Self-Regulatory Organizations; Topaz Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees, 9547-9550 [2014-03558]

Download as PDF Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices 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–Phlx–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 only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx– 2014–08, and should be submitted on or before March 12, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–03560 Filed 2–18–14; 8:45 am] EMCDONALD on DSK67QTVN1PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71527; File No. SR–Topaz– 2014–07] Self-Regulatory Organizations; Topaz Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees February 12, 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 February 3, 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 have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Topaz is proposing to amend its Schedule of Fees. 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 the Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend the Schedule of Fees to (1) introduce volume-based tiered rebates for Firm Proprietary/Broker1 15 24 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 16:15 Feb 18, 2014 2 17 Jkt 232001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00092 Fmt 4703 Sfmt 4703 9547 Dealer and Professional Customer orders, (2) increase Maker Rebates provided to Priority Customer orders in Non-Penny Symbols, and (3) increase the Taker Fee and Fee for Responses to Crossing Orders charged for Market Maker orders in Non-Penny Symbols. The fee changes discussed apply to both Standard Options and Mini Options traded on Topaz. The Exchange’s Schedule of Fees has separate tables for fees applicable to Standard Options and Mini Options. The Exchange notes that while the discussion below relates to fees for Standard Options, the fees for Mini Options, which are not discussed below, are and shall continue to be 1/10th of the fees for Standard Options. On September 3, 2013 the Exchange filed with the Commission an immediately effective rule filing that established volume-based tiered rebates for adding liquidity on the Exchange (‘‘Maker Rebates’’).3 Specifically, that filing established Maker Rebates applicable to Market Maker 4 and Priority Customer 5 orders based on a Member’s average daily volume (‘‘ADV’’) in a given month. Topaz now proposes to amend its Schedule of Fees to introduce similar tiered Maker Rebates for Firm Proprietary/BrokerDealer 6 and Professional Customer 7 orders that add liquidity on the Exchange. The proposed tiered Maker Rebates will replace the current uniform Maker Rebate of $0.25 per contract that is currently provided to all Firm Proprietary/Broker-Dealer and Professional Customer orders in all symbols regardless of the volume executed by a Member. A Member’s tier will be based on its ‘‘maker’’ ADV in Firm Proprietary/ Broker-Dealer and Professional Customer orders, which must be from 0–9,999 contracts for Tier 1, from 10,000–24,999 contracts for Tier 2, from 25,000–39,999 contracts for Tier 3, and 3 See Securities Exchange Act Release No. 70426 (September 17, 2013), 78 FR 58359 (September 23, 2013) (SR–Topaz–2013–04). 4 The term Market Maker refers to ‘‘Competitive Market Makers’’ and ‘‘Primary Market Makers’’ collectively. Market Maker orders sent to the Exchange by an Electronic Access Member are assessed fees and rebates at the same level as Market Maker orders. See footnote 2, Schedule of Fees, Section I and II. 5 A Priority Customer is a person or entity that is not a broker/dealer in securities, and does not place more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). 6 A Firm Proprietary order is an order submitted by a Member for its own proprietary account. A Broker-Dealer order is an order submitted by a Member for a non-Member broker-dealer account. 