Self-Regulatory Organizations; Topaz Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding System Protections, 5491-5495 [2014-01965]
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Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
Section 6(b) of the Act. Finally, the
Proposed Rule Change is consistent
with Section 6(b)(8) of the Act because
it will not impose any burden on
competition, as discussed in Section 4
below.
The Proposed Rule Change does not
modify the Options Exchange’s trading
or compliance rules and preserves the
existing mechanisms for ensuring the
Exchange’s compliance with the Act,
the rules and regulations promulgated
thereunder and the rules of the
Exchange. Furthermore, the proposed
amendments to the provisions of the
LLC Agreement related to ownership
limitations in the Proposed Rule Change
clarify the mechanisms by which
Members may maintain compliance
with applicable laws and regulations,
enabling and ensuring continued
compliance with such laws and
regulations by both the Exchange and its
Members. Finally, the proposed
amendments do not change the
structure of the joint venture which
retains NYSE MKT’s regulatory control
over the Options Exchange or the
provisions specifically designed to
ensure the independence of its selfregulatory function and to ensure that
any regulatory determinations by NYSE
MKT, as the self-regulatory organization
for the Options Exchange, are
controlling with respect to the actions
and decisions of the Options Exchange.
Additionally, the Amended LLC
Agreement continues to require the
Company, its Members and its directors
to comply with the federal securities
laws and the rules and regulations
promulgated thereunder and to engage
in conduct that fosters and does not
interfere with the Exchange’s or the
Company’s ability to carry out its
respective responsibilities under the
Act.
ownership limitations, enabling and
ensuring continued compliance with
applicable equity ownership limits by
Members of the Exchange. In addition,
the Proposed Rule Change does not
affect the availability or pricing of any
goods or services and, as a result, will
not affect competition either between
the Exchange and others that provide
the same goods and services as the
Exchange or among market participants.
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 competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Proposed Rule Change does not
substantively change the LLC
Agreement and Members Agreement,
and instead provides clarifications to
address certain ambiguities in those
documents. Furthermore, the proposed
amendments to the provisions of the
LLC Agreement related to ownership
limitations in the Proposed Rule Change
clarify the mechanisms by which
Members may maintain compliance
with applicable laws and regulations,
including the Commission’s policies
with respect to permissible equity
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEMKT–2014–08 on the
subject line.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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:
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–NYSEMKT–2014–08. 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
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5491
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
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
publicly available. All submissions
should refer to File Number SRNYSEMKT–2014–08 and should be
submitted on or before February 21,
2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–01969 Filed 1–30–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71405; File No. SR–Topaz–
2014–05]
Self-Regulatory Organizations; Topaz
Exchange, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Regarding System
Protections
January 27, 2014.
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 January
17, 2014, 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
25 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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Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
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 specify in
its rules certain system protections
contained in the trading system.
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, and at
the Commission’s Public Reference
Room.
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
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The purpose of the proposal is to
specify in the Exchange’s rules certain
existing trading system protections that
prevent the entry and/or execution of
orders in certain circumstances. These
protections are in addition to the system
protection currently described in Rule
714 that prevents orders from being
automatically executed at prices that are
inferior to a protected bid or offer on
another exchange (‘‘trade through
protection’’) pursuant to the
requirements of the Intermarket Linkage
Plan (the ‘‘Plan’’) and rules adopted by
the Exchange to implement the Plan (the
‘‘Linkage Rules’’).3
Specifically, Topaz Rule 714 provides
that incoming orders will not be
automatically executed at prices that are
inferior to the national best bid or offer
(‘‘NBBO’’). Thus, the language currently
contained in Rule 714 reflects how the
3 Linkage Rules of the International Securities
Exchange, LLC (‘‘ISE’’) are incorporated by
reference into the Topaz rulebook. The ISE Linkage
Rules are provided in Chapter 19 of the ISE
rulebook.
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trading system assures compliance with
the prohibition on trading through the
NBBO contained in Topaz Rule 1901.
Rule 714 also indicates that the
prohibition on trade-throughs does not
apply with respect to non-firm
quotations as provided in Topaz Rule
1900(k). The Exchange proposes to
make several non-substantive changes to
the text and format of Topaz Rule 714
with respect to these linkage-related
provisions for clarity,4 and to add a
reference to intermarket sweep orders
(‘‘ISOs’’). Pursuant to Topaz Rule 1901,
ISOs are eligible to be executed at a
price that is inferior to the NBBO. For
clarity, the Exchange believes it is
appropriate to specify in Rule 714 that
the system does not prevent the
automatic execution of an ISO at a price
that is inferior to the NBBO.
