[Federal Register Volume 77, Number 210 (Tuesday, October 30, 2012)]
[Notices]
[Page 65754]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26638]
[[Page 65754]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68096, File No. SR-C2-2012-030]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Order Approving Proposed Rule Change Relating to the Complex Order
Auction Process
October 24, 2012.
I. Introduction
On August 30, 2012, the C2 Options Exchange, Incorporated
(``Exchange'' or ``C2'') filed with the Securities and Exchange
Commission (``Commission''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to modify C2 Rule 6.13(c),
``Process for Complex Order RFR Auction,'' to: (i) Include the side of
the market in the request for response (``RFR'') message sent to
Participants at the start of a Complex Order Auction (``COA''); and
(ii) require responses to an RFR message (``RFR Responses'') to be on
the opposite side of the market from the order being auctioned in a
COA. The proposed rule change was published for comment in the Federal
Register on September 17, 2012.\3\ The Commission received no comment
letters regarding the proposal. This order approves the proposed rule
change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 67828 (September 11,
2012), 77 FR 57173 (``Notice'').
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II. Description of the Proposal
COA is an automated RFR auction process for COA-eligible orders.\4\
On receipt of a COA-eligible order and a request from the Participant
representing the order that the order be subjected to a COA, C2 sends
an RFR message to all Participants that have elected to receive RFR
messages.\5\ The RFR message identifies the component series, the size
of the COA-eligible order, and any contingencies, if applicable, but
not the side of the market (i.e. whether the order is to buy or to
sell).\6\ Responders to the COA, who do not know the side of the market
of the order being auctioned, may submit RFR Responses on both sides of
the market.\7\ Because RFR Responses on the same side of the market as
the COA-eligible order cannot trade with the order and thus are
unnecessary, C2's trading system automatically rejects these RFR
Responses.\8\
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\4\ A ``COA-eligible order'' is a complex order that, as
determined by the Exchange on a class-by-class basis, is eligible
for a COA considering the order's marketability (defined as a number
of ticks away from the current market), size, complex order type,
and complex order origin (i.e. non-broker-dealer public customer,
broker-dealers that are not Market-Makers or specialist on an
options exchange, and/or Market-makers or specialists on an options
exchange). See C2 Rule 6.13(c)(1)(B).
\5\ See C2 Rule 6.13(c)(2).
\6\ See id.
\7\ See Notice, supra note 3, at 57174.
\8\ See id.
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The Exchange proposes to amend C2 Rule 6.13(c) to: (i) Include the
side of the market in the RFR message sent to Participants at the start
of a COA; and (ii) require RFR Responses to be on the opposite side of
the market from the order being auctioned in a COA. C2 believes that
these proposed changes will make the COA process more efficient by
eliminating the entry of unnecessary RFR Responses that cannot trade
with the COA order.\9\ C2 also believes that this increased efficiency
could lead to more meaningful and competitively priced RFR Responses,
which could result in better prices for customers.\10\
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\9\ See id.
\10\ See id.
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III. Discussion
After careful consideration of the proposed rule change, the
Commission finds that the proposal is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
national securities exchange.\11\ The Commission believes that the
proposed rule change is consistent with Section 6(b) of the Act, in
general, and Section 6(b)(5) of the Act,\12\ in particular, in that it
is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
More specifically, the Commission believes that the proposal could
improve the efficiency of the COA process by eliminating unnecessary
RFR Responses, which otherwise would been rejected automatically by
C2's trading system.
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\11\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\12\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\13\ that the proposed rule change (SR-C2-2012-030) is approved.
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\13\ 15 U.S.C. 78s(b)(2).
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-26638 Filed 10-29-12; 8:45 am]
BILLING CODE 8011-01-P