[Federal Register Volume 79, Number 76 (Monday, April 21, 2014)]
[Notices]
[Pages 22170-22172]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08974]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71950; File No. SR-C2-2014-009]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend Its Fees Schedule
April 15, 2014.
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 April 4, 2014, C2 Options Exchange, Incorporated (the
``Exchange'' or ``C2'') 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
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
C2 Options Exchange, Incorporated (the ``Exchange'' or ``C2'')
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. Currently, C2
Market-Maker fees for simple, non-complex orders in equity options
classes (both Penny Pilot classes and non-Penny Pilot classes) are
calculated using a formula.\3\ The maximum fee is $0.85 per contract
($0.085 for mini-options). The Exchange would like to set a standard
fee of $0.40 per contract ($0.04 for mini-options) for C2 Market-Makers
for simple, non-complex orders in Penny Pilot equity options
classes.\4\ This set rate is lower than the maximum fee in order to
encourage quoting in such classes, and would lower the fee paid by C2
Market-Makers trading simple, non-complex orders in Penny Pilot equity
options classes in the majority of transactions.
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\3\ Fee = (C2 BBO Market Width at time of execution) x (Market
Participant Rate) x 50*
* For mini-options, the multiplier will be 5 instead of 50.
BBO Market Width: Displayed C2 Ask Price--Displayed C2 Bid
Price.
The Market Participant Rate for C2 Market-Makers is 30%.
For more information, see C2 Fees Schedule, Section 1B.
\4\ The Exchange proposes to add the statement ``The above fee
structure calculation does not apply to C2 Market-Makers trading
Penny Pilot options; such C2 Market-Makers will be assessed a fee of
$0.40 per contract ($0.04 for mini-options).''
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In conjunction with the above proposed change, the Exchange also
proposes to modify the maximum Public Customer Taker Rebate (also for
simple, non-complex orders in equity options classes) for Penny Pilot
options.\5\ Currently, the maximum rebate is $0.75 per contract ($0.075
for mini options), regardless of whether the options being traded are
Penny Pilot classes or non-Penny Pilot classes. The Exchange does not
propose to change this maximum rebate with respect to non-Penny Pilot
options, but does propose to lower the maximum rebate to $0.60 per
contract ($0.06 for mini-options) for Penny Pilot options. Since the
Exchange is setting a fixed maximum fee rate for C2 Market-Makers, the
Exchange desires to ensure that the spread between the maximum fee for
C2 Market-Makers and maximum Public Customer Taker Rebate is not so
large as to become economically imprudent for the Exchange.
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\5\ For more information about the Public Customer Taker Rebate,
see C2 Fees Schedule, Section 1B.
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Also in conjunction with the above proposed changes, the Exchange
also proposes to delete from Section 1B the statement that ``For the
BAC, MBI, BBRY, DELL and JCP equity options classes, the maximum fee
will be $0.55 per contract and the maximum rebate will be $0.45 per
contract.'' This will put BAC, MBI, BBRY, DELL and JCP (the ``Special
Classes'') on the same competitive footing, from a fees standpoint, as
all other classes, and the same fees that apply to all other classes
will apply to the Special Classes. Because the Special Classes are all
Penny Pilot classes, C2 Market-Maker fees for such trades will be $0.40
per contract and the maximum Public Customer Taker Rebate for such
trades will be $0.60 per contract.
The Exchange also proposes to adopt a fee of $50 per month per
login ID for PULSe workstation users that elect to access a COB
Feed.\6\ The COB Feed provides data (which has already been otherwise-
available to PULSe Workstation users) on a data feed that specifically
provides COB data. In order to improve the provision of this COB data,
the Exchange has recently contracted an outside vendor to provide the
COB Feed. The Exchange proposes to assess the new COB Feed Fee in order
to recoup costs associated with the provision of the COB Feed.
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\6\ ``COB'' stands for the Exchange's Complex Order Book. For a
more detailed description of the PULSe workstation and its other
functionalities, see, e.g., Securities Exchange Act Release Nos.
63246 (November 4, 2010) 75 FR 69478 (November 12, 2010) (SR-C2-
2010-007), 65279 (September 7, 2011), 76 FR 56824 (September 14,
2011) (SR-C2-2011-020), 65482 (October 4, 2011), 76 FR 62879
(October 11, 2011) (SR-C2-2011-028), and 69991 (July 16, 2013), 78
FR 43956 (July 22, 2013) (SR-C2-2013-026).
