Self-Regulatory Organizations; Topaz Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Schedule of Fees September 17, 2013., 58359-58362 [2013-23007]
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Federal Register / Vol. 78, No. 184 / Monday, September 23, 2013 / Notices
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEArca-2013–90. 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 (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 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 the
filing also will be available for
inspection and copying at the principal
office 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 Number SR–
NYSEArca–2013–90 and should be
submitted on or before October 15,
2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–23006 Filed 9–20–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
emcdonald on DSK67QTVN1PROD with NOTICES
[Release No. 34–70426; File No. SR–Topaz–
2013–04]
Self-Regulatory Organizations; Topaz
Exchange, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the Schedule
of Fees September 17, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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20:16 Sep 20, 2013
Jkt 229001
notice is hereby given that on
September 3, 2013, the Topaz Exchange,
LLC (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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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 adopt volume-based
tiered rebates for adding liquidity on the
Exchange (‘‘Maker Rebate’’), and to
increase the rebate for certain
participant types in Non-Penny
Symbols. The text of the proposed rule
change is available on the Exchange’s
Web site, 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
self-regulatory organization 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
Topaz is proposing to amend its
Schedule of Fees to establish volumebased rebates for adding liquidity in
Regular Orders 3 traded on the
Exchange. The Exchange believes the
proposed rebates will incentivize firms
that route orders to Topaz to increase
order flow to the Exchange. The
Exchange is also proposing to increase
the rebates applicable to Non-Topaz
Market Maker,4 Firm Proprietary/
3 A Regular Order is an order that consists of only
a single option series and is not submitted with a
stock leg.
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.
PO 00000
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58359
Broker-Dealer,5 and Professional
Customer 6 orders in Non-Penny
Symbols.7
For Regular Orders in Penny
Symbols 8 and SPY the Exchange
currently pays a Maker Rebate in
Standard Options of $0.48 per contract
for Priority Customer orders,9 $0.37 per
contract ($0.39 per contract in SPY) for
Market Maker orders,10 and $0.25 per
contract for Non-Topaz Market Maker,
Firm Proprietary/Broker-Dealer, and
Professional Customer orders. For
Regular Orders in Non-Penny Symbols,
the Exchange currently pays a Maker
Rebate in Standard Options of $0.82 per
contracts for Priority Customer orders,
$0.40 per contract for Market Maker
orders, and $0.10 per contract for NonTopaz Market Maker, Firm Proprietary/
Broker-Dealer, and Professional
Customer orders. For Regular Orders in
Mini Options,11 Maker Rebates are 1/
10th the rate applicable in Standard
Options.
The Exchange proposes to amend the
rebates described above so that Maker
Rebates will be based on a Member’s
average daily volume (‘‘ADV’’) in a
given month.12 In particular, the
Exchange proposes to pay a Maker
Rebate based on four volume tier levels
as described in the table below.
Members may qualify for each tier based
on their volume in the following
categories: (i) Total Affiliated Member
ADV,13 (ii) Priority Customer Maker
ADV, or (iii) Total Affiliated Member
ADV with a Minimum Priority
Customer Maker ADV. For example, a
Member can reach Tier 2 by sending
65,000 contracts in Total Affiliated
Member ADV, 20,000 contracts in
Priority Customer Maker ADV, or 40,000
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 Non-Penny Symbols are options overlying all
symbols excluding Penny Symbols.
8 Penny Symbols are options overlying all
symbols listed on Topaz that are in the Penny Pilot
Program.
9 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).
10 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.
11 Mini Options are options overlying ten (10)
shares of AAPL, AMZN, GLD, GOOG and SPY.
12 ADV includes all volume in all symbols and
order types.
13 The Total Affiliated Member ADV category
includes all volume in all symbols and order types.
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Federal Register / Vol. 78, No. 184 / Monday, September 23, 2013 / Notices
contracts in Total Affiliated Member
ADV of which 15,000 contracts is
Priority Customer Maker volume.
Maker Rebates will be paid based on
the highest tier that a Member reaches
in a given month, and this tiered rate
will apply retroactively to all eligible
traded contracts for all client categories.