The Exchange also is proposing to
amend Rule 714 to add additional
circumstances in which the trading
system does not provide automatic
executions as follows:
• Price Level Protection. There is a
limit on the number of price levels at
which an incoming order to sell (buy)
will be executed automatically when
there are no bids (offers) from other
exchanges at any price for the options
series. In such a circumstance, incoming
orders are automatically executed at
each successive price level until the
maximum number of price levels is
reached,5 and any balance is either
handled by the primary market maker
(‘‘PMM’’) (in the case of Priority
Customer Orders) 6 or canceled (in the
case of Professional Orders).7 The
number of price levels, which may be
4 The current text of Rule 714 references non-firm
quotations on the Exchange. This language
preceded the adoption of the Linkage Rules and is
no longer applicable. Accordingly, the Exchange
proposes to delete this language.
5 For example, assume the parameter is set to
three tick levels, the best bid on Topaz in an
options series that is traded in penny increments is
$1.50, and there are no bids in the series from any
other exchanges. If a Priority Customer market order
to sell is received, the system will not automatically
execute the incoming order at a price below $1.48.
Therefore, such an order will execute the full size
available at $1.50, $1.49 and $1.48, and any
unexecuted balance will be handled by the PMM.
In this respect, the PMM has the obligation under
existing Exchange rules to engage in dealings for his
own account when, among other things, there is a
temporary disparity between the supply of and
demand for a particular options contract, and to act
with due diligence in handling orders. See infra,
notes 13 and 14 and accompanying text.
6 Pursuant to Topaz Rule 100(a)(37A) and (37B),
a Priority Customer Order is an order for the
account of a person or entity that (i) is not a broker
or dealer in securities, and (ii) does not place more
than 390 orders in listed options per day on average
during a calendar month for its own beneficial
account(s).
7 Pursuant to Topaz Rule 100(a)(37C), a
Professional Order is an order that is for the account
of a person or entity that is not a Priority Customer.
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between 1 and 10, is determined by the
Exchange from time-to-time on a classby-class basis. Currently, this limit is set
to three price levels.8
• Limit Order Price Protection. There
is a limit on the amount by which
incoming limit orders to buy may be
priced above the Exchange’s best offer
and by which incoming limit orders to
sell may be priced below the Exchange’s
best bid. Limit orders that exceed the
pricing limit are rejected upon entry.
The limit is established by the Exchange
from time-to-time, on a class-by-class
basis, as the greater of: (i) an absolute
amount not to exceed $2.00, or (ii) a
percentage of the Exchange’s best bid/
offer not to exceed 10 percent.9 The
Exchange currently has these limits set
to $1.00 and 1 percent respectively.10
• Size Limitation. There is a limit on
the number of contracts an incoming
order may specify. Orders or quotes that
exceed the maximum number of
contracts are rejected upon entry.11 The
maximum number of contracts, which
shall not be less than 10,000, is
established by the Exchange from timeto-time on a class-by-class basis.
Currently, this limit is set to 999,999
contracts.12
The Exchange further proposes that,
in the event of unusual market
conditions and in the interest of a fair
and orderly market, the Exchange may
temporarily establish the levels at which
the order protections are triggered as
necessary and appropriate.
When the PMM handles Priority
Customer orders that are not
automatically executed or canceled
pursuant to the price level protection
described above, they must do so
pursuant to their obligations under
Topaz Rule 803 and consistent with
Rule 400 (Just and Equitable Principles
8 The Exchange will provide at least a two week
notice to members via an exchange circular prior to
changing the price level limit to allow members the
opportunity to perform any system changes. Any
change to the price level limit would be subject to
consultations with members.
9 For example, if the Topaz best bid is $3.00 and
the limits are set to the greater of $1.00 or 1%
(which equals $0.03 in this example), a limit order
to sell that is entered with a limit price below $2.00
will be rejected.
10 The Exchange will provide at least a two week
notice to members via an exchange circular prior to
changing the limit order price check to allow
members the opportunity to perform any system
changes. Any change to the limit order price check
would be subject to consultations with members.
11 For example, if the limit is set to 800,000
contracts, an order with a size of 800,001 or greater
would be rejected by the system.
12 The Exchange will provide at least a two week
notice to members via an exchange circular prior to
changing the size limit to allow members the
opportunity to perform any system changes. Any
change to the size limit would be subject to
consultations with members.
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of Trade). Rule 803 states, among other
things, that market makers have a
continuous obligation to engage, to a
reasonable degree under the existing
circumstances, in dealings for his own
account when there exists, or it is
reasonably anticipated that there will
exist, a lack of price continuity, a
temporary disparity between the supply
of and demand for a particular options
contract, or a temporary distortion of the
price relationships between options
contracts of the same class.13 The Rule
also specifies that a PMM must act with
due diligence in handling orders and
must accord priority to such orders over
the PMM’s principal orders.14 In
addition to these existing provisions,
the Exchange proposes to specify in
Rule 803(c) that PMMs are required to
address orders they handle as soon as
practical by either (i) executing all or a
portion of the orders at a price that at
least matches the NBBO and that
improves upon the Exchange’s best bid
(in the case of a sell order) or the
Exchange’s best offer (in the case of a
buy order); 15 or (ii) releasing all or a
portion of the order for execution
against bids and offers on the Exchange.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Securities Exchange Act of 1934
(the ‘‘Act’’) 16 in general, and furthers
the objectives of Section 6(b)(5) of the
Act 17 in particular, in that it is designed
to promote just and equitable principles
of trade, to remove impediments to and
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
system protections described above
were implemented in the interest of
protecting investors and to assure fair
and orderly markets on the Exchange.