7 A Professional Customer is a person who is not a broker/dealer and is not a Priority Customer. E:\FR\FM\19FEN1.SGM 19FEN1 EMCDONALD on DSK67QTVN1PROD with NOTICES 9548 Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices 40,000 or more contracts for Tier 4.8 Instead of the uniform Maker Rebates currently provided, Firm Proprietary/ Broker Dealer and Professional Customer orders will now qualify for tiered Maker Rebates, which are proposed to be $0.25 per contract in Penny Symbols and $0.35 per contract in Non-Penny Symbols for Tier 1, $0.30 per contract in Penny Symbols and $0.45 per contract in Non-Penny Symbols for Tier 2, $0.35 per contract in Penny Symbols and $0.55 per contract in Non-Penny Symbols for Tier 3, and $0.40 per contract in Penny Symbols and $0.65 per contract in Non-Penny Symbols for Tier 4. The highest tier threshold attained by a Member will apply retroactively in a given month to all eligible traded contracts and for all eligible market participants. These tiers, however, will be completely separate from the tiers currently in place for Market Maker and Priority Customer orders. Thus, for example, if a Member executes sufficient volume to qualify for Tier 2 rebates for its Firm Proprietary/ Broker-Dealer and Professional Customer orders that Member will not thereby qualify for Tier 2 rebates for its Market Maker or Priority Customer orders, and vice versa. Market Maker and Priority Customer orders will continue to be eligible for tiers based exclusively on achieving volume thresholds in the current table of qualifying tier thresholds, which has been relabeled ‘‘Table 1.’’ Firm Proprietary/Broker-Dealer and Professional Customer orders will be eligible for higher tiers based exclusively on achieving volume thresholds in new ‘‘Table 2.’’ Members who do not achieve a higher tier based on the applicable table will receive Tier 1 rates. In connection with the new tiered Maker Rebates described above, the Exchange is also proposing to make non-substantive edits to the text of its Schedule of Fees to clarify which items are included in the various ADV categories. In particular, the Exchange proposes to adopt amended text that states that: (1) The Total Affiliated Member ADV category includes all volume in all symbols and order types, including both maker and taker volume and volume executed in the PIM, Facilitation, Solicitation, and QCC 8 All eligible volume from affiliated Members will be aggregated in determining applicable tiers, provided there is at least 75% common ownership between the Members as reflected on each Member’s Form BD, Schedule A. ADV thresholds will be based on Standard and Mini volume, but their respective rebates/fees will apply. Any day that the market is not open for the entire trading day may be excluded from the ADV calculation. VerDate Mar<15>2010 16:15 Feb 18, 2014 Jkt 232001 mechanisms; 9 and (2) the Priority Customer Maker ADV category includes all Priority Customer volume that adds liquidity in all symbols. This amended language will supplement new text indicating, as explained above, that the Firm Proprietary/Broker-Dealer and Professional Customer Maker ADV category includes all Firm Proprietary/ Broker-Dealer and Professional Customer volume that adds liquidity in all symbols. The Exchange is also proposing to increase the Maker Rebates applicable to Priority Customer orders in Non-Penny Symbols. Currently, Priority Customer orders in Non-Penny Symbols receive a Maker Rebate of $0.70 per contract for Tier 1, $0.75 per contract for Tier 2, $0.80 per contract for Tier 3, and $0.82 per contract for Tier 4. The Exchange proposes to increase the Maker Rebate for Priority Customer orders in NonPenny Symbols to be $0.75 per contract for Tier 1, $0.80 per contract for Tier 2, $0.82 per contract for Tier 3, and $0.85 per contract for Tier 4. Finally, the Exchange is proposing to increase the Taker Fee and Fee for Responses to Crossing Orders applicable to Market Maker orders in Non-Penny Symbols. Currently, Market Maker orders in Non-Penny Symbols that remove liquidity or respond to a Crossing Order pay a fee of $0.84 per contract. The Exchange is proposing to increase both of these fees to $0.86 per contract. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,10 in general, and Section 6(b)(4) of the Act,11 in particular, in that it is designed to provide for the equitable allocation of reasonable dues, fees, and other charges among its members and other persons using its facilities. The Exchange believes the proposed tiered Maker Rebates are reasonable, equitable, and not unfairly discriminatory because Topaz has already established volume-based pricing for Market Maker and Priority Customer orders, and is merely proposing to adopt a similar pricing model for Firm Proprietary/BrokerDealer and Professional Customer orders in order to incentivize Members to send this order flow to the Exchange. The new Maker Rebate tiers will allow 9 Only the Total Affiliated Member ADV category includes volume executed in the PIM, Facilitation, Solicitation, and QCC mechanisms as orders executed in the Exchange’s crossing mechanisms are not considered ‘‘maker’’ volume. 