[Federal Register Volume 80, Number 69 (Friday, April 10, 2015)]
[Notices]
[Pages 19385-19388]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-08203]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74655; File No. SR-C2-2015-005]


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

April 6, 2015.
    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 1, 2015 C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (``SEC'' or ``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

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed

[[Page 19386]]

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 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, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule, effective April 
1, 2015. First, the Exchange proposes to amend Taker fees for complex 
orders in all equity, multiply-listed index, ETF and ETN options 
classes (except Russell 2000 Index (``RUT'')). Currently, for such 
orders, the Exchange provides a rebate of $0.35 per contract for Public 
Customers and assesses a fee of $0.45 per contract to C2 Market-Makers 
as well as to orders from all other origins (Professional Customer, 
Firm, Broker/Dealer, non-C2 Market-Maker, JBO, etc.). The Exchange 
proposes to eliminate the rebate for Public Customers and establish a 
fee of $0.47 per contract for Public Customer Orders. Additionally, the 
Exchange proposes to increase the Taker fee amounts for all other 
origins by $0.03, resulting in a fee of $0.48 per contract for all 
other origins, including C2 Market-Makers. The Exchange notes that the 
proposed Taker fee amounts are the same amounts currently assessed for 
simple, non-complex orders in equity, multiply-listed index, ETF and 
ETN options classes and are also in line with Taker fees assessed at 
other Exchanges.\3\
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    \3\ See, e.g., C2 Fees Schedule, Section 1A (Transaction Fees 
for Simple, Non-Complex Orders), and NYSE Arca Options Fee Schedule, 
which lists, for electronic executions in Penny Pilot issues, (1) 
Customer Taker fee of $0.47, (2) Market Maker Taker fee of $0.49, 
and (3) Firm and Broker Dealer Taker fee of $0.49; and for 
electronic executions in non-Penny Pilot issues, (1) Customer Taker 
fee of $0.85, (2) Market Maker Taker fee of $0.87, and (3) Firm and 
Broker Taker fee of $0.89.
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    Currently, Section 1A of the Fees Schedule, which sets forth fees 
for simple, non-complex orders in all equity, multiply-listed index, 
ETF and ETN options classes (other than RUT), includes an asterisk 
attached to all Maker Rebates and denotes the following language: 
``Rebates do not apply to orders that trade with Public Customer 
complex orders. In such a circumstance there will be no rebate or 
fee.'' The Exchange notes that it had adopted this language since 
Public Customer Taker complex orders also receive a rebate and thus, if 
the Exchange had offered the rebate when a Public Customer Maker simple 
order trades with another Public Customer complex order, the Exchange 
would be providing a rebate on both sides of the order (which would not 
have been economically feasible or viable it would result in a net 
negative for the Exchange). As such, no fee or rebate is applied in 
these circumstances. Similarly, the Exchange notes that Section 1B of 
the Fees Schedule, which sets forth fees for complex orders in all 
equity, multiply-listed index, ETF and ETN options classes (other than 
RUT), includes an asterisk attached to Public Customer Rebates and 
denotes the following language: ``The rebate will only apply to Public 
Customer complex orders that trade with non-Public Customer complex 
orders. In other circumstances, there will be no Maker or Taker fee or 
rebate.'' Again the Exchange notes that Public Customers are currently 
entitled to a rebate regardless of whether they were a Maker or a Taker 
for complex orders and thus, if the Exchange offered the rebate when a 
Public Customer complex order trades with another Public Customer 
complex order, the Exchange would be providing a rebate on both sides 
of the order. As noted above, it would not have been economically 
feasible or viable to provide a rebate on an order that is trading with 
an order that is not generating a fee and therefore, in these 
circumstances, no fee or rebate is applied. However, in light of the 
Exchange eliminating the Taker rebate for Public Customers complex 
orders and replacing it with a fee, the Exchange will no longer be 
providing a rebate on both sides of a transaction in instances in which 
a simple, non-complex Maker order trades with a Public Customer complex 
order or where a Public Customer Complex order trades with another 
Public Customer complex order. Consequently, as the Exchange will only 
be providing a rebate on one side of a transaction for these orders, 
the Exchange believes that this exception is no longer necessary and 
proposes to eliminate the asterisk and asterisked language from the 
Fees Schedule.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \5\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(4) of the Act,\7\ which requires 
that Exchange rules provide for the equitable allocation of reasonable 
dues, fees, and other charges among its Trading Permit Holders and 
other persons using its facilities.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ Id.
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed increases to Taker fees for 
complex orders in all equity, multiply-listed index, ETF and ETN 
options classes (except RUT) are reasonable because the proposed fee 
amounts are equivalent to Taker fees for complex [sic] orders in all 
equity, multiply-listed index, ETF and ETN options classes (except 
RUT).\8\ The Exchange believes it is reasonable to eliminate the Public 
Customer rebate for Taker complex orders because Public Customer Taker 
simple orders also do not offer a rebate. Additionally, other exchanges 
also provide for a fee instead of a rebate for Public Customer Taker 
orders.\9\ The

[[Page 19387]]

Exchange believes the proposed Public Customer Taker fee amount for 
complex orders is reasonable because the proposed amount is equivalent 
to the amount currently assessed for Public Customer Taker simple 
orders on C2, as well as the amount assessed on another exchange for 
Public Customer Taker orders.\10\
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    \8\ See C2 Fees Schedule, Section 1A (Transaction Fees for 
Simple, Non-Complex Orders)
    \9\ See NYSE Arca Options Fee Schedule, which lists, for 
electronic executions in Penny Pilot issues a Customer Taker fee of 
$0.47 in non-Penny Pilot issues a Customer Taker fee of $0.85. See 
also, NOM Price List, which lists fees for Customer orders that 
remove liquidity in Penny Pilot options at $0.48 per contract and 
non-Penny Pilot options at $0.85 per contract.
    \10\ See C2 Fees Schedule, Section 1A and NOM Price List.
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    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess lower fees to Public Customers as compared to 
other market participants because Public Customer order flow enhances 
liquidity on the Exchange for the benefit of all market participants. 
Specifically, Public Customer liquidity benefits all market 
participants by providing more trading opportunities, which attracts 
Market-Makers. An increase in the activity of these market participants 
in turn facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
Additionally, the proposed fee change applying to Public Customers will 
be applied equally to all Public Customers.
    The Exchange believes that the differences between the Maker 
rebates and fees and Taker fees for complex orders are reasonable, 
equitable and not unfairly discriminatory because they are intended to 
cover the costs associated with operating the Exchange's trading 
systems necessary to provide these trading opportunities.
    The Exchange believes that amending the Fees Schedule so that Maker 
rebates will apply to all orders, including orders that trade with 
Public Customer complex orders is reasonable, equitable and not 
unfairly discriminatory because the Exchange no longer also provides a 
rebate for Public Customer complex Taker orders, and thus it is no 
longer the case that it is not economically feasible or viable to 
provide a rebate in these circumstances. Similarly, the Exchange 
believes that its proposal to remove the language that permitted the 
Exchange to not provide a rebate for Public Customer complex orders 
that trade with other Public Customer orders is reasonable, equitable 
and not unfairly discriminatory because the Exchange again no longer 
provides a rebate for Public Customer complex Taker orders, and thus it 
is no longer the case that it is not economically feasible or viable to 
provide a rebate in these circumstances. The Exchange also believes 
this proposed rule change is reasonable, equitable and not unfairly 
discriminatory because all market-participants entitled to receive a 
rebate when acting as a Maker in simple and complex orders when trading 
against non-Public Customers will also receive the rebate when trading 
with a Public Customer order.

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

    C2 does not believe that the proposed rule changes will impose any 
burden on competition that are not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed rule change will impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act because, while different fees and rebates are 
assessed to different market participants in some circumstances, these 
different market participants have different obligations and different 
circumstances as discussed above. The Exchange believes this proposal 
will not cause an unnecessary burden on intermarket competition because 
the Taker fee amounts for complex orders in all equity, multiply-listed 
index, ETF and ETN options classes (except RUT) is similar to fees 
assessed at other exchanges.\11\ To the extent that the proposed 
changes make C2 a more attractive marketplace for market participants 
at other exchanges, such market participants are welcome to become C2 
market participants.
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    \11\ See e.g., See NYSE Arca Options Fee Schedule, which lists, 
for electronic executions in Penny Pilot issues, (1) Customer Taker 
fee of $0.47, (2) Market-Maker Taker fee of $0.49, and (3) Firm and 
Broker Dealer Taker fee of $0.49; and for electronic executions in 
non-Penny Pilot issues, (1) Customer Taker fee of $0.85, (2) Market-
Maker Taker fee of $0.87, and (3) Firm and Broker Taker fee of 
$0.89.
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    Additionally, the Exchange does not believe amending the Fees 
Schedule so that all Maker rebates will apply to all orders (including 
orders that trade with Public Customer complex orders) will impose any 
burden on intramarket competition because all market-participants 
entitled to receive a rebate when acting as a Maker when trading 
against non-Public Customers will receive the rebate when trading with 
a Public Customer order. The Exchange does not believe amending the 
Fees Schedule so that all Maker rebates will apply to all orders 
(including orders that trade with Public Customer complex orders) will 
impose any burden on intermarket competition because it only applies to 
trading on the Exchange and because to the extent the availability of 
these rebates make C2 a more attractive marketplace for market 
participants at other exchanges, such market participants are welcome 
to become C2 market participants.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4 \13\ 
thereunder. 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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
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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-C2-2015-005 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-C2-2015-005. 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/

[[Page 19388]]

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-
2015-005 and should be submitted on or before May 1, 2015.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2015-08203 Filed 4-9-15; 8:45 am]
 BILLING CODE 8011-01-P