13 Rule
803(b).
803, Supplementary Material .01. The
Exchange currently conducts surveillance of PMMs
to assure that orders are handled timely, that such
orders are executed at appropriate prices, and that
such orders are afforded priority over the PMM’s
principal orders. This surveillance includes all
orders handled by the PMM regardless of whether
they are handling them via operation of the NBBO
trade through protection and price level protection.
15 A PMM cannot provide an execution at the
same price as the Exchange’s best bid or offer (as
applicable) because that would allow the PMM to
by-pass the execution priority rules contained in
Rule 713. The Exchange conducts surveillance to
detect instances when the PMM executes an order
it is handling at the same price as the Topaz best
bid or offer (as applicable). It is not a violation for
the PMM to execute an order at the same price as
the Topaz best bid or offer when the PMM is the
only market participant at that price.
16 15 U.S.C. 78f(b).
17 15 U.S.C. 78f(b)(5).
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14 Rule
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Specifically, the Exchange operates an
electronic marketplace in which orders
are processed and executed in less than
one second. Without any safeguards,
orders that outsize the liquidity
available at the displayed best bid or
offer on the Exchange could potentially
trade at prices far below the best bid and
far above the best offer, creating extreme
volatility in the marketplace and poor
executions for investors. The primary
safeguard in the national market system
that protects against such occurrences is
the prohibition against trading through
protected bids and offers on other
options exchanges, as this links the
liquidity available across markets and in
most circumstances, provides a stop-gap
on each individual exchange. However,
not all products are multiply traded,
and even in multiply-traded options
series, it is possible that Topaz could be
the only exchange disseminating a
protected bid and/or offer in a particular
options series at any given sub-second
during the trading day.
Accordingly, the Exchange designed
its system to provide the price level
protection described above when there
are no other protected bids and offers in
the national market system. The
Exchange believes that limiting the
number of price levels at which an
incoming order will execute in these
circumstances appropriately balances
the interests of investors seeking
execution of their orders and the
Exchange’s obligations to provide a fair
and orderly market. While Professional
Orders are canceled in these
circumstances, the Exchange seeks to
provide a higher level of service for
Priority Customer orders by having
them handled by the PMM, which has
an affirmative obligation to provide
liquidity and price continuity. This
procedure also provides an opportunity
for liquidity to refresh in the market,
further providing better execution
potential for Priority Customer orders.
The Exchange believes that providing
this service for Priority Customer orders
is appropriate and consistent with
feedback from members that enter
Priority Customer orders on the
Exchange, who prefer that Priority
Customer orders not be canceled in this
circumstance.
Similarly, the Exchange’s experience
and member feedback indicates that the
current limit of three price levels has
worked well to balance the interests of
investors receiving execution of their
orders while protecting them from being
executed at unreasonable prices.
Nevertheless, the Exchange believes it is
appropriate to maintain some flexibility
to adjust the number of price level so
that it can continually evaluate market
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conditions and investor needs. In this
respect, under the proposal, the
Exchange has the flexibility to adjust the
number of price levels up to ten. The
Exchange believes this limit is sufficient
to give it the ability to make appropriate
adjustments as necessary and
appropriate to maintain fair and orderly
markets.
The Exchange also represents that the
proposal merely clarifies the existing
PMM obligations by specifying that the
PMM must address orders it handles by
either providing an execution or
releasing orders for execution against
bids and offers on the Exchange. The
proposal further specifies that the price
at which a PMM may execute an order
must be at least equal to the NBBO and
improve upon the best bid (offer) on the
Exchange.18 While this was not
previously stated explicitly in the Rules
for this specific circumstance, the
Exchange has always applied the
obligations contained in Topaz Rule
803(b) and Supplementary Material .01
thereto, as well as Rule 400 and Rule
713, consistent with the additional
proposed language and has enforced
compliance accordingly.19 Moreover,
the Exchange believes the specified
order handling provisions are
appropriate to assure compliance with
all applicable Exchange Rules with
respect to the handling of orders by the
PMM.20
The limit order price protection and
size limitation for regular orders were
designed to reject orders upon entry that
were likely submitted in error. Limit
orders that are entered with prices that
cross the market by a large amount are
likely to have been entered in the wrong
options series, on the wrong side of the
market, or with an erroneous price (e.g.,
a bid of $15 rather than $1.50).
Similarly, orders entered with an
unreasonably large size (e.g., 1 million
contracts or more) are likely to have
been entered in error. The Exchange
believes that it is in the interest of fair
and orderly markets and the protection
of investors to reject these orders upon
entry, and thereby prevent erroneous
transactions from occurring.
