[Federal Register Volume 78, Number 57 (Monday, March 25, 2013)]
[Notices]
[Pages 17967-17969]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-06694]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69156; File No. SR-C2-2013-014]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend C2 Rule 6.3 for Mini-Options Launch

March 18, 2013.
    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 14, 2013, the 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 and II below, which Items have been prepared by the 
Exchange. The Exchange filed 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

    C2 proposes to amend C2 Rule 6.3 (Meaning of Premium Bids and 
Offers) by adding how bids and offers will be expressed for option 
contracts overlying 10 shares of a security. 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's Public Reference Room.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    C2 Chapter 5 (Securities Dealt In) was recently amended to allow 
for the listing of option contracts that deliver 10 physical shares on 
SPDR S&P 500 (``SPY''), Apple, Inc. (``AAPL''), SPDR Gold Trust 
(``GLD''), Google Inc. (``GOOG'') and Amazon.com Inc. (``AMZN'') 
(``mini-options''). The purpose of this proposed rule change is to 
amend C2 Rule 6.3 (Meaning of Premium Bids and Offers) by adding how 
bids and offers would be expressed for mini-options.
CBOE Rules Incorporated by Reference Into C2's Rules
    The majority of C2's rules are the same as Chicago Board Options 
Exchange, Incorporated's (``CBOE'') rules and were adopted as part of 
the Securities and Exchange Commission's

[[Page 17968]]

