Self-Regulatory Organizations; Topaz Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating To Exchange Trading Days and Hours of Business and Trading Halts, 68485-68487 [2013-27205]
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Federal Register / Vol. 78, No. 220 / Thursday, November 14, 2013 / Notices
TKELleY on DSK3SPTVN1PROD with NOTICES
Financial Industry Regulatory Authority
(‘‘FINRA’’), on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares, in the equity
securities in which the Fund will invest,
and in the U.S. exchange-traded options
that the Fund will buy and write, with
other markets and other entities that are
members of the ISG, and that FINRA
may obtain trading information
regarding trading in the Shares and in
such equity securities and U.S.
exchange-traded options from such
markets and other entities.34 In
addition, the Exchange may obtain
information regarding trading in the
Shares and in such equity securities and
U.S. exchange-traded options from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.35
The Exchange further represents that
the Shares are deemed to be equity
securities, thus rendering trading in the
Shares subject to the Exchange’s
existing rules governing the trading of
equity securities.36 In support of this
proposal, the Exchange has made
representations, including:
(1) The Shares will be subject to Rule
5735, which sets forth the initial and
continued listing criteria applicable to
Managed Fund Shares.
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) The Exchange represents that
trading in the Shares will be subject to
the existing trading surveillances,
administered by both Nasdaq and
FINRA on behalf of the Exchange,
to be registered under the Investment Advisers Act
of 1940 (‘‘Advisers Act’’). As a result, the Adviser
and Sub-Adviser and their related personnel are
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
investment adviser must be consistent with Rule
204A–1 under the Advisers Act. In addition, Rule
206(4)–7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment
advice to clients unless such investment adviser has
(i) adopted and implemented written policies and
procedures reasonably designed to prevent
violation, by the investment adviser and its
supervised persons, of the Advisers Act and the
Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review
regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i)
above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
34 See Notice, supra note 3, 78 FR at 59407.
35 See id.
36 See id.
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which are designed to detect violations
of Exchange rules and applicable federal
securities laws, and that these
procedures are adequate to properly
monitor Exchange trading of the Shares
in all trading sessions and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
(4) Prior to the commencement of
trading, the Exchange will inform its
members in an Information Circular of
the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Circular
will discuss the following: (a) The
procedures for purchases and
redemptions of Shares in Creation Units
(and that Shares are not individually
redeemable); (b) Nasdaq Rule 2111A,
which imposes suitability obligations on
Nasdaq members with respect to
recommending transactions in the
Shares to customers; (c) how
information regarding the Intraday
Indicative Value is disseminated; (d) the
risks involved in trading the Shares
during the Pre-Market and Post-Market
Sessions when an updated Intraday
Indicative Value will not be calculated
or publicly disseminated; (e) the
requirement that members deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (f) trading information.
(5) For initial and continued listing,
the Fund must be in compliance with
Rule 10A–3 under the Exchange Act.37
(6) A minimum of 100,000 Shares will
be outstanding at the commencement of
trading on the Exchange.
(7) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities (calculated
at the time of investment); will monitor
its portfolio liquidity on an ongoing
basis to determine whether, in light of
current circumstances, an adequate
level of liquidity is being maintained;
and will consider taking appropriate
steps in order to maintain adequate
liquidity if, through a change in values,
net assets, or other circumstances, more
than 15% of the Fund’s net assets are
held in illiquid securities.
(8) The equity securities in which the
Fund will invest and the options that
the Fund will write will be limited to
U.S. exchange-traded securities and
options, respectively, that trade in
markets that are members of the ISG,
which includes all U.S. national
securities exchanges and certain foreign
exchanges, or are parties to a
comprehensive surveillance sharing
agreement with the Exchange.
(9) Under normal market conditions,
the Fund will invest primarily in largecap U.S. exchange-traded equity
securities. The Fund will also utilize an
options strategy in which it will write
U.S. exchange-traded covered call
options on the Index. The market value
of the options strategy may be up to
20% of the Fund’s overall net asset
value.
(10) In addition to the options strategy
that is part of the Fund’s principal
investment strategy, the Fund may
invest up to 10% of the market value of
its net assets in futures, options, options
on futures, total return swaps, credit
default swaps, and forward contracts.
To the extent practicable, the Fund will
invest in swaps cleared through the
facilities of a centralized clearing house.
(11) The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage.
