[Federal Register Volume 75, Number 208 (Thursday, October 28, 2010)]
[Notices]
[Pages 66404-66405]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27242]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63164; File No. SR-C2-2010-005]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Modify Rule 6.12

October 22, 2010.
    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 October 14, 2010, C2 Options Exchange, Incorporated 
(``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the 
Exchange. The Exchange filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify the wording of Rule 6.12 relating 
to the C2 matching algorithm. The text of the proposed rule change is 
available on the Exchange's Web site (http://www.cboe.org/Legal), at 
the Exchange's Office of the Secretary, at the Commission's Public 
Reference Room, and on the Commission's Web site at http://www.sec.gov.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, C2 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 those 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In 2009, C2 was registered as a national securities exchange under 
Section 6 of the Exchange Act.\5\ C2 has yet to commence trading 
options, however a launch is anticipated in October 2010. The central 
purpose of this filing is to streamline Rule 6.12 relating to order 
execution and priority. Currently Rule 6.12 allows C2 to select a base 
matching algorithm and subsequently overlay certain priorities over the 
selected base algorithm. There are currently two base algorithms: 
price-time (often referred to as first in, first out or FIFO) in which 
trading interest at a given price point is ranked based on time 
priority, and pro-rata in which trading interest at a given price point 
is ranked based on the size of each order/quote at that price. The 
priority overlays allowed under Rule 6.12 are public customer priority 
(priority to non-broker-dealer orders), trade participation right 
priority (priority, up to a designated percentage, for qualifying 
Preferred Market-Makers), and market turner priority (priority, up to a 
designated percentage, for participants that are first to improve the 
market price on C2).
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    \5\ See Exchange Act Release No. 61152 (Dec. 10, 2009), 74 FR 
66699 (Dec. 16, 2009).
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    C2 seeks to simplify Rule 6.12 to allow for 3 choices of matching 
algorithms: price-time, pro-rata, and price-time with first priority 
going to public customers and second priority pursuant to the trade 
participation right. The first two of these options are unchanged. C2 
believes that adding the third, which is achievable under existing C2 
Rule 6.12 and which is the intended algorithm of choice for the C2 
launch, makes C2 matching rules clearer for C2 users. Thus, the filing 
is not in

[[Page 66405]]

any way adding new matching functionality, it is streamlining the 
wording of Rule 6.12 (in the process, it is eliminating certain 
matching ``options'' available under the current rule, but C2 has no 
intention to use a matching algorithm other than the three set forth in 
the revised rule). Further, as proposed, the new Rule would continue to 
allow for a market turner overlay. The Exchange represents that market 
turner priority would only be applicable and would only be utilized 
when the pro-rata algorithm is in place. This is because the market 
turner overlay gives priority to the participant that is first in time 
at an improved price point, something that price-time priority already 
accomplishes.
    The filing also proposes to correct two mistaken references in the 
definitions of Professional and Voluntary Professional in Rule 1.1. 
Specifically those definitions mistakenly reference Rule 6.13(c)(5) as 
6.13(c)(v).
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') \6\ and the rules and 
regulations thereunder and, in particular, the requirements of Section 
6(b) of the Act.\7\ Specifically, the Exchange believes the proposed 
rule change is consistent with the Section 6(b)(5) \8\ requirements 
that the rules of an exchange be designed to promote just and equitable 
principles of trade, to prevent fraudulent and manipulative acts, to 
remove impediments to and to perfect the mechanism for a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest. Streamlining the C2 matching rules 
will assist users seeking to better understand the matching 
alternatives available on C2.
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    \6\ 15 U.S.C. 78s(b)(1).
    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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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 not necessary or appropriate in furtherance of 
the purposes of the Act.

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 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its 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. C2 has satisfied this requirement.
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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.

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 e-mail to [email protected]. Please include 
File Number SR-C2-2010-005 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-C2-2010-005. This file 
number should be included on the subject line if e-mail 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 
a.m. and 3 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-C2-2010-005 and should be 
submitted on or before November 18, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27242 Filed 10-27-10; 8:45 am]
BILLING CODE 8011-01-P