[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Notices]
[Pages 76884-76886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30178]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71074; File No. SR-Topaz-2013-13]


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 charge a 
``taker'' fee to non-Priority Customers orders executed during the 
opening rotation. 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 purpose of the proposed rule change is to amend the Schedule of 
Fees to specify that the Exchange will charge its ``taker'' fee for 
non-Priority Customer orders executed during the opening rotation 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.
    The Exchange currently treats all volume executed during the 
opening rotation as adding liquidity for the purpose of determining 
applicable fees and rebates. This has resulted in a negative rate per 
contract for the Exchange during the opening rotation as both sides of 
each trade are paid the applicable rebate for adding liquidity, i.e., 
the ``maker'' rebate. As volume executed on the opening rotation 
continues to grow, and in order to avoid a situation where the Exchange 
must pay a significant rebate on both sides of these trades, the 
Exchange proposes to charge its ``taker'' fee to non-Priority Customer 
orders executed during the opening rotation. Thus, based on current fee 
levels, the Exchange will charge a fee of $0.48 per contract in Penny 
Symbols and SPY to Market Maker,\3\ non-Topaz Market Maker,\4\ Firm 
Proprietary/Broker-Dealer,\5\ and Professional Customer orders.\6\ In 
non-Penny Symbols the Exchange will charge a fee of $0.84 per contract 
for Market Maker orders, and a fee of $0.87 per contract for non-Topaz 
Market Maker, Firm Proprietary/Broker-Dealer, and Professional Customer 
orders. In order to attract Priority Customer orders,\7\ the Exchange 
will continue to pay Priority Customers the ``maker'' rebate, which 
currently ranges from $0.25 per contract for Tier 1 Priority Customers 
to $0.48 per contract for Tier 4 Priority Customers,\8\ for orders 
executed during the opening rotation.
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    \3\ The term Market Maker refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. Market Maker 
orders sent to the Exchange by an Electronic Access Member are 
assessed fees and rebates at the same level as Market Maker orders. 
See footnote 2, Schedule of Fees, Section I and II.
    \4\ A Non-Topaz Market Maker, or Far Away Market Maker 
(``FarMM''), is a market maker as defined in Section 3(a)(38) of the 
Securities Exchange Act of 1934, as amended, registered in the same 
options class on another options exchange.
    \5\ A Firm Proprietary order is an order submitted by a Member 
for its own proprietary account. A Broker-Dealer order is an order 
submitted by a Member for a non-Member broker-dealer account.
    \6\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
    \7\ 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).
    \8\ The Exchange provides rebates to Members for adding 
liquidity based on tiers that reflect their Total Affiliated Member 
Average Daily Volume (``ADV''), Priority Customer Maker ADV, or a 
combination of the two. See Securities Exchange Act Release No. 
70426 (September 17, 2013) 78 FR 58359 (September 23, 2013).
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2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act,\9\ in general, and furthers the objectives of Section 
6(b)(4) of the Act,\10\ in particular, in that it provides for an 
equitable allocation of reasonable fees

[[Page 76885]]

and other charges among Exchange Members and other persons using its 
facilities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is fair and equitable to charge its 
``taker'' fee for non-Priority Customer orders executed during the 
opening rotation in order to avoid the negative economics associated 
with paying a rebate on both sides of each trade. The Exchange notes 
that other options exchanges have implemented opening-only pricing. For 
example, the BOX Options Exchange (``BOX'') LLC fee schedule provides 
that transactions that occur on the opening or re-opening of trading 
will be deemed to neither ``add'' nor ``remove'' liquidity, and will 
therefore be exempt from certain fees and credits.\11\ The Exchange is 
proposing to charge non-Priority Customers its ``taker'' fee rather 
than waiving fees and rebates for all market participants so that it 
can attract Priority Customer orders, which will continue to be paid 
rebates. The Exchange does not believe that it is unfairly 
discriminatory not to similarly charge its ``taker'' fee to Priority 
Customers. In general, Priority Customers are provided higher rebates 
and lower fees than other market participants on the Exchange. The 
Exchange believes continuing to provide rebates to Priority Customer 
orders executed during the opening rotation will attract that order 
flow to Topaz and thereby create liquidity to the benefit of all market 
participants who trade on 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.
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    \11\ See BOX Fee Schedule, Section II. Liquidity Fees and 
Credits, Exempt Transactions.
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    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

    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. As 
described above, this proposed rule change is intended to remedy the 
negative economics associated with paying a rebate to market 
participants on both sides of trades executed during the opening 
rotation. While only Priority Customers will continue to receive a 
rebate for trades executed during the opening rotation, this is 
consistent with current practices of charging lower fees and providing 
higher rebates to Priority Customers, and will encourage Members to 
send additional Priority Customer order flow to the Exchange, to the 
benefit of all market participants. 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,\12\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\13\ because it establishes a due, fee, or other charge 
imposed by Topaz.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 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-2013-13 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.

All submissions should refer to File No. SR-Topaz-2013-13. 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

[[Page 76886]]

should refer to File No. SR-Topaz-2013-13, and should be submitted on 
or before January 9, 2014.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30178 Filed 12-18-13; 8:45 am]
BILLING CODE 8011-01-P