The Exchange further believes that the
Exchange’s experience and member
feedback indicates that the current
limits of $1.00 and 1 percent for the
limit order price protection, and
999,999 contracts for the size limitation,
has worked well to provide the
protection of rejecting orders that have
been entered in error while assuring that
valid orders are not rejected. In this
18 See
19 See
supra, note 15.
supra, notes 14 and 15.
20 Id.
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Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
respect, the Exchange notes that orders
below the established limits may well
have been entered in error, but that it is
highly unlikely that orders entered
above the current limits were not
entered in error. The Exchange believes
it is appropriate to maintain some
flexibility to adjust the limits so that it
can continually evaluate the extent to
which such limits could be reduced to
prevent the entry of additional
erroneous orders without rejecting
legitimate orders. In this respect, under
the proposal, the Exchange has specified
that the limit order price protection
limits shall not exceed $2.00 and 10
percent respectively. The Exchange
believes that these limits provide
sufficient flexibility for the Exchange to
make appropriate adjustments in the
interest of maintaining fair and orderly
markets. The Exchange also notes that it
has specified that the order size
limitation shall not be less than 10,000
contracts. The Exchange notes in this
respect that a block-size options order is
defined as an order of at least 50
contracts,21 and that an order of 500
contracts is considered a very large
institutional-size order (a block-size
order in the equities market is an order
of at least 10,000 shares).22 Accordingly,
the Exchange believes that it would not
be unreasonable to set a size limit as
low as 10,000 contracts should the
Exchange determine that it was
necessary to maintain fair and orderly
markets and to protect investors from
executing orders entered with an
erroneously large size.
Finally, the Exchange notes that it
will give members at least a two week
notice prior to changing the level at
which the system protections are
triggered to allow members to perform
any system changes, and that the
Exchange provides these protections for
the benefit of, and in consultation with,
its members. Notwithstanding, the
Exchange also recognizes that the
applicable protections may not be
appropriate in unusual market
conditions. In this respect, the Exchange
has included in the proposal a provision
providing that, in the event of unusual
market conditions and in the interest of
a fair and orderly market, the Exchange
may temporarily establish the levels at
which the system protections are
triggered that are beyond those specified
in the rule. The Exchange believes this
is consistent with its obligation to
716(a).
e.g., Rule 716(e) (providing that the
minimum size of an order entered into the Solicited
Order Mechanism is 500 contracts); and Rule 715(j)
(providing that a qualified Contingent Cross Order
must be for at least 1,000 contracts).
assure a fair and orderly market, and
that the need for such flexibility is
recognized in other Exchange rules,
such as those related to position limits,
quote-width differentials and market
maker risk parameters.23 In the event
that the Exchange temporarily revises
the levels at which the protections are
triggered, it will immediately notify all
members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change specifies
circumstances in which the trading
system does not provide an automatic
execution in the interest of protecting
investors against the execution of
erroneous orders or the execution of
orders at erroneous prices. As such, the
proposal does not impose any burden
on competition.
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) 24 of the Act and Rule
19b–4(f)(6) thereunder 25 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
21 Rule
22 See,
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23 See Rule 412 (regarding position limits), Rule
803 (regarding maximum quotation spreads) and
Rule 804 (regarding market maker risk parameters).
24 15 U.S.C. 78s(b)(3)(A).
25 17 CFR 240.19b–4(f)(6).
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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–2014–05 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-2014–05. 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-Topaz2014–05 and should be submitted on or
before February 21, 2014.
E:\FR\FM\31JAN1.SGM
31JAN1
Federal Register / Vol. 79, No. 21 / Friday, January 31, 2014 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.26
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–01965 Filed 1–30–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–71406; File No. SR–ISE–
2014–05]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Regarding System Protections
January 27, 2014.
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 January
17, 2014, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or the
‘‘ISE’’) 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.
tkelley on DSK3SPTVN1PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend its
rules to specify in its rules certain
system protections contained in the
trading system. The text of the proposed
rule change is available on the
Exchange’s Web site 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
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.
26 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
22:42 Jan 30, 2014
Jkt 232001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposal is to
specify in the Exchange’s rules certain
existing trading system protections that
prevent the entry and/or execution of
orders in certain circumstances. These
protections are in addition to the system
protection currently described in Rule
714 that prevents orders from being
automatically executed at prices that are
inferior to a protected bid or offer on
another exchange (‘‘trade through
protection’’) pursuant to the
requirements of the Intermarket Linkage
Plan (the ‘‘Plan’’) and ISE Rules adopted
to implement the Plan (the ‘‘Linkage
Rules’’).3
Specifically, ISE Rule 714 provides
that incoming orders will not be
automatically executed at prices that are
inferior to the national best bid or offer
(‘‘NBBO’’). Thus, the language currently
contained in Rule 714 reflects how the
trading system assures compliance with
the prohibition on trading through the
NBBO contained in ISE Rule 1901. Rule
714 also indicates that the prohibition
on trade-throughs does not apply with
respect to non-firm quotations as
provided in ISE Rule 1900(k). The
Exchange proposes to make several nonsubstantive changes to the text and
format of ISE Rule 714 with respect to
these linkage-related provisions for
clarity,4 and to add a reference to
intermarket sweep orders (‘‘ISOs’’).
