[Federal Register Volume 81, Number 79 (Monday, April 25, 2016)]
[Notices]
[Pages 24153-24155]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-09454]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77651; File No. SR-C2-2016-004]


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

April 19, 2016.
    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 11, 2016, 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 Exchange's Web site at (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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule.\3\ Specifically, 
the Exchange proposes to adopt separate transaction fees and rebates 
for non-Penny option classes. By way of background, the Exchange began 
adding an additional 2,000 option classes the week of February 22, 
2016. The Exchange notes that the additional classes are non-Penny 
option classes (i.e., each traded in nickel increments, as opposed to 
penny increments). As such, the Exchange proposes adopting fee and 
rebate rates for these classes that would be different than the current 
fees and rebates which would apply to Penny option classes only.
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee change on 
April 1, 2016 (SR-C2-2016-003). On April 11, 2016, the Exchange 
withdrew that filing and replaced it with SR-C2-2016-004.
---------------------------------------------------------------------------

    Specifically, the Exchange proposes to adopt the following rates 
for simple and complex orders in all equity, multiply-listed index, ETF 
and ETN non-Penny option classes. Listed rates are per contract.

------------------------------------------------------------------------
                                          Maker            Taker fee
------------------------------------------------------------------------
Public Customer...................             ($.75)               $.83
C2 Market-Maker...................              (.68)                .85
All Other Origins (Professional                 (.60)                .88
 Customer, Firm, Broker/Dealer,
 non-C2 Market-Maker, JBO, etc.)..

[[Page 24154]]

 
Trades on the Open................                .00                .00
------------------------------------------------------------------------

    The Exchange notes that the proposed fees are similar to those 
adopted on other Exchanges.\4\
---------------------------------------------------------------------------

    \4\ See e.g., NYSE Arca Options Fee Schedule, which lists, for 
electronic executions in in non-Penny Pilot issues, (1) the standard 
Customer Maker rebate of $0.75 versus a Taker fee of $0.85, (2) the 
standard Market Maker rebate of $0.05 versus a Taker fee of $0.99, 
and (3) the standard Firm and Broker Dealer Maker fee of $0.50 
versus a Taker fee of $0.99. See also, ISE Gemini Schedule of Fees, 
which lists for executions in Non-Penny symbols, (1) the standard 
Customer Maker rebate of between $0.75 to $0.85 versus a Taker fee 
between $0.81 to $0.82, (2) the standard Market Maker rebate between 
$0.40 to $0.49 versus a Taker fee of $0.89, and (3) the standard 
Firm and Broker Dealer Maker rebate between $0.25 to $0.65 versus a 
Taker fee of $0.89.
---------------------------------------------------------------------------

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.\5\ Specifically, 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. In particular, the Exchange's proposal to adopt fees and 
rebates for non-Penny option classes is reasonable because the amounts 
proposed are similar to, and in line with, the rebates and fees for 
non-Penny option transactions at other Exchanges that use the Make-Take 
pricing structure.\7\
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ See supra note 4.
---------------------------------------------------------------------------

    The Exchange believes that it is equitable and not unfairly 
discriminatory to assess lower fees to Public Customers as compared to 
other market participants and to provide higher rebates 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. 
Finally, all fee and rebate amounts listed as applying to Public 
Customers will be applied equally to all Public Customers.
    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 and provide 
higher rebates to Market-Makers as compared to other market 
participants other than Public Customers because Market-Makers, unlike 
other C2 market participants, take on a number of obligations, 
including quoting obligations, that other market participants do not 
have. Further, these lower fees and higher rebates offered to Market-
Makers are intended to incent Market-Makers to quote and trade more on 
the Exchange, thereby providing more trading opportunities for all 
market participants. Finally, all fee and rebate amounts listed as 
applying to Market-Makers will be applied equally to all Market-Makers.
    The Exchange also believes it is equitable and not unfairly 
discriminatory to assess higher fees and lower rebates to all other 
origins (i.e., Professional Customer, Firm, Broker/Dealer, non-C2 
Market-Maker, JBO, etc.). Particularly, the Exchange notes that it 
believes it's equitable and not unfairly discriminatory to assess a 
higher fee and lower rebate than it does of Market-Makers, because 
these market participants do not have the same obligations, such as 
quoting, as Market-Makers do. The Exchange believes it's equitable and 
not unfairly discriminatory to assess a higher fee and lower rebate 
than it does to Public Customers, because, as described above, there is 
a history of providing preferential pricing to Public Customers as 
Public Customer liquidity benefits all market participants by providing 
more trading opportunities. The Exchange notes that the proposed fee 
and rebate amounts listed will also be applied to each of these market 
participants (i.e., Professional Customers, Firms, Broker/Dealers, non-
C2 Market-Makers, JBOs, etc. will be assessed the same amount). It 
should also be noted that all fee and rebate amounts described herein 
are intended to attract greater order flow to the Exchange, which 
should therefore serve to benefit all Exchange market participants.
    The Exchange believes it's reasonable, equitable and not unfairly 
discriminatory to assess no fees and offer no rebates for Trades on the 
Open because trades on the Open involve the matching of undisplayed 
pre-opening trading interest. As such, there is, in effect, no Maker or 
Taker activity occurring. Additionally, the Exchange would like to 
encourage users to submit pre-opening orders.
    The Exchange lastly believes it's equitable and not unfairly 
discriminatory to assess higher fees and rebates for non-Penny option 
classes than Penny option classes because Penny classes and non-Penny 
classes offer different pricing, liquidity, spread and trading 
incentives. The spreads in Penny classes are tighter than those in non-
Penny classes (which trade in $0.05 increments). The wider spreads in 
non-Penny option classes allow for greater profit potential. Further, a 
number of options exchanges offer different pricing for Penny and non-
Penny option classes.\8\
---------------------------------------------------------------------------

    \8\ See e.g., NYSE Arca Options Fee Schedule and ISE Gemini 
Schedule of Fees.
---------------------------------------------------------------------------

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. 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, these different market 
participants have different obligations and different circumstances (as 
described in the ``Statutory Basis'' section above). For example, 
Public Customers order flow, as discussed above, enhances liquidity on 
the Exchange for the benefit of all market participants. There is also 
a history in the options markets of providing preferential treatment to 
Public Customers. Additionally, Market-Makers have quoting obligations 
that other market participants do not have.
    The Exchange does not believe that the proposed change will impose 
any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act

[[Page 24155]]

because it only applies to trading on the Exchange. Further, the 
proposed fee and rebate amounts are similar to those assessed for 
similar orders by other exchanges,\9\ and therefore should continue to 
encourage competition. Should the proposed change make C2 a more 
attractive trading venue for market participants at other exchanges, 
such market participants may elect to become market participants at C2 
[sic]
---------------------------------------------------------------------------

    \9\ See supra note 4.
---------------------------------------------------------------------------

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 \10\ and paragraph (f) of Rule 19b-4 \11\ 
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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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-C2-2016-004 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-C2-2016-004. 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-C2-2016-004, and should be 
submitted on or before May 16, 2016.
---------------------------------------------------------------------------

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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-09454 Filed 4-22-16; 8:45 am]
 BILLING CODE 8011-01-P