This approval order is based on all of
the Exchange’s representations and
description of the Fund, including those
set forth above and in the Notice.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 38 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,39 that the
proposed rule change (SR–NASDAQ–
2013–122) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–27204 Filed 11–13–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70830; File No. SR–
TOPAZ–2013–10]
Self-Regulatory Organizations; Topaz
Exchange, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating To Exchange
Trading Days and Hours of Business
and Trading Halts
November 7, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
38 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
40 17 CFR 200.30–3(a)(12).
39 15
37 17
PO 00000
CFR 240.10A–3.
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Federal Register / Vol. 78, No. 220 / Thursday, November 14, 2013 / Notices
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
31, 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 Exchange.
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 Substance of
the Proposed Rule Change
The Exchange proposes to amend
Exchange rules to clarify Rule 700,
‘‘Days and Hours of Business,’’ and Rule
702, ‘‘Trading Halts.’’
The text of the proposed rule change
is available on the Exchange’s Internet
Web site at https://www.ise.com, at the
principal office of the Exchange, at the
Commission’s Public Reference Room,
and on the Commission’s Web site at
https://www.sec.gov.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
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.
TKELleY on DSK3SPTVN1PROD with NOTICES
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to amend
its rules to clarify when it will be open
for trading along with when trading
halts on underlying securities will
inhibit trading on the Exchange. The
Exchange is submitting this proposed
rule change as a competitive response to
a recently approved rule filing
submitted by the Chicago Board Options
Exchange (‘‘CBOE’’).3 Specifically, the
Exchange is proposing to amend its
rules to clarify that it will not be solely
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 69558
(May 10, 2013), 78 FR 28911 (May 16, 2013) (SR–
CBOE–2013–035).
2 17
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Jkt 232001
dependent upon the ‘‘primary market’’
when determining when to open and/or
halt securities. Instead, the Exchange is
proposing to clarify in its rules that it
will be open if there is ample liquidity
in the underlying market for the
security. Generally, the national equity
exchanges have similar core business
hours.4 With this proposal, the
Exchange is attempting to clarify in its
rules that it can remain open to trade
options during such business hours
even if the ‘‘primary market’’ of the
underlying securities is not open for
business. The Exchange believes that
the proposed changes will allow the
markets to continue to function in an
instance where all exchanges may not
be halted. In addition, the Exchange
believes the proposed changes will
bring greater clarity to its Members
regarding when the Exchange will be
open for trading.
Currently, Exchange Rule 700
provides that no Member shall make
any bid, offer, or transaction on the
Exchange before or after business
hours.5 As an administrative cleanup
change, the Exchange is proposing to
eliminate this language as it is no longer
relevant. Executions may only happen
during business hours, however,
Members have the ability to submit
information in the Exchange’s electronic
trading system outside of business
hours. The Exchange believes deleting
this language would bring greater clarity
to Exchange rules while updating the
rule text to the current trading
environment.
Next, the Exchange is proposing to
add language to Rule 700(a) to specify
that the Exchange will not solely rely on
the ‘‘primary market’’ of an underlying
security to determine whether the
Exchange may trade the option for such
security. The Exchange believes that the
proposed rule change will specify that
if there is an ample market in the
underlying security, the Exchange has
the authority to trade the option even if
the primary market is not open. The
Exchange believes that allowing such
discretion will create a lesser market
disruption if the primary exchange is
unable to open for trading.
Further, Rule 702 specifies when the
Exchange will halt trading.6
4 See, e.g., New York Stock Exchange Rule 51(a)
and BATS Exchange Rule 1.5(w) which describes
regular trading hours as 9:30 a.m. through 4:00 p.m.
Eastern.
5 See Exchange Rule 700.
6 See Exchange Rule 702. The Exchange is not
proposing any change to Rule 702(c), Trading
Pauses, because a trading halt with respect to
options is mandatory and not subject to discretion
whenever trading in the security underlying the
option contract has been paused by the primary
listing market.
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Specifically, Rule 702(a)(1) lists factors
that may be considered in making that
determination. Currently, Rule
702(a)(1)(i) lists, as a factor in the
decision with respect to options,
‘‘trading in the underlying security has
been halted or suspended in the primary
market.’’ The Exchange is proposing to
add language to state, instead of the
‘‘primary market,’’ that the Exchange
may factor in if ‘‘trading in the
underlying security has been halted or
suspended in one or more of the
markets trading the underlying
security.’’ The Exchange believes the
proposed changes will grant discretion
for the Exchange to be open for trading
when there is a robust market in the
underlying security rather than limit it
to only when the ‘‘primary market’’ is
open.