Pursuant to ISE Rule 1901, ISOs are
eligible to be executed at a price that is
inferior to the NBBO. For clarity, the
Exchange believes it is appropriate to
specify in Rule 714 that the system does
not prevent the automatic execution of
an ISO at a price that is inferior to the
NBBO.
The Exchange also is proposing to
amend Rule 714 to add additional
circumstances in which the trading
system does not provide automatic
executions as follows:
• Price Level Protection. There is a
limit on the number of price levels at
which an incoming order to sell (buy)
will be executed automatically when
there are no bids (offers) from other
exchanges at any price for the options
series. In such a circumstance, incoming
orders are automatically executed at
each successive price level until the
maximum number of price levels is
3 ISE
Rules 1900 through 1902 (Linkage Rules).
current text of ISE Rule 714 references nonfirm quotations on the Exchange. This language
preceded the adoption of the Linkage Rules and is
no longer applicable. Accordingly, the Exchange
proposes to delete this language.
4 The
PO 00000
Frm 00128
Fmt 4703
Sfmt 4703
5495
reached,5 and any balance is either
handled by the primary market maker
(‘‘PMM’’) (in the case of Priority
Customer Orders)6 or canceled (in the
case of Professional Orders).7 The
number of price levels, which may be
between 1 and 10, is determined by the
Exchange from time-to-time on a classby-class basis. Currently, this limit is set
to three price levels.8
• Limit Order Price Protection. There
is a limit on the amount by which
incoming limit orders to buy may be
priced above the Exchange’s best offer
and by which incoming limit orders to
sell may be priced below the Exchange’s
best bid. Limit orders that exceed the
pricing limit are rejected upon entry.
The limit is established by the Exchange
from time-to-time, on a class-by-class
basis, as the greater of: (i) An absolute
amount not to exceed $2.00, or (ii) a
percentage of the Exchange’s best bid/
offer not to exceed 10 percent.9 The
Exchange currently has these limits set
to $1.00 and 1 percent respectively.10
• Size Limitation. There is a limit on
the number of contracts an incoming
order may specify. Orders or quotes that
exceed the maximum number of
5 For example, assume the parameter is set to
three tick levels, the best bid on the ISE in an
options series that is traded in penny increments is
$1.50, and there are no bids in the series from any
other exchanges. If a Priority Customer market order
to sell is received, the system will not automatically
execute the incoming order at a price below $1.48.
Therefore, such an order will execute the full size
available at $1.50, $1.49 and $1.48, and any
unexecuted balance will be handled by the PMM.
In this respect, the PMM has the obligation under
existing Exchange rules to engage in dealings for his
own account when, among other things, there is a
temporary disparity between the supply of and
demand for a particular options contract, and to act
with due diligence in handling orders. See infra,
notes 13 and 14 and accompanying text.
6 Pursuant to ISE Rule 100(a)(37A) and (37B), a
Priority Customer Order is an order for the account
of a person or entity that (i) is not a broker or dealer
in securities, and (ii) does not place more than 390
orders in listed options per day on average during
a calendar month for its own beneficial account(s).
7 Pursuant to ISE Rule 100(a)(37C), a Professional
Order is an order that is for the account of a person
or entity that is not a Priority Customer.
8 The Exchange will provide at least a two week
notice to members via an exchange circular prior to
changing the price level limit to allow members the
opportunity to perform any system changes. Any
change to the price level limit would be subject to
consultations with members.
9 For example, if the ISE best bid is $3.00 and the
limits are set to the greater of $1.00 or 1% (which
equals $0.03 in this example), a limit order to sell
that is entered with a limit price below $2.00 will
be rejected.
10 The Exchange will provide at least a two week
notice to members via an exchange circular prior to
changing the limit order price check to allow
members the opportunity to perform any system
changes. Any change to the limit order price check
would be subject to consultations with members.
E:\FR\FM\31JAN1.SGM
31JAN1
]]>Agencies
[Federal Register Volume 79, Number 21 (Friday, January 31, 2014)]
[Notices]
[Pages 5491-5495]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-01965]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71405; File No. SR-Topaz-2014-05]
Self-Regulatory Organizations; Topaz Exchange, LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Regarding
System Protections
January 27, 2014.
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 January 17, 2014, 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
[[Page 5492]]
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 specify in its rules certain system
protections contained in the trading system.
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, and at the Commission's Public Reference Room.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposal is to specify in the Exchange's rules
certain existing trading system protections that prevent the entry and/
or execution of orders in certain circumstances. These protections are
in addition to the system protection currently described in Rule 714
that prevents orders from being automatically executed at prices that
are inferior to a protected bid or offer on another exchange (``trade
through protection'') pursuant to the requirements of the Intermarket
Linkage Plan (the ``Plan'') and rules adopted by the Exchange to
implement the Plan (the ``Linkage Rules'').\3\
---------------------------------------------------------------------------
\3\ Linkage Rules of the International Securities Exchange, LLC
(``ISE'') are incorporated by reference into the Topaz rulebook. The
ISE Linkage Rules are provided in Chapter 19 of the ISE rulebook.
