[Federal Register Volume 76, Number 196 (Tuesday, October 11, 2011)]
[Notices]
[Pages 62879-62881]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26138]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65482; File No. SR-C2-2011-028]


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

October 4, 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 October 3, 2011, C2 Options Exchange, Incorporated 
(``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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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 
available on 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 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 adopt a PULSe 
routing fee for executions of orders on C2 that originate from non-
Trading Permit Holder (``TPH'') PULSe workstations. The Exchange is 
also proposing some non-substantive changes to the fees schedule text 
to clarify the existing operation of the Routing Intermediary fee. 
These changes, which are described in more detail below, will be 
effective October 3, 2011.\5\
---------------------------------------------------------------------------

    \5\ See e-mail from Jennifer M. Lamie, Assistant Secretary, C2, 
to Steve L. Kuan, Attorney, Division of Trading and Markets, 
Commission, on October 3, 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 
and trading centers (``away market routing'').\6\ To use the away-
market routing functionality, a C2 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 and trading centers. 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.\7\
---------------------------------------------------------------------------

    \6\ For a more detailed description of the PULSe workstation and 
its other functionalities, see, e.g., Securities Exchange Act 
Release Nos. 63246 (November 4, 2010), 75 FR 69478 (November 12, 
2010) (SR-C2-2010-007) and 65279 (September 7, 2011), 76 FR 56824 
(September 14, 2011) (SR-C2-2011-020).
    \7\ The PULSe workstation offers the ability to route orders to 
any market including, among others, C2 affiliates Chicago Board 
Options Exchange, Incorporated (``CBOE'') and CBOE Stock Exchange, 
LLC (``CBSX,'' CBOE's stock execution facility). To the extent a C2 
TPH that is also a CBOE/CBSX TPH obtains a PULSe workstation through 
CBOE, 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, e.g., 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 a CBSX TPH, the 
``Away-Market Routing'' and ``Routing Intermediary'' fees detailed 
in the Exchange Fees Schedule are not be applicable because the fees 
are only applicable for away-market routing. The TPH would not be 
away-market routing, 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 a CBSX TPH, the Away-Market 
Routing and Routing Intermediary fees would apply for the TPH's 
executions on CBOE or CBSX, as applicable.
---------------------------------------------------------------------------

    The first purpose of this proposed rule change is to adopt a C2 
Routing fee. This fee would be payable by a TPH that makes the PULSe 
workstation available to non-TPHs and would only be applicable for 
routing to C2 from such non-TPH PULSe workstations. The fee would be 
$0.02 per contract or share equivalent for the first 1 million 
contracts or share equivalent executed in a month on C2 that originate 
from non-TPH PULSe workstations made available by the TPH, and $0.03 
per contract or share equivalent for each additional contract or share 
equivalent executed on C2 in the same month from the non-TPH PULSe 
workstations made available by the TPH.\8\
---------------------------------------------------------------------------

    \8\ The Exchange notes that CBOE is submitting a similar rule 
change to introduce a ``CBOE/CBSX Routing'' fee that will be 
applicable to CBOE TPHs and CBSX TPHs. See SR-CBOE-2011-092. To the 
extent that a C2 TPH making the non-TPH PULSe workstations available 
is not also a CBOE TPH or a CBSX TPH, routing from the non-TPH 
workstations to CBOE or CBSX would not be considered ``CBOE/CBSX 
Routing'' and, therefore, would not be subject to that fee (it would 
instead be considered ``away-market routing'' and subject to the 
Away-Market Routing and Routing Intermediary fees described above). 
To the extent that a C2 TPH making the non-TPH PULSe workstations 
available is also a CBOE TPH or CBSX TPH, routing from the non-TPH 
workstations to CBOE or CBSX would be considered ``CBOE/CBSX 
Routing'' and therefore would be subject to that fee.
    Example 1: Assume a C2 TPH that is not a CBOE TPH makes a PULSe 
workstation available to Non-TPH User A. To the extent that orders 
originating from Non-TPH User A's PULSe workstation are routed to 
C2, any resulting executions would be subject to the C2 Routing fee. 
To the extent that orders originating from Non-TPH User A's PULSe 
workstation are routed to CBOE, any resulting executions would be 
considered away-market routing and subject to the Away-Market 
Routing and Routing Intermediary fees (and not subject to the CBOE/
CBSX Routing fee).
    Example 2: Assume a C2 TPH that is also a CBOE TPH makes a PULSe 
workstation available to Non-TPH User A. To the extent that orders 
originating from Non-TPH User A's PULSe workstation are routed to 
C2, any resulting executions would be subject to the C2 Routing fee. 
To the extent that orders originating from Non-TPH User A's PULSe 
workstation are routed to CBOE, any resulting executions would be 
subject to the CBOE/CBSX Routing fee. (Given the C2 TPH's status as 
a CBOE TPH, such orders are not considered away-market routing and 
therefore are not subject to the Away-Market Routing and Routing 
Intermediary fees.)

---------------------------------------------------------------------------

[[Page 62880]]

    The C2 Routing fee will allow for the recoupment of the costs of 
developing, maintaining, and supporting the PULSe workstation and for 
income from the value-added services being provided through use of the 
PULSe workstation. The Exchange believes the fee structure represents 
an equitable allocation of reasonable fees in that the same fees will 
be applicable to all TPHs that make PULSe workstations available to 
non-TPHs. The Exchange also believes that the establishment of the fee, 
which is payable by TPHs only for transactions originating from non-TPH 
workstations, is equitable and not unfairly discriminatory because non-
TPHs are able to obtain the benefits of utilizing the PULSe 
workstation--including the ability to route orders to the Exchange--
without becoming a TPH (and incurring the associated costs of TPH 
membership). In addition, the Exchange believes that the $0.02/$0.03 C2 
Routing fee is reasonable and appropriate in light of the facts that it 
is small in relation to the total costs typically incurred in routing 
and executing orders and that the amount is comparable to the 
Exchange's existing Routing Intermediary fee for away-market routing. 
The Exchange notes that the lower $0.02 rate for the first 1 million 
contracts or share equivalent (as compared to the $0.03 rate for each 
additional contract or share equivalent) is reasonable in that it is 
designed to help attract and encourage use of the PULSe workstation. 
The Exchange also notes that use of the PULSe workstation, and the 
routing technology available through the PULSe workstation, are not 
compulsory. The service is offered as a convenience and is not the 
exclusive means available to send or route orders to C2 (or another 
market).
    The second purpose of this proposed rule change is to revise and 
expand on the description in the Fees Schedule text of the ``Routing 
Intermediary'' fee.\9\ In particular, the Exchange is renaming the fee 
from ``Routing Intermediary'' fee to ``Away-Market Routing 
Intermediary'' fee. Because this fee is only applicable when a Routing 
Intermediary is routing to away markets, the Exchange believes this 
change in title will be more descriptive and helpful to persons reading 
the Fees Schedule. Likewise, the Exchange is expanding on the 
description in the text to make clear that the ``Away-Market Routing 
Intermediary'' fee is payable by a Routing Intermediary and is only 
applicable for away-market routing from any PULSe workstation. The 
expanded description also makes clear that the fee rates are determined 
based on the aggregate level of transactions across all away-markets 
and across all PULSe workstations for which firm serves as the Routing 
Intermediary. This level of detail on the meaning and application of 
the fee was previously included in the discussion section of prior rule 
filings and is consistent with the Exchange's original intent and 
understanding the fee structure.\10\ The Exchange is simply proposing 
to include the clarifying information within the text of the Fees 
Schedule.
---------------------------------------------------------------------------

    \9\ This fee is currently $0.02 per contract or share equivalent 
for the first 1 million contracts or share equivalent executed in a 
month and $0.03 per contract or share equivalent for each additional 
contract or share equivalent executed in the same month.
    \10\ See, e.g., SR-C2-2011-020, note 5, supra.
---------------------------------------------------------------------------

2 Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\11\ in general, and furthers the objectives of Section 6(b)(4) of 
the Act,\12\ 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 are applicable to all TPHs that utilize the 
PULSe workstation or make it available to non-TPHs.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    With respect to the C2 Routing fee in particular, the Exchange 
believes that the establishment of the C2 Routing fee, which is payable 
by TPHs only for transactions originating from non-TPH workstations, is 
equitable and not unfairly discriminatory because, from the TPH 
perspective, as indicated above, the same fees are applicable to all 
TPHs that make the PULSe workstation available to non-TPHs. In 
addition, because non-TPHs are able to obtain the benefits of utilizing 
the PULSe workstation--including the ability to route orders to the 
Exchange--without becoming a TPH (and incurring the associated costs of 
TPH membership), the Exchange believes it is equitable and not unfairly 
discriminatory for the Exchange to assess the C2 Routing fee to TPHs 
for executions of orders originating from non-TPH PULSe workstations. 
The Exchange believes that the $0.02/$0.03 C2 Routing fee rate itself--
which will allow for the recoupment of the costs of developing, 
maintaining, and supporting the PULSe workstation and for income from 
the value-added services being provided through use of the PULSe 
workstation--is reasonable and appropriate in light of the facts that 
it is small in relation to the total costs typically incurred in 
routing and executing orders and that the amount is comparable to the 
Exchange's existing Routing Intermediary fee for away-market routing. 
The Exchange also believes that the lower $0.02 rate for the first 1 
million contracts or share equivalent (as compared to the $0.03 rate 
for each additional contract or share equivalent) is reasonable in that 
it is designed to help attract and encourage use of the PULSe 
workstation. Finally, in our consideration that the fee is equitable 
and not unfairly discriminatory, the Exchange note that use of the 
PULSe workstation, and the routing technology available through the 
PULSe workstation, are not compulsory. The service is offered as a 
convenience and is not the exclusive means available to send or route 
orders to C2 (or another market).

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

    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 proposed rule change is designated by the Exchange as 
establishing or changing a due, fee, or other charge, thereby 
qualifying for

[[Page 62881]]

effectiveness on filing pursuant to Section 19(b)(3)(A)(ii) of the Act 
\13\ and subparagraph (f)(2) of Rule 19b-4\14\ thereunder.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \14\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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-C2-2011-028 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-C2-2011-028. 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-C2-2011-028 and should be 
submitted on or before November 1, 2011.
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
---------------------------------------------------------------------------
pursuant to delegated authority.\15\

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26138 Filed 10-7-11; 8:45 am]
BILLING CODE 8011-01-P