
[Federal Register Volume 77, Number 174 (Friday, September 7, 2012)]
[Notices]
[Pages 55257-55265]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-22059]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67772; File No. SR-C2-2012-024]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing of a Proposed Rule Change to Adopt a Designated 
Primary Market-Maker Program

August 31, 2012.
    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 21, 2012, 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 and II 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 adopt a Designated Primary Market-Maker 
(``DPM'') program. 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, at the Commission's Web site 
(http://www.sec.gov), 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 proposed rule change proposes to adopt a DPM program.\3\ The 
Exchange believes the DPM program will encourage deeper liquidity in 
allocated classes by imposing obligations on DPMs to attract order flow 
to the Exchange in allocated securities and to quote competitively. 
These proposed Rules also impose special eligibility requirements and 
market performance standards on DPMs. As specialists, DPMs will receive 
a trade participation right in their allocated classes in exchange for 
their heightened responsibilities.
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    \3\ The proposed rules are based generally on the rules 
governing the DPM program on Chicago Board Options Exchange, 
Incorporated (``CBOE''), excluding among other things certain 
provisions that are inapplicable to C2 (such as provisions related 
to floor trading and CBOE-specific provisions) as well as other 
provisions that are outdated. See CBOE Rules 6.45A(a)(ii)(2) and 
(iii), 6.45B(a)(i)(2) and (iii), 8.80, 8.83-8.91, 8.95, and 
17.50(g)(14). See Item 8 of the Form 19b-4 for a discussion of the 
differences between the proposed Rules and the corresponding CBOE 
rules.
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DPM Program

Rule 1.1--Definition of DPM 4

    The proposed rule change amends Rule 1.1 to adopt a definition of 
the term ``Designated Primary Market-Maker'', which is used throughout 
the proposed DPM Rules. A DPM is a Participant \5\ organization that is 
approved by the Exchange to function in allocated securities as a 
Market-Maker and is subject to obligations under proposed Rule 8.17. 
The purpose of requiring that a DPM be an organization is to ensure 
that each DPM has a formal organizational structure in place to govern 
the manner in which it will operate as a DPM. The Exchange believes it 
is essential that it have the sole authority to approve a Participant 
organization to act as a DPM to ensure that the Participant 
organization satisfies the eligibility requirements set forth in 
proposed Rule 8.14 and the financial requirements set forth in proposed 
Rule 8.18, and can otherwise meet the obligations and responsibilities 
of a DPM set forth in proposed Rule 8.17.
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    \4\ See CBOE Rule 8.80(a).
    \5\ A ``Participant'' is an Exchange-recognized holder of a 
Trading Permit, which is an Exchange-issued permit that confers the 
ability to transact on the Exchange. See Rule 1.1.
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Rule 8.14--Approval to Act as a DPM 6

    Proposed Rule 8.14 addresses the DPM approval process. To act as a 
DPM, a Participant must file an application with the Exchange on such 
forms as the Exchange may prescribe. The Exchange will determine the 
appropriate number of approved DPMs. The Exchange will make each DPM 
approval from among the DPM applications on file with the Exchange, 
based on the Exchange's judgment as to which applicant is best able to 
perform the functions of a DPM. The factors the Exchange may consider 
when making this selection include, but are not limited to, any one or 
more of the following:
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    \6\ See CBOE Rules 8.83, 8.88, and 8.89.
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    (1) Adequacy of capital;
    (2) operational capacity;
    (3) trading experience of and observance of generally accepted 
standards of conduct by the applicant and its associated persons;
    (4) regulatory history of and history of adherence to Exchange 
Rules by the applicant and its associated persons; and
    (5) willingness and ability of the applicant and its associated 
persons to promote the Exchange as a marketplace.
    The following are some examples of the many ways in which the 
Exchange may consider these factors:
     In considering adequacy of capital of an applicant, the 
Exchange may look at whether the applicant meets the financial 
requirements set forth in proposed Rule 8.18 and whether it otherwise 
has the resources to meet the heightened responsibilities.
     In considering operational capacity of an applicant, the 
Exchange may look to criteria such as the number of Market-Makers or 
personnel and the ability to process order flow in determining whether 
it would be able to satisfy the DPM obligations in an efficient manner.