---------------------------------------------------------------------------
Specifically, Topaz Rule 714 provides that incoming orders will not
be automatically executed at prices that are inferior to the national
best bid or offer (``NBBO''). Thus, the language currently contained in
Rule 714 reflects how the trading system assures compliance with the
prohibition on trading through the NBBO contained in Topaz Rule 1901.
Rule 714 also indicates that the prohibition on trade-throughs does not
apply with respect to non-firm quotations as provided in Topaz Rule
1900(k). The Exchange proposes to make several non-substantive changes
to the text and format of Topaz Rule 714 with respect to these linkage-
related provisions for clarity,\4\ and to add a reference to
intermarket sweep orders (``ISOs''). Pursuant to Topaz Rule 1901, ISOs
are eligible to be executed at a price that is inferior to the NBBO.
For clarity, the Exchange believes it is appropriate to specify in Rule
714 that the system does not prevent the automatic execution of an ISO
at a price that is inferior to the NBBO.
---------------------------------------------------------------------------
\4\ The current text of Rule 714 references non-firm quotations
on the Exchange. This language preceded the adoption of the Linkage
Rules and is no longer applicable. Accordingly, the Exchange
proposes to delete this language.
---------------------------------------------------------------------------
The Exchange also is proposing to amend Rule 714 to add additional
circumstances in which the trading system does not provide automatic
executions as follows:
Price Level Protection. There is a limit on the number of
price levels at which an incoming order to sell (buy) will be executed
automatically when there are no bids (offers) from other exchanges at
any price for the options series. In such a circumstance, incoming
orders are automatically executed at each successive price level until
the maximum number of price levels is reached,\5\ and any balance is
either handled by the primary market maker (``PMM'') (in the case of
Priority Customer Orders) \6\ or canceled (in the case of Professional
Orders).\7\ The number of price levels, which may be between 1 and 10,
is determined by the Exchange from time-to-time on a class-by-class
basis. Currently, this limit is set to three price levels.\8\
---------------------------------------------------------------------------
\5\ For example, assume the parameter is set to three tick
levels, the best bid on Topaz in an options series that is traded in
penny increments is $1.50, and there are no bids in the series from
any other exchanges. If a Priority Customer market order to sell is
received, the system will not automatically execute the incoming
order at a price below $1.48. Therefore, such an order will execute
the full size available at $1.50, $1.49 and $1.48, and any
unexecuted balance will be handled by the PMM. In this respect, the
PMM has the obligation under existing Exchange rules to engage in
dealings for his own account when, among other things, there is a
temporary disparity between the supply of and demand for a
particular options contract, and to act with due diligence in
handling orders. See infra, notes 13 and 14 and accompanying text.
\6\ Pursuant to Topaz Rule 100(a)(37A) and (37B), a Priority
Customer Order is an order for the account of a person or entity
that (i) is not a broker or dealer in securities, and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial account(s).
\7\ Pursuant to Topaz Rule 100(a)(37C), a Professional Order is
an order that is for the account of a person or entity that is not a
Priority Customer.
\8\ The Exchange will provide at least a two week notice to
members via an exchange circular prior to changing the price level
limit to allow members the opportunity to perform any system
changes. Any change to the price level limit would be subject to
consultations with members.
---------------------------------------------------------------------------
Limit Order Price Protection. There is a limit on the
amount by which incoming limit orders to buy may be priced above the
Exchange's best offer and by which incoming limit orders to sell may be
priced below the Exchange's best bid. Limit orders that exceed the
pricing limit are rejected upon entry. The limit is established by the
Exchange from time-to-time, on a class-by-class basis, as the greater
of: (i) an absolute amount not to exceed $2.00, or (ii) a percentage of
the Exchange's best bid/offer not to exceed 10 percent.\9\ The Exchange
currently has these limits set to $1.00 and 1 percent respectively.\10\
---------------------------------------------------------------------------
\9\ For example, if the Topaz best bid is $3.00 and the limits
are set to the greater of $1.00 or 1% (which equals $0.03 in this
example), a limit order to sell that is entered with a limit price
below $2.00 will be rejected.
\10\ The Exchange will provide at least a two week notice to
members via an exchange circular prior to changing the limit order
price check to allow members the opportunity to perform any system
changes. Any change to the limit order price check would be subject
to consultations with members.
---------------------------------------------------------------------------
Size Limitation. There is a limit on the number of
contracts an incoming order may specify. Orders or quotes that exceed
the maximum number of contracts are rejected upon entry.\11\ The
maximum number of contracts, which shall not be less than 10,000, is
established by the Exchange from time-to-time on a class-by-class
basis. Currently, this limit is set to 999,999 contracts.\12\
---------------------------------------------------------------------------
\11\ For example, if the limit is set to 800,000 contracts, an
order with a size of 800,001 or greater would be rejected by the
system.