This means, for example, a Member
with an ADV of 115,000 Priority
Customer Maker contracts would also
qualify for the highest rebate tier for all
Market Maker volume it trades on the
Exchange that provides liquidity.
QUALIFYING TIER THRESHOLDS
Total affiliated
member ADV
Tier
Tier
Tier
Tier
Tier
1
2
3
4
.......................................................................................................
.......................................................................................................
.......................................................................................................
.......................................................................................................
Volume in Standard Options and
Mini Options will be combined to
calculate the tier a Member has reached.
For example, a Member can reach Tier
2 under Total Affiliated Member ADV
by sending an ADV of 50,000 contracts
in Standard Options and 15,000
Total affiliated member
ADV/minimum priority
customer maker ADV
Priority customer
maker ADV
0–64,999
65,000–149,999
150,000–274,999
275,000+
0–19,999
20,000–64,999
65,000–114,999
115,000+
contracts in Mini Options. Based on the
tier achieved, the Member will be
rebated for that tier for all the Standard
Options traded at the Standard Option
rebate amount, and for all the Mini
Options traded at the Mini Option
rebate amount. In addition, all eligible
0–39,999/0+
40,000–114,999/15,000+
115,000–224,999/45,000+
225,000+/65,000+
volume from affiliated Topaz Members
will be aggregated in determining
applicable tiers.14
The proposed Maker Rebates for each
tier and participant type are as follows:
I. REGULAR ORDER REBATES FOR ADDING LIQUIDITY IN STANDARD OPTIONS
Priority
customer
Tier
Topaz market
maker
Firm proprietary,
B/D, FarMM & professional customer
Penny Symbols and SPY Maker Rebates (per contract)
Tier
Tier
Tier
Tier
Tier
1
2
3
4
4
....................................................................................................................
....................................................................................................................
....................................................................................................................
....................................................................................................................
SPY ...........................................................................................................
($0.25)
(0.40)
(0.45)
(0.48)
(0.48)
($0.30)
(0.32)
(0.34)
(0.37)
(0.39)
($0.25)
(0.25)
(0.25)
(0.25)
(0.25)
(0.40)
(0.42)
(0.44)
(0.46)
(0.25)
(0.25)
(0.25)
(0.25)
Non-Penny Symbols Maker Rebates (per contract)
Tier
Tier
Tier
Tier
1
2
3
4
....................................................................................................................
....................................................................................................................
....................................................................................................................
....................................................................................................................
(0.70)
(0.75)
(0.80)
(0.82)
II. REGULAR ORDER REBATES FOR ADDING LIQUIDITY IN MINI OPTIONS
Priority
customer
Tier
Topaz market
maker
Firm proprietary,
B/D, FarMM & professional customer
Penny Symbols and SPY Maker Rebates (per contract)
Tier
Tier
Tier
Tier
Tier
1
2
3
4
4
....................................................................................................................
....................................................................................................................
....................................................................................................................
....................................................................................................................
SPY ...........................................................................................................
($0.025)
(0.040)
(0.045)
(0.048)
(0.048)
($0.030)
(0.032)
(0.034)
(0.037)
(0.039)
($0.025)
(0.025)
(0.025)
(0.025)
(0.025)
(0.040)
(0.042)
(0.044)
(0.046)
(0.025)
(0.025)
(0.025)
(0.025)
emcdonald on DSK67QTVN1PROD with NOTICES
Non-Penny Symbols Maker Rebates (per contract)
Tier
Tier
Tier
Tier
1
2
3
4
....................................................................................................................
....................................................................................................................
....................................................................................................................
....................................................................................................................
14 Each Member would be responsible for
notifying the Exchange of its affiliations so that
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20:16 Sep 20, 2013
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(0.070)
(0.075)
(0.080)
(0.082)
volume of the Member and its affiliates may be
aggregated.
