[Federal Register Volume 76, Number 118 (Monday, June 20, 2011)]
[Notices]
[Pages 35928-35930]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-15280]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-64673; File No. SR-C2-2011-013]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Relating to the Sales Value Fee
June 15, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\
notice is hereby given that on June 3, 2011, C2 Options Exchange,
Incorporated (``C2'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'' or ``SEC'') the proposed rule
change as described in Items I, II, and III below, which Items have
been prepared by C2. 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 Substance
of the Proposed Rule Change
C2 Options Exchange, Incorporated (``C2'' or ``Exchange'') proposes
to make clarifying changes to its Fees Schedule concerning the
application and collection of the Sales Value Fee. The text of the
proposed rule change is available on the Exchange's Web site (http://www.cboe.org/legal), at the Exchange's Office of the Secretary and at
the Commission.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, C2 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. C2 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, Proposed Rule Change
1. Purpose
The Exchange is proposing amendments to its Fees Schedule to make
clear the circumstances that trigger application of the Sales Value
Fee, and to make other clarifying changes. Section 6 of the C2 Fees
Schedule permits the Exchange to collect a fee from its Trading Permit
Holders for sales of securities on C2 with respect to which the
Exchange is obligated to pay a fee to the SEC pursuant to Section 31 of
the Act \3\ and Rule 31, thereunder.\4\ Each national securities
exchange and association is required to calculate the aggregate dollar
amount of ``covered sales'' occurring on the exchange or through a
member of
[[Page 35929]]
the national securities association and to pay fees based on those
covered sales to the Commission (``Section 31 fees''). A covered sale
is a ``sale of a security, other than an exempt sale or a sale of a
security future, occurring on a national securities exchange or by or
through any member of a national securities association otherwise than
on a national securities exchange.'' \5\ Pursuant to Section 6 of the
Fees Schedule, the Exchange assesses a Trading Permit Holder the Sales
Value Fee for an executed sell order entered on C2 that results in a
covered sale. The Sales Value Fee defrays the cost of the Section 31
fee triggered by the covered sale. In this regard, the Sales Value Fee
assessed a Trading Permit Holder is equal to the Section 31 fee
assessed by the Commission for the covered sale. Further, the Exchange
adjusts the Sales Value Fee in lock step with changes to the Section 31
fee made by the Commission. Assessing a sales fee is common practice
among the national securities exchanges and associations.\6\
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\3\ 15 U.S.C. 78ee.
\4\ 17 CFR 240.31.
\5\ 17 CFR 240.31(a)(6).
\6\ See, e.g., ISE Rule 212, NASDAQ Rule 7002, NASDAQ OMX PHLX
Rule 607 and NYSE Rule 440H.
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As noted above, the Sales Value Fee defrays the cost of the Section
31 fee. The Sales Value Fee is triggered by the fulfillment of a
Trading Permit Holder's sell order in options securities entered on C2
that results in a covered sale. If the Trading Permit Holder's sell
order is fulfilled on C2, the Exchange incurs a Section 31 fee
obligation. Sell orders in securities entered on C2 that are routed to
another market for execution, however, do not result in a covered sale
on C2. Execution of such routed orders is facilitated by C2's routing
broker,\7\ which acts as the selling Trading Permit Holder for a routed
order on the away market on behalf of the C2 Trading Permit Holder that
entered the sell order. Such routed sell orders result in a covered
sale on the away market, which incurs a Section 31 fee obligation. Like
the Exchange, the away market assesses a sales fee on the Trading
Permit Holder that entered the sell order, in this case the C2 routing
broker, to defray the cost of the Section 31 fee obligation. The
Exchange may reimburse its routing broker for all Section 31-related
fees (e.g., away market sales fees) incurred by the routing broker in
connection with the routing services it provides. In turn, the Exchange
assesses its Trading Permit Holder, the original selling party, a Sales
Value Fee pursuant to Section 6 of the Fees Schedule to defray the cost
of the Section 31 fee passed on by the away exchange pursuant to its
sales fee. As such, the Exchange's Sales Value Fee offsets the sales
fee its routing broker is assessed by the away market (which the
routing broker then passes to C2), the result of which is to place the
parties involved in the transaction in the same position as if the
covered sale had occurred on C2.
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\7\ C2 routes orders to other exchanges in conjunction with one
or more routing brokers pursuant to C2 Rule 636.
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In light of the varying means by which a Sales Value Fee is
incurred by Trading Permit Holders, as described above, the Exchange
believes that a more detailed description of the circumstances that
trigger the Sales Value Fee is warranted. Accordingly, the new Fees
Schedule language proposed by the Exchange expressly discusses covered
sales in option securities. In addition, the proposed new Fees Schedule
language includes a description of sell orders entered on C2 that
result in a covered sale on another exchange, expressly discussing the
fee incurred by the Exchange and the application of the Sales Value Fee
in that circumstance.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) of the Securities Exchange Act of 1934 (``Act''),\8\ in
general, and furthers the objectives of Section 6(b)(4) \9\ of the Act
in particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees, and other charges among C2 Trading
Permit Holders and other persons using its facilities and it does not
unfairly discriminate between customers, issuers, brokers or dealers.
The proposed clarifying language does not change the application and
assessment of the Sales Value Fee under the Fees Schedule, but rather
provides greater detail on the transactions that trigger the fee and
the process by which the fee is collected. The Exchange applies Section
6 of its Fees Schedule uniformly to all Trading Permit Holders' sell
orders entered on C2 resulting in covered sales. The Exchange also
believes the proposed rule change is consistent with the provisions of
Section 6 of the Act,\10\ in general and with Section 6(b)(5) of the
Act,\11\ in particular, which requires that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices,
promote just and equitable principles of trade, foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general,
protect investors and the public interest. The Exchange believes that
the proposed rule change is consistent with these requirements because
the proposed amended Fees Schedule text provides Trading Permit Holders
with more detail regarding the circumstances under which the Exchange
assesses a Sales Value Fee, and the process by which the fee is
collected. As such, the proposed changes will help avoid Trading Permit
Holder confusion and foster better understanding of the application of
the fee. Accordingly, the Exchange believes the proposed rule change
will promote just and equitable principles of trade, remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and protect investors and the public interest.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
C2 does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of purposes of the Act.
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
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 \13\
thereunder. 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 necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing,
[[Page 35930]]
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 e-mail to [email protected]. Please include
File Number SR-C2-2011-013 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-C2-2011-013. This file
number should be included on the subject line if e-mail 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
a.m. and 3 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 available publicly. All
submissions should refer to File No. SR-C2-2011-013 and should be
submitted on or before July 11, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15280 Filed 6-17-11; 8:45 am]
BILLING CODE 8011-01-P