\12\ The Exchange will provide at least a two week notice to
members via an exchange circular prior to changing the size limit to
allow members the opportunity to perform any system changes. Any
change to the size limit would be subject to consultations with
members.
---------------------------------------------------------------------------
The Exchange further proposes that, in the event of unusual market
conditions and in the interest of a fair and orderly market, the
Exchange may temporarily establish the levels at which the order
protections are triggered as necessary and appropriate.
When the PMM handles Priority Customer orders that are not
automatically executed or canceled pursuant to the price level
protection described above, they must do so pursuant to their
obligations under Topaz Rule 803 and consistent with Rule 400 (Just and
Equitable Principles
[[Page 5493]]
of Trade). Rule 803 states, among other things, that market makers have
a continuous obligation to engage, to a reasonable degree under the
existing circumstances, in dealings for his own account when there
exists, or it is reasonably anticipated that there will exist, a lack
of price continuity, a temporary disparity between the supply of and
demand for a particular options contract, or a temporary distortion of
the price relationships between options contracts of the same
class.\13\ The Rule also specifies that a PMM must act with due
diligence in handling orders and must accord priority to such orders
over the PMM's principal orders.\14\ In addition to these existing
provisions, the Exchange proposes to specify in Rule 803(c) that PMMs
are required to address orders they handle as soon as practical by
either (i) executing all or a portion of the orders at a price that at
least matches the NBBO and that improves upon the Exchange's best bid
(in the case of a sell order) or the Exchange's best offer (in the case
of a buy order); \15\ or (ii) releasing all or a portion of the order
for execution against bids and offers on the Exchange.
---------------------------------------------------------------------------
\13\ Rule 803(b).
\14\ Rule 803, Supplementary Material .01. The Exchange
currently conducts surveillance of PMMs to assure that orders are
handled timely, that such orders are executed at appropriate prices,
and that such orders are afforded priority over the PMM's principal
orders. This surveillance includes all orders handled by the PMM
regardless of whether they are handling them via operation of the
NBBO trade through protection and price level protection.
\15\ A PMM cannot provide an execution at the same price as the
Exchange's best bid or offer (as applicable) because that would
allow the PMM to by-pass the execution priority rules contained in
Rule 713. The Exchange conducts surveillance to detect instances
when the PMM executes an order it is handling at the same price as
the Topaz best bid or offer (as applicable). It is not a violation
for the PMM to execute an order at the same price as the Topaz best
bid or offer when the PMM is the only market participant at that
price.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Securities Exchange Act of 1934 (the ``Act'') \16\ in
general, and furthers the objectives of Section 6(b)(5) of the Act \17\
in particular, in that it is designed to promote just and equitable
principles of trade, to remove impediments to and 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 system
protections described above were implemented in the interest of
protecting investors and to assure fair and orderly markets on the
Exchange.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f(b).
\17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Specifically, the Exchange operates an electronic marketplace in
which orders are processed and executed in less than one second.
Without any safeguards, orders that outsize the liquidity available at
the displayed best bid or offer on the Exchange could potentially trade
at prices far below the best bid and far above the best offer, creating
extreme volatility in the marketplace and poor executions for
investors. The primary safeguard in the national market system that
protects against such occurrences is the prohibition against trading
through protected bids and offers on other options exchanges, as this
links the liquidity available across markets and in most circumstances,
provides a stop-gap on each individual exchange. However, not all
products are multiply traded, and even in multiply-traded options
series, it is possible that Topaz could be the only exchange
disseminating a protected bid and/or offer in a particular options
series at any given sub-second during the trading day.
Accordingly, the Exchange designed its system to provide the price
level protection described above when there are no other protected bids
and offers in the national market system. The Exchange believes that
limiting the number of price levels at which an incoming order will
execute in these circumstances appropriately balances the interests of
investors seeking execution of their orders and the Exchange's
obligations to provide a fair and orderly market. While Professional
Orders are canceled in these circumstances, the Exchange seeks to
provide a higher level of service for Priority Customer orders by
having them handled by the PMM, which has an affirmative obligation to
provide liquidity and price continuity. This procedure also provides an
opportunity for liquidity to refresh in the market, further providing
better execution potential for Priority Customer orders. The Exchange
believes that providing this service for Priority Customer orders is
appropriate and consistent with feedback from members that enter
Priority Customer orders on the Exchange, who prefer that Priority
Customer orders not be canceled in this circumstance.
Similarly, the Exchange's experience and member feedback indicates
that the current limit of three price levels has worked well to balance
the interests of investors receiving execution of their orders while
protecting them from being executed at unreasonable prices.
Nevertheless, the Exchange believes it is appropriate to maintain some
flexibility to adjust the number of price level so that it can
continually evaluate market conditions and investor needs. In this
respect, under the proposal, the Exchange has the flexibility to adjust
the number of price levels up to ten. The Exchange believes this limit
is sufficient to give it the ability to make appropriate adjustments as
necessary and appropriate to maintain fair and orderly markets.