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Federal Register / Vol. 78, No. 184 / Monday, September 23, 2013 / Notices
By way of example, under the new
tiered rebate structure a Member that
executed an ADV of 20,000 Priority
Customer contracts in all classes listed
on the Exchange that added liquidity in
a given month would be entitled to
receive the proposed Tier 2 Maker
Rebate of $0.40 per contract for
Standard Options and $0.040 per
contract for Mini Options in Penny
Symbols. If the Member executed an
ADV of 65,000 Priority Customer
contracts that added liquidity in the
same month, the Exchange would
instead pay the proposed Tier 3 Maker
Rebate of $0.45 per contract for
Standard Options and $0.045 per
contract for Mini Options in Penny
Symbols. The applicable tier reached
will similarly affect the maker rebates
paid on non-Priority Customer maker
volume as reflected in the tables.
The Exchange notes that the Maker
Rebates currently being paid on Topaz
are equivalent to Tier 4 rebates under
the new structure, with a few
exceptions. During the initial rollout of
symbols on Topaz, the Exchange could
not adopt the proposed tiered structure
due to the impossibility of calculating
appropriate ADV thresholds for each
tier when symbols were being listed on
the Exchange each week. The Exchange,
therefore, opted to provide a higher
introductory rate for Maker Rebates in
order to attract orders to the Exchange
during the initial rollout phase. By
adopting the proposed tiered structure
now, the Exchange seeks to incentivize
Members to send additional order flow
to the Exchange in order to qualify for
the higher Maker Rebates.
At this time the Exchange is not
modifying the Maker Rebates applicable
to Non-Topaz Market Maker, Firm
Proprietary/Broker-Dealer, or
Professional Customer orders in Penny
Symbols and SPY. Although the
Exchange is adopting a tiered structure
for these orders, the amount of the
applicable Maker Rebate remains
unchanged from current levels of $0.25
per contract for Standard Options and
$0.025 per contract for Mini Options,
regardless of the tier achieved. In order
to increase order flow from these market
participants in Non-Penny symbols, the
Exchange is increasing the Maker Rebate
for these market participants so that the
rebate is now equivalent to the rebate
offered in Penny Symbols and SPY. As
such, Non-Topaz Market Maker, Firm
Proprietary/Broker-Dealer, and
Professional Customer orders in NonPenny Symbols will be provided an
increased Maker Rebate of $0.25 per
contract for Standard Options and
$0.025 per contract for Mini Options, up
VerDate Mar<15>2010
20:16 Sep 20, 2013
Jkt 229001
from $0.10 per contract and $0.010 per
contract, respectively.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,15
in general, and Section 6(b)(4) of the
Act,16 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.
The Exchange believes the proposed
rebates are reasonable and equitably
allocated because Topaz has already
established Maker Rebates for Members
that provide liquidity on the Exchange,
and is merely proposing to adopt
volume-based tiers designed to
incentivize Members to send additional
order flow to the Exchange. The
Exchange believes that the proposed
Maker Rebates are not unfairly
discriminatory because the rebate
structure is competitive with tiered
rebate structures that exist today at
other options exchanges such as the
NASDAQ Options Market (‘‘NOM’’).17
For example, NOM provides its
members with a rebate for adding
liquidity in Penny Symbols that ranges
between $0.25 per contract and $0.48
per contract for customer and
professional orders, and between $0.25
per contract and $0.32 per contract for
Market Maker orders.18 As proposed,
Topaz will also offer Priority Customers
the same range of rebates as currently
provided by NOM, and will actually
offer more competitive rebates for
Market Makers, from $0.30 per contract
for the base tier and as high as $0.37 per
contract for the highest tier. Topaz also
compares competitively with respect to
the thresholds required to achieve
higher levels of rebates. For example, a
Member executing an ADV of 275,000
contracts on Topaz would qualify for
the highest $0.48 rebate for Priority
Customer orders, whereas the same firm
would have to execute an extra 50,000
contracts in ADV to qualify for that level
of rebate on NOM. Topaz also does not
separate out thresholds for different
participant types, meaning that a
Member that qualifies for a higher tier
in Priority Customer volume would also
earn the higher rebate amount for any
15 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
17 See NASDAQ Options Rules, Chapter XV
Options Pricing, Section 2, NASDAQ Options
Market—Fees and Rebates.
