[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Notices]
[Pages 54144-54146]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19313]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78508; File No. SR-C2-2016-016]


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

August 9, 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 August 1, 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. Specifically, the 
Exchange proposes to establish a fee scale for the purchase of Market 
Maker Quoting and Order Bandwidth Packets (``Bandwidth Packets''), 
provide for an allotment scale of CMI CAS Servers, and adopt a fee for 
extra CMI CAS Servers.
    The Exchange first proposes to adopt a fee scale for Bandwidth 
Packets. Particularly, the Exchange proposes to provide that the first 
through ninth Bandwidth Packets obtained by a Trading Permit Holder 
(``TPH'') would cost $1,000 per packet per month, the tenth through 
fourteenth Bandwidth Packets obtained by that TPH would cost $500 per 
packet per month, and the fifteenth and each additional Bandwidth 
Packet obtained by that TPH would cost $250 per packet per month. The 
Exchange believes the proposed fee scale will encourage Market Makers 
to purchase additional Bandwidth Packets which will allow them to quote 
and trade more on the Exchange, thereby providing more trading 
opportunities for all market participants.
    The Exchange next proposes to amend its Fees Schedule with respect 
to Connectivity Charges. By way of background, in order to connect to 
CBOE Command, which allows a TPH to trade on the C2 System, a TPH must 
connect via either a CMI or FIX interface (depending on the 
configuration of the TPH's own systems). For TPHs that connect via a 
CMI interface, they must use CMI CAS Servers. Currently each TPH is 
provided one CAS Server plus access to a pool of shared backup CAS 
Servers. In order to ensure that a CAS Server is not overburdened by 
quoting activity for Market Makers, the Exchange proposes to allot each 
Market Maker a certain number of CASs (in addition to the shared 
backups) based on the amount of quoting bandwidth that they have. 
Quoting Bandwidth would be determined by the number of Bandwidth 
Packets the TPH holds in addition to 5 times the number of Market Maker 
Trading Permits it holds.\3\ Additionally, the Exchange will aggregate 
the Market Maker Trading Permits and Market Maker Quoting and Order 
Entry Bandwidth Packets from affiliated TPHs (TPHs with at least 75% 
common ownership between the firms as reflected on each firm's Form BD, 
Schedule A) for purposes of determining the number of Trading Permits 
and Market Maker Quoting and Order Entry Bandwidth Packets a TPH holds. 
Particularly, the Exchange proposes to add a chart listing the amounts 
of equivalent Bandwidth Packets and corresponding CAS Servers:
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    \3\ The Exchange notes that a C2 Market Maker Quoting and Order 
Entry Bandwidth Packet is equivalent to 1/5th of a Market Maker 
Trading Permit. As such, each Market-Maker Trading Permit a TPH 
holds is equivalent to 5 Quoting and Order Entry Bandwidth Packet 
for purposes of bandwidth. Therefore, if a TPH has 2 Market Maker 
Trading Permits and 16 Quoting and Order Entry Bandwidth Packets, 
the TPH has an equivalent of 26 Bandwidth Packets. The Exchange 
proposes to include this example in the Fees Schedule to provide 
additional clarity.

------------------------------------------------------------------------
   Total bandwidth  packets equivalency              CAS Servers
------------------------------------------------------------------------
1-25......................................  1 + shared backup.
26-50.....................................  2 + shared backup.
51-75.....................................  3 + shared backup.
76-100....................................  4 + shared backup.
100+......................................  5 + shared backup.
------------------------------------------------------------------------

    Next, the Exchange proposes to provide that if a Market Maker 
wishes to connect via an extra CMI CAS Server (in order to segregate 
TPH users for business or availability purposes) beyond the TPH's 
allotted number of CMI CAS Servers (described above), that TPH will be 
assessed a fee of $2,000 per month for each extra CMI CAS Server. The 
purpose of this proposed change is to manage the allotment of CMI CAS 
Servers in a fair manner and to prevent the Exchange from being 
required to expend large amounts of resources (the provision and 
management of the CMI CAS Servers can be costly) in order to provide 
TPHs with an unlimited amount of CMI CAS Servers. The purpose of the 
fee for extra CMI CAS Servers is to cover the costs related to the 
provision, management and upkeep of such CMI CAS Servers.
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,

[[Page 54145]]

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.
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    \4\ 15 U.S.C. 78f(b).
    \5\ 15 U.S.C. 78f(b)(5).
    \6\ 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 the opportunity to have lower fees 
for the Market Maker Quoting and Order Entry Bandwidth Packets than 
previously. The proposed change is also equitable and not unfairly 
discriminatory because the fee scale will apply to all Market Makers 
uniformly. The Exchange believes it's equitable and not unfairly 
discriminatory to establish a discounted fee scale for Market Maker 
Quoting and Order Entry Bandwidth Packets 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, the proposed change is intended to incent Market Makers 
to quote and trade more on the Exchange, thereby providing more trading 
opportunities for all market participants.
    The Exchange believes that the proposed change regarding CMI CAS 
Servers is reasonable because each CMI CAS Server should be capable of 
handling the bandwidth needs of at least the equivalent of 25 Bandwidth 
Packets. This proposed allotment is equitable and not unfairly 
discriminatory because it will be applied to all Market Makers 
accessing CBOE Command via a CMI connection. It is equitable and not 
unfairly discriminatory to provide allotment of CASs for Market Makers 
only, because the impact of non-quoting activity does not result in the 
need for more than one CAS. The proposed fee of $2,000 for each extra 
CMI CAS Server that a Market Maker requests is reasonable because it 
allows the Exchange to recoup the costs related to the provision, 
maintenance and upkeep of such Servers, and is equitable and not 
unfairly discriminatory because the fee will be applied to all Market 
Makers that request an extra CMI CAS Server.

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 apply to Market-Maker 
Quoting and Order Bandwidth Packets, Market-Makers have different 
obligations and different circumstances (as described in the 
``Statutory Basis'' section above). Additionally, the proposed change 
is intended to encourage Market Makers to quote more, which provides 
more trading opportunities for all market participants. The Exchange 
does not believe that the proposed allotment of one CMI CAS Server for 
every equivalent 25 Market Maker Bandwidth Packets that a TPH holds 
(plus one shared backup) and the proposed fee of $2,000 for each extra 
CMI CAS Server that a TPH requests will cause an unnecessary burden on 
intramarket competition because while such allotment and fee will only 
be applied to Market Makers accessing CBOE Command via a CMI 
connection, Market Makers have different obligations and different 
circumstances (as described in the ``Statutory Basis'' section above) 
and because market participants that do not quote would not need 
additional CASs.
    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. Additionally the Exchange does not 
believe such proposed bandwidth scale, CAS allotment and fee will cause 
an unnecessary burden on intermarket competition because different 
exchanges have different systemic setups for connection to such 
exchanges and are likely not comparable or competitive. 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.

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 \7\ and paragraph (f) of Rule 19b-4 \8\ 
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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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-C2-2016-016 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-C2-2016-016. 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

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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-C2-2016-016, and should be submitted on or before 
September 6, 2016.
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    \9\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19313 Filed 8-12-16; 8:45 am]
 BILLING CODE 8011-01-P