[Federal Register Volume 76, Number 178 (Wednesday, September 14, 2011)]
[Notices]
[Pages 56824-56826]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-23375]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65279; File No. SR-C2-2011-020]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated: 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to PULSe Fees

September 7, 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 August 31, 2011, C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') Filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I, II and III below, which Items have been prepared by the 
Exchange. The Exchange has designated this proposal as one establishing 
or changing a due, fee, or other charge imposed by the Exchange under 
Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
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)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its Fees Schedule as it relates 
to the PULSe workstation. The text of the proposed rule change is 
availableon the Exchange's Web site (http://www.c2exchange.com), 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 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 
Statutory Basis for, Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to revise the PULSe 
Away-Market Routing and Routing Intermediary fees. The Exchange is also 
proposing to expand on its past description of the away-market routing 
functionality available for stock orders. In addition, the Exchange is 
proposing to eliminate the PULSe non-standard services fee. All of 
these changes, which are described in more detail below, will be 
effective September 1, 2011.
    By way of background, the PULSe workstation is a front-end order 
entry system designed for use with respect to orders that may be sent 
to the trading systems of C2. In addition, the PULSe workstation 
provides a user with the capability to send options orders to other 
U.S. options exchanges and stock orders to other U.S. stock exchanges 
(``away market routing'').\5\ To use the away-market routing 
functionality, a C2 Trading Permit Holder (``TPH'') must either be a 
PULSe Routing Intermediary or establish a relationship with a third 
party PULSe Routing Intermediary. A ``PULSe Routing Intermediary'' is a 
C2 TPH that has connectivity to, and is a member of, other options and/
or stock exchanges. If a TPH sends an order from the PULSe workstation, 
the PULSe Routing Intermediary will route that order to the designated 
market on behalf of the entering TPH.
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    \5\ For a more detailed description of the PULSe workstation and 
its other functionalities, see, e.g., Securities Exchange Act 
Release No. 63246 (November 4, 2010), 75 FR 69478 (November 12, 
2010)(SR-C2-2010-007).
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    The first purpose of this proposed rule change is to reduce the 
PULSe Away-Market Routing fee. Currently the fee is set at $0.05 per 
executed contract or share equivalent. The Exchange is proposing to 
reduce the fee to $0.02 per contract or share equivalent.
    The second purpose of this proposed rule change is to modify the 
PULSe Routing Intermediary fee. Currently, the Fees Schedule provides 
that each PULSe Routing Intermediary is charged a fee of $20 per PULSe 
workstation per month for each PULSe workstation that is enabled to 
send orders through the Routing Intermediary. However, the fee is only 
assessed for those workstations in which the Routing Intermediary is

[[Page 56825]]