18 Both Topaz and NOM provide higher rebates
than those listed here for market maker orders in
certain specific symbols (e.g. SPY).
16 15
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58361
Market Maker volume it trades on the
Exchange that provides liquidity.
While the Exchange is lowering the
current Maker Rebate provided to
Members that have not achieved the
highest volume tier, the Exchange
believes that Members will in fact be
incentivized to bring additional order
flow to the Exchange to obtain higher
rebates. Additionally, the Exchange
believes that the proposed Maker
Rebates are fair, equitable and not
unfairly discriminatory because they are
consistent with rebate differentiation
that exists today at other option
exchanges.
With respect to rebates for Market
Makers, the Exchange believes that the
price differentiation between the
various market participants is
appropriate and not unfairly
discriminatory because Market Makers
have different requirements and
obligations to the Exchange that other
market participants do not (such as
quoting requirements). The Exchange
believes that it is equitable and not
unfairly discriminatory to provide a
lower rebate to market participants that
do not have such requirements and
obligations that Exchange Market
Makers do.
The Exchange also believes that
providing higher rebates to Priority
Customer orders, and creating ADV
thresholds specifically for Members that
send such orders to Topaz, attracts that
order flow to the Exchange and thereby
creates liquidity to the benefit of all
market participants who trade on the
Exchange. Further, the Exchange
believes that it is equitable and not
unfairly discriminatory to provide
higher rebates to Priority Customer
orders than to Professional Customer
orders. 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. Further,
Professional Customers engage in
trading activity similar to that
conducted by market makers and
proprietary traders. For example,
Professional Customers join bids and
offers on the Exchange and thus
compete for incoming order flow.
The Exchange has determined to
charge fees and provide rebates for
Regular Orders in Mini Options at a rate
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58362
Federal Register / Vol. 78, No. 184 / Monday, September 23, 2013 / Notices
that is 1/10th the rate of fees and rebates
the Exchange currently provides for
trading in Standard Options. The
Exchange believes it is reasonable and
equitable and not unfairly
discriminatory to assess lower fees and
rebates to provide market participants
an incentive to trade Mini Options on
the Exchange. The Exchange believes
the proposed rebates 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 rebates that are
1/10th of those applicable to Standard
Options.
The Exchange notes that the proposed
rule filing is intended to establish Topaz
as an attractive venue for market
participants to direct their order flow as
the proposed rebates are competitive
with those established by other
exchanges. The Exchange operates in a
highly competitive market in which
market participants can readily direct
order flow to another exchange if they
deem rebates at a particular exchange to
be too low. For the reasons noted above,
the Exchange believes that the proposed
rebates are fair, equitable and not
unfairly discriminatory.
emcdonald on DSK67QTVN1PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,19 the Exchange does not believe
that the proposed rule change will
impose any burden on inter-market
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. The tiered rebate
structure that the Exchange proposes to
adopt here is similar to that currently in
effect on other maker/taker options
exchanges such as NOM,20 and will
increase competition between Topaz
and other markets.
In establishing tiered rebates for
providing liquidity, the Exchange is not
imposing any burden on intra-market
competition. The established volume
tiers are transparent and offer Members
a variety of ways to reach different
levels of rebates on the exchange,
similar to levels and differentials these
same participants are familiar with on
several other exchanges. Volume tiers
are not new to the options industry and
generally reward Members for
submitting additional volume to the
Exchange, with Topaz now seeking to
introduce a similar structure.
19 15
U.S.C. 78f(b)(8).
NASDAQ Options Rules, Chapter XV
Options Pricing, Section 2, NASDAQ Options
Market—Fees and Rebates.
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 21 and
subparagraph (f)(2) of Rule 19b–4
thereunder,22 because it establishes a
due, fee, or other charge imposed by
Topaz.
