[Federal Register Volume 76, Number 148 (Tuesday, August 2, 2011)]
[Notices]
[Pages 46348-46349]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-19461]



[[Page 46348]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64974; File No. SR-C2-2011-016]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Adopt Fees for the Execution of Complex Orders

July 27, 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 July 22, 2011, 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 adopt fees for the execution of complex 
orders. 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, 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 self-regulatory organization 
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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In December 2009, the Commission approved adoption of C2's rules, 
including the process for the execution of complex orders.\3\ Beginning 
on July 25, 2011, C2 intends to permit the execution of complex orders 
on the Exchange. To that end, the Exchange hereby proposes to adopt a 
set of fees for such executions. The adoption of such fees will allow 
the Exchange to equitably assess reasonable fees incurred for 
processing such orders.
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    \3\ See Securities Exchange Act Release No. 61152 (December 10, 
2009), 74 FR 66699 (December 16, 2009).
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    The complex order fees apply to complex orders in multiply-listed, 
equity and ETF options classes. The complex order fees apply to all 
components of a complex order itself, but may not apply to both sides 
of a transaction involving a complex order. For transactions in which 
straight one-sided orders execute against a complex order, each 
component of the complex order will be assessed the complex order fees 
listed in Section 1B of the Fees Schedule, while the straight one-sided 
orders will be assessed the transaction fees listed in Section 1A of 
the Fees Schedule. For transactions in which a complex order executes 
against another complex order, each component of the complex order will 
be assessed the complex order fees listed in Section 1B of the Fees 
Schedule. For executions that occur within the Complex Order Auction 
(``COA'') against auction responses, the incoming/auctioned order is 
considered maker, and auction responses are considered taker.
    The Exchange proposes to offer a maker rebate of $0.25 for complex 
orders entered by public customers and assess a maker fee of $0.10 for 
complex orders entered by C2 market makers and $0.20 for complex orders 
entered from all other market participant origins (professional 
customers, firms, broker/dealers, non-C2 market-makers, etc.). The 
Exchange proposes to assess taker fees of $0.00 for complex orders 
entered by public customers and $0.35 for complex orders entered from 
C2 market-makers and all other market participant origins (professional 
customers, firms, broker/dealers, non-C2 market-makers, etc.). Listed 
rates for the complex order fees are per contract.
    As with straight one-sided orders, the Exchange proposes to charge 
no fees and offer no rebates to any market participants for trades on 
the open. 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. The Exchange would like to encourage users to 
submit pre-opening orders.
    The Exchange also proposes to amend Section 1A of the Fees Schedule 
to clarify that the fees therein apply to straight one-sided orders, as 
opposed to the new fees listed in Section 1B, which apply to complex 
orders.
    The proposed complex order fee structure should encourage public 
customers to execute complex orders on the Exchange.
    The proposed rule change will take effect on July 25, 2011.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\4\ in general, and furthers the objectives of Section 6(b)(4) \5\ 
of the Act in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
C2 Trading Permit Holders and other persons using Exchange facilities. 
The Exchange believes that the assessment of transaction fees for 
complex orders is an equitable allocation of reasonable fees because 
such orders require processing and the assessment of such fees allows 
the Exchange to recoup costs incurred processing such orders, as well 
as recoup administrative and other costs. The Exchange believes that 
the amounts of the proposed fees are reasonable because they are 
comparable or favorable to fees assessed by the International 
Securities Exchange, LLC (``ISE'') \6\ and NASDAQ OMX PHLX, LLC 
(``PHLX'') \7\ for complex order execution.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ See ISE Schedule of Fees, page 16.
    \7\ See PHLX Fee Schedule, pages 6-8.
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    The Exchange believes that, with respect to complex orders, 
offering a maker rebate to public customers (and not other market 
participants) and assessing a lower taker fee for public customers than 
for other market participants is equitable and not unfairly 
discriminatory because it will attract public customer order flow to 
the Exchange and incentivize broker-dealers and firms to execute public 
customer orders on the Exchange. To the extent that this purpose is 
achieved, all of the Exchange's market participants should benefit from 
the improved market liquidity and the greater number of public customer 
orders with which to trade. Further, the Exchange believes that the 
public customer maker rebate and taker fee for complex orders is not 
unfairly discriminatory because the same rebates and fees would be 
assessed uniformly to all public customers.
    The Exchange believes that assessing a lower maker fee for complex 
orders

[[Page 46349]]

originating from C2 market-makers than for those originating from all 
other origins (except Public Customers) is equitable and not unfairly 
discriminatory because C2 market-makers have affirmative obligations 
(such as quoting) to the Exchange that other market participants do not 
have. Further, assessing different complex order fee amounts to 
different types of market participants on C2 is equitable and not 
unfairly discriminatory because ISE and PHLX assess different complex 
order fee amounts to different types of market participants in 
connection with complex order executions.\8\ Finally, assessing 
different fee levels based on order origin type is a longstanding 
practice in the options market.\9\
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    \8\ See ISE Schedule of Fees, page 16 and PHLX Fee Schedule, 
pages 6-8.
    \9\ See the Fee Schedules of the BATS Exchange, Inc., BATS Y-
Exchange, Inc., Chicago Board Options Exchange, Incorporated, ISE, 
NASDAQ OMX BX, Inc., PHLX, NYSE Amex, LLC, and NYSE Arca, Inc. In 
the Fee Schedules of all of these exchanges, these respective 
exchanges assess different fee levels based on order origin type in 
a variety of circumstances.
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    The Exchange believes that the complex order fees being assessed to 
C2 market-makers are equitable and not unfairly discriminatory because 
the same fees would be assessed uniformly to all C2 market-makers. The 
Exchange also believes that the fees being assessed to complex orders 
entered by all origins other than public customers and C2 market-makers 
are equitable and not unfairly discriminatory because the same fees 
would be assessed to all complex orders entered from origins other than 
public customers and C2 market-makers.
    The Exchange believes that, with respect to complex orders, 
assessing a fee of $0.00 for trades on the open is reasonable because 
it is in line with the fee assessed for straight one-sided trades on 
the open \10\ and is equitable and not unfairly discriminatory because 
the same fee is assessed to all market participants.
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    \10\ See Exchange Fees Schedule, Section 1A.
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    Finally, the Exchange believes that amending Section 1A of the Fees 
Schedule to clarify that the section applies to straight one-sided 
orders (as opposed to complex orders) furthers the objectives of 
Section 6(b)(5) \11\ of the Act, in that it is designed to avoid 
investor confusion, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system. The 
Exchange operates in a highly competitive market comprised in which 
[sic] sophisticated and knowledgeable market participants readily can, 
and do, send order flow to competing exchanges if they deem fee levels 
at a particular exchange to be excessive. The Exchange believes that 
the proposed complex order fees it assesses must be competitive with 
fees assessed on other options exchanges. The Exchange believes that 
this competitive marketplace impacts the fees present on the Exchange 
today and influences the proposals set forth above.
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    \11\ 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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

    The Exchange has designated the proposed rule change as 
establishing or changing a due, fee, or other charge imposed by the 
Exchange, thereby qualifying the proposal for effectiveness on filing 
pursuant to Section 19(b)(3)(A)(ii) of the Act \12\ and Rule 19b-
4(f)(2) \13\ 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \13\ 17 CFR 240.19b-4(f)(2).
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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-C2-2011-016 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-C2-2011-016. 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 website (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 website viewing and printing in 
the Commission's Public Reference Room on official business days 
between the hours of 10 a.m. 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-
2011-016 and should be submitted on or before August 23, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19461 Filed 8-1-11; 8:45 am]
BILLING CODE 8011-01-P