[Federal Register Volume 79, Number 135 (Tuesday, July 15, 2014)]
[Notices]
[Pages 41325-41327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-16495]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72569; File No. SR-C2-2014-014]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Extending AIM Pilot Program Until July 18, 2015
July 9, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 1, 2014, C2 Options Exchange, Incorporated (``Exchange'' or
``C2'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II 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 proposed rule change proposes to amend the Exchange's rules
related to its Automated Improvement Mechanism (``AIM''). The text of
the proposed rule change is provided below.
(additions are underlined; deletions are [bracketed])
* * * * *
C2 Options Exchange, Incorporated
Rules
* * * * *
Rule 6.51. Automated Improvement Mechanism (``AIM'')
Notwithstanding the provisions of Rule 6.50, a Participant that
represents agency orders may electronically execute an order it
represents as agent (``Agency Order'') against principal interest or
against a solicited order provided it submits the Agency Order for
execution into the AIM auction (``Auction'') pursuant to this Rule.
(a)-(b) No change.
. . . Interpretations and Policies:
.01-.02 No change.
.03 Initially, and for at least a Pilot Period expiring on July 18,
201[4]5, there will be no minimum size requirement for orders to be
eligible for the Auction. During this Pilot Period, the Exchange will
submit certain data, periodically as required by the Commission, to
provide supporting evidence that, among other things, there is
meaningful competition for all size orders and that there is an active
and liquid market functioning on the Exchange outside of the Auction
mechanism. Any data which is submitted to the Commission will be
provided on a confidential basis.
.04-.09 No change.
* * * * *
The text of the proposed rule change is also available on the
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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
In December 2009, the Commission approved adoption of C2's rules,
including the AIM auction process.\3\ AIM exposes certain orders
electronically to an auction process to provide these orders with the
opportunity to receive an execution at an improved price. The AIM
auction is available only for orders that a Trading Permit Holder
represents as agent (``Agency Order'') and for which a second order of
the same size as the Agency Order (and on the opposite side of the
market) is also submitted (effectively stopping the Agency Order at a
given price).\4\
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\3\ See Securities Exchange Act Release No. 61152 (December 10,
2009), 74 FR 66699 (December 16, 2009) (SR-C2-2011-015).
\4\ The Exchange first activated AIM on October 17, 2011 for
P.M.-settled options on the S&P 500 Index (SPXpm), which are no
longer listed on the Exchange. Currently, AIM is not activated for
any classes on C2.
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The Commission approved on a pilot basis the component of AIM that
there is no minimum size requirement for orders to be eligible for the
auction. In
[[Page 41326]]
connection with the pilot program, the Exchange has submitted to the
Commission reports providing AIM auction and order execution data, and
the Exchange will continue to submit to the Commission these reports.
Four one-year extensions to the pilot program have previously become
effective.\5\ The proposed rule change merely extends the duration of
the pilot program until July 18, 2015. Extending the pilot for an
additional year will allow the Commission more time to consider the
impact of the pilot program on AIM order executions.
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\5\ See Securities Exchange Act Release Nos. 63238 (November 3,
2010), 75 FR 68844 (November 9, 2010) (SR-C2-2010-008); 64929 (July
20, 2011), 76 FR 44635 (July 26, 2011) (SR-C2-2011-015); 67303 (June
28, 2012), 77 FR 39777 (July 5, 2012) (SR-C2-2012-021); and 69868
(June 27, 2013), 78 FR 40235 (July 3, 2013) (SR-C2-2013-023).
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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.\6\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \7\ 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.
Additionally, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \8\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\6\ 15 U.S.C. 78f(b).
\7\ 15 U.S.C. 78f(b)(5).
\8\ Id.
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In particular, the proposed rule change protects investors and the
public interest by allowing for an extension of the AIM pilot program,
and thus allowing additional time for the Commission to evaluate the
AIM pilot program. The AIM pilot program will continue to allow smaller
orders to receive the opportunity for price improvement pursuant to the
AIM auction.
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
the proposed rule change imposes any burden on intramarket competition
because it applies to all Trading Permit Holders. All Trading Permit
Holders that submit orders into an AIM auction are still subject to the
same requirements. In addition, the Exchange does not believe the
proposed rule change will impose any burden on intermarket competition,
as it merely extends the duration of an existing pilot program, which
is available to all market participants through Trading Permit Holders.
AIM will continue to function in the same manner as it currently
functions for an extended period of time.
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
Because the foregoing proposed rule change does not: (i)
Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A)(ii) of the Act \9\ and Rule
19b-4(f)(6) \10\ thereunder.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires the Exchange to give the Commission written notice of the
Exchange's intent to file the proposed rule change, along with a
brief description and text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission. The
Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of the filing. However,
pursuant to Rule 19b-4(f)(6)(iii), the Commission may designate a
shorter time if such action is consistent with the protection of
investors and the public interest. The Exchange requested that the
Commission waive the 30-day operative delay. The Exchange noted that
waiver will permit the AIM pilot program to continue without
interruption.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest, as
it will allow the pilot program to continue uninterrupted, thereby
avoiding any potential investor confusion that could result from a
temporary interruption in the pilot program. Further, the Commission
notes that because the filing was submitted for immediate effectiveness
on July 1, 2014, the fact that the current pilot programs do not expire
until July 18, 2014 will afford interested parties the opportunity to
comment on the proposal before the Exchange requires it to become
operative. For this reason, the Commission designates the proposed rule
change to be operative on July 18, 2014.\11\
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\11\ For purposes only of waiving the operative delay, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. 15 U.S.C. 78c(f).
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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.\12\
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\12\ 15 U.S.C. 78s(b)(3)(C).
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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-C2-2014-014 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-C2-2014-014. 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/
[[Page 41327]]
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-
2014-014 and should be submitted on or before August 5, 2014.
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\13\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-16495 Filed 7-14-14; 8:45 am]
BILLING CODE 8011-01-P