acting as a third-party routing intermediary for another TPH (i.e., the 
fee is not assessed on those workstations where the Routing 
Intermediary is acting as a routing intermediary on its own behalf). 
This fee has been waived through September 30, 2011. The Exchange is 
proposing to amend the fee to instead provide that a Routing 
Intermediary will be charged a fee for utilizing the PULSe away-market 
routing technology of $0.02 per executed contract or share equivalent 
for the first 1 million contracts or share equivalent executed in a 
given month and $0.03 per contract or share equivalent for each 
additional contract or share equivalent executed in the same month. The 
Exchange intends to assess this fee to Routing Intermediaries whether 
the Routing Intermediary is routing orders on behalf of itself as a TPH 
or as a third party Routing Intermediary for other TPHs. The Exchange 
notes that the Routing Intermediary fee will not be applicable for 
routes to the Chicago Board Options Exchange, Incorporated (``CBOE'') 
or the CBOE Stock Exchange, LLC (``CBSX'') to the extent that the C2 
TPH submitting the order to CBOE or CBSX is also a CBOE TPH or CBSX 
TPH, as applicable.\6\
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    \6\ The PULSe workstation offers the ability to route orders to 
any market, including C2 affiliates CBOE and CBSX. To the extent a 
C2 TPH that is also a CBOE/CBSX TPH obtains a PULSe workstation 
through C2, it is not necessary for that TPH to obtain a separate 
PULSe workstation through CBOE or CBSX to route orders to CBOE or 
CBSX, as applicable. See SR-C2-2010-007, note 5, supra. It is also 
not necessary for that TPH to utilize the services of a Routing 
Intermediary to route orders to CBOE or CBSX, as applicable. As 
such, to the extent a C2 TPH is also a CBOE TPH or CBSX TPH, a 
Routing Intermediary fee would not be applicable because the fee is 
only applicable for away-market routing through a Routing 
Intermediary. The TPH would not be routing away through a Routing 
Intermediary, but instead would be submitting orders directly to C2 
as a C2 TPH, CBOE as a CBOE TPH or CBSX as a CBSX TPH, as 
applicable, where the TPH's activity would be subject to the 
transaction fee schedule of C2, CBOE or CBSX, respectively. To the 
extent a C2 TPH is not a CBOE TPH or CBSX TPH and utilizes the 
services of a third party Routing Intermediary to route orders to 
CBOE or CBSX, as applicable, the Routing Intermediary would be 
subject to the fee for the C2 TPH's executions on CBOE or CBSX, as 
applicable.
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    The revised PULSe Routing Intermediary fee will allow for the 
recoupment of the costs of developing, maintaining, and supporting the 
PULSe workstation and related Routing Intermediary functionality and 
for income from the value-added services being provided through use of 
the PULSe workstation and related away-market routing technology. The 
Exchange believes the fee structure represents an equitable allocation 
of reasonable fees in that the same fees are applicable to all Routing 
Intermediaries that provide away-market routing for TPHs via the PULSe 
workstation. In addition, the Exchange believes that the $0.02/$0.03 
Routing Intermediary fee is reasonable and appropriate in light of the 
fact that it is small in relation to the total costs typically incurred 
in routing and executing orders. The Exchange also notes that use of 
the PULSe workstation, and the Routing Intermediary functionality and 
the away-market routing technology available through the PULSe 
workstation, are not compulsory. In addition, the decision to function 
as a Routing Intermediary for PULSe purposes is discretionary, and a 
TPH may choose to route orders for itself or others without using the 
PULSe workstation. The services are offered as a convenience and are 
not the exclusive means available to send or route orders to C2 or 
intermarket.
    The third purpose of this proposed rule change is to expand on our 
prior description of the away-market routing functionality available 
for stock orders. In particular, as noted above, the Exchange has 
previously indicated that the PULSe workstation provides a user with 
the capability to send stock orders to other U.S. stock exchanges 
through a PULSe Routing Intermediary.\7\ The Exchange also notes that 
it may determine that the PULSe workstation would provide a user with 
the capability to send stock orders to other trading centers,\8\ not 
just U.S. stock exchanges, through a Routing Intermediary.
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    \7\ See note 5, supra, and surrounding discussion.
    \8\ A ``trading center,'' as provided under Rule 600(b)(78) of 
Regulation NMS, 17 CFR 242.600(b)(78), means a national securities 
exchange or national securities association that operates an SRO 
trading facility, an alternative trading system, an exchange market 
maker, an OTC market maker, or any other broker or dealer that 
executes orders internally by trading as principal or crossing 
orders as agent.
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    Finally, the fourth purpose of this proposed rule change is to 
eliminate the fee for non-standard services, which is currently $350 
per hour plus costs. Non-standard services may include time and 
materials for non-standard installations or modifications to PULSe to 
accommodate a TPH's use of PULSe with other technologies. The Exchange 
is proposing to eliminate the fee at this time because, given that 
PULSe workstation is a relatively new technology that is being fine-
tuned and enhanced based on our experience with and feedback from TPHs, 
we find it difficult to assess which services should be considered 
``non-standard'' at this point in time. (The fee was first implemented 
in November 2010.\9\ To date, the Exchange has not identified an 
instance where the fee was applicable to any service considered to be 
non-standard and has not collected any fees under this provision.) The 
Exchange may determine to reintroduce a non-standard services fee in 
the future through another rule change filing once we gain more 
experience with the PULSe workstation.
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    \9\ See SR-C2-2010-007, note 5, supra.
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2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\10\ in general, and furthers the objectives of Section 6(b)(4) of 
the Act,\11\ in particular, in that it is designed to provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
TPHs in that the same fees and fee waivers are applicable to all TPHs 
and Routing Intermediaries that utilize the PULSe workstation, Routing 
Intermediary functionality and the away-market routing services.
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    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(4).
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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 purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

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

    The proposed rule change is designated by the Exchange as 
establishing or changing a due, fee, or other charge, thereby 
qualifying for effectiveness on filing pursuant to Section 
19(b)(3)(A)(ii) of the Act \12\ and subparagraph (f)(2) of Rule 19b-4 
\13\ thereunder.
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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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    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.

[[Page 56826]]

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-C2-2011-020 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-C2-2011-020. 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 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-C2-2011-020 and should be 
submitted on or before October 5, 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. 2011-23375 Filed 9-13-11; 8:45 am]
BILLING CODE 8011-01-P