(``SEC or Commission'') order approving C2's application for 
registration as a national securities exchange.\5\ CBOE Rule 5.5.22 was 
recently adopted to provide for the listing and trading of mini-
options.\6\ C2 Chapter 5 provides, ``[t]he rules contained in CBOE 
Chapter V, as such rules may be in effect from time to time, shall 
apply to C2 and are hereby incorporated into this Chapter.'' 
Accordingly, mini-options trading is permitted on C2. Mini-options 
trading on CBOE and C2 is expected to commence on March 18, 2013.
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    \5\ See Securities Exchange Act Release No. 61152 (December 10, 
2009), 74 FR 66699, 66709-10 (December 16, 2009) (In the Matter of 
the Application of C2 Options Exchange, Incorporated for 
Registration as a National Securities Exchange Findings, Opinion, 
and Order of the Commission (File No. 10-191). In the Order, the 
Commission granted C2's request for exemption, pursuant to Section 
36 of the Act, from the rule filing requirements of Section 19(b) of 
the Act with respect to the rules that C2 proposed to incorporate by 
reference. The exemption was conditioned upon C2 providing written 
notice to its members whenever CBOE proposes to change a rule that 
C2 has incorporated by reference. In the Order, the Commission 
stated its belief that ``this exemption is appropriate in the public 
interest and consistent with the protection of investors because it 
will promote more efficient use of Commission and SRO resources by 
avoiding duplicative rule flings based on simultaneous changes to 
identical rules sought by more than one SRO.''
    C2 satisfied this requirement with respect to mini-options by 
posting a copy of the CBOE rule filing to list mini-options (SR-
CBOE-2013-001) on C2's rule filing Web site at the same time the 
CBOE rule filing was posted to the CBOE rule filing Web site. The C2 
rule filing Web site is located at: http://www.c2exchange.com/Legal/RuleFilings.aspx. By posting CBOE rule filings to C2's rule filing 
Web site that amend C2's rule by reference, the Exchange provides 
its members with notice of the proposed rule change so that they 
have an opportunity to comment on it.
    \6\ See Securities Exchange Act Release No. 68656 (January 15, 
2013), 78 FR 4526 (January 22, 2013) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change to List and Trade Option 
Contracts Overlying 10 Shares of Certain Securities) (SR-CBOE-2013-
001) (``CBOE mini-option filing''). The Exchange notes that CBOE 
also adopted CBOE Rule 4.11.08 which addresses position limits for 
mini-options. CBOE Rule 4.11.08 is also incorporated by reference 
into C2's rules. See C2 Chapter 4 that provides, ``[t]he rules 
contained in CBOE Chapter IV, as such rules may be in effect from 
time to time, shall apply to C2 and are hereby incorporated into 
this Chapter.''
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    The premium multiplier for mini-options is $10, rather than $100, 
which reflects the smaller unit of trading. To reflect this mini-option 
feature, new subparagraph (c) was added to CBOE Rule 6.41 (Meaning of 
Premium Bids and Offers) and provides that bids and offers for an 
option contract overlying 10 shares will be expressed in terms of 
dollars per \1/10\th part of the total value of the contract.\7\ Thus, 
an offer of ``.50'' shall represent an offer $5.00 for an option 
contract having a unit of trading consisting of 10 shares.
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    \7\ See 78 FR at 4527 (CBOE mini-option filing). The Exchange 
notes that NYSE Arca, Inc. (``NYSE Arca'') and International 
Securities Exchange, LLC (``ISE'') have similar rules governing how 
bids and offers for mini-options will be expressed. See Securities 
Exchange Act Release No. 67948 (September 28, 2012) 77 FR 60735 
(October 4, 2012) (Notice of Filing of Amendments No. 1 and Order 
Granting Accelerated Approval of Proposed Rule Changes as Modified 
by Amendments No. 1 to List and Trade Option Contracts Overlying 10 
Shares of Certain Securities) (SR-NYSEArca-2012-64 and SR-ISE-2012-
58).
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    Chapter 6 to C2's rules does not incorporate CBOE's rules by 
reference. However, C2 Rule 6.3 (Meaning of Premium Bids and Offers) is 
identical to CBOE Rule 6.41 (Meaning of Premium Bids and Offers). 
Accordingly, C2 proposes to add new subparagraph (c) to C2 Rule 6.3 to 
provide that bids and offers for an option contract overlying 10 shares 
will be expressed in terms of dollars per \1/10\th part of the total 
value of the contract. Thus, an offer of ``.50'' shall represent an 
offer $5.00 for an option contract having a unit of trading consisting 
of 10 shares.
    No other changes to C2's rules are being proposed by this filing.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder, including the 
requirements of Section 6(b) of the Act.\8\ In particular, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \9\ requirements that the rules of an exchange be designed to 
promote just and equitable principles of trade, to prevent fraudulent 
and manipulative acts, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, 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.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that investors would benefit 
from the current rule proposal because it would specify how premium 
bids and offers would be expressed for mini-options traded on C2. The 
Exchange believes that the marketplace and investors will be expecting 
that premium bids and offers for mini-options traded on C2 would be 
expressed in the same manner as premium bids and offers for mini-
options traded on CBOE (and other exchanges). As a result, the Exchange 
believes that this change would lessen investor and marketplace 
confusion because C2 Rule 6.3 will be clear as to how premium bids and 
offers for mini-options would be expressed.

B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. In this regard and as indicated above, the Exchange notes that 
the rule change is being proposed to ready C2 for mini-options trading 
which is scheduled to commence on March 18, 2013. The Exchange notes 
that the CBOE mini-option filing (which permits C2 to list mini-options 
as well) was submitted as a competitive response to approved NYSE Arca 
and ISE filings. C2 believes this proposed rule change is necessary to 
permit fair competition among the options exchanges.

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

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of 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 Exchange has fulfilled this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay so that the proposed rule change may 
coincide with the anticipated launch of trading in Mini Options. The 
Commission believes that waiving the 30-day operative delay

[[Page 17969]]

is consistent with the protection of investors and the public 
interest.\12\ Waiver of the operative delay will allow the Exchange to 
implement its proposal consistent with the commencement of trading in 
Mini Options as scheduled and expected by members and other 
participants on March 18, 2013. For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
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    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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.

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-C2-2013-014 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-C2-2013-014 on the 
subject line. 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 
the 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-C2-2013-014 on the subject line and should be submitted 
on or before April 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-06694 Filed 3-22-13; 8:45 am]
BILLING CODE 8011-01-P