[[Page 55258]]

     In considering trading experience of and observance of 
generally accepted standards of conduct by the applicant and its 
associated persons, the Exchange may look at the applicant's and its 
associated persons' history at the Exchange or in the industry, the 
trading volume of the applicant and its associated persons, and market 
performance reviews in determining whether the applicant would be able 
to meet the DPM market performance standards.
     In considering the regulatory history of and history of 
adherence to Exchange Rules by the applicant and its associated 
persons, the Exchange may look to whether the applicant or its 
associated persons have been found to have violated Exchange rules or 
have been subject to any enforcement proceedings in determining whether 
the applicant and its associated persons would comply with obligations 
imposed by the DPM Rules and other Rules of the Exchange, as well as 
federal securities laws and regulations.
     In considering willingness and ability of the applicant 
and its associated persons to promote the Exchange as a marketplace, 
the Exchange may look at whether the applicant has engaged (or how it 
intends to engage) in activities such as assisting in meeting and 
educating market participants, maintaining communications with 
Participants in order to be responsive to suggestions and complaints, 
and responding to suggestions and complaints in determining whether the 
applicant could bring order flow to the Exchange.
    These are the primary factors that the Exchange believes are 
necessary for it to consider when determining whether a DPM applicant 
is able to meet the DPM obligations, responsibilities, and market 
performance standards imposed by the proposed DPM Rules. Given that the 
Exchange may limit the number of approved DPMs, it is important that 
the Exchange can reasonably determine that the Participants it approves 
to act as DPMs will increase liquidity and quote competitively in order 
to attract order flow as intended by the proposed DPM program.
    Each applicant for approval as a DPM will have an opportunity to 
present any matter that it wishes the Exchange to consider in 
conjunction with the approval decision. The Exchange may require that a 
presentation be solely or partially in writing, and may require the 
submission of additional information from the applicant or its 
associated persons. Formal rules of evidence will not apply to these 
proceedings. This opportunity will allow a DPM applicant to ensure that 
the Exchange considers all information that the DPM applicant deems 
relevant, in addition to the standard information described by the 
factors above that the Exchange reviews. The Exchange believes the 
presentation of this information, in addition to the information 
requested by the Exchange, will result in fair and fully informed 
decisions by the Exchange during the DPM approval process.
    In selecting an applicant for approval as a DPM, the Exchange may 
place one or more conditions on the approval, including but not limited 
to conditions concerning the capital or operations of or persons 
associated with the DPM applicant, and the number or type of securities 
that may be allocated to the applicant. Depending on the circumstances 
surrounding a specific DPM applicant, the Exchange believes it is 
necessary to have the ability to impose conditions on the specific DPM 
approval in addition to the obligations otherwise imposed by the DPM 
Rules as an additional means to ensure that the DPM applicant is able 
to adequately perform the DPM functions.
    Each DPM will retain its approval to act as a DPM for one year, 
unless the Exchange relieves the DPM of its approval and obligations to 
act as a DPM or earlier terminates the DPM's approval to act as a DPM 
pursuant to proposed Rule 8.20. After each one-year term, a DPM may 
file an application with the Exchange to renew its approval to act as a 
DPM on forms prescribed by the Exchange, which renewal application the 
Exchange may approve or disapprove in its sole discretion in the same 
manner and based on the same factors set forth in proposed Rule 8.14(b) 
through (d), and any other factors the Exchange deems relevant 
(including an evaluation of the extent to which the DPM has satisfied 
its obligations under proposed Rule 8.17). Because the proposed rule 
change provides that the Exchange will determine the appropriate number 
of approved DPMs in a class, the Exchange believes that having 
temporary DPM appointments will provide all Participants with regular 
opportunities to be selected as DPMs by the Exchange rather than allow 
certain Participants to have perpetual DPM appointments.
    If the Exchange terminates or otherwise limits its approval for a 
Participant to act as a DPM, the Exchange may do one or both of the 
following: (1) Approve a DPM on an interim basis, pending the final 
approval of a new DPM; and (2) allocate on an interim basis to another 
DPM(s) the securities that were allocated to the affected DPM, pending 
a final allocation of the securities pursuant to proposed Rule 8.15 (as 
described below). Neither an interim approval nor allocation will be 
viewed as a prejudgment with respect to the final approval or 
allocation. Interim approvals and allocations will provide 
uninterrupted DPM quoting in appointed classes and prevent any reduced 
liquidity in those classes that could otherwise result from a 
termination, condition, or limit on a DPM's approval or allocation.
    Proposed Rule 8.14(g) provides that DPM appointments may not be 
sold, assigned, or otherwise transferred without prior written approval 
of the Exchange. This provision clarifies that only the Exchange may 
authorize a firm to act as a DPM, which will allow the Exchange to 
ensure that a Participant is qualified to adequately perform DPM 
functions and fulfill its obligations and responsibilities as a DPM 
under the proposed DPM Rules.