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:
20:16 Sep 20, 2013
Jkt 229001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–23007 Filed 9–20–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule–comments@
sec.gov. Please include File Number SR–
Topaz–2013–04 on the subject line.
[Release No. 34–70428; File No. SR–CTA–
2013–05]
Consolidated Tape Association; Notice
of Filing of the Eighteenth Substantive
Amendment to the Second
Restatement of the CTA Plan
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
Number SR–Topaz–2013–04. 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.
20 See
VerDate Mar<15>2010
The Commission will post all
comments on the Commission’s Internet
Web site (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 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 Number SR–Topaz–
2013–04, and should be submitted on or
before October 15, 2013.
21 15
22 17
PO 00000
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
Frm 00096
Fmt 4703
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September 17, 2013.
Pursuant to Section 11A of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 608 thereunder,2
notice is hereby given that on
September 9, 2013, the Consolidated
Tape Association (‘‘CTA’’) Plan
participants (‘‘Participants’’) 3 filed with
23 17
CFR 200.30–3(a)(12).
U.S.C. 78k–1.
2 17 CFR 242.608.
3 Each participant executed the proposed
amendment. The Participants are: BATS Exchange,
Inc., BATS–Y Exchange, Inc., Chicago Board
Options Exchange, Incorporated, Chicago Stock
Exchange, Inc., EDGA Exchange, Inc. (‘‘EDGA’’),
EDGX Exchange, Inc. (‘‘EDGX’’), Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’), International
1 15
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[Federal Register Volume 78, Number 184 (Monday, September 23, 2013)]
[Notices]
[Pages 58359-58362]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-23007]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70426; File No. SR-Topaz-2013-04]
Self-Regulatory Organizations; Topaz Exchange, LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Amending the
Schedule of Fees September 17, 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 September 3, 2013, the Topaz Exchange, LLC (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 adopt volume-
based tiered rebates for adding liquidity on the Exchange (``Maker
Rebate''), and to increase the rebate for certain participant types in
Non-Penny Symbols. The text of the proposed rule change is available on
the Exchange's Web site, 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 self-regulatory organization
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
Topaz is proposing to amend its Schedule of Fees to establish
volume-based rebates for adding liquidity in Regular Orders \3\ traded
on the Exchange. The Exchange believes the proposed rebates will
incentivize firms that route orders to Topaz to increase order flow to
the Exchange. The Exchange is also proposing to increase the rebates
applicable to Non-Topaz Market Maker,\4\ Firm Proprietary/Broker-
Dealer,\5\ and Professional Customer \6\ orders in Non-Penny
Symbols.\7\
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\3\ A Regular Order is an order that consists of only a single
option series and is not submitted with a stock leg.
\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\ Non-Penny Symbols are options overlying all symbols
excluding Penny Symbols.
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For Regular Orders in Penny Symbols \8\ and SPY the Exchange
currently pays a Maker Rebate in Standard Options of $0.48 per contract
for Priority Customer orders,\9\ $0.37 per contract ($0.39 per contract
in SPY) for Market Maker orders,\10\ and $0.25 per contract for Non-
Topaz Market Maker, Firm Proprietary/Broker-Dealer, and Professional
Customer orders. For Regular Orders in Non-Penny Symbols, the Exchange
currently pays a Maker Rebate in Standard Options of $0.82 per
contracts for Priority Customer orders, $0.40 per contract for Market
Maker orders, and $0.10 per contract for Non-Topaz Market Maker, Firm
Proprietary/Broker-Dealer, and Professional Customer orders. For
Regular Orders in Mini Options,\11\ Maker Rebates are 1/10th the rate
applicable in Standard Options.
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\8\ Penny Symbols are options overlying all symbols listed on
Topaz that are in the Penny Pilot Program.
\9\ 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).
\10\ 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.
\11\ Mini Options are options overlying ten (10) shares of AAPL,
AMZN, GLD, GOOG and SPY.
