[Federal Register Volume 82, Number 63 (Tuesday, April 4, 2017)]
[Notices]
[Pages 16442-16443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06571]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-80339]
Order Granting Application by C2 Options Exchange, Incorporated
for an Exemption Pursuant to Section 36(a) of the Exchange Act From the
Rule Filing Requirements of Section 19(b) of the Exchange Act With
Respect to Certain Rules Incorporated by Reference
March 29, 2017.
C2 Options Exchange, Incorporated (``C2'' or ``Exchange'') has
filed with the Securities and Exchange Commission (``Commission'') an
application for an exemption under Section 36(a)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ from the rule filing
requirements of Section 19(b) of the Exchange Act \2\ with respect to
certain rules of the Chicago Board Options Exchange, Incorporated
(``CBOE'') that the Exchange seeks to incorporate by reference. Section
36 of the Exchange Act authorizes the Commission to conditionally or
unconditionally exempt any person, security, or transaction, or any
class thereof, from any provision of the Exchange Act or rule
thereunder, if necessary or appropriate in the public interest and
consistent with the protection of investors.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78mm(a)(1).
\2\ 15 U.S.C. 78s(b).
---------------------------------------------------------------------------
Both C2 and CBOE are Participants in the National Market System
Plan Governing the Consolidated Audit Trail (``CAT NMS Plan'' or
``Plan'').\3\ Each Participant in the CAT NMS Plan is required to
enforce compliance by its members with the provisions of the Plan by
adopting a ``Compliance Rule'' applicable to its members.\4\ On January
30, 2017, CBOE filed a proposed rule change with the Commission to
adopt new Section F to Chapter VI of its rules to implement the CAT
Compliance Rule.\5\ On the same day, C2 filed a proposed rule change
with the Commission to incorporate by reference, in new Section F of
Chapter 6 of its rules, the rules contained in Section F of Chapter VI
of CBOE's rules.\6\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 79318 (November 15,
2016), 81 FR 84696 (November 23, 2016) (``CAT NMS Plan Approval
Order''). All capitalized terms not otherwise defined herein shall
have the meaning ascribed to them in the CAT NMS Plan or CAT NMS
Plan Approval Order.
\4\ Id. at 84945, 84950.
\5\ See Securities Exchange Act Release No. 79950 (February 2,
2017), 82 FR 9916 (February 8, 2017).
\6\ See Securities Exchange Act Release No. 79953 (February 3,
2017), 82 FR 10034 (February 9, 2017). CBOE and C2's proposed rule
changes were approved by the Commission on March 15, 2017. See
Securities Exchange Act Release No. 80256, 82 FR 14526 (March 21,
2017).
---------------------------------------------------------------------------
C2 has requested, pursuant to Rule 0-12 under the Exchange Act,\7\
that the Commission grant the Exchange an exemption from the rule
filing requirements of Section 19(b) of the Exchange Act for changes to
Section F of Chapter 6 of C2's rules that are effected solely by virtue
of a change to Section F of Chapter VI of CBOE's rules. Specifically,
C2 requests that it be permitted to incorporate by reference changes
made to Section F of Chapter VI of CBOE's rules \8\ without the need
for C2 to file separately the same proposed rule changes pursuant to
Section 19(b) of the Exchange Act.\9\ By virtue of these incorporations
by reference, the requirements applicable to C2 Permit Holders \10\
will change when the applicable CBOE rules change, without the need for
C2 to file separately the same proposed rule changes pursuant to
Section 19(b) of the Exchange Act.\11\
---------------------------------------------------------------------------
\7\ 17 CFR 240.0-12.
\8\ C2 Chapter 6, Section F states: ``The rules contained in
Section F of CBOE Chapter VI relating to the Consolidated Audit
Trail (CAT) Compliance Rule, as such rules may be in effect from
time to time, shall apply to C2 and are hereby incorporated into
this Chapter.''
\9\ See Letter from Laura G. Dickman, Lead Counsel, CBOE, to
Brent J. Fields, Secretary, Commission, dated January 30, 2017 (``C2
Letter'').
\10\ ``Permit Holder'' means ``the Exchange recognized holder of
a Trading Permit. A Permit Holder is also known as a Trading Permit
Holder under the Bylaws. Permit Holders are deemed `members' under
the Exchange Act.'' C2 Rule 1.1.
\11\ C2 Letter, supra note 8.
---------------------------------------------------------------------------
The Exchange represents that Section F of Chapter 6 is a category
of Exchange rules (rather than individual rules within a category) that
are not trading rules, and that the incorporation by reference of CBOE
Chapter VI, Section F, which are regulatory rules, is intended to be a
comprehensive
[[Page 16443]]
integration of the relevant CBOE rules into C2's rules. The Exchange
has agreed to provide written notice to its members whenever CBOE
proposes a change to a CBOE rule that the Exchange has incorporated by
reference.\12\
---------------------------------------------------------------------------
\12\ The Exchange will provide this notice by posting on its Web
site, at the same location as it posts its own rule filings as
required by Rule 19b-4(l), a link to the location on CBOE's Web site
where the proposed rule change is posted. Id.