Rule 8.15--Allocation of Securities to DPMs 7

    Proposed Rule 8.15 sets forth the manner in which the Exchange will 
allocate securities to DPMs. Proposed Rule 8.15(a) provides that the 
Exchange will determine for each security traded on the Exchange 
whether the security should be allocated to a DPM and, if so, to which 
DPM the security should be allocated. The proposed rule change could 
produce additional quotation volume in classes that are allocated to 
DPMs. The Exchange maintains a rigorous capacity planning program that 
monitors system performance and projected capacity demands and, as a 
general matter, considers the potential system capacity impact of all 
new initiatives. The Exchange has analyzed the potential for additional 
quote traffic resulting from the addition of DPMs and has concluded 
that the Exchange has sufficient system capacity to handle those 
additional quotes without degrading the performance of its systems. The 
Exchange also notes that any additional quote traffic will be limited, 
as the Exchange may allocate securities to DPMs on a class-by-class 
basis as opposed to allocating all classes to DPMs. Ultimately, the 
Exchange believes that it has the necessary systems capacity to 
allocate option classes to DPMs as described in this proposed rule 
change. The Exchange will monitor quoting volume associated with DPMs 
and its effect on C2's systems.
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    \7\ See CBOE Rule 8.95.
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    Proposed Rule 8.15(b) describes the criteria that the Exchange may 
consider in making allocation determinations.

[[Page 55259]]