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The Exchange proposes to amend the rebates described above so that
Maker Rebates will be based on a Member's average daily volume
(``ADV'') in a given month.\12\ In particular, the Exchange proposes to
pay a Maker Rebate based on four volume tier levels as described in the
table below. Members may qualify for each tier based on their volume in
the following categories: (i) Total Affiliated Member ADV,\13\ (ii)
Priority Customer Maker ADV, or (iii) Total Affiliated Member ADV with
a Minimum Priority Customer Maker ADV. For example, a Member can reach
Tier 2 by sending 65,000 contracts in Total Affiliated Member ADV,
20,000 contracts in Priority Customer Maker ADV, or 40,000
[[Page 58360]]
contracts in Total Affiliated Member ADV of which 15,000 contracts is
Priority Customer Maker volume.
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\12\ ADV includes all volume in all symbols and order types.
\13\ The Total Affiliated Member ADV category includes all
volume in all symbols and order types.
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Maker Rebates will be paid based on the highest tier that a Member
reaches in a given month, and this tiered rate will apply retroactively
to all eligible traded contracts for all client categories. This means,
for example, a Member with an ADV of 115,000 Priority Customer Maker
contracts would also qualify for the highest rebate tier for all Market
Maker volume it trades on the Exchange that provides liquidity.
Qualifying Tier Thresholds
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Total affiliated Priority customer Total affiliated member ADV/minimum
Tier member ADV maker ADV priority customer maker ADV
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Tier 1........................... 0-64,999 0-19,999 0-39,999/0+
Tier 2........................... 65,000-149,999 20,000-64,999 40,000-114,999/15,000+
Tier 3........................... 150,000-274,999 65,000-114,999 115,000-224,999/45,000+
Tier 4........................... 275,000+ 115,000+ 225,000+/65,000+
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Volume in Standard Options and Mini Options will be combined to
calculate the tier a Member has reached. For example, a Member can
reach Tier 2 under Total Affiliated Member ADV by sending an ADV of
50,000 contracts in Standard Options and 15,000 contracts in Mini
Options. Based on the tier achieved, the Member will be rebated for
that tier for all the Standard Options traded at the Standard Option
rebate amount, and for all the Mini Options traded at the Mini Option
rebate amount. In addition, all eligible volume from affiliated Topaz
Members will be aggregated in determining applicable tiers.\14\
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\14\ Each Member would be responsible for notifying the Exchange
of its affiliations so that volume of the Member and its affiliates
may be aggregated.
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The proposed Maker Rebates for each tier and participant type are
as follows:
I. Regular Order Rebates for Adding Liquidity in Standard Options
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Firm proprietary,
B/D, FarMM &
Tier Priority customer Topaz market maker professional
customer
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Penny Symbols and SPY Maker Rebates (per contract)
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Tier 1.............................................. ($0.25) ($0.30) ($0.25)
Tier 2.............................................. (0.40) (0.32) (0.25)
Tier 3.............................................. (0.45) (0.34) (0.25)
Tier 4.............................................. (0.48) (0.37) (0.25)
Tier 4 SPY.......................................... (0.48) (0.39) (0.25)
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Non-Penny Symbols Maker Rebates (per contract)
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Tier 1.............................................. (0.70) (0.40) (0.25)
Tier 2.............................................. (0.75) (0.42) (0.25)
Tier 3.............................................. (0.80) (0.44) (0.25)
Tier 4.............................................. (0.82) (0.46) (0.25)
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II. Regular Order Rebates for Adding Liquidity in Mini Options
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Firm proprietary,
B/D, FarMM &
Tier Priority customer Topaz market maker professional
customer
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Penny Symbols and SPY Maker Rebates (per contract)
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Tier 1.............................................. ($0.025) ($0.030) ($0.025)
Tier 2.............................................. (0.040) (0.032) (0.025)
Tier 3.............................................. (0.045) (0.034) (0.025)
Tier 4.............................................. (0.048) (0.037) (0.025)
Tier 4 SPY.......................................... (0.048) (0.039) (0.025)
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Non-Penny Symbols Maker Rebates (per contract)
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Tier 1.............................................. (0.070) (0.040) (0.025)
Tier 2.............................................. (0.075) (0.042) (0.025)
Tier 3.............................................. (0.080) (0.044) (0.025)
Tier 4.............................................. (0.082) (0.046) (0.025)
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[[Page 58361]]
By way of example, under the new tiered rebate structure a Member
that executed an ADV of 20,000 Priority Customer contracts in all
classes listed on the Exchange that added liquidity in a given month
would be entitled to receive the proposed Tier 2 Maker Rebate of $0.40
per contract for Standard Options and $0.040 per contract for Mini
Options in Penny Symbols. If the Member executed an ADV of 65,000
Priority Customer contracts that added liquidity in the same month, the
Exchange would instead pay the proposed Tier 3 Maker Rebate of $0.45
per contract for Standard Options and $0.045 per contract for Mini
Options in Penny Symbols. The applicable tier reached will similarly
affect the maker rebates paid on non-Priority Customer maker volume as
reflected in the tables.
