[Federal Register Volume 76, Number 49 (Monday, March 14, 2011)]
[Notices]
[Pages 13688-13689]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5762]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64058; File No. SR-C2-2011-006]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Related to the Opening System

March 8, 2011.
    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 March 1, 2011, the 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 has designated 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 Rule 6.11, Openings (and sometimes 
Closings). The text of the proposed rule change is available on the 
Exchange's Web site (http://www.c2exchange.com/Legal/RuleFilings.aspx), 
at the Exchange's Office of the Secretary and at the Commission.

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 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
    Rule 6.11 describes the Exchange's procedures for conducting 
trading rotations. The Exchange is proposing to amend Rule 6.11 in 
various respects.
    First, to have more flexibility in a manner that is consistent with 
other C2 rules with order eligibility provisions, the Exchange is 
proposing to amend Rule 6.11 to include an order eligibility provision. 
In particular, Rule 6.11 will be amended to provide that the Exchange 
shall designate the eligible order size, eligible order type, eligible 
order origin code (i.e., public customer orders, non-Market Maker 
broker-dealer orders, and Market Maker broker-dealer orders) that the 
System will accept for rotations on a class-by-class basis. The 
proposal would not, however, permit the Exchange to discriminate among 
individual market participants of the same type (e.g., permit certain 
market-maker orders but not others to be eligible). The Rule will also 
be amended to delete a reference to spread orders and contingency 
orders not being eligible to participate in opening trades or in the 
determination of the opening price, expected opening price or expected 
opening size. (As revised, the Exchange would determine whether to 
designate these orders types as eligible on a class-by-class basis, 
just as it would for any other order type.) Any changes to the order 
eligibility parameters determined by the Exchange would be announced to 
C2 Participants via Regulatory Circular.
    This proposed change to include order eligibility requirements 
within Rule 6.11 is consistent with the order eligibility requirements 
contained in other rules, such as the order eligibility requirements 
for Rule 6.14, SAL (SAL is a feature that auctions marketable orders 
for price improvement over the national best bid and offer). The 
proposed rule change is also consistent with the provisions of Rule 
6.10, Orders Types Defined,\5\ which provides that the classes and/or 
systems for which the orders types described in Rule 6.10 shall be 
available will be as provided in the Exchange Rules, as the context may 
indicate, or as otherwise specified via Regulatory Circular.
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    \5\ The Exchange is also proposing to change the title of Rule 
6.10 to ``Order Types Defined.''
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    Second, the Exchange is proposing to adopt new Interpretation and 
Policy .01 to Rule 6.11 to provide that the Exchange may determine on a 
class-by-class basis which electronic allocation algorithm \6\ would 
apply for rotations. Currently Rule 6.11(g) provides that, in 
determining priority of orders and quotes to be traded at a single 
clearing price, the System gives priority to public customer market 
orders first (with multiple orders ranked based on time priority), then 
to non-public customer market orders second (with multiple orders being 
ranked based on time priority), then to multiple quotes and orders 
whose price is better than the opening price (with multiple quotes and 
orders being ranked in accordance with the allocation algorithm in 
effect for the option class), then to limit orders and quotes at the 
opening price (with multiple orders and quotes ranked in accordance 
with the allocation algorithm in effect for the class). Any remaining 
marketable order(s) are then exposed and allocated in accordance with 
the matching algorithms in effect for the class. The Exchange is 
proposing to remove these specific allocation algorithm descriptions. 
Instead, the provision will be amended to provide that, in determining 
the priority of orders and quotes to be traded at a single clearing 
price, the System will give priority to market orders first, then to 
limit orders and quotes whose price is better than the opening price, 
and then to resting orders and quotes at the opening price. In 
addition, as indicated above, the Exchange is proposing to adopt new 
Interpretation and Policy .01 to Rule 6.11. Proposed Interpretation and 
Policy .01 to Rule 6.11 will provide that the Exchange may determine on 
a class-by-class basis which electronic allocation algorithm would 
apply for rotations. This change will also provide the Exchange with 
additional flexibility to permit the allocation algorithm in effect for 
a rotation to be different from the allocation algorithm in effect for 
the option class. All pronouncements regarding allocation algorithm 
determinations by the Exchange will be announced to C2 Participants via 
Regulatory Circular.
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    \6\ The allocation algorithms include base execution algorithms 
(price-time, pro-rata, and price-time with primary public customer 
priority and secondary trade participation right priority) and an 
optional market turner priority overlay. See Rule 6.12, Order 
Execution and Priority.
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    In conjunction with this change, the Exchange is also proposing to 
modify Rule 6.11 to codify and describe the

[[Page 13689]]

manner in which the System handles opening imbalances in series that 
open at a minimum price increment (e.g., a series that opens at a price 
of $0.05 when the series is quoted in $0.05 increments and a series 
that opens at a price of $0.01 when the series is quoted in $0.01 
increments). In those scenarios, the System opens even if a sell market 
order imbalance exists. In addition, the Exchange may determine to 
apply a separate electronic allocation algorithm for series that open 
at a minimum price increment due to a sell market order imbalance. As 
indicated above, pronouncements regarding allocation algorithm 
determinations will be announced via Regulatory Circular.
    The matching algorithm applied for rotations for each option class 
will be pursuant to Rule 6.12. Thus, the Exchange is not creating any 
new algorithms, but is amending Rule 6.11 to make clear that the 
Exchange may determine the applicable allocation algorithm for 
rotations as described above and to provide the flexibility for the 
Exchange to choose an algorithm from among the existing algorithms to 
be applied to rotations, rather than simply defaulting to the algorithm 
in effect for intra-day trading in the option class.
    Finally, the Exchange is proposing non-substantive amendments to 
Rule 6.11, so that the rule text can generally be more consistently 
organized, numbered and worded. For example, the Exchange is proposing 
to add descriptive headings to sections of the rule that do not already 
have such headings, and to replace multiple references to Exchange 
determinations being announced via Regulatory Circular with a single 
reference in proposed Interpretation and Policy .02, which will provide 
that all pronouncements regarding determinations by the Exchange 
pursuant to Rule 6.11 and the Interpretations and Policies thereunder 
will be announced to Participants via Regulatory Circular.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) of the Act \7\ in general and furthers the objectives of 
Section 6(b)(5) of the Act \8\ in particular in that it is designed 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. 
In particular, the Exchange believes that the proposed change would 
provide more flexibility and clarity in our rotations rule. The 
Exchange also believes that the proposed order eligibility provision is 
consistent with order eligibility provisions in other existing rules, 
such as the SAL and order type rules.
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    \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

    The Exchange 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.

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 rule 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 if consistent with the protection of investors 
and the public interest, provided that the self-regulatory organization 
has given the Commission written notice of its intent to file 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 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\ At any time within 60 days of the filing of such 
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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6).
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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 e-mail to [email protected]. Please include 
File Number SR-C2-2011-006 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-C2-2011-006. 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 
am and 3 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-C2-2011-006 and should be 
submitted on or before April 4, 2011.
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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\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5762 Filed 3-11-11; 8:45 am]
BILLING CODE 8011-01-P