The factors the Exchange may consider when making these determinations 
include, but are not limited to, any one or more of the following: 
Performance, volume, capacity, market performance commitments, 
operational factors, efficiency, competitiveness, environment in which 
the security will be traded, expressed preferences of issuers, and 
recommendations of any Exchange committees. The following are some 
examples of the many ways in which these criteria may be applied:
     In considering performance, the Exchange may look at the 
market performance ranking of the applicable DPMs, as established by 
market performance reviews that are conducted by the Exchange.
     In considering volume, the Exchange may look at the 
anticipated trading volume of the security and the trading volume 
attributable to the applicable DPMs in determining which DPMs would be 
best able to handle the additional volume.
     In considering capacity, operational factors, and 
efficiency, the Exchange may look to criteria such as the number of 
Market-Makers or DPM personnel, the ability to process order flow, and 
the amount of DPM capital in determining which DPMs would be best able 
to handle additional securities.
     In considering marketing performance commitments, the 
Exchange may look at the pledges a DPM has made with respect to how 
narrow its bid-ask spreads will be and the number of contracts for 
which it will honor its disseminated market quotations beyond what is 
required by Exchange Rules.
     In considering competitiveness, the Exchange may look at 
percentage of volume attributable to a DPM in allocated securities that 
are multiply listed.
     In considering the environment in which the security will 
be traded, the Exchange may seek a proportionate distribution of 
securities between the Market-Maker system and the DPM system and 
across different DPMs.
     In considering expressed preferences of issuers, the 
Exchange may consider the views of the issuer of a security traded on 
the Exchange with respect to the allocation of that security or to the 
licensor of an index on which an index option is based with respect to 
the allocation of that index option.
     The Exchange may consider the recommendation of any 
Exchange committees, particularly those that evaluate DPM market 
performance.
    Proposed Rule 8.15(c) provides that the Exchange may remove an 
allocation and reallocate the applicable security during a DPM's term 
if the DPM fails to adhere to any market performance commitments made 
by the DPM in connection with receiving the allocation. The Exchange 
typically requests that DPMs make market performance commitments as 
part of their applications to receive allocations of particular 
securities. As described above, these commitments may relate to pledges 
to keep bid-ask spreads within a particular width or to make 
disseminated quotes firm for a designated number of contracts beyond 
what is required by Exchange Rules. Proposed Rule 8.15(c) permits the 
Exchange to remove an allocation if these commitments are not met, 
which the Exchange believes will incentive [sic] DPMs to abide by these 
commitments. The Exchange believes these types of commitments will be 
instrumental in causing DPMs to quote more competitively.
    Proposed Rule 8.15(c) also provides that the Exchange may change an 
allocation determination if it concludes that doing so is in the best 
interests of the Exchange based on operational factors or efficiency. 
For example, if, due to market conditions, trading volume in a security 
greatly increased over a very short time frame and the DPM allocated 
that security could not handle the additional order flow, the Exchange 
may deem it necessary to reallocate the security to another DPM with 
the capacity to do so. This provision will allow the Exchange to ensure 
that there is sufficient liquidity during trading hours in the 
allocated option classes.
    Proposed Rule 8.15(d) provides that prior to taking any action to 
remove an allocation, the Exchange will generally give the DPM prior 
notice of the contemplated action and an opportunity to be heard 
concerning the action. The only exception to this requirement would be 
in those unusual situations when expeditious action is required due to 
extreme market volatility or some other situation requiring emergency 
action. Specifically, except when expeditious action is required, 
proposed Rule 8.15(d) requires that prior to taking any action to 
remove an allocation, the Exchange must notify the DPM involved of the 
reasons the Exchange is considering taking the contemplated action, and 
will either convene one or more informal meetings with the DPM to 
discuss the matter, or provide the DPM with the opportunity to submit a 
written statement to the Exchange concerning the matter. Due to the 
informal nature of the meetings provided for under proposed Rule 
8.15(d) and in order to encourage constructive communication between 
the Exchange and the affected DPM at those meetings, ordinarily neither 
counsel for the Exchange nor counsel for the DPM will be invited to 
attend these meetings and no verbatim record of the meetings will be 
kept.
    As with any decision made by the Exchange, any person adversely 
affected by a decision made by the Exchange to remove an allocation may 
appeal the decision to the Exchange under Chapter 19 of the Exchange 
Rules. The appeal procedures in Chapter 19 provide for the right to a 
formal hearing concerning any such decision and for the right to be 
accompanied, represented, and advised by counsel at all stages of the 
proceeding. In addition, any decision of the Exchange's Appeals 
Committee may be appealed to the Board of Directors pursuant to CBOE 
Rule 19.5 (which is incorporated into the Exchange Rules). The Exchange 
believes these hearing and appeal procedures will provide DPMs with 
appropriate due process with respect to decisions made regarding their 
DPM allocations and will promote a fair and fully informed decision-
making process.
    Proposed Rule 8.15(e) provides that the allocation of a security to 
a DPM does not convey ownership rights in the allocation or in the 
order flow associated with the allocation. Proposed Rule 8.15(e) is 
intended to make clear that DPMs may not buy, sell, or otherwise 
transfer an allocation and that, instead, the Exchange has the sole 
authority to determine allocations. As discussed above, DPM 
appointments may only be transferred with Exchange approval pursuant to 
proposed Rule 8.14(g).
    Proposed Rule 8.15(f) provides that in allocating and reallocating 
securities to DPMs, the Exchange will act in accordance with any 
limitation or restriction on the allocation of securities that is 
established pursuant to another Exchange Rule. For example, the 
Exchange may take remedial action against a DPM for failure to satisfy 
minimum market performance standards, and such action may involve a 
restriction related to the allocation of securities to that DPM. 
Similarly, the Exchange may place restrictions on a DPM's ability to 
receive or retain allocations of securities pursuant to various 
provisions of these proposed Rules, including as a condition of 
appointment as a DPM (proposed Rule 8.14(d)), due to failure to perform 
DPM functions (proposed Rule 8.20(a)(2)), or due to a material 
financial or operational change (proposed Rule 8.20)(a)(1)). Proposed 
Rule 8.15(f) is intended to make clear that the

[[Page 55260]]

Exchange must act in accordance with any of these restrictions in 
making allocation determinations.
    Proposed Rule 8.15, Interpretation and Policy .01 generally 
provides that the Exchange may reallocate a security at the end of a 
DPM's one-year term, in the event that the security is removed pursuant 
to another Exchange Rule from the DPM to which the security has been 
allocated, or in the event that for some other reason the DPM to which 
the security has been allocated no longer retains the allocation. For 
example, at the end of a DPM's term, the Exchange may allocate the 
security to the same DPM again (if the DPM applied for its appointment 
to be renewed and the Exchange approved the renewal application), to 
another DPM, or to no DPM. As another example, as described above, the 
Exchange may take remedial actions against DPMs in specified 
circumstances, including the removal of an allocation. Proposed Rule 
8.15, Interpretation and Policy .01 is intended to clarify that in the 
event the Exchange removes an allocation pursuant to Exchange Rules, 
the Exchange will reallocate the security pursuant to proposed Rule 
8.15. The only exception to this provision is that the Exchange is 
authorized pursuant to proposed Rule 8.14(f) to allocate to an interim 
DPM on a temporary basis a security that is removed from another DPM 
until the Exchange has made a final allocation of the security. As with 
several other proposed Rules, this provision is intended allow the 
Exchange to ensure that there is sufficient liquidity in allocated 
classes despite changing circumstances.

