[Federal Register Volume 81, Number 79 (Monday, April 25, 2016)]
[Notices]
[Pages 24153-24155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09454]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77651; File No. SR-C2-2016-004]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule to
Amend the Fees Schedule
April 19, 2016.
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 11, 2016, 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 at (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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fees Schedule.\3\ Specifically,
the Exchange proposes to adopt separate transaction fees and rebates
for non-Penny option classes. By way of background, the Exchange began
adding an additional 2,000 option classes the week of February 22,
2016. The Exchange notes that the additional classes are non-Penny
option classes (i.e., each traded in nickel increments, as opposed to
penny increments). As such, the Exchange proposes adopting fee and
rebate rates for these classes that would be different than the current
fees and rebates which would apply to Penny option classes only.
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\3\ The Exchange initially filed the proposed fee change on
April 1, 2016 (SR-C2-2016-003). On April 11, 2016, the Exchange
withdrew that filing and replaced it with SR-C2-2016-004.
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Specifically, the Exchange proposes to adopt the following rates
for simple and complex orders in all equity, multiply-listed index, ETF
and ETN non-Penny option classes. Listed rates are per contract.
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Maker Taker fee
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Public Customer................... ($.75) $.83
C2 Market-Maker................... (.68) .85
All Other Origins (Professional (.60) .88
Customer, Firm, Broker/Dealer,
non-C2 Market-Maker, JBO, etc.)..
[[Page 24154]]
Trades on the Open................ .00 .00
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The Exchange notes that the proposed fees are similar to those
adopted on other Exchanges.\4\
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\4\ See e.g., NYSE Arca Options Fee Schedule, which lists, for
electronic executions in in non-Penny Pilot issues, (1) the standard
Customer Maker rebate of $0.75 versus a Taker fee of $0.85, (2) the
standard Market Maker rebate of $0.05 versus a Taker fee of $0.99,
and (3) the standard Firm and Broker Dealer Maker fee of $0.50
versus a Taker fee of $0.99. See also, ISE Gemini Schedule of Fees,
which lists for executions in Non-Penny symbols, (1) the standard
Customer Maker rebate of between $0.75 to $0.85 versus a Taker fee
between $0.81 to $0.82, (2) the standard Market Maker rebate between
$0.40 to $0.49 versus a Taker fee of $0.89, and (3) the standard
Firm and Broker Dealer Maker rebate between $0.25 to $0.65 versus a
Taker fee of $0.89.
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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.\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. In particular, the Exchange's proposal to adopt fees and
rebates for non-Penny option classes is reasonable because the amounts
proposed are similar to, and in line with, the rebates and fees for
non-Penny option transactions at other Exchanges that use the Make-Take
pricing structure.\7\
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
\7\ See supra note 4.
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The Exchange believes that it is equitable and not unfairly
discriminatory to assess lower fees to Public Customers as compared to
other market participants and to provide higher rebates to Public
Customers as compared to other market participants because Public
Customer order flow enhances liquidity on the Exchange for the benefit
of all market participants. Specifically, Public Customer liquidity
benefits all market participants by providing more trading
opportunities, which attracts Market-Makers. An increase in the
activity of these market participants in turn facilitates tighter
spreads, which may cause an additional corresponding increase in order
flow from other market participants. Moreover, the options industry has
a long history of providing preferential pricing to Public Customers.
Finally, all fee and rebate amounts listed as applying to Public
Customers will be applied equally to all Public Customers.
The Exchange believes that it is equitable and not unfairly
discriminatory to assess lower fees to Market-Makers as compared to
other market participants other than Public Customers and provide
higher rebates to Market-Makers as compared to other market
participants other than Public Customers because Market-Makers, unlike
other C2 market participants, take on a number of obligations,
including quoting obligations, that other market participants do not
have. Further, these lower fees and higher rebates offered to Market-
Makers are intended to incent Market-Makers to quote and trade more on
the Exchange, thereby providing more trading opportunities for all
market participants. Finally, all fee and rebate amounts listed as
applying to Market-Makers will be applied equally to all Market-Makers.
The Exchange also believes it is equitable and not unfairly
discriminatory to assess higher fees and lower rebates to all other
origins (i.e., Professional Customer, Firm, Broker/Dealer, non-C2
Market-Maker, JBO, etc.). Particularly, the Exchange notes that it
believes it's equitable and not unfairly discriminatory to assess a
higher fee and lower rebate than it does of Market-Makers, because
these market participants do not have the same obligations, such as
quoting, as Market-Makers do. The Exchange believes it's equitable and
not unfairly discriminatory to assess a higher fee and lower rebate
than it does to Public Customers, because, as described above, there is
a history of providing preferential pricing to Public Customers as
Public Customer liquidity benefits all market participants by providing
more trading opportunities. The Exchange notes that the proposed fee
and rebate amounts listed will also be applied to each of these market
participants (i.e., Professional Customers, Firms, Broker/Dealers, non-
C2 Market-Makers, JBOs, etc. will be assessed the same amount). It
should also be noted that all fee and rebate amounts described herein
are intended to attract greater order flow to the Exchange, which
should therefore serve to benefit all Exchange market participants.
The Exchange believes it's reasonable, equitable and not unfairly
discriminatory to assess no fees and offer no rebates for Trades on the
Open because trades on the Open involve the matching of undisplayed
pre-opening trading interest. As such, there is, in effect, no Maker or
Taker activity occurring. Additionally, the Exchange would like to
encourage users to submit pre-opening orders.
The Exchange lastly believes it's equitable and not unfairly
discriminatory to assess higher fees and rebates for non-Penny option
classes than Penny option classes because Penny classes and non-Penny
classes offer different pricing, liquidity, spread and trading
incentives. The spreads in Penny classes are tighter than those in non-
Penny classes (which trade in $0.05 increments). The wider spreads in
non-Penny option classes allow for greater profit potential. Further, a
number of options exchanges offer different pricing for Penny and non-
Penny option classes.\8\
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\8\ See e.g., NYSE Arca Options Fee Schedule and ISE Gemini
Schedule of Fees.
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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 rule change will impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act because, while different fees and rebates are
assessed to different market participants, these different market
participants have different obligations and different circumstances (as
described in the ``Statutory Basis'' section above). For example,
Public Customers order flow, as discussed above, enhances liquidity on
the Exchange for the benefit of all market participants. There is also
a history in the options markets of providing preferential treatment to
Public Customers. Additionally, Market-Makers have quoting obligations
that other market participants do not have.
The Exchange does not believe that the proposed change will impose
any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act
[[Page 24155]]
because it only applies to trading on the Exchange. Further, the
proposed fee and rebate amounts are similar to those assessed for
similar orders by other exchanges,\9\ and therefore should continue to
encourage competition. Should the proposed change make C2 a more
attractive trading venue for market participants at other exchanges,
such market participants may elect to become market participants at C2
[sic]
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\9\ See supra note 4.
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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 \10\ and paragraph (f) of Rule 19b-4 \11\
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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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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-C2-2016-004 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-C2-2016-004. 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 the 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-C2-2016-004, and should be
submitted on or before May 16, 2016.
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\12\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\12\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-09454 Filed 4-22-16; 8:45 am]
BILLING CODE 8011-01-P