---------------------------------------------------------------------------
The Exchange believes this exemption is necessary and appropriate
to maintain consistency between C2 rules and the relevant CBOE rules,
thus helping to ensure identical regulation of C2 Permit Holders that
are also CBOE Trading Permit Holders \13\ with respect to the
incorporated provisions as well as helping to ensure that C2-only
Permit Holders are subject to consistent regulation as CBOE Trading
Permit Holders.\14\ The Exchange believes that, without such an
exemption, such Permit Holders could be subject to two different
standards.\15\
---------------------------------------------------------------------------
\13\ ``Trading Permit Holder'' means ``any individual,
corporation, partnership, limited liability company or other entity
authorized by the Rules that holds a Trading Permit . . . A Trading
Permit Holder is a `member' solely for purposes of the [Exchange]
Act.'' See CBOE Rule 1.1 (citing Section 1.1 of CBOE Bylaws).
\14\ C2 Letter, supra note 8.
\15\ Id.
---------------------------------------------------------------------------
The Commission has issued exemptions similar to the Exchange's
request.\16\ In granting one such exemption in 2010, the Commission
repeated a prior, 2004 Commission statement that it would consider
similar future exemption requests from other self-regulatory
organizations (``SROs''), provided that:
---------------------------------------------------------------------------
\16\ See, e.g., Securities Exchange Act Release Nos. 72650 (July
22, 2014), 79 FR 44075 (July 29, 2014) (order granting exemptive
requests from NASDAQ OMX BX, Inc. and the NASDAQ Stock Market LLC
relating to rules of NASDAQ OMX PHLX LLC incorporated by reference);
67256 (June 26, 2012), 77 FR 39277, 39286 (July 2, 2012) (order
approving SR-BX-2012-030 and granting exemptive request relating to
rules incorporated by reference by the BX Options rules); 61534
(February 18, 2010), 75 FR 8760 (February 25, 2010) (order granting
BATS Exchange, Inc.'s exemptive request relating to rules
incorporated by reference by the BATS Exchange Options Market rules)
(``BATS Options Market Order''); 67256 (June 26, 2012), 77 FR 39277,
39286 (July 2, 2012) (order approving SR-BX-2012-030 and granting
exemptive request relating to rules incorporated by reference by the
BX Options rules); and 57478 (March 12, 2008), 73 FR 14521, 14539-40
(March 18, 2008) (order approving SR-NASDAQ-2007-004 and SR-NASDAQ-
2007-080, and granting exemptive request relating to rules
incorporated by reference by The NASDAQ Options Market).
---------------------------------------------------------------------------
An SRO wishing to incorporate rules of another SRO by
reference has submitted a written request for an order exempting it
from the requirement in Section 19(b) of the Exchange Act to file
proposed rule changes relating to the rules incorporated by reference,
has identified the applicable originating SRO(s), together with the
rules it wants to incorporate by reference, and otherwise has complied
with the procedural requirements set forth in the Commission's release
governing procedures for requesting exemptive orders pursuant to Rule
0-12 under the Exchange Act; \17\
---------------------------------------------------------------------------
\17\ See 17 CFR 240.0-12 and Securities Exchange Act Release No.
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998)
(``Commission Procedures for Filing Applications for Orders for
Exemptive Relief Pursuant to Section 36 of the Exchange Act; Final
Rule'').
---------------------------------------------------------------------------
The incorporating SRO has requested incorporation of
categories of rules (rather than individual rules within a category)
that are not trading rules (e.g., the SRO has requested incorporation
of rules such as margin, suitability, or arbitration); and
The incorporating SRO has reasonable procedures in place
to provide written notice to its members each time a change is proposed
to the incorporated rules of another SRO.\18\
---------------------------------------------------------------------------
\18\ See BATS Options Market Order, supra note 15 (citing
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR
8500 (February 24, 2004) (order granting exemptive request relating
to rules incorporated by reference by several SROs) (``2004
Order'')).
---------------------------------------------------------------------------
The Commission believes that the Exchange has satisfied each of
these conditions. The Commission also believes that granting the
Exchange an exemption from the rule filing requirements under Section
19(b) of the Exchange Act will promote efficient use of Commission and
Exchange resources by avoiding duplicative rule filings based on
simultaneous changes to identical rule text sought by more than one
SRO.\19\ The Commission therefore finds it appropriate in the public
interest and consistent with the protection of investors to exempt the
Exchange from the rule filing requirements under Section 19(b) of the
Exchange Act with respect to the above-described rules it has
incorporated by reference. This exemption is conditioned upon the
Exchange promptly providing written notice to its members whenever CBOE
changes a rule that the Exchange has incorporated by reference.
---------------------------------------------------------------------------
\19\ See BATS Options Market Order, supra note 15, 75 FR at
8761; see also 2004 Order, supra note 17, 69 FR at 8502.
---------------------------------------------------------------------------
Accordingly, it is ordered, pursuant to Section 36 of the Exchange
Act,\20\ that the Exchange is exempt from the rule filing requirements
of Section 19(b) of the Exchange Act solely with respect to changes to
the rules identified in its request that incorporate by reference
certain CBOE rules that are the result of changes to such CBOE rules,
provided that the Exchange promptly provides written notice to its
members whenever CBOE proposes to change a rule that the Exchange has
incorporated by reference.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78mm.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(76).
---------------------------------------------------------------------------
[FR Doc. 2017-06571 Filed 4-3-17; 8:45 am]
BILLING CODE 8011-01-P