[Federal Register Volume 81, Number 147 (Monday, August 1, 2016)]
[Notices]
[Pages 50580-50582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18057]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78421; File No. SR-C2-2016-013]


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

July 26, 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 July 14, 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.
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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 the 
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 (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

[[Page 50581]]

Exchange proposes to increase Maker rebates for simple orders in all 
equity, multiply-listed index (except Russell 2000 Index (``RUT'')), 
ETF and ETN options classes. Specifically, the Exchange proposes to 
adopt the following rates. Listed rates are per contract.
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    \3\ The Exchange initially filed the proposed fee change on July 
1, 2016 (SR-C2-2016-011). On July 14, 2016, the Exchange withdrew 
that filing and replaced it with this filing.

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                                                           Penny Classes                     Non-Penny
                                                 ---------------------------------------------------------------
                                                      Current        Proposed         Current        Proposed
----------------------------------------------------------------------------------------------------------------
Public Customer.................................           (.37)           (.42)           (.75)           (.80)
C2 Market-Maker.................................           (.40)           (.45)           (.68)           (.73)
All Other Origins (Professional Customer, Firm,            (.35)           (.40)           (.60)           (.65)
 Broker/Dealer, non-C2 Market-Maker, JBO, etc.).
Trades on the Open..............................          (0.00)          (0.00)          (0.00)          (0.00)
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    The Exchange believes the increased amounts will incentivize more 
volume to the Exchange. Specifically, the proposed increased rebates 
are intended to encourage C2 Market-Makers to quote more often and 
attract market participants to send orders to the Exchange, which will 
then incent Takers to trade with those orders and quotes. The Exchange 
notes that the proposed Maker rebate amounts are similar to and in line 
with the amounts currently assessed for simple, non-complex orders in 
equity, multiply-listed index, ETF and ETN options classes at other 
Exchanges.\4\
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    \4\ See e.g., Bats BZX Options Exchange Fee Schedule, 
Transaction Fees, which lists, for executions in Penny Pilot 
securities, (1) Customer Maker rebate of $0.25 to $0.53, (2) Market-
Maker Maker rebate of $0.35 to $0.42, and (3) Firm and Broker Dealer 
Maker rebate of $0.36 to $0.46; and for executions in non-Penny 
Pilot securities, (1) Customer Maker rebate of $0.85 to $1.00, (2) 
Market-Maker Maker rebate of $0.42 to $0.52, and (3) Firm and Broker 
Maker rebate of $0.36 to $0.67.
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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 the 
Section 6(b)(5) \6\ 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,\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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed rule change is reasonable 
because the proposed change provides additional rebates to Makers and 
is designed to attract additional volume to the Exchange, which 
benefits all market participants.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to provide higher rebates to Public Customers as 
compared to other market participants (other than C2 Market-Makers for 
penny classes) 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 provide higher rebates to Market-Makers as compared 
to other market participants other than Public Customers (for non-penny 
options) 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 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 provide 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 provide lower rebates 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 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 equally 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 continue 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.

[[Page 50582]]

    The Exchange lastly believes it's equitable and not unfairly 
discriminatory to assess higher 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.
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 rebates are assessed to 
different market participants in some circumstances, 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 because it only 
applies to trading on the Exchange. Further, the proposed rebate 
amounts are similar to those assessed for similar orders by other 
exchanges,\8\ 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.
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    \8\ See supra note 4.
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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.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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-C2-2016-013 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-C2-2016-013. 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 such 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-C2-2016-013, and should be 
submitted on or before August 22, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Robert W. Errett,
Deputy Secretary.
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    \11\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-18057 Filed 7-29-16; 8:45 am]
 BILLING CODE 8011-01-P