Next, the Exchange is proposing to
amend Rule 702(a)(2) so that a
designated Exchange official may halt
trading in an option not only if the
‘‘primary market’’ of the security has
halted trading but if the security has
been halted in ‘‘one or more of the
markets trading the underlying
security.’’ Under the current rule, the
designated Exchange official almost
certainly must halt trading whenever
there is a halt of trading in the
underlying security. The Exchange
believes this proposed change will
provide the designated Exchange official
the discretion and the authority to halt
trading in an option if the primary
market for an underlying security is not
open for business however that security
is being traded elsewhere. For example,
if the primary market is unable to open
due to a natural disaster, or other
circumstance, but other stock exchanges
are trading the underlying security, the
proposed change will allow the
Exchange to continue trading the
overlaying options.
The Exchange believes the proposed
changes will allow the Exchange to
trade options for underlying stocks even
if that underlying listing market shall be
unable to trade due to an emergency or
other circumstance unique to that stock
exchange. Making these proposed
changes will allow the Exchange to
trade options when an underlying
security is trading on any national
securities exchange regardless of where
that security is formally listed. The
proposed discretion attempts to create a
lessor [sic] market disruption if a listing
or primary market is unable to trade due
to some circumstance. Because of the
connectivity of the national securities
exchanges today, the Exchange believes
limiting its ability to trade options to
when the primary market of the
underlying security is open might hurt
E:\FR\FM\14NON1.SGM
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Federal Register / Vol. 78, No. 220 / Thursday, November 14, 2013 / Notices
investors if some circumstance should
render the primary exchange inoperable.
In addition, the Exchange believes that
the reference to ‘‘primary market’’ is
ambiguous and has the potential to
cause confusion. Thus, the Exchange
believes by further clarifying the
language, it is clearer when the
Exchange will be open for trading.
TKELleY on DSK3SPTVN1PROD with NOTICES
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder, including the requirements
of Section 6(b) of the Act.7 In particular,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 8 requirements that the rules of
an exchange be designed to promote just
and equitable principles of trade, to
prevent fraudulent and manipulative
acts, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and to perfect
the mechanism for a free and open
market and a national market system,
and, in general, to protect investors and
the public interest.
The Exchange believes the proposed
rule change protects investors by
allowing trading in options as long as
the underlying security is trading on
another exchange. Instead of only
relying on the ‘‘primary market,’’ the
proposed rule change attempts to clarify
when options will trade on the
Exchange to allow greater continuity in
the marketplace. By allowing the
Exchange to trade options whenever the
underlying securities are trading, the
proposed rule change seeks to create
less of a disconnect if the ‘‘primary’’
market should be experiencing technical
difficulties, an emergency, or other
situation that may inhibit it to be
connected to the marketplace.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
This proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange does not believe the
proposed rule change imposes any
burden on intramarket competition
because it will apply to all Members
[sic]. In addition, the Exchange does not
believe the proposed rule change will
impose any burden on intermarket
competition as it will merely give the
Exchange discretion to trade options
when there is an ample market for the
underlying security of those options.
Thus, the Exchange believes the
proposed rule change will promote
competition by giving the Exchange the
ability to trade options when the
underlying security is trading anywhere,
and, thus, helping the Exchange to
better participate in the marketplace.
Additionally, as noted above, the
proposed rule change is a competitive
response to a recently approved rule
filing submitted by the CBOE.9 Topaz
believes this proposed rule change is
necessary to permit fair competition
among the options exchanges.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
VerDate Mar<15>2010
19:20 Nov 13, 2013
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–2013–10 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.
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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
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 Exchange believes that the
foregoing proposed rule change may
take effect upon filing with the
Commission pursuant to
Section19(b)(3)(A) 10 of the Act and Rule
19b–4(f)(6) thereunder 11 because the
foregoing proposed rule change does not
(i) significantly affect the protection of
investors or the public interest, (ii)
impose any significant burden on
competition, and (iii) become operative
for 30 days after its filing date, or such
shorter time as the Commission may
designate.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
of investors; or (iii) 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.
supra note 3.
U.S.C. 78s(b)(3)(A).
11 17 CFR 240.19b–4(f)(6).
