in securities, and does not
place more than 390 orders in listed options per day on average during
a calendar month for its own beneficial account(s). This limitation
does not apply to participants on the Exchange whose behavior is
substantially similar to that of market professionals, including
Professional Customers, who will generally submit a higher number of
orders (many of which do not result in executions) than Priority
Customers. Moreover, the Exchange does not believe that it is unfairly
discriminatory to apply the proposed lower fee only to those Members
that have achieved at least Tier 2 based on ADV, as this is in line
with the Exchange's tiered approach to fees and rebates, and
incentivizes Members to bring more order flow to the Exchange.
The Exchange notes that it has determined to charge fees in Mini
Options at a rate that is 1/10th the rate of fees the Exchange provides
for trading in Standard Options. The Exchange believes it is reasonable
and equitable and not unfairly discriminatory to assess lower fees to
provide market participants an incentive to trade Mini Options on the
Exchange. The Exchange believes the proposed fees are reasonable and
equitable in light of the fact that Mini Options have a smaller
exercise and assignment value, specifically 1/10th that of a standard
option contract, and, as such, is providing fees that are 1/10th of
those applicable to Standard Options.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\8\ the Exchange does
not believe that the proposed rule change will impose any burden on
intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The proposed
fees are within the range of fees currently charged by other maker/
taker options exchanges, as explained above, and will increase
competition between Topaz and other markets by incentivizing Members to
execute more volume on the Exchange in order to qualify for the lower
Priority Customer taker fee. While the lower proposed fees only apply
to Priority Customers, this is consistent with current practices of
charging lower fees and providing higher rebates to Priority Customers.
The proposed rule change will encourage Members to send additional
Priority Customer order flow to the Exchange, to the benefit of all
market participants.
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\8\ 15 U.S.C. 78f(b)(8).
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The Exchange operates in a highly competitive market in which
market participants can readily direct their order flow to competing
venues. In such an environment, the Exchange must continually review,
and consider adjusting, its fees and rebates to remain competitive with
other exchanges. For the reasons described above, the Exchange believes
that the proposed fee changes reflect this competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\9\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\10\ because it establishes a due, fee, or other charge
imposed by Topaz.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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 (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File No. SR-Topaz-2013-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
[[Page 76884]]
All submissions should refer to File No. SR-Topaz-2013-14. 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 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 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 filing also will be available for inspection
and copying at the principal offices 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 No. SR-Topaz-2013-14, and should be
submitted on or before January 9, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30180 Filed 12-18-13; 8:45 am]
BILLING CODE 8011-01-P