The Exchange also represents that the proposal merely clarifies the
existing PMM obligations by specifying that the PMM must address orders
it handles by either providing an execution or releasing orders for
execution against bids and offers on the Exchange. The proposal further
specifies that the price at which a PMM may execute an order must be at
least equal to the NBBO and improve upon the best bid (offer) on the
Exchange.\18\ While this was not previously stated explicitly in the
Rules for this specific circumstance, the Exchange has always applied
the obligations contained in Topaz Rule 803(b) and Supplementary
Material .01 thereto, as well as Rule 400 and Rule 713, consistent with
the additional proposed language and has enforced compliance
accordingly.\19\ Moreover, the Exchange believes the specified order
handling provisions are appropriate to assure compliance with all
applicable Exchange Rules with respect to the handling of orders by the
PMM.\20\
---------------------------------------------------------------------------
\18\ See supra, note 15.
\19\ See supra, notes 14 and 15.
\20\ Id.
---------------------------------------------------------------------------
The limit order price protection and size limitation for regular
orders were designed to reject orders upon entry that were likely
submitted in error. Limit orders that are entered with prices that
cross the market by a large amount are likely to have been entered in
the wrong options series, on the wrong side of the market, or with an
erroneous price (e.g., a bid of $15 rather than $1.50). Similarly,
orders entered with an unreasonably large size (e.g., 1 million
contracts or more) are likely to have been entered in error. The
Exchange believes that it is in the interest of fair and orderly
markets and the protection of investors to reject these orders upon
entry, and thereby prevent erroneous transactions from occurring.
The Exchange further believes that the Exchange's experience and
member feedback indicates that the current limits of $1.00 and 1
percent for the limit order price protection, and 999,999 contracts for
the size limitation, has worked well to provide the protection of
rejecting orders that have been entered in error while assuring that
valid orders are not rejected. In this
[[Page 5494]]
respect, the Exchange notes that orders below the established limits
may well have been entered in error, but that it is highly unlikely
that orders entered above the current limits were not entered in error.
The Exchange believes it is appropriate to maintain some flexibility to
adjust the limits so that it can continually evaluate the extent to
which such limits could be reduced to prevent the entry of additional
erroneous orders without rejecting legitimate orders. In this respect,
under the proposal, the Exchange has specified that the limit order
price protection limits shall not exceed $2.00 and 10 percent
respectively. The Exchange believes that these limits provide
sufficient flexibility for the Exchange to make appropriate adjustments
in the interest of maintaining fair and orderly markets. The Exchange
also notes that it has specified that the order size limitation shall
not be less than 10,000 contracts. The Exchange notes in this respect
that a block-size options order is defined as an order of at least 50
contracts,\21\ and that an order of 500 contracts is considered a very
large institutional-size order (a block-size order in the equities
market is an order of at least 10,000 shares).\22\ Accordingly, the
Exchange believes that it would not be unreasonable to set a size limit
as low as 10,000 contracts should the Exchange determine that it was
necessary to maintain fair and orderly markets and to protect investors
from executing orders entered with an erroneously large size.
---------------------------------------------------------------------------
\21\ Rule 716(a).
\22\ See, e.g., Rule 716(e) (providing that the minimum size of
an order entered into the Solicited Order Mechanism is 500
contracts); and Rule 715(j) (providing that a qualified Contingent
Cross Order must be for at least 1,000 contracts).
---------------------------------------------------------------------------
Finally, the Exchange notes that it will give members at least a
two week notice prior to changing the level at which the system
protections are triggered to allow members to perform any system
changes, and that the Exchange provides these protections for the
benefit of, and in consultation with, its members. Notwithstanding, the
Exchange also recognizes that the applicable protections may not be
appropriate in unusual market conditions. In this respect, the Exchange
has included in the proposal a provision providing that, in the event
of unusual market conditions and in the interest of a fair and orderly
market, the Exchange may temporarily establish the levels at which the
system protections are triggered that are beyond those specified in the
rule. The Exchange believes this is consistent with its obligation to
assure a fair and orderly market, and that the need for such
flexibility is recognized in other Exchange rules, such as those
related to position limits, quote-width differentials and market maker
risk parameters.\23\ In the event that the Exchange temporarily revises
the levels at which the protections are triggered, it will immediately
notify all members.
---------------------------------------------------------------------------
\23\ See Rule 412 (regarding position limits), Rule 803
(regarding maximum quotation spreads) and Rule 804 (regarding market
maker risk parameters).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change specifies circumstances in which the
trading system does not provide an automatic execution in the interest
of protecting investors against the execution of erroneous orders or
the execution of orders at erroneous prices. As such, the proposal does
not impose any burden on competition.
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) \24\ of the Act and Rule 19b-4(f)(6) thereunder \25\
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.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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-2014-05 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-2014-05. 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-Topaz-2014-05 and should be
submitted on or before February 21, 2014.
[[Page 5495]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-01965 Filed 1-30-14; 8:45 am]
BILLING CODE 8011-01-P