U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(5).
Comments may be submitted by any of
the following methods:
All submissions should refer to File
Number SR–TOPAZ–2013–10. 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 Section, 100 F Street NE.,
Washington, DC 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also 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–
TOPAZ–2013–10 and should be
submitted on or before December 5,
2013.
9 See
7 15
[FR Doc. 2013–27205 Filed 11–13–13; 8:45 am]
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]]>Agencies
[Federal Register Volume 78, Number 220 (Thursday, November 14, 2013)]
[Notices]
[Pages 68485-68487]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-27205]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70830; File No. SR-TOPAZ-2013-10]
Self-Regulatory Organizations; Topaz Exchange, LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating To
Exchange Trading Days and Hours of Business and Trading Halts
November 7, 2013.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 68486]]
``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 31, 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
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Exchange rules to clarify Rule 700,
``Days and Hours of Business,'' and Rule 702, ``Trading Halts.''
The text of the proposed rule change is available on the Exchange's
Internet Web site at https://www.ise.com, at the principal office of the
Exchange, at the Commission's Public Reference Room, and on the
Commission's Web site at https://www.sec.gov.
II. Self-Regulatory Organization's Statement of the Purpose of, and
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 is proposing to amend its rules to clarify when it
will be open for trading along with when trading halts on underlying
securities will inhibit trading on the Exchange. The Exchange is
submitting this proposed rule change as a competitive response to a
recently approved rule filing submitted by the Chicago Board Options
Exchange (``CBOE'').\3\ Specifically, the Exchange is proposing to
amend its rules to clarify that it will not be solely dependent upon
the ``primary market'' when determining when to open and/or halt
securities. Instead, the Exchange is proposing to clarify in its rules
that it will be open if there is ample liquidity in the underlying
market for the security. Generally, the national equity exchanges have
similar core business hours.\4\ With this proposal, the Exchange is
attempting to clarify in its rules that it can remain open to trade
options during such business hours even if the ``primary market'' of
the underlying securities is not open for business. The Exchange
believes that the proposed changes will allow the markets to continue
to function in an instance where all exchanges may not be halted. In
addition, the Exchange believes the proposed changes will bring greater
clarity to its Members regarding when the Exchange will be open for
trading.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 69558 (May 10,
2013), 78 FR 28911 (May 16, 2013) (SR-CBOE-2013-035).
\4\ See, e.g., New York Stock Exchange Rule 51(a) and BATS
Exchange Rule 1.5(w) which describes regular trading hours as 9:30
a.m. through 4:00 p.m. Eastern.
---------------------------------------------------------------------------
Currently, Exchange Rule 700 provides that no Member shall make any
bid, offer, or transaction on the Exchange before or after business
hours.\5\ As an administrative cleanup change, the Exchange is
proposing to eliminate this language as it is no longer relevant.
Executions may only happen during business hours, however, Members have
the ability to submit information in the Exchange's electronic trading
system outside of business hours. The Exchange believes deleting this
language would bring greater clarity to Exchange rules while updating
the rule text to the current trading environment.
---------------------------------------------------------------------------
\5\ See Exchange Rule 700.
---------------------------------------------------------------------------
Next, the Exchange is proposing to add language to Rule 700(a) to
specify that the Exchange will not solely rely on the ``primary
market'' of an underlying security to determine whether the Exchange
may trade the option for such security. The Exchange believes that the
proposed rule change will specify that if there is an ample market in
the underlying security, the Exchange has the authority to trade the
option even if the primary market is not open. The Exchange believes
that allowing such discretion will create a lesser market disruption if
the primary exchange is unable to open for trading.
Further, Rule 702 specifies when the Exchange will halt trading.\6\
Specifically, Rule 702(a)(1) lists factors that may be considered in
making that determination. Currently, Rule 702(a)(1)(i) lists, as a
factor in the decision with respect to options, ``trading in the
underlying security has been halted or suspended in the primary
market.'' The Exchange is proposing to add language to state, instead
of the ``primary market,'' that the Exchange may factor in if ``trading
in the underlying security has been halted or suspended in one or more
of the markets trading the underlying security.'' The Exchange believes
the proposed changes will grant discretion for the Exchange to be open
for trading when there is a robust market in the underlying security
rather than limit it to only when the ``primary market'' is open.