10 15 U.S.C. 78f. 11 15 U.S.C. 78f(b)(4). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 Members to receive increased rebates for their Firm Proprietary/Broker-Dealer and Professional Customer orders. In Penny Symbols, Members that bring this order flow to the Exchange will receive the same $0.25 per contract Maker Rebate that they receive today at the lowest tier, and an additional $0.15 per contract above the current rebate at the highest tier. In Non-Penny Symbols, Members will receive an additional $0.10 per contract above the current rebate at the lowest tier, and an additional $0.40 per contract above the current rebate at the highest tier. As noted above, Market Maker and Priority Customer orders currently benefit from tiered rebates, and the Exchange believes that these rebates have been successful in attracting that order flow to Topaz. This proposal is designed to attract additional order flow from certain market participants that are not incentivized by the current tiers for Market Maker and Priority Customer orders. The Exchange believes that providing higher rebates for Firm Proprietary/Broker-Dealer and Professional Customer orders executed by Members that have achieved specified volume thresholds will attract that order flow to Topaz, and thereby create additional liquidity to the benefit of all market participants who trade on the Exchange. While non-Topaz Market Makers will not be eligible for the proposed tiers, the Exchange does not believe that this is unfairly discriminatory as the proposal is not intended to incentivize additional flow from non-Members who will continue to receive Maker Rebates at the current rate. In addition, the Exchange believes that it is appropriate, in connection with this change, to make non-substantive amendments to the text of the Schedule of Fees in order to make the current and proposed rebate programs more transparent to Members and investors. The Exchange also believes that it is reasonable, equitable, and not unfairly discriminatory to increase Maker Rebates provided to Priority Customer orders in Non-Penny Symbols. As with the new Maker Rebates discussed above for Firm Proprietary/Broker-Dealer and Professional Customer orders, the Exchange believes that providing higher rebates for Priority Customer orders attracts that order flow to Topaz and thereby creates liquidity to the benefit of all market participants who trade on the Exchange. While the proposed rule change increases Maker Rebates for both Priority and Professional Customer orders the Exchange notes that Priority Customer orders will remain entitled to higher rebates than Professional E:\FR\FM\19FEN1.SGM 19FEN1 Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices EMCDONALD on DSK67QTVN1PROD with NOTICES Customer orders. The Exchange believes that it is equitable and not unfairly discriminatory to provide higher rebates to Priority Customer orders than to Professional Customer orders. A Priority Customer is by definition not a broker or dealer in securities, and does not place more than 390 orders in listed options per day on average during a calendar month for its own beneficial account(s). This limitation does not apply to participants on the Exchange whose behavior is substantially similar to that of market professionals, including Professional Customers, who will generally submit a higher number of orders (many of which do not result in executions) than Priority Customers. Finally, the Exchange believes that it is reasonable, equitable, and not unfairly discriminatory to increase the Taker Fee and Fee for Responses to Crossing Orders charged for Market Maker orders in Non-Penny Symbols as these fees are still within the range of fees currently charged on other options exchanges. For example, the NASDAQ Options Market currently charges a fee for removing liquidity of $0.89 per contract for Market Maker orders in Non-Penny Symbols, which is higher than the $0.86 per contract fee proposed here.12 The Exchange notes that it is increasing response fees in tandem with its Taker Fees as an execution resulting from a Response to a Crossing Order is akin to taking liquidity. The Exchange notes that it has determined to charge fees and provide rebates in Mini Options at a rate that is 1/10th the rate of fees and rebates the Exchange provides for trading in Standard Options. The Exchange believes it is reasonable and equitable and not unfairly discriminatory to assess lower fees and rebates to provide market participants an incentive to trade Mini Options on the Exchange. The Exchange believes the proposed fees and rebates are reasonable and equitable in light of the fact that Mini Options have a smaller exercise and assignment value, specifically 1/10th that of a standard option contract, and, as such, is providing fees and rebates for Mini Options that are 1/10th of those applicable to Standard Options. B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,13 the Exchange does not believe that the proposed rule change will impose any burden on inter-market or 12 See NASDAQ Options Rules, Chapter XV Options Pricing, Section 2, NASDAQ Options Market—Fees and Rebates. 13 15 U.S.C. 78f(b)(8). VerDate Mar<15>2010 16:15 Feb 18, 2014 Jkt 232001 intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. To the contrary, the Exchange believes that the proposed changes will promote competition as they are designed to allow Topaz to better compete for order flow by offering higher rebates to market participants that add liquidity on the Exchange. While the Exchange proposes to increase taker and response fees for a subset of orders, the Exchange believes that this will not impose a burden on competition because the new fees are consistent with those charged by other options exchanges.14 Furthermore, the Exchange believes that the clarifying text being added to the Schedule of Fees is non-substantive, and therefore does not impact the competition analysis. The Exchange operates in a highly competitive market in which market participants can readily direct their order flow to competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and rebates to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed fee changes reflect this competitive environment. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act,15 and subparagraph (f)(2) of Rule 19b–4 thereunder,16 because it establishes a due, fee, or other charge imposed by Topaz. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings 14 See supra note 12. U.S.C. 78s(b)(3)(A)(ii). 16 17 CFR 240.19b–4(f)(2). 15 15 PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 9549 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 No. SR– Topaz–2014–07 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–2014–07. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/ sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal offices of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Topaz–2014–07, and should be submitted on or before March 12, 2014. E:\FR\FM\19FEN1.SGM 19FEN1 9550 Federal Register / Vol. 79, No. 33 / Wednesday, February 19, 2014 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–03558 Filed 2–18–14; 8:45 am] BILLING CODE 8011–01–P A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–71528; File No. SR–FINRA– 2014–007] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend Rule 7510 and Rule 7540 Relating to Fees for the Alternative Display Facility February 12, 2014. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 31, 2014, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change FINRA is proposing to amend Rule 7510 and Rule 7540 relating to fees for the Alternative Display Facility (‘‘ADF’’).3 The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA and at the Commission’s Public Reference Room. EMCDONALD on DSK67QTVN1PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed 17 17 rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 FINRA notes that it has submitted proposed rule change SR–FINRA–2013–053, which would, among other things, amend Rule 7510. See Securities Exchange Act Release No. 71147 (December 19, 2013), 78 FR 78451 (December 26, 2013). FINRA will amend this filing and/or SR–FINRA–2013–053, as necessary, to reflect Commission approval, or the effectiveness, of any of the proposed rule changes. 1. Purpose The ADF is a quotation collection and trade reporting facility that provides ADF Market Participants (i.e., ADFregistered market makers or electronic communications networks (‘‘ECNs’’)) 4 the ability to post quotations, display orders and report transactions in NMS stocks 5 for submission to the Securities Information Processors (‘‘SIPs’’) for consolidation and dissemination to vendors and other market participants. In addition, the ADF delivers real-time data to FINRA for regulatory purposes, including enforcement of requirements imposed by Regulation NMS.6 Since the second quarter of 2010, there have been no ADF Market Participants.7 FINRA is currently in the process of migrating the ADF to its multi-product platform (‘‘MPP’’). In connection with the migration to the MPP, and the addition of new ADF Market Participants, FINRA is proposing certain changes to the fees relating to ADF operations. Specifically, FINRA is proposing to (1) expand the web browser access that is currently available on the Trade Reporting and Compliance Engine (‘‘TRACE’’) to provide ADF Market Participants with trade reporting and trade management functionality for ADF trades and to adopt fees for such service; (2) expand the FINRA Automated Data Delivery Service (‘‘ADDS’’) that is currently available on TRACE to include ADF data and to adopt fees for such service; (3) revise Rule 7510(a) so that certain of the transaction charges would be assessed on a per-trade basis, with the fee being charged to the executing party; (4) revise Rule 7510(a) to provide a carve-out to the Corrective Transaction Charge pursuant to which the fee would be assessed to the executing party only; (5) delete the carve-out for fees for the late reporting of trades; and (6) delete a provision of Rule 7540(c) relating to a fee for certain testing services and make 1 15 VerDate Mar<15>2010 16:15 Feb 18, 2014 Jkt 232001 4 See Rule 6220(a)(3). 17 CFR 242.600. 6 See 17 CFR 242.600. 7 FINRA notes that it recently submitted a proposed rule change to add a new entrant, LavaFlow, to the ADF. See Securities Exchange Act Release No. 71042 (December 11, 2013), 78 FR 76341 (December 17, 2013) (Notice of Filing of File No. SR–FINRA–2013–52). 5 See PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 corresponding changes to the remaining testing service fee in that section. Proposed Web Browser Access Although there are currently no active ADF participants, an ADF participant today that wished to report a trade in an ADF-eligible security to the ADF would utilize FINRA’s Trade Reporting and Comparison Service (‘‘TRACS’’) pursuant to Rule 6280.8 Following the migration of the ADF to the MPP, FINRA will expand its current web browser access, which members may currently use to access the Trade Reporting and Compliance Engine (‘‘TRACE’’), so that ADF Market Participants may use this functionality to access the ADF and to report ADF trades.9 Pursuant to proposed paragraph (c)(1) of Rule 7510, FINRA is proposing to charge ADF Market Participants $20 per user ID per month for web browser access.10 In addition to reporting trades through the web browser, ADF Market Participants that elect to utilize the web browser feature will be able to access trade management functions, such as trade reconciliation, cancel and correct, and will be able to access up to three prior days’ worth of their trade data as well as the current trading day’s trades. The proposed web browser access will offer the same level of functionality as the Level I (Trade Report Only) web browser access and trade management functionality that is offered under Rule 7730(a) for TRACE. In addition, the proposed fee is identical to the fee currently charged under Rule 7730(a) for Level I (Trade Report Only) web browser access and trade management functionality for TRACE.11 8 FINRA notes that it has recently proposed to replace the reference to TRACS in the rules relating to the ADF, including replacing the reference to TRACS in Rule 6281 with a more generalized reference to the ADF. See Securities Exchange Act Release No. 71147 (December 19, 2013), 78 FR 78451 (December 26, 2013) (Notice of Filing of File No. SR–FINRA–2013–053). 9 Due to system capacity limitations, FINRA proposes to offer the web browser access to ADF Market Participants (i.e., Registered Reporting ADF Market Makers and Registered Reporting ADF ECNs) only. FINRA proposes to offer ADDS, which is discussed in greater detail below, to all ADF participants (i.e., a market participant that is a party to an ADF trade). 10 An ADF Market Participant that elects to not utilize the web browser access would report trades directly to the ADF through FIX (Financial Information eXchange) protocol. Although a participant would incur connectivity costs when submitting trade reports to the ADF through FIX, FINRA will not assess a charge for a FIX connection to the ADF. 11 In contrast to TRACE, FINRA does not propose to offer a Level II web browser access for the ADF. The Level II service for TRACE web browser access provides all real-time TRACE transaction data, in addition to the functionality of Level I. TRACE is the sole platform for the reporting of fixed-income E:\FR\FM\19FEN1.SGM 19FEN1

Agencies

[Federal Register Volume 79, Number 33 (Wednesday, February 19, 2014)]
[Notices]
[Pages 9547-9550]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-03558]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71527; File No. SR-Topaz-2014-07]


Self-Regulatory Organizations; Topaz Exchange LLC; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the 
Schedule of Fees

February 12, 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 February 3, 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 have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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

    Topaz is proposing to amend its Schedule of Fees. 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 the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The self-regulatory organization has prepared summaries, 
set forth in Sections A, B and C below, of the most significant aspects 
of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Schedule of 
Fees to (1) introduce volume-based tiered rebates for Firm Proprietary/
Broker-Dealer and Professional Customer orders, (2) increase Maker 
Rebates provided to Priority Customer orders in Non-Penny Symbols, and 
(3) increase the Taker Fee and Fee for Responses to Crossing Orders 
charged for Market Maker orders in Non-Penny Symbols. The fee changes 
discussed apply to both Standard Options and Mini Options traded on 
Topaz. The Exchange's Schedule of Fees has separate tables for fees 
applicable to Standard Options and Mini Options. The Exchange notes 
that while the discussion below relates to fees for Standard Options, 
the fees for Mini Options, which are not discussed below, are and shall 
continue to be 1/10th of the fees for Standard Options.
    On September 3, 2013 the Exchange filed with the Commission an 
immediately effective rule filing that established volume-based tiered 
rebates for adding liquidity on the Exchange (``Maker Rebates'').\3\ 
Specifically, that filing established Maker Rebates applicable to 
Market Maker \4\ and Priority Customer \5\ orders based on a Member's 
average daily volume (``ADV'') in a given month. Topaz now proposes to 
amend its Schedule of Fees to introduce similar tiered Maker Rebates 
for Firm Proprietary/Broker-Dealer \6\ and Professional Customer \7\ 
orders that add liquidity on the Exchange. The proposed tiered Maker 
Rebates will replace the current uniform Maker Rebate of $0.25 per 
contract that is currently provided to all Firm Proprietary/Broker-
Dealer and Professional Customer orders in all symbols regardless of 
the volume executed by a Member.
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 70426 (September 17, 
2013), 78 FR 58359 (September 23, 2013) (SR-Topaz-2013-04).
    \4\ The term Market Maker refers to ``Competitive Market 
Makers'' and ``Primary Market Makers'' collectively. Market Maker 
orders sent to the Exchange by an Electronic Access Member are 
assessed fees and rebates at the same level as Market Maker orders. 
See footnote 2, Schedule of Fees, Section I and II.
    \5\ A Priority Customer is a person or entity that is not a 
broker/dealer in securities, and does not place more than 390 orders 
in listed options per day on average during a calendar month for its 
own beneficial account(s).
    \6\ A Firm Proprietary order is an order submitted by a Member 
for its own proprietary account. A Broker-Dealer order is an order 
submitted by a Member for a non-Member broker-dealer account.
    \7\ A Professional Customer is a person who is not a broker/
dealer and is not a Priority Customer.
---------------------------------------------------------------------------

    A Member's tier will be based on its ``maker'' ADV in Firm 
Proprietary/Broker-Dealer and Professional Customer orders, which must 
be from 0-9,999 contracts for Tier 1, from 10,000-24,999 contracts for 
Tier 2, from 25,000-39,999 contracts for Tier 3, and

[[Page 9548]]

40,000 or more contracts for Tier 4.\8\ Instead of the uniform Maker 
Rebates currently provided, Firm Proprietary/Broker Dealer and 
Professional Customer orders will now qualify for tiered Maker Rebates, 
which are proposed to be $0.25 per contract in Penny Symbols and $0.35 
per contract in Non-Penny Symbols for Tier 1, $0.30 per contract in 
Penny Symbols and $0.45 per contract in Non-Penny Symbols for Tier 2, 
$0.35 per contract in Penny Symbols and $0.55 per contract in Non-Penny 
Symbols for Tier 3, and $0.40 per contract in Penny Symbols and $0.65 
per contract in Non-Penny Symbols for Tier 4. The highest tier 
threshold attained by a Member will apply retroactively in a given 
month to all eligible traded contracts and for all eligible market 
participants. These tiers, however, will be completely separate from 
the tiers currently in place for Market Maker and Priority Customer 
orders. Thus, for example, if a Member executes sufficient volume to 
qualify for Tier 2 rebates for its Firm Proprietary/Broker-Dealer and 
Professional Customer orders that Member will not thereby qualify for 
Tier 2 rebates for its Market Maker or Priority Customer orders, and 
vice versa. Market Maker and Priority Customer orders will continue to 
be eligible for tiers based exclusively on achieving volume thresholds 
in the current table of qualifying tier thresholds, which has been 
relabeled ``Table 1.'' Firm Proprietary/Broker-Dealer and Professional 
Customer orders will be eligible for higher tiers based exclusively on 
achieving volume thresholds in new ``Table 2.'' Members who do not 
achieve a higher tier based on the applicable table will receive Tier 1 
rates.
---------------------------------------------------------------------------

    \8\ All eligible volume from affiliated Members will be 
aggregated in determining applicable tiers, provided there is at 
least 75% common ownership between the Members as reflected on each 
Member's Form BD, Schedule A. ADV thresholds will be based on 
Standard and Mini volume, but their respective rebates/fees will 
apply. Any day that the market is not open for the entire trading 
day may be excluded from the ADV calculation.
---------------------------------------------------------------------------

