
[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Notices]
[Pages 76882-76884]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30180]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71077; File No. SR-Topaz-2013-14]


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

December 13, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 2, 2013, the Topaz Exchange, LLC (d/b/a ISE Gemini) 
(the ``Exchange'' or ``Topaz'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Topaz is proposing to amend its Schedule of Fees to decrease 
Priority Customer taker fees for affiliated Members that achieve the 
ADV threshold for Tiers 2, 3, or 4. The proposed rule change is 
available on the Exchange's Internet Web site at http://www.ise.com, at 
the principal office of the Exchange, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to decrease Priority Customer \3\ taker fees 
for affiliated Members that achieve the average daily volume (``ADV'') 
threshold for Tiers 2, 3, or 4 as described below. The fee changes 
discussed apply to both Standard Options and Mini Options traded on the 
Exchange. The Exchange's Schedule of Fees has separate tables for fees 
applicable to Standard Options and Mini Options. The Exchange notes 
that while the discussion below relates to fees for Standard Options, 
the fees for Mini Options, which are not discussed below, are and shall 
continue to be 1/10th of the fees for Standard Options.
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    \3\ 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).
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    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.\4\ Under the framework 
proposed in that rule filing, the Exchange established four qualifying 
tiers based on a Member's ADV in a given month. The Exchange is now 
proposing to also apply tiers--which currently only apply to rebates 
for adding liquidity--to Priority Customer fees for removing liquidity. 
In order to qualify for the lower Priority Customer taker fee being 
proposed in this filing a Member would, at a minimum, have to qualify 
for Tier 2 by executing (i) a Total Affiliated Member ADV of 65,000 or 
more contracts, (ii) a Priority Customer Maker ADV of at least 20,000 
contracts, or (iii) a Total Affiliated Member ADV of 40,000 contracts 
with a Minimum Priority Customer Maker ADV of 15,000 contracts.
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    \4\ See Securities Exchange Act Release No. 70426 (September 17, 
2013), 78 FR 58359 (September 23, 2013) (Topaz-2013-04).
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    Currently all Members pay a Priority Customer taker fee of $0.45 
per contract in Penny Symbols and SPY, and $0.82 per contract in non-
Penny Symbols. Under the proposed rule change, Members that qualify for 
Tier 2 or higher will instead be charged taker fees for Priority 
Customer orders that are $0.01 per contract less than the taker fees 
currently charged on the Exchange. In particular, Members that have

[[Page 76883]]

achieved Tier 2 or higher will pay a taker fee of $0.44 per contract in 
Penny Symbols and SPY, and $0.81 per contract in non-Penny Symbols, for 
Priority Customer orders. The Exchange believes that lowering the taker 
fee for Priority Customer orders for Members that achieve higher volume 
tiers will incentivize Members to bring more order flow to Topaz, 
including a higher volume of Priority Customer orders, to the benefit 
of all market participants that trade on the Exchange. The Exchange is 
not proposing to modify the fees charged to any other market 
participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and Section 
6(b)(4) of the Act,\6\ in particular, in that it is designed to provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its members and other persons using its facilities.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed Priority Customer taker fees for 
Priority Customers that achieve Tiers 2, 3, or 4 are reasonable and 
equitably allocated because Topaz has already established volume-based 
pricing, and is merely proposing to adopt taker fees in line with such 
pricing in order to further incentivize Members to send additional 
order flow to the Exchange. The Exchange believes that charging lower 
taker fees to Priority Customer orders, and in particular Priority 
Customer orders from Members that have achieved specified volume 
thresholds, attracts that order flow to Topaz and thereby creates 
liquidity to the benefit of all market participants who trade on the 
Exchange. Moreover, the proposed fees are within the range of fees 
currently charged by other maker/taker options exchange such as NYSE 
Arca Options (``Arca''), which charges a customer fee for taking 
liquidity of $0.45 per contract in penny pilot names, and $0.82 per 
contract in non-penny pilot names.\7\
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    \7\ See Arca Fees and Charges, Trade-Related Charges for 
Standard Options.
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    The Exchange further believes that it is equitable and not unfairly 
discriminatory to lower the fees only for Priority Customer orders in 
order to attract that order flow to the Exchange. A Priority Customer 
is by definition not a broker or dealer in securities, and does not 
place more than 390 orders in listed options per day on average during 
a calendar month for its own beneficial account(s). This limitation 
does not apply to participants on the Exchange whose behavior is 
substantially similar to that of market professionals, including 
Professional Customers, who will generally submit a higher number of 
orders (many of which do not result in executions) than Priority 
Customers. Moreover, the Exchange does not believe that it is unfairly 
discriminatory to apply the proposed lower fee only to those Members 
that have achieved at least Tier 2 based on ADV, as this is in line 
with the Exchange's tiered approach to fees and rebates, and 
incentivizes Members to bring more order flow to the Exchange.
    The Exchange notes that it has determined to charge fees in Mini 
Options at a rate that is 1/10th the rate of fees the Exchange provides 
for trading in Standard Options. The Exchange believes it is reasonable 
and equitable and not unfairly discriminatory to assess lower fees to 
provide market participants an incentive to trade Mini Options on the 
Exchange. The Exchange believes the proposed fees are reasonable and 
equitable in light of the fact that Mini Options have a smaller 
exercise and assignment value, specifically 1/10th that of a standard 
option contract, and, as such, is providing fees that are 1/10th of 
those applicable to Standard Options.

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

    In accordance with Section 6(b)(8) of the Act,\8\ the Exchange does 
not believe that the proposed rule change will impose any burden on 
intermarket or intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
fees are within the range of fees currently charged by other maker/
taker options exchanges, as explained above, and will increase 
competition between Topaz and other markets by incentivizing Members to 
execute more volume on the Exchange in order to qualify for the lower 
Priority Customer taker fee. While the lower proposed fees only apply 
to Priority Customers, this is consistent with current practices of 
charging lower fees and providing higher rebates to Priority Customers. 
The proposed rule change will encourage Members to send additional 
Priority Customer order flow to the Exchange, to the benefit of all 
market participants.
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    \8\ 15 U.S.C. 78f(b)(8).
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    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,\9\ and subparagraph (f)(2) of Rule 19b-4 
thereunder,\10\ because it establishes a due, fee, or other charge 
imposed by Topaz.
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    \9\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \10\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-Topaz-2013-14 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.

[[Page 76884]]

All submissions should refer to File No. SR-Topaz-2013-14. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method.
    The Commission will post all comments on the Commission's Internet 
Web site (http://www.sec.gov/rules/sro.shtml). Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing also will be available for inspection 
and copying at the principal offices of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File No. SR-Topaz-2013-14, and should be 
submitted on or before January 9, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30180 Filed 12-18-13; 8:45 am]
BILLING CODE 8011-01-P