The Exchange notes that the Maker Rebates currently being paid on
Topaz are equivalent to Tier 4 rebates under the new structure, with a
few exceptions. During the initial rollout of symbols on Topaz, the
Exchange could not adopt the proposed tiered structure due to the
impossibility of calculating appropriate ADV thresholds for each tier
when symbols were being listed on the Exchange each week. The Exchange,
therefore, opted to provide a higher introductory rate for Maker
Rebates in order to attract orders to the Exchange during the initial
rollout phase. By adopting the proposed tiered structure now, the
Exchange seeks to incentivize Members to send additional order flow to
the Exchange in order to qualify for the higher Maker Rebates.
At this time the Exchange is not modifying the Maker Rebates
applicable to Non-Topaz Market Maker, Firm Proprietary/Broker-Dealer,
or Professional Customer orders in Penny Symbols and SPY. Although the
Exchange is adopting a tiered structure for these orders, the amount of
the applicable Maker Rebate remains unchanged from current levels of
$0.25 per contract for Standard Options and $0.025 per contract for
Mini Options, regardless of the tier achieved. In order to increase
order flow from these market participants in Non-Penny symbols, the
Exchange is increasing the Maker Rebate for these market participants
so that the rebate is now equivalent to the rebate offered in Penny
Symbols and SPY. As such, Non-Topaz Market Maker, Firm Proprietary/
Broker-Dealer, and Professional Customer orders in Non-Penny Symbols
will be provided an increased Maker Rebate of $0.25 per contract for
Standard Options and $0.025 per contract for Mini Options, up from
$0.10 per contract and $0.010 per contract, respectively.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\15\ in general, and
Section 6(b)(4) of the Act,\16\ 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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\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed rebates are reasonable and
equitably allocated because Topaz has already established Maker Rebates
for Members that provide liquidity on the Exchange, and is merely
proposing to adopt volume-based tiers designed to incentivize Members
to send additional order flow to the Exchange. The Exchange believes
that the proposed Maker Rebates are not unfairly discriminatory because
the rebate structure is competitive with tiered rebate structures that
exist today at other options exchanges such as the NASDAQ Options
Market (``NOM'').\17\ For example, NOM provides its members with a
rebate for adding liquidity in Penny Symbols that ranges between $0.25
per contract and $0.48 per contract for customer and professional
orders, and between $0.25 per contract and $0.32 per contract for
Market Maker orders.\18\ As proposed, Topaz will also offer Priority
Customers the same range of rebates as currently provided by NOM, and
will actually offer more competitive rebates for Market Makers, from
$0.30 per contract for the base tier and as high as $0.37 per contract
for the highest tier. Topaz also compares competitively with respect to
the thresholds required to achieve higher levels of rebates. For
example, a Member executing an ADV of 275,000 contracts on Topaz would
qualify for the highest $0.48 rebate for Priority Customer orders,
whereas the same firm would have to execute an extra 50,000 contracts
in ADV to qualify for that level of rebate on NOM. Topaz also does not
separate out thresholds for different participant types, meaning that a
Member that qualifies for a higher tier in Priority Customer volume
would also earn the higher rebate amount for any Market Maker volume it
trades on the Exchange that provides liquidity.