Rule 8.16--Conditions on the Allocation of Securities to DPMs \8\
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    \8\ See CBOE Rule 8.84.
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    Proposed Rule 8.16 allows the Exchange to establish (1) 
restrictions applicable to all DPMs on the concentration of securities 
allocable to a single DPM and to affiliated DPMs and (2) minimum 
eligibility standards applicable to all DPMs, which must be satisfied 
in order for a DPM to receive allocations of securities, including but 
not limited to standards relating to adequacy of capital and 
operational capacity (including number of personnel). Among the reasons 
for granting the Exchange the authority to limit the concentration of 
securities allocable to a single DPM and to affiliated DPMs is to 
promote competition in the Exchange's market and to help ensure that no 
DPM or group of affiliated DPMs is allocated such a large number of 
securities that it would be difficult for the Exchange to quickly 
reallocate those securities to other DPMs or Market-Makers in the event 
that for some reason the DPM or group of affiliated DPMs were no longer 
able to perform in that capacity. Among the reasons for granting the 
Exchange the authority to establish minimum eligibility standards for 
DPMs to receive allocations of securities is to help ensure that a DPM 
has the financial and operational ability to handle additional 
allocations of securities and meet its DPM obligations with respect to 
those securities. Similarly, the Exchange may utilize this proposed 
Rule to establish specific minimum market performance standards that 
must be satisfied by DPMs in order to receive allocations of securities 
so that a DPM that is not performing adequately with respect to the 
securities that have already been allocated to the DPM is not allocated 
additional securities.

Rule 8.17--DPM Obligations \9\
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    \9\ See CBOE Rule 8.85.
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    Proposed Rule 8.17 describes the obligations of a DPM. Proposed 
Rule 8.17(a) includes the general obligation with respect to each of 
its allocated securities to fulfill all of the obligations of a Market-
Maker under Exchange Rules in addition to the requirements set forth in 
this proposed Rule.\10\ Proposed Rule 8.17(a) requires each DPM:
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    \10\ To the extent there is any inconsistency between the 
specific obligations of a DPM set forth in proposed Rule 8.17 and 
the general obligations of a Market-Maker under the Exchange Rules, 
proposed Rule 8.17 will govern.
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    (1) To provide continuous quotes in at least the lesser of 99% of 
the non-adjusted option series (as defined in Rule 8.5(a)(1)) or 100% 
of the non-adjusted option series minus one call-put pair of each 
option class allocated to it, with the term ``call-put pair'' referring 
to one call and one put that cover the same underlying instrument and 
have the same expiration date and exercise price, and assure that its 
disseminated market quotations are accurate; \11\
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    \11\ For purposes of this provision, ``continuous'' means 90% of 
the time. If a technical failure or limitation of the System 
prevents a DPM from maintaining, or from communicating to the 
Exchange, timely and accurate quotes in a series, the duration of 
such failure will not be considered in determining whether that that 
[sic] DPM has satisfied the 99% quoting standard with respect to the 
series.
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    (2) to assure that each of its displayed market quotations are for 
the number of contracts required by Rule 8.6(a), ``Market-Maker Firm 
Quotes'';
    (3) to segregate in a manner prescribed by the Exchange (a) all 
transactions consummated by the DPM in securities allocated to the DPM 
and (b) any other transactions consummated by or on behalf of the DPM 
that are related to the DPM's DPM business; \12\
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    \12\ This will permit the Exchange to monitor each DPM's trading 
positions in order to ensure that the DPM is in compliance with the 
financial and other requirements that are applicable DPMs.
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    (4) to not initiate a transaction for the DPM's own account that 
would result in putting into effect any stop or stop limit order that 
may be in the Book \13\ and when the DPM guarantees that the stop or 
stop limit order will be executed at the same price as the electing 
transaction; \14\ and
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    \13\ The term ``Book'' means the electronic book of buy and sell 
orders and quotes maintained by the System. The ``System'' is the 
automated trading system used by the Exchange for the trading of 
options contracts. See Rule 1.1.
    \14\ These restrictions apply to stop or stop limit orders only 
if the terms of such orders are visible to the DPM or if such orders 
are handled by the DPM.
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    (5) to ensure that a trading rotation is initiated promptly 
following the opening of the underlying security (or promptly after 
8:30 a.m. Central Time in an index class) in accordance with Rule 6.11 
in 100% of the series of each allocated class by entering opening 
quotes as necessary.
    Proposed Rule 8.17(b) provides that a DPM may not represent 
discretionary orders as an agent in its allocated classes.
    Proposed Rule 8.17(c) lists additional obligations of a DPM, 
including that a DPM must:
    (1) Resolve disputes relating to transactions in the securities 
allocated to the DPM, subject to Exchange official review, upon the 
request of any party to the dispute;
    (2) make competitive markets on the Exchange and otherwise promote 
the Exchange in a manner that is likely to enhance the ability of the 
Exchange to compete successfully for order flow in the classes it 
trades;
    (3) promptly inform the Exchange of any material change in the 
financial or operational condition of the DPM;
    (4) supervise all persons associated with the DPM to assure 
compliance with the Exchange Rules;
    (5) segregate in a manner prescribed by the Exchange the DPM's 
business and activities as a DPM from the DPM's other business and 
activities; \15\ and
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    \15\ This requirement will help reduce the risk that a DPM's 
financial integrity will be adversely impacted by financial losses 
that may be incurred by the DPM in connection with its other 
businesses and activities.
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    (6) continue to act as a DPM and to fulfill all of the DPM's 
obligations as a DPM until its DPM appointment has lapsed, the Exchange 
relieves the DPM

[[Page 55261]]

of its approval and obligations to act as a DPM, or the Exchange 
terminates the DPM's approval to act as a DPM pursuant to proposed Rule 
8.20.
    Proposed Rule 8.17(d) provides that each person associated with a 
DPM will be obligated to comply with the provisions of proposed Rule 
8.17(a) through (c) when acting on behalf of the DPM.
    Proposed Rule 8.17(e) provides that each DPM must hold the number 
of Trading Permits as may be necessary based on the aggregate 
``registration cost'' for the classes allocated to the DPM. Each 
Trading Permit held by the DPM has a registration cost of 1.0.\16\ For 
example, if the Exchange allocates to a DPM classes with an aggregate 
registration cost of 1.6, the DPM would be required to hold two Trading 
Permits. The Exchange may change at any time the registration cost of 
any option class; upon any such change, each DPM will be required to 
hold the appropriate number of Trading Permits reflecting the revised 
registration costs of the classes that have been allocated to it. 
Additionally, a DPM is required to hold the appropriate number of 
Trading Permits at the time a new option class is allocated to it 
pursuant to proposed Rule 8.16 begins trading.
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    \16\ Rule 8.2(d) lists the registration costs for the classes of 
securities on the Exchange.
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    In the event a Participant approved as a DPM is also approved to 
act as a Market-Maker and has excess Trading Permit capacity above the 
aggregate registration cost for the classes allocated to it as the DPM, 
the Participant may utilize the excess Trading Permit capacity to quote 
in an appropriate number of classes in the capacity of a Market-Maker. 
For example, if the DPM has been allocated a number of option classes 
with an aggregate registration cost of 1.6, the Participant could 
request an appointment as a Market-Maker in any combination of option 
classes whose aggregate registration cost does not exceed 0.40. The 
Participant will not function as a DPM in any of these additional 
classes. In the event the Participant utilizes any excess Trading 
Permit capacity to quote in some additional classes as a Market-Maker, 
it must comply with the provisions of Rule 8.2.
    Rule 8.17, Interpretation and Policy .01 clarifies that willingness 
of a DPM to promote the Exchange as a marketplace includes assisting in 
meeting and educating Participants (and taking the time for travel 
related thereto), maintaining communications with Participants in order 
to be responsive to suggestions and complaints, responding to 
suggestions and complaints, and other like activities.
    The Exchange believes that these obligations will result in 
additional liquidity and competitive quoting in the allocated classes 
on C2's market, which could ultimately lead to additional order flow 
directed to the Exchange. The Exchange believes that these obligations 
will strengthen its market and are reasonable given the benefits 
conferred upon DPMs in exchange for these heightened obligations in the 
form of a participation entitlement, as discussed further below.

Rule 8.18--DPM Financial Requirements \17\
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    \17\ See CBOE Rule 8.86.
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    Proposed Rule 8.18 requires each DPM to maintain net liquidating 
equity in its DPM account of not less than $100,000. It also requires 
each DPM to maintain net capital sufficient to comply with the 
requirements of Rule 15c3-1 under the Act and requires each DPM that is 
a Clearing Participant \18\ also to maintain net capital sufficient to 
comply with the requirements of The Options Clearing Corporation. 
Additionally, proposed Rule 8.18 requires DPMs to maintain net 
liquidating equity in their DPM accounts in conformity with any 
guidelines as the Exchange may establish from time to time. The 
Exchange expects to draft and use DPM financial guidelines in 
connection with the process for allocating securities to DPMs, and 
proposed Rule 8.18 would permit the Exchange to implement and enforce 
these guidelines as DPM financial requirements under Exchange Rules. 
The Exchange will announce these guidelines to Participants by 
Regulatory Circular. Although there are other rules that already 
subject DPMs to these financial requirements (and all Market-Makers 
must comply with the Act requirements applicable to specialists, 
including financial requirements), the Exchange believes that it is 
worthwhile to also include these requirements in proposed Rule 8.18 so 
that the proposed DPM Rules are more informative and complete.
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    \18\ A ``Clearing Participant'' means a Permit Holder that has 
been admitted to membership in The Options Clearing Corporation 
(``OCC'') pursuant to the provisions of OCC rules. A ``Permit 
Holder'' means the Exchange recognized holder of a Trading Permit. A 
Permit Holder is also known as a Trading Permit Holder under the 
Exchange's Bylaws. Permit Holders are deemed ``members'' under the 
Act. See Rule 1.1.
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Rule 8.19--Participation Entitlement of DPMs \19\
---------------------------------------------------------------------------

    \19\ See CBOE Rule 8.90 [sic].
---------------------------------------------------------------------------

    Rule 6.12 sets forth how the System prioritizes orders for 
execution purposes. Rule 6.12(a)(3) provides that the Exchange may 
prioritize orders using a price-time priority with primary priority for 
public customers and secondary priority for certain trade participation 
rights. Proposed Rule 8.19 grants to DPMs a trade participation right. 
Proposed Rule 8.19(a) gives the Exchange authority to determine the 
appropriate participation right for DPMs by providing that the 
Exchange, subject to review by the Exchange Board of Directors, may 
establish from time to time a participation entitlement formula that is 
applicable to all DPMs.
    Proposed Rule 8.19(b)(1) provides that: (1) A DPM will be entitled 
to a participation entitlement only if quoting at the best bid or offer 
disseminated on the Exchange (``BBO''); (2) a DPM may not be allocated 
a total quantity greater than the quantity that the DPM is quoting at 
the BBO; and (3) the participation entitlement is based on the number 
of contracts remaining after all public customer orders in the Book at 
the BBO have been satisfied.
    Proposed Rule 8.19(b)(2) provides that the collective DPM 
participation entitlement shall be: 50% when there is one Market-Maker 
also quoting at the BBO and 40% when there are two or more Market-
Makers also quoting at the BBO. If only the DPM is quoting at the BBO 
(with no Market-Makers quoting at the BBO), the participation 
entitlement will not be applicable and the allocation procedures under 
Rule 6.12 will apply.
    Proposed Rule 8.19(b)(3) provides that a DPM will not receive its 
participation entitlement in trades for which a Preferred Market-Maker 
(``PMM'') already received a participation entitlement pursuant to Rule 
8.13, based on the priority determination made by the Exchange under 
Rule 6.12. This provision clarifies that only one trade participation 
right may be applied to the same trade (see the discussion of the 
proposed rule change to Rule 6.12(a) below). For example, if the 
Exchange has activated both a PMM participation right and DPM 
participation right in a class and determines under Rule 6.12 that a 
PMM has higher priority than a DPM, and a PMM receives its 
participation entitlement for a trade, then a DPM may not receive its 
participation entitlement for that trade.
    Proposed Rule 8.19, Interpretation and Policy .01 provides that the 
Exchange may also establish a lower

[[Page 55262]]

DPM participation rate on a product-by-product basis for newly listed 
products or products that are being allocated to a DPM for the first 
time. The Exchange will announce any lower participation rate to 
Participants by Regulatory Circular.
    The Exchange believes that DPMs will play an important role in 
providing additional liquidity and more price competition because of 
the obligations imposed on DPMs by the proposed Rules, as discussed 
above. The Exchange also believes that the proposed participation 
entitlement, which DPMs may receive only when quoting at the best 
price, is an appropriate reward for DPMs' satisfaction of their DPM 
obligations, particularly given the overall benefit to the Exchange's 
market and customers that the additional DPM liquidity will create. 
Further, the Exchange believes that the limited percentage of the 
participation entitlement still provides other market participants with 
opportunities to be allocated a significant number of contracts in 
trades in which a DPM receives its participation entitlement. 
Similarly, the Exchange believes it is appropriate to only allow a PMM 
or DPM to receive its participation entitlement for a trade to further 
ensure that these opportunities are available to other market 
participants in classes with a DPM or PMM. While the Exchange believes 
that DPMs will add liquidity to the benefit of the market and 
customers, it is still important for all market participations to 
engage in price competition on the Exchange. This participation 
entitlement is part of the Exchange's careful balancing of the rewards 
and obligations of all types of Exchange Participants, which is part of 
the overall market structure designed to encourage vigorous price 
competition among Market-Makers, while still maximizing the benefits or 
price competition resulting from the entry of customer and non-customer 
orders, while encouraging Participants to provide market depth.

Rule 8.20--Termination, Conditioning, or Limiting Approval to Act as a 
DPM \20\
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    \20\ See CBOE Rule 8.90.
---------------------------------------------------------------------------

    Proposed Rule 8.20 governs the termination, conditioning, and 
limiting of approval to act as a DPM. Rule 8.20(a) provides that the 
Exchange may terminate, place conditions upon, or limit a Participant's 
approval to act as a DPM if the Participant: (1) Incurs a material 
financial or operational; (2) fails to comply with any requirements 
under Exchange Rules regarding DPM obligations and responsibilities; or 
(3) is no longer eligible to act as DPM or be allocated a particular 
security or securities. Proposed Rule 8.20(a) also provides that before 
the Exchange may take any action to terminate, condition, or otherwise 
limit a Participant's approval to act as a DPM, the Participant will be 
given notice of such possible action and an opportunity to present any 
matter that it wishes the Exchange to consider in determining whether 
to take such action. These proceedings will be conducted in the same 
manner as the Exchange proceedings concerning DPM approvals described 
above.
    Proposed Rule 8.20(b) provides an exception to this provision, 
which grants authority to the Exchange to immediately terminate, 
condition, or otherwise limit a Participant's approval to act as a DPM 
if the DPM incurs a material financial or operational warranting 
immediate action or if the DPM fails to comply with any of the 
financial requirements applicable to DPMs.
    In addition, proposed Rule 8.20(c) provides that limiting a 
Participant's approval to act as a DPM may include, among other things, 
limiting or withdrawing a DPM's participation entitlement and 
withdrawing a DPM's right to act as DPM in one or more of its allocated 
securities.
    As discussed above, it is important for the Exchange to have the 
sole authority to approve a Participant to act as a DPM (and allocate 
securities to a DPM) to ensure that the Participant is able to satisfy 
DPM obligations and perform DPM functions. Similarly, the Exchange 
needs authority to terminate, condition, or limit a DPM's approval when 
necessary to incentive DPMs to meet their DPM obligations and 
responsibilities in order to continue to receive the corresponding DPM 
benefits provided for in the proposed DPM Rules. In addition, if any of 
the circumstances set forth in proposed Rule 8.20(a) occurs, the 
Exchange's authority to terminate, condition, or limit a DPM's 
approval, and appoint another DPM if necessary (in the interim or 
permanently as discussed above), is essential to provide for 
uninterrupted DPM quoting in appointed classes and prevent any reduced 
liquidity in the DPM's allocated class that could otherwise result 
under these circumstances.
    Proposed Rule 8.20(d) provides that if a Participant's approval to 
act as a DPM is terminated, conditioned, or otherwise limited by the 
Exchange pursuant to proposed Rule 8.20, the Participant may appeