[Federal Register Volume 80, Number 76 (Tuesday, April 21, 2015)]
[Notices]
[Pages 22251-22254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-09069]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74733; File No. SR-C2-2015-007]


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

April 15, 2015.
    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 April 10, 2015, 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.
---------------------------------------------------------------------------

    \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

    The Exchange proposes to amend its Fees Schedule. The text of the 
proposed rule change is available on the

[[Page 22252]]

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.\3\ Specifically, 
the Exchange proposes to amend its fees for the Russell 2000 Index 
(``RUT''). As of April 1, 2015, RUT is listed exclusively on C2 and 
Chicago Board Options Exchange, Incorporated (``CBOE''). As such, the 
Exchange proposes to make conforming changes to its Fees Schedule.
---------------------------------------------------------------------------

    \3\ C2 initially filed the proposed fee change on March 31, 2015 
(SR-C2-2015-004). On April 10, 2015, C2 withdrew that filing and 
submitted this filing.
---------------------------------------------------------------------------

    Currently the Exchange assesses different fees and rebates for 
simple and complex RUT orders. Specifically, for simple, non-complex 
RUT orders, the Exchange assesses the following per-contract fees 
structure (rebates in parentheses):

------------------------------------------------------------------------
                                                      Maker    Taker fee
------------------------------------------------------------------------
Public Customer...................................   * ($.75)       $.80
C2 Market-Maker...................................       .00         .80
All Other Origins (Professional Customer, Firm,          .50         .80
 Broker/Dealer, non-C2 Market-Maker, JBO, etc.)...
Trades on the Open................................       .00         .00
------------------------------------------------------------------------

    For complex orders in RUT, the Exchange currently assesses the 
following per-contract fees structure (rebates in parentheses):

------------------------------------------------------------------------
                                                    Maker fee/ Taker fee/
                                                     (rebate)   (rebate)
------------------------------------------------------------------------
Public Customer...................................   * ($.75)   * ($.75)
C2 Market-Maker...................................       .85        .85
All Other Origins (Professional Customer, Firm,          .85        .85
 Broker/Dealer, non-C2 Market-Maker, JBO, etc.)...
Trades on the Open................................       .00        .00
------------------------------------------------------------------------

    The Exchange notes that for both simple and complex RUT orders, 
rebates do not apply to orders that trade with Public Customer complex 
orders. In such circumstances, there is no fee or rebate. In light of 
the new licensing arrangement for RUT, the Exchange seeks to amend its 
RUT fees structure. Specifically, the Exchange seeks to eliminate the 
Maker-Taker fee structure for RUT and instead adopt standard 
transaction fees. The Exchange also proposes to eliminate the Public 
Customer rebates for RUT, as well as change the current fee amounts 
assessed. The Exchange notes that Trades on the Open will continue to 
not be assessed a fee or rebate. For both simple and non-complex RUT 
orders, the Exchange proposes to assess the following per-contract 
fees:

------------------------------------------------------------------------
                             RUT
------------------------------------------------------------------------
Public Customer..............................................       $.15
C2 Market-Maker..............................................        .35
All Other Origins (Professional Customer, Firm, Broker/              .55
 Dealer, non-C2 Market-Maker, JBO, etc.).....................
Trades on the Open...........................................        .00
------------------------------------------------------------------------

    Additionally, the Exchange notes that it currently assesses an 
Index License Surcharge for RUT (``RUT Surcharge'') of $0.30 per 
contract for all non-Public Customer orders. The Exchange now proposes 
to increase the RUT Surcharge from $0.30 to 0.45 per contract in order 
to recoup the increased costs associated with the RUT license. The 
Exchange will still be subsidizing the costs of the RUT license.
    Finally, the Exchange proposes to delete sections (B) and (D) from 
Section 1 of the Fees Schedule. The Exchange notes that as of January 
2015, the fees for simple, non-complex orders in equities, multiply-
listed index, ETF, and ETN options classes are the same and the fees 
for complex orders in equities, multiply-listed index, ETF, and ETN 
options classes are the same (i.e., there is no longer a distinction 
between fees and rebates for equities options class and multiply-listed 
index, ETF, and ETN options classes). As such, the Exchange proposes to 
consolidate its Fees Schedule and add ``equities'' to Section 1A and 
the current Section 1C (which will now be renumbered as ``B''). The 
Exchange believes the proposed rule change will make the Fees Schedule 
easier to read and alleviate potential confusion. The Exchange notes 
that no substantive changes are being made by this change.
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 
Section 6(b)(4) of the Act,\6\ 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.
---------------------------------------------------------------------------

    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to charge different fee 
amounts to different user types in the manner proposed because the 
proposed fees are consistent with the price differentiation that exists 
today at other options exchanges (for example, the proposed fees are 
comparable with fees for other index option products, traded on CBOE -
including RUT \7\). Additionally, while the Exchange notes that the fee 
structure for RUT is changing from a Maker-Taker structure to a 
standard transaction fees structure, the Exchange believes the proposed 
fee amounts for RUT orders are reasonable because the proposed fee 
amounts are within the range of standard transaction fee amounts

[[Page 22253]]

charged for RUT at another exchange (i.e., CBOE).\8\
---------------------------------------------------------------------------

    \7\ See CBOE Fees Schedule, Specified Proprietary Index Options 
Rate Table.
    \8\ See CBOE Fees Schedule, Specified Proprietary Index Options 
Rate Table, which shows that standard transaction fees for RUT 
orders range from $0.18 per contract to $0.65 per contract.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to eliminate the rebates for Public Customers for RUT 
transactions because the Exchange devotes a lot of resources to 
developing and maintain an exclusively-listed product and therefore 
does not desire to offer a rebate associated with exclusively-listed 
products. The Exchange notes that this proposed change will apply to 
all Public Customers for all RUT transactions. The Exchange also 
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. Moreover, the options industry has 
a long history of providing preferential pricing to Public Customers, 
and the Exchange's current Fees Schedule currently does so in many 
places, as do the fees structures of many other exchanges. Finally, all 
fee amounts listed as applying to Public Customers will be applied 
equally to all Public Customers (meaning that all Public Customers will 
be assessed the same amount).
    The Exchange believes that it is equitable and not unfairly 
discriminatory to, assess lower fees to Market-Makers as compared to 
other market participants other than Public Customers because Market-
Makers, unlike other market participants, take on a number of 
obligations, including quoting obligations, that other market 
participants do not have. Further, these lower fees offered to Market-
Makers are intended to incent Market-Makers to quote and trade more on 
C2, thereby providing more trading opportunities for all market 
participants. Finally, all fee amounts listed as applying to Market-
Makers will be applied equally to all Market-Makers (meaning that all 
Market-Makers will be assessed the same amount). Similarly, the 
Exchange notes that the RUT fee amounts for each separate type of other 
market participants will be assessed equally to all such market 
participants (i.e. all Broker-Dealer orders will be assessed the same 
amount, all Joint Back-Office orders will be assessed the same amount, 
etc.).
    The Exchange believes increasing the RUT Surcharge is reasonable 
because the Exchange still pays more for the RUT license than the 
amount of the proposed RUT Surcharge (meaning that the Exchange is, and 
will still be, subsidizing the costs of the RUT license). This increase 
is equitable and not unfairly discriminatory because the increased 
amount will be assessed to all market participants to whom the RUT 
Surcharge applies. Not applying the RUT Index License Surcharge Fee to 
Public Customer orders is equitable and not unfairly discriminatory 
because this is designed to attract Public Customer RUT orders, which 
increases liquidity and provides greater trading opportunities to all 
market participants.
    The Exchange believes that the proposed new fee structure for 
simple and complex RUT options is equitable and not unfairly 
discriminatory because the structure and fee amounts are identical for 
both simple and complex RUT orders.
    Finally, the Exchange believes that eliminating sections B and D of 
Section 1 of the Fees Schedule and consolidating it with current 
sections A and C, respectively, maintains clarity in the Fees Schedule 
and promotes just and equitable principles of trade by eliminating 
potential confusion and removing impediments to and perfecting the 
mechanism of a free and open market and a national market system.

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 are assessed to 
different market participants in some circumstances, these different 
market participants have different obligations and different 
circumstances as discussed above. For example, Market-Makers have 
quoting obligations that other market participants do not have. 
Further, the proposed fees structure for RUT is intended to encourage 
more trading of RUT, which brings liquidity to the Exchange and 
benefits all market participants.
    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act because RUT will 
now be exclusively listed on C2 (and CBOE). 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.

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 \9\ and paragraph (f) of Rule 19b-4 \10\ 
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.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-C2-2015-007 on the subject line.

Paper Comments

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


[[Page 22254]]


All submissions should refer to File Number SR-C2-2015-007. 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-C2-2015-007 and should be 
submitted on or before May 12, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
---------------------------------------------------------------------------

    \11\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-09069 Filed 4-20-15; 8:45 am]
 BILLING CODE 8011-01-P