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\17\ See NASDAQ Options Rules, Chapter XV Options Pricing,
Section 2, NASDAQ Options Market--Fees and Rebates.
\18\ Both Topaz and NOM provide higher rebates than those listed
here for market maker orders in certain specific symbols (e.g. SPY).
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While the Exchange is lowering the current Maker Rebate provided to
Members that have not achieved the highest volume tier, the Exchange
believes that Members will in fact be incentivized to bring additional
order flow to the Exchange to obtain higher rebates. Additionally, the
Exchange believes that the proposed Maker Rebates are fair, equitable
and not unfairly discriminatory because they are consistent with rebate
differentiation that exists today at other option exchanges.
With respect to rebates for Market Makers, the Exchange believes
that the price differentiation between the various market participants
is appropriate and not unfairly discriminatory because Market Makers
have different requirements and obligations to the Exchange that other
market participants do not (such as quoting requirements). The Exchange
believes that it is equitable and not unfairly discriminatory to
provide a lower rebate to market participants that do not have such
requirements and obligations that Exchange Market Makers do.
The Exchange also believes that providing higher rebates to
Priority Customer orders, and creating ADV thresholds specifically for
Members that send such orders to Topaz, attracts that order flow to the
Exchange and thereby creates liquidity to the benefit of all market
participants who trade on the Exchange. Further, the Exchange believes
that it is equitable and not unfairly discriminatory to provide higher
rebates to Priority Customer orders than to Professional Customer
orders. 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. Further, Professional Customers
engage in trading activity similar to that conducted by market makers
and proprietary traders. For example, Professional Customers join bids
and offers on the Exchange and thus compete for incoming order flow.
The Exchange has determined to charge fees and provide rebates for
Regular Orders in Mini Options at a rate
[[Page 58362]]
that is 1/10th the rate of fees and rebates the Exchange currently
provides for trading in Standard Options. The Exchange believes it is
reasonable and equitable and not unfairly discriminatory to assess
lower fees and rebates to provide market participants an incentive to
trade Mini Options on the Exchange. The Exchange believes the proposed
rebates 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
rebates that are 1/10th of those applicable to Standard Options.
The Exchange notes that the proposed rule filing is intended to
establish Topaz as an attractive venue for market participants to
direct their order flow as the proposed rebates are competitive with
those established by other exchanges. The Exchange operates in a highly
competitive market in which market participants can readily direct
order flow to another exchange if they deem rebates at a particular
exchange to be too low. For the reasons noted above, the Exchange
believes that the proposed rebates are fair, equitable and not unfairly
discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\19\ the Exchange
does not believe that the proposed rule change will impose any burden
on inter-market competition that is not necessary or appropriate in
furtherance of the purposes of the Act. The tiered rebate structure
that the Exchange proposes to adopt here is similar to that currently
in effect on other maker/taker options exchanges such as NOM,\20\ and
will increase competition between Topaz and other markets.
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\19\ 15 U.S.C. 78f(b)(8).
\20\ See NASDAQ Options Rules, Chapter XV Options Pricing,
Section 2, NASDAQ Options Market--Fees and Rebates.
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In establishing tiered rebates for providing liquidity, the
Exchange is not imposing any burden on intra-market competition. The
established volume tiers are transparent and offer Members a variety of
ways to reach different levels of rebates on the exchange, similar to
levels and differentials these same participants are familiar with on
several other exchanges. Volume tiers are not new to the options
industry and generally reward Members for submitting additional volume
to the Exchange, with Topaz now seeking to introduce a similar
structure.
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 \21\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\22\ because it establishes a due, fee, or other charge
imposed by Topaz.
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\21\ 15 U.S.C. 78s(b)(3)(A)(ii).
\22\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-Topaz-2013-04 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 Number SR-Topaz-2013-04. 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 (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 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 Number SR-Topaz-2013-04, and should be
submitted on or before October 15, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-23007 Filed 9-20-13; 8:45 am]
BILLING CODE 8011-01-P
