[Federal Register Volume 78, Number 84 (Wednesday, May 1, 2013)]
[Notices]
[Pages 25505-25506]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10279]



[[Page 25505]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69458; File No. SR-C2-2013-019]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend C2 Rule 6.52

April 25, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 19, 2013, C2 Options Exchange, Incorporated (``C2'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    C2 proposes to amend C2 Rule 6.52 (Solicitation Auction Mechanism), 
which sets forth a minimum order eligibility size predicated on an 
option contract delivering 100 shares. The proposal would amend C2 Rule 
6.52 to establish a minimum order eligibility size in an amount 
proportional to mini-options delivering 10 shares (i.e., the same 
number of underlying securities). The Exchange is not proposing to 
change the substantive content of this rule. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    C2's rules were recently amended to allow for the listing of mini-
options 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'').\3\ Mini-options trading 
commenced on March 18, 2013.
---------------------------------------------------------------------------

    \3\ Chapter 5 to the C2 Rulebook provides that the rules 
contained in Chicago Board Options Exchange, Incorporated (``CBOE'') 
Chapter V, as such rules may be in effect from time to time, shall 
apply to C2 and that C2 participants shall comply with CBOE Rule 
Chapter V as if such rules were part of the C2 Rules. Accordingly, 
when CBOE amended Rule 5.5 to provide for the trading of mini-
options, that filing resulted in a simultaneous change to identical 
C2 rules. 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) (``mini-option filing'').
---------------------------------------------------------------------------

    Standard equity and exchange-traded fund (``ETF'') option contracts 
have a unit of trading of 100 shares deliverable and mini-options have 
a unit of trading of 10 shares deliverable.\4\ Except for the 
difference in the number of deliverable shares, mini-options have the 
same terms and contract characteristics as standard equity and ETF 
options, including exercise style. Accordingly, the mini-option filing 
contained a representation that the rules that apply to the trading of 
standard option contracts will apply to mini-options as well.\5\
---------------------------------------------------------------------------

    \4\ Strike prices for mini-options are set at the same level as 
for standard options. See CBOE Rule 5.5.22(b). Bids and offers for 
mini-options are expressed in terms of dollars per 1/10th part of 
the total value of the contract. See C2 Rule 6.3(c). No additional 
series of mini-options may be added if the underlying security is 
trading at $90 or less. The underlying security must trade above $90 
for five consecutive days prior to listing mini-option contracts in 
an additional expiration month. See CBOE Rule 5.5.22(c).
    \5\ 78 FR 4527.
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 6.52 (Solicitation Auction 
Mechanism), which sets forth a minimum order eligibility size 
predicated on an option contract delivering 100 shares. The purpose of 
the proposed rule change is to amend C2 Rule 6.52 to establish a 
minimum order eligibility size in an amount proportional to mini-
options delivering 10 shares (i.e., the same number of underlying 
securities). The Exchange is not proposing to change the substantive 
content of this rule.
    C2 Rule 6.52 permits a C2 Participant that represents agency orders 
to electronically execute orders it represents as agent (``Agency 
Order'') against solicited orders provided it submits the Agency Order 
for electronic execution into the solicitation auction mechanism (the 
``Auction'') pursuant to the requirements of C2 Rule 6.52. C2 Rule 
6.52(a)(1) requires the Exchange to determine minimum eligible size 
parameters for participation in Auctions, however, the eligible order 
size may not be less than 500 standard option contracts (which is 
equivalent to 5,000 mini-option contracts). The Exchange proposes to 
maintain the minimum eligibility size parameters for mini-options that 
are required for standard options in proportion.
    Accordingly, C2 proposes to amend C2 Rule 6.52(a)(1) to specify 
that the minimum order size for standard options may not be less than 
500 contracts and the minimum order size for mini-options may not be 
less than 5,000 contracts.
    Standard option series subject to an adjustment will be subject to 
the minimum order quantity for standard options contained in C2 Rule 
6.52 and mini-option series subject to an adjustment will be subject to 
the minimum order quantities for mini-options contained in C2 Rule 
6.52.
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.\6\ In particular, the Exchange 
believes the proposed rule change is consistent with the Section 
6(b)(5) \7\ 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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that investors would benefit 
from the current rule proposal because it would clarify how the minimum 
order quantity that is predicated on an option contract delivering 100 
shares will apply to mini-options. The Exchange believes that the 
marketplace and investors will be expecting clarification by the 
Exchange on this issue. As a result, the Exchange believes that this 
change would lessen investor and marketplace

[[Page 25506]]

confusion because the rule being amended by this filing will be clear 
as to the application to mini-options.
    The Exchange also believes that the current proposal is designed to 
promote just and equitable principles of trade because it will maintain 
the minimum order quantity set forth in C2 Rule 6.52 in an amount 
proportional to mini-options.

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, since mini-options are permitted on multiply-
listed classes, several exchanges have changed their auction rules so 
that those rules [sic] set forth minimum order quantities for standard 
options will apply in amounts proportional to mini-options. C2 believes 
that the proposed rule change will enhance competition by providing for 
the same proportional minimum order quantity contained in Rule 6.52 to 
apply to standard and mini-options on the same security.

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 \8\ and Rule 19b-4(f)(6) thereunder.\9\
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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.
---------------------------------------------------------------------------

    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-C2-2013-019 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-C2-2013-019. 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-C2-2013-019 and should be 
submitted on or before May 22, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-10279 Filed 4-30-13; 8:45 am]
BILLING CODE 8011-01-P