[Federal Register Volume 77, Number 180 (Monday, September 17, 2012)]
[Notices]
[Pages 57177-57178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22791]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67832; File No. SR-C2-2012-031]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change to 
Make Technical Amendments to the Rules

September 11, 2012.
    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 September 4, 2012, 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

    C2 proposes to make technical amendments to the C2 rules. The text 
of the proposed rule change is available on the Exchange's Web site 
(http://www.c2exchange.com/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 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 Exchange proposes to make technical amendments to chapters in 
the Exchange rulebook that incorporate by reference rules of the 
Chicago Board Options Exchange, Incorporated (``CBOE''). CBOE Chapter 
4--Business Conduct (which includes Interpretation and Policy .06 to 
Rule 4.11--Position Limits) is incorporated into the C2 rules by 
reference as C2 Chapter 4.\3\ Interpretation and Policy .06 to CBOE 
Rule 4.11 describes the procedures and criteria by which a TPH 
organization may obtain a facilitation exemption from applicable 
standard position limits in non-multiply-listed Exchange options for 
the purposes of facilitating some orders, pursuant to the provisions of 
CBOE Rule 6.74(b). CBOE Rule 6.74(b) describes the process that allows 
a floor broker to cross orders. Because C2, as an all-electronic 
exchange, does not have floor brokers, CBOE Rule 6.74(b) does not apply 
to C2 (and indeed, is not incorporated into C2 rules). And since 
Interpretation and Policy .06 to Rule 4.11 relies on the inapplicable-
to-C2 CBOE Rule 6.74(b), Interpretation and Policy .06 to Rule 4.11 is 
thereby itself inapplicable to C2. As such, the Exchange proposes to 
state that, with respect to applicability to C2 only, Interpretation 
and Policy .06 to CBOE Rule 4.11 is not applicable to C2.
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    \3\ See Securities Exchange Act Release No. 34-62323 (June 17, 
2010), 75 FR 36144 (June 24, 2012) (SR-C2-2010-002).
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    The Exchange also proposes to amend its Rule 17.50--Imposition of 
Fines for Minor Rule Violations to fix inaccurate references. CBOE 
Chapter 17--Discipline (which includes Rule 17.50--Imposition of Fines 
for Minor Rule Violations) is incorporated into the C2 rules by 
reference as C2 Chapter 17.\4\ CBOE Rule 17.50 references CBOE Rule 
3.23--Integrated Billing System. However, C2's Integrated Billing 
System rule is C2 Rule 3.9. Therefore, C2 proposes to state that any 
references in Rule 17.50 to Rule 3.23 should be read, in reference to 
C2 only, to C2 Rule 3.9. Substantively, CBOE Rule 3.23 and C2 Rule 3.9 
are identical.
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    \4\ See Securities Exchange Act Release No. 34-62323 (June 17, 
2010), 75 FR 36144 (June 24, 2012) (SR-C2-2010-002).
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    C2 also proposes to amend its Chapter 17 to state that, with 
respect to applicability to C2 only, CBOE Rules 17.50(g)(4), 
17.50(g)(5) and 17.50(g)(7) are not applicable to C2. Sections (g)(4), 
(g)(5) and (g)(7) of CBOE Rule 17.50 are not applicable to C2 because 
those sections apply to floor-based trading, and C2, as an all-
electronic exchange, does not have any floor-based trading. CBOE Rule 
17.50(g)(4) imposes fines for the failures to submit trade information 
on time and to the price reporter. On C2, trade information is 
submitted automatically (and the Exchange represents that C2 has 
appropriate systems in place to ensure that this occurs), rendering 
CBOE Rule 17.50(g)(4) inapplicable.
    CBOE Rule 17.50(g)(5) imposes fines for the failure of a Market-
Maker or Floor Broker to (1) honor the firm quote requirements of CBOE 
Rule 8.51, and (2) honor the priority of marketable customer orders 
maintained in the Customer Limit Order Book pursuant to CBOE Rule 6.45. 
Due to C2's nature as all-electronic, Market-Makers lack the requisite 
control to commit such violations (and C2 does not have Floor Brokers). 
The Exchange represents that C2 has appropriate systems in place to 
ensure that firm quote violations do not occur and customer order 
priority is automatically honored. CBOE Rule 17.50(g)(5) also imposes 
fines for the failure of a Market-Maker or Floor Broker to use due 
diligence in the execution of orders for which the floor Trading Permit 
Holder maintains an agency obligation pursuant to CBOE Rule 6.73. This 
section is inapplicable to C2 because C2 does not have floor Trading 
Permit Holders.

[[Page 57178]]

    CBOE Rule 17.50(g)(7) imposes fines for failure to submit trade 
data on the trade date. On C2, such trade data is submitted 
automatically (and the Exchange represents that C2 has appropriate 
systems in place to ensure that trade data is submitted in a timely 
manner), rendering CBOE Rule 17.50(g)(7) inapplicable.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\5\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5)6 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. By correcting references and removing inapplicable sections 
within Rule 17.50 and Interpretation and Policy .06 to Rule 4.11, the 
Exchange eliminates confusion that could arise from reading Exchange 
rules, thereby removing impediments to and perfecting the mechanism for 
a free and open market.
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    \5\ 15 U.S.C. 78f(b).
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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 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 
proposed rule change.

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

    Because the foregoing proposed rule change does not:
    A. Significantly affect the protection of investors or the public 
interest;
    B. Impose any significant burden on competition; and
    C. Become operative for 30 days from the date on which it was 
filed, or such shorter time as the Commission may designate, it has 
become effective pursuant to Section 19(b)(3)(A) \7\ of the Act and 
Rule 19b-4(f)(6) \8\ thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 17 CFR 240.19b 4(f)(6).
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    At any time within 60 days of the filing of this 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 email to [email protected]. Please include 
File Number SR-C2-2012-031 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.

All submissions should refer to File Number SR-C2-2012-031. This file 
number should be included on the subject line if email 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 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of C2. 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-C2-2012-031 and should be 
submitted on or before October 9, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22791 Filed 9-14-12; 8:45 am]
BILLING CODE 8011-01-P