[Federal Register Volume 78, Number 97 (Monday, May 20, 2013)]
[Notices]
[Pages 29420-29422]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-11899]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69570; File No. SR-C2-2013-020]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend the Fees Schedule

May 14, 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 May 01, 2013, C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (the ``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.
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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

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is available on the Exchange's Web site (http://www.c2exchange.com/Legal/), at the Exchange's Office of the Secretary, 
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 Exchange 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 Exchange proposes to amend its Fees Schedule. First, the 
Exchange proposes to make changes to its fees for orders in all 
multiply-listed index and ETF options classes. Currently, the Exchange 
offers a rebate for Public Customer complex orders, including those 
that trade against simple (non-complex) orders (excluding trades on the 
open, for which no fees are assessed or rebates given). However, the 
Exchange also offers a rebate for all Maker simple orders (excluding 
trades on the open, for which no fees are assessed or rebates given). 
Therefore, in circumstances when a Public Customer complex order trades 
against a simple Maker order, the Exchange pays a rebate to both market 
participants and takes in no fees. The Exchange has determined that 
this is not economically viable. Therefore, the Exchange proposes to 
add a note that applies to the listing of all Maker rebates in Section 
1A of the Fees Schedule (which discusses fees for simple, non-complex 
orders in all multiply-listed index and ETF options classes) that 
states ``Rebates do not apply to orders that trade with Public Customer 
complex orders. In such a circumstance, there will be no fee or 
rebate.'' The Exchange also proposes to amend the note that already 
applies to the listing of all Public Customer rebates in Section 1D 
[sic] \3\ of the Fees Schedule (which discusses fees for complex orders 
in all multiply-listed index and ETF options classes). This note 
currently states that the rebate for Public Customer complex orders 
does not apply to Public Customer orders that trade with other Public 
Customer orders. In such a circumstance, there will be no Maker or 
Taker fee or rebate. The Exchange proposes to amend this note to state 
that the rebate (for Public Customer complex orders) will only apply to 
Public Customer complex orders that trade with non-Public Customer 
complex orders. In other circumstances, there will be no Maker or Taker 
fee or rebate. This simple language achieves the goal of excepting out 
Public Customer complex orders that trade with simple orders from 
receiving the rebate (as well as excepting out Public Customer complex 
orders that trade with other Public Customer complex orders, which were 
already excepted out of receiving the

[[Page 29421]]

