[Federal Register Volume 78, Number 174 (Monday, September 9, 2013)]
[Notices]
[Pages 55128-55130]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-21814]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70301; File No. SR-C2-2013-032]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to the Options Regulatory Fee
September 3, 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 August 21, 2013, C2 Options Exchange, Incorporated 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 Substance
of the Proposed Rule Change
C2 Options Exchange, Incorporated (the ``Exchange'' or ``C2'')
proposes to amend the Options Regulatory Fee. 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 has reevaluated the current amount of the Options
Regulatory Fee (``ORF'') in light of better than expected trading
volume so far in 2013 among other factors. In order to try to ensure
that revenue collected from the ORF, in combination with other
regulatory fees and fines, does not exceed the Exchange's total
regulatory costs, the Exchange proposes to reduce the ORF from $.002
per contract to zero. The proposed fee change would be operative on
September 1, 2013. The Exchange intends to reevaluate the amount of the
ORF again in connection with its annual budget review.
The ORF is assessed by the Exchange to each Permit Holder for all
options transactions executed or cleared by the Permit Holder that are
cleared by The Options Clearing Corporation (``OCC'') in the customer
range (i.e., transactions that clear in a customer account at OCC)
regardless of the marketplace of execution. In other words, the
Exchange imposes the ORF on all customer-range transactions executed by
a Permit Holder, even if the transactions do not take place on the
Exchange.\3\ The ORF also is charged for transactions that are not
executed by a Permit Holder but are ultimately cleared by a Permit
Holder.
[[Page 55129]]
In the case where a Permit Holder executes a transaction and a
different Permit Holder clears the transaction, the ORF is assessed to
the Permit Holder who executed the transaction. In the case where a
non-Permit Holder executes a transaction and a Permit Holder clears the
transaction, the ORF is assessed to the Permit Holder who clears the
transaction. The ORF is collected indirectly from Permit Holders
through their clearing firms by OCC on behalf of the Exchange.
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\3\ Exchange rules require each Permit Holder to record the
appropriate account origin code on all orders at the time of entry
in order to allow the Exchange to properly prioritize and route
orders and assess transaction fees pursuant to the rules of the
Exchange and report resulting transactions to the OCC. C2 order
origin codes are defined in C2 Regulatory Circular RG13-015. The
Exchange represents that it has surveillances in place to verify
that Trading Permit Holders mark orders with the correct account
origin code.
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The ORF is designed to recover a material portion of the costs to
the Exchange of the supervision and regulation of Permit Holder
customer options business, including performing routine surveillances,
investigations, examinations, financial monitoring, as well as policy,
rulemaking, interpretive and enforcement activities. The Exchange
believes that revenue generated from the ORF, when combined with all of
the Exchange's other regulatory fees and fines, will cover a material
portion, but not all, of the Exchange's regulatory costs. The Exchange
notes that its regulatory responsibilities with respect to Permit
Holder compliance with options sales practice rules have largely been
allocated to FINRA under a 17d-2 agreement. The ORF is not designed to
cover the cost of that options sales practice regulation.
The Exchange will continue to monitor the amount of revenue
collected from regulatory fees and fines to ensure that it does not
exceed the Exchange's total regulatory costs and to ensure the Exchange
is meeting its revenue benchmarks. The Exchange may make other
adjustments to the ORF in the future as necessary. The Exchange
notifies Permit Holders of adjustments to the ORF via regulatory
circular.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\4\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\5\ which provides that Exchange rules may provide
for the equitable allocation of reasonable dues, fees, and other
charges among its Permit Holders and other persons using its
facilities. Additionally, the Exchange believes the proposed rule
change is consistent with the Section 6(b)(5) \6\ requirement that the
rules of an exchange not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(4).
\6\ Id. [sic]
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The Exchange believes the proposed ORF reduction is reasonable in
that it would help the Exchange try to ensure that revenue collected
from the ORF, in combination with other regulatory fees and fines, does
not exceed the Exchange's total regulatory costs in light of better
than expected trading volume so far in 2013 and other factors.
The Exchange believes the ORF is equitable and not unfairly
discriminatory in that it is charged to all Permit Holders on all their
transactions that clear in the customer range at the OCC. Moreover, the
Exchange believes the ORF ensures fairness by assessing higher fees to
those Permit Holders that require more Exchange regulatory services
based on the amount of customer options business they conduct.
Regulating customer trading activity is much more labor intensive and
requires greater expenditure of human and technical resources than
regulating non-customer trading activity, which tends to be more
automated and less labor-intensive. As a result, the costs associated
with administering the customer component of the Exchange's overall
regulatory program are materially higher than the costs associated with
administering the non-customer component (e.g., Permit Holder
proprietary transactions) of its regulatory program.\7\
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\7\ If the Exchange changes its method of funding regulation or
if circumstances otherwise change in the future, the Exchange may
decide to modify the ORF or assess a separate regulatory fee on
Permit Holder proprietary transactions if the Exchange deems it
advisable.
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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 proposed rule change is not
designed to address any competitive issues. Rather, the proposed rule
change is designed to help the Exchange to adequately fund its
regulatory activities while seeking to ensure that total regulatory
revenues do not exceed total regulatory costs.
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 \8\ and paragraph (f) of Rule 19b-4 \9\
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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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 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 [email protected]. Please include
File Number SR-C2-2013-032 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-C2-2013-032. 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
[[Page 55130]]
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 publicly available. All
submissions should refer to File Number SR-C2-2013-032 and should be
submitted on or before September 30, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-21814 Filed 9-6-13; 8:45 am]
BILLING CODE 8011-01-P