    In connection with the new tiered Maker Rebates described above, 
the Exchange is also proposing to make non-substantive edits to the 
text of its Schedule of Fees to clarify which items are included in the 
various ADV categories. In particular, the Exchange proposes to adopt 
amended text that states that: (1) The Total Affiliated Member ADV 
category includes all volume in all symbols and order types, including 
both maker and taker volume and volume executed in the PIM, 
Facilitation, Solicitation, and QCC mechanisms; \9\ and (2) the 
Priority Customer Maker ADV category includes all Priority Customer 
volume that adds liquidity in all symbols. This amended language will 
supplement new text indicating, as explained above, that the Firm 
Proprietary/Broker-Dealer and Professional Customer Maker ADV category 
includes all Firm Proprietary/Broker-Dealer and Professional Customer 
volume that adds liquidity in all symbols.
---------------------------------------------------------------------------

    \9\ Only the Total Affiliated Member ADV category includes 
volume executed in the PIM, Facilitation, Solicitation, and QCC 
mechanisms as orders executed in the Exchange's crossing mechanisms 
are not considered ``maker'' volume.
---------------------------------------------------------------------------

    The Exchange is also proposing to increase the Maker Rebates 
applicable to Priority Customer orders in Non-Penny Symbols. Currently, 
Priority Customer orders in Non-Penny Symbols receive a Maker Rebate of 
$0.70 per contract for Tier 1, $0.75 per contract for Tier 2, $0.80 per 
contract for Tier 3, and $0.82 per contract for Tier 4. The Exchange 
proposes to increase the Maker Rebate for Priority Customer orders in 
Non-Penny Symbols to be $0.75 per contract for Tier 1, $0.80 per 
contract for Tier 2, $0.82 per contract for Tier 3, and $0.85 per 
contract for Tier 4.
    Finally, the Exchange is proposing to increase the Taker Fee and 
Fee for Responses to Crossing Orders applicable to Market Maker orders 
in Non-Penny Symbols. Currently, Market Maker orders in Non-Penny 
Symbols that remove liquidity or respond to a Crossing Order pay a fee 
of $0.84 per contract. The Exchange is proposing to increase both of 
these fees to $0.86 per contract.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\10\ in general, and 
Section 6(b)(4) of the Act,\11\ in particular, in that it is designed 
to provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members and other persons using its facilities.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes the proposed tiered Maker Rebates are 
reasonable, equitable, and not unfairly discriminatory because Topaz 
has already established volume-based pricing for Market Maker and 
Priority Customer orders, and is merely proposing to adopt a similar 
pricing model for Firm Proprietary/Broker-Dealer and Professional 
Customer orders in order to incentivize Members to send this order flow 
to the Exchange. The new Maker Rebate tiers will allow Members to 
receive increased rebates for their Firm Proprietary/Broker-Dealer and 
Professional Customer orders. In Penny Symbols, Members that bring this 
order flow to the Exchange will receive the same $0.25 per contract 
Maker Rebate that they receive today at the lowest tier, and an 
additional $0.15 per contract above the current rebate at the highest 
tier. In Non-Penny Symbols, Members will receive an additional $0.10 
per contract above the current rebate at the lowest tier, and an 
additional $0.40 per contract above the current rebate at the highest 
tier. As noted above, Market Maker and Priority Customer orders 
currently benefit from tiered rebates, and the Exchange believes that 
these rebates have been successful in attracting that order flow to 
Topaz. This proposal is designed to attract additional order flow from 
certain market participants that are not incentivized by the current 
tiers for Market Maker and Priority Customer orders. The Exchange 
believes that providing higher rebates for Firm Proprietary/Broker-
Dealer and Professional Customer orders executed by Members that have 
achieved specified volume thresholds will attract that order flow to 
Topaz, and thereby create additional liquidity to the benefit of all 
market participants who trade on the Exchange. While non-Topaz Market 
Makers will not be eligible for the proposed tiers, the Exchange does 
not believe that this is unfairly discriminatory as the proposal is not 
intended to incentivize additional flow from non-Members who will 
continue to receive Maker Rebates at the current rate. In addition, the 
Exchange believes that it is appropriate, in connection with this 
change, to make non-substantive amendments to the text of the Schedule 
of Fees in order to make the current and proposed rebate programs more 
transparent to Members and investors.
    The Exchange also believes that it is reasonable, equitable, and 
not unfairly discriminatory to increase Maker Rebates provided to 
Priority Customer orders in Non-Penny Symbols. As with the new Maker 
Rebates discussed above for Firm Proprietary/Broker-Dealer and 
Professional Customer orders, the Exchange believes that providing 
higher rebates for Priority Customer orders attracts that order flow to 
Topaz and thereby creates liquidity to the benefit of all market 
participants who trade on the Exchange. While the proposed rule change 
increases Maker Rebates for both Priority and Professional Customer 
orders the Exchange notes that Priority Customer orders will remain 
entitled to higher rebates than Professional

[[Page 9549]]

Customer orders. The Exchange believes that it is equitable and not 
unfairly discriminatory to provide higher rebates to Priority Customer 
orders than to Professional Customer orders. A Priority Customer is by 
definition not a broker or dealer in securities, and does not place 
more than 390 orders in listed options per day on average during a 
calendar month for its own beneficial account(s). This limitation does 
not apply to participants on the Exchange whose behavior is 
substantially similar to that of market professionals, including 
Professional Customers, who will generally submit a higher number of 
orders (many of which do not result in executions) than Priority 
Customers.
    Finally, the Exchange believes that it is reasonable, equitable, 
and not unfairly discriminatory to increase the Taker Fee and Fee for 
Responses to Crossing Orders charged for Market Maker orders in Non-
Penny Symbols as these fees are still within the range of fees 
currently charged on other options exchanges. For example, the NASDAQ 
Options Market currently charges a fee for removing liquidity of $0.89 
per contract for Market Maker orders in Non-Penny Symbols, which is 
higher than the $0.86 per contract fee proposed here.\12\ The Exchange 
notes that it is increasing response fees in tandem with its Taker Fees 
as an execution resulting from a Response to a Crossing Order is akin 
to taking liquidity.
---------------------------------------------------------------------------

    \12\ See NASDAQ Options Rules, Chapter XV Options Pricing, 
Section 2, NASDAQ Options Market--Fees and Rebates.
---------------------------------------------------------------------------

    The Exchange notes that it has determined to charge fees and 
provide rebates in Mini Options at a rate that is 1/10th the rate of 
fees and rebates the Exchange provides for trading in Standard Options. 
The Exchange believes it is reasonable and equitable and not unfairly 
discriminatory to assess lower fees and rebates to provide market 
participants an incentive to trade Mini Options on the Exchange. The 
Exchange believes the proposed fees and rebates are reasonable and 
equitable in light of the fact that Mini Options have a smaller 
exercise and assignment value, specifically 1/10th that of a standard 
option contract, and, as such, is providing fees and rebates for Mini 
Options that are 1/10th of those applicable to Standard Options.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\13\ the Exchange 
does not believe that the proposed rule change will impose any burden 
on inter-market or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. To the contrary, 
the Exchange believes that the proposed changes will promote 
competition as they are designed to allow Topaz to better compete for 
order flow by offering higher rebates to market participants that add 
liquidity on the Exchange. While the Exchange proposes to increase 
taker and response fees for a subset of orders, the Exchange believes 
that this will not impose a burden on competition because the new fees 
are consistent with those charged by other options exchanges.\14\ 
Furthermore, the Exchange believes that the clarifying text being added 
to the Schedule of Fees is non-substantive, and therefore does not 
impact the competition analysis. The Exchange operates in a highly 
competitive market in which market participants can readily direct 
their order flow to competing venues. In such an environment, the 
Exchange must continually review, and consider adjusting, its fees and 
rebates to remain competitive with other exchanges. For the reasons 
described above, the Exchange believes that the proposed fee changes 
reflect this competitive environment.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b)(8).
    \14\ See supra note 12.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\15\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\16\ because it establishes a due, fee, or other charge 
imposed by Topaz.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \16\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-Topaz-2014-07 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-2014-07. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method.
    The Commission will post all comments on the Commission's Internet 
Web site (https://www.sec.gov/rules/sro.shtml). Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal offices of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly.
    All submissions should refer to File Number SR-Topaz-2014-07, and 
should be submitted on or before March 12, 2014.


[[Page 9550]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

    \17\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-03558 Filed 2-18-14; 8:45 am]
BILLING CODE 8011-01-P
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