rebate), and states that such orders will be assessed no fee or rebate.
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    \3\ The Commission notes that the proposed change modifies 
section 1C of the Fees Schedule, not 1D.
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    The Exchange also proposes to amend fees for simple, non-complex 
orders in equity options classes. The maximum fees for such orders are 
$0.85 ($0.085 mini-options) and the maximum rebates for such orders are 
$0.75 ($0.075 for mini-options).\4\ Feedback received from C2 market 
participants has made it clear to the Exchange that in the BAC, MBI, 
BBRY, DELL and JCP equity options classes (the ``Unique Classes''), the 
economics of a fee/rebate structure that has a maximum fee of $0.85 per 
contract and a maximum rebate of $0.75 per contract is disproportionate 
to pricing and does not encourage trading. As such, the Exchange 
proposes to amend its Fees Schedule to state that the maximum fee for 
the Unique Classes will be $0.55 per contract and the maximum rebate 
for the Unique Classes will be $0.45 per contract (mini-options are not 
traded on the Unique Classes). This maintains the $0.10 difference 
between the maximum fee and rebate (as currently exists).
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    \4\ All fee amounts referenced are per-contract.
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    The Exchange also proposes to amend its Fees Schedule to make a 
number of technical changes. First, the Exchange proposes to remove all 
references in the Fees Schedule to SPXPM, a product which is no longer 
traded on C2. Therefore, Section 1E of the current Fees Schedule, which 
listed the rates for SPXPM executions, is no longer relevant, and 
therefore the Exchange proposes to delete it. Section 1F--Index License 
Surcharge Fees--can also be deleted, as the only Index License 
Surcharge Fee listed was that for SPXPM. References to the SPXPM Tier 
Appointment Fee in Section 3 will also be deleted.
    The Exchange also proposes to delete references to past dates from 
its Fees Schedule. Section 1B describes how fees for simple, non-
complex orders in equity options classes will be calculated, effective 
February 1, 2013. Since that date has passed, the Exchange proposes to 
delete such reference. Similarly, Section 8E lists the Options 
Regulatory Fee (``ORF'') as being $.0015 per contract through December 
31, 2012 and $.002 per contract effective January 2, 2013. As January 
2, 2013 has passed, the Exchange proposes to delete the reference to 
the previous fee and merely state that the ORF will be $.002 per 
contract.
    Finally, the Exchange proposes to clearly state that the fees in 
Sections 1A and 1C that apply to multiply-listed index and ETF options 
classes also apply to multiply-listed ETN options classes. This was not 
previously explicitly-stated on the Fees Schedule.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\5\ Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\6\ which requires that 
Exchange rules provide for the equitable allocation of reasonable dues, 
fees, and other charges among its Trading Permit Holders and other 
persons using its facilities. The proposed changes to the rebates 
offered for multiply-listed index and ETF options are reasonable 
because, while in the circumstances discussed, market participants will 
no longer be receiving a rebate, they still will not be paying a fee 
for such transactions. Further, it is not economically viable for the 
Exchange to be paying out rebates in transactions in which the Exchange 
does not collect a fee (especially to be paying out rebates on both 
sides of such transactions). This change is equitable and not unfairly 
discriminatory because it will apply to all market participants who had 
previously been receiving rebates for such transactions, and they will 
all now simply not be assessed a fee (or provided a rebate) in those 
circumstances.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed change to the maximum fee 
and rebate amounts for the Unique Classes is reasonable because the 
maximum amounts of both fees and rebates will be lower than it 
currently is. Further, the maximum fee amount is reasonable because, 
among other things, the fee will not always be assessed for the maximum 
amount. The fee will only be for the maximum amount when the BBO Market 
Width is wide. Otherwise, the fee will be smaller. Indeed, the purpose 
of the fees structure is to encourage tighter quoting by linking lower 
fees to such tighter quoting. It is necessary to maintain a spread 
between the maximum fee and the maximum rebate because, in the event 
that the maximum fee and rebate both apply, the $0.10 per-contract 
difference will allow the Exchange to maintain a minimum level of 
profit potential. Rebate amounts are often generally lower than fee 
amounts on the Exchange, as well as on other exchanges,\7\ for this 
reason (among others). The Exchange believes that it is equitable and 
not unfairly discriminatory to offer different maximum fees and rebates 
for simple, non-complex orders in the Unique Classes than for other 
equity options classes because the economics of the Unique Classes are 
such that the proposed maximum fee and rebates for the Unique Classes 
are more relevant and will encourage greater trading in those classes. 
Further, the spread between the maximum fee and rebate for the Unique 
Classes and for other equity options classes will be the same ($0.10 
per contract). Finally, the proposed maximum fee and rebate amounts for 
the Unique Classes apply to all market participants in the same manner 
that the current maximum fee and rebate amounts do.
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    \7\ See current C2 Fees Schedule, Section 1, and NOM Chapter XV 
(Options Pricing), Section 2.
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    The Exchange believes that making changes to remove references to 
SPXPM and past dates, and to add the references to ETN options, is 
consistent with the Section 6(b)(5) \8\ requirements that the rules of 
an exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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. 
Removing obsolete and irrelevant references and sections from the Fees 
Schedule and improving the references to ETN options prevents possible 
investor confusion, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system, and, 
in general, protecting investors and the public interest.
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    \8\ 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 the purposes of the Act. The Exchange does not believe 
that the proposed changes to the rebates offered for multiply-listed 
index and ETF options will impose any unnecessary or inappropriate 
burden on intramarket competition because the changes will apply to all 
market participants who had previously been receiving rebates for such 
transactions, and they will all now simply not be assessed a fee (or 
provided a rebate) in

[[Page 29422]]

those circumstances. The Exchange does not believe that the proposed 
changes to the maximum fee and rebate amounts for the Unique Classes 
will impose any unnecessary or inappropriate burden on intramarket 
competition because they will apply to all market participants in the 
same manner that the current maximum fee and rebate amounts do. The 
Exchange does not believe that the proposed changes will impose any 
unnecessary or inappropriate burden on intermarket competition because 
they apply only to trading on C2, and because these changes lower 
rebates that had previously been provided. To the extent that these 
changes make C2 a more attractive trading venue for market participants 
on other exchanges, such market participants may always elect to become 
market participants at C2.

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

    The Exchange neither solicited nor received comments on 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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
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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 Number SR-C2-2013-020 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-C2-2013-020. 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 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-C2-2013-020, and should be 
submitted on or before June 10, 2013.

    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. 2013-11899 Filed 5-17-13; 8:45 am]
BILLING CODE 8011-01-P