---------------------------------------------------------------------------
\6\ See Exchange Rule 702. The Exchange is not proposing any
change to Rule 702(c), Trading Pauses, because a trading halt with
respect to options is mandatory and not subject to discretion
whenever trading in the security underlying the option contract has
been paused by the primary listing market.
---------------------------------------------------------------------------
Next, the Exchange is proposing to amend Rule 702(a)(2) so that a
designated Exchange official may halt trading in an option not only if
the ``primary market'' of the security has halted trading but if the
security has been halted in ``one or more of the markets trading the
underlying security.'' Under the current rule, the designated Exchange
official almost certainly must halt trading whenever there is a halt of
trading in the underlying security. The Exchange believes this proposed
change will provide the designated Exchange official the discretion and
the authority to halt trading in an option if the primary market for an
underlying security is not open for business however that security is
being traded elsewhere. For example, if the primary market is unable to
open due to a natural disaster, or other circumstance, but other stock
exchanges are trading the underlying security, the proposed change will
allow the Exchange to continue trading the overlaying options.
The Exchange believes the proposed changes will allow the Exchange
to trade options for underlying stocks even if that underlying listing
market shall be unable to trade due to an emergency or other
circumstance unique to that stock exchange. Making these proposed
changes will allow the Exchange to trade options when an underlying
security is trading on any national securities exchange regardless of
where that security is formally listed. The proposed discretion
attempts to create a lessor [sic] market disruption if a listing or
primary market is unable to trade due to some circumstance. Because of
the connectivity of the national securities exchanges today, the
Exchange believes limiting its ability to trade options to when the
primary market of the underlying security is open might hurt
[[Page 68487]]
investors if some circumstance should render the primary exchange
inoperable. In addition, the Exchange believes that the reference to
``primary market'' is ambiguous and has the potential to cause
confusion. Thus, the Exchange believes by further clarifying the
language, it is clearer when the Exchange will be open for trading.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder, including the requirements of Section 6(b) of
the Act.\7\ In particular, the Exchange believes the proposed rule
change is consistent with the Section 6(b)(5) \8\ requirements that the
rules of an exchange be designed to promote just and equitable
principles of trade, to prevent fraudulent and manipulative acts, to
foster cooperation and coordination with persons engaged in
facilitating transactions in securities, to remove impediments to and
to perfect the mechanism for a free and open market and a national
market system, and, in general, to protect investors and the public
interest.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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The Exchange believes the proposed rule change protects investors
by allowing trading in options as long as the underlying security is
trading on another exchange. Instead of only relying on the ``primary
market,'' the proposed rule change attempts to clarify when options
will trade on the Exchange to allow greater continuity in the
marketplace. By allowing the Exchange to trade options whenever the
underlying securities are trading, the proposed rule change seeks to
create less of a disconnect if the ``primary'' market should be
experiencing technical difficulties, an emergency, or other situation
that may inhibit it to be connected to the marketplace.
B. Self-Regulatory Organization's Statement on Burden on Competition
This proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. The Exchange does not believe the proposed rule change imposes
any burden on intramarket competition because it will apply to all
Members [sic]. In addition, the Exchange does not believe the proposed
rule change will impose any burden on intermarket competition as it
will merely give the Exchange discretion to trade options when there is
an ample market for the underlying security of those options. Thus, the
Exchange believes the proposed rule change will promote competition by
giving the Exchange the ability to trade options when the underlying
security is trading anywhere, and, thus, helping the Exchange to better
participate in the marketplace. Additionally, as noted above, the
proposed rule change is a competitive response to a recently approved
rule filing submitted by the CBOE.\9\ Topaz believes this proposed rule
change is necessary to permit fair competition among the options
exchanges.
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\9\ See supra note 3.
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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 Exchange believes that the foregoing proposed rule change may
take effect upon filing with the Commission pursuant to
Section19(b)(3)(A) \10\ of the Act and Rule 19b-4(f)(6) thereunder \11\
because the foregoing proposed rule change does not (i) significantly
affect the protection of investors or the public interest, (ii) impose
any significant burden on competition, and (iii) become operative for
30 days after its filing date, or such shorter time as the Commission
may designate.
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) 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-2013-10 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-2013-10. 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 Section, 100 F Street
NE., Washington, DC 20549-1090 on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also 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-
TOPAZ-2013-10 and should be submitted on or before December 5, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
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\12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-27205 Filed 11-13-13; 8:45 am]
BILLING CODE 8011-01-P