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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.\7\ Specifically, the Exchange believes the proposed rule change is
consistent with Section 6(b)(4)
[[Page 22171]]
of the Act,\8\ 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
Exchange believes the proposed change to the C2 Market-Maker fee for
simple, non-complex orders in Penny Pilot equity options classes is
reasonable because, in most transactions, it would lower the fee paid
by C2 Market-Makers trading simple, non-complex orders in Penny Pilot
equity options classes (and would lower the maximum fee for such
transactions from $0.85 per contract to $0.40 per contract (and from
$0.085 to $0.04 for mini-options)). The Exchange believes that the
proposed change is equitable and not unfairly discriminatory because it
will apply to all C2 Market-Makers, and C2 Market-Makers take on
certain obligations, such as quoting obligations, that other market
participants do not have.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed change to the Public
Customer Taker Rebate for simple, non-complex orders in Penny Pilot
equity options classes is reasonable because Public Customers Taking
liquidity in those Penny Pilot classes will still receive a rebate
(instead of paying a fee). The Exchange believes that the proposed
change is equitable and not unfairly discriminatory because it will
apply to all Public Customer Takers. While the proposed change will
lower the Public Customer Taker Rebate, Public Customers will still be
the only market participants that receive said rebate. This is
equitable and not unfairly discriminatory because the options industry
has a long history of providing preferential pricing to Public
Customers in order to encourage Public Customer trading, which benefits
other market participants (who prefer to trade with Public Customers).
Further, Public Customers often have less sophisticated trading systems
and apparatuses than other market participants.
The Exchange believes that it is equitable and not unfairly
discriminatory to offer different pricing for Penny Pilot and non-Penny
Pilot options because Penny Pilot options and non-Penny Pilot options
offer different pricing, liquidity, spread and trading incentives. The
spreads in Penny Pilot options are tighter than those in non-Penny
Pilot options (which trade in $0.05 and $0.10 increments). Further, a
number of options exchanges offer different pricing for Penny Pilot and
non-Penny Pilot options.
The Exchange believes that eliminating separate pricing for the
Special Classes is reasonable, equitable and not unfairly
discriminatory because this will place the Special Classes on the same
competitive footing, from a pricing standpoint, as all other Penny
Pilot classes, and the same pricing that applies to all other Penny
Pilot classes will apply to the Special Classes.
The Exchange believes that the COB Feed Fee is reasonable because,
in order to improve the provision of this COB data, the Exchange has
recently contracted an outside vendor to provide the COB Feed, and the
new COB Feed Fee will help serve to recoup costs associated with the
provision of the COB Feed. The Exchange believes the COB Feed Fee is
equitable and not unfairly discriminatory because it will be assessed
equally to all PULSe workstation users that request the COB Feed.
B. Self-Regulatory Organization's Statement on Burden on Competition
C2 does not believe that the proposed rule changes will impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act because the proposed changes
regarding C2 Market-Maker pricing will apply to all C2 Market-Makers,
and C2 Market-Makers take on certain obligations, such as quoting
obligations, that other market participants do not have. The proposed
changes regarding the Public Customer Taker Rebate will apply to all
Public Customers. While the proposed change will lower the Public
Customer Taker Rebate, Public Customers will still be the only market
participants that receive said rebate. This is not a burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the options industry has
a long history of providing preferential pricing to Public Customers in
order to encourage Public Customer trading, which benefits other market
participants (who prefer to trade with Public Customers). Further,
Public Customers often have less sophisticated trading systems and
apparatuses than other market participants. The COB Feed Fee will be
assessed to all PULSe workstation users who request the COB Feed. C2
does not believe that the proposed rule changes will impose any burden
on intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act because the proposed changes are
intended to encourage trading on C2 and make C2 a more competitive
market (and may encourage more competitive pricing from other
exchanges). To the extent that the proposed changes make C2 a more
attractive market for market participants at other exchanges, such
market participants may elect to become C2 market participants. The
proposed change only affects trading on 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 [email protected]. Please include
File Number SR-C2-2014-009 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-C2-2014-009. 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
[[Page 22172]]
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 publicly available. All
submissions should refer to File Number SR-C2-2014-009 and should be
submitted on or before May 12, 2014.
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\11\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08974 Filed 4-18-14; 8:45 am]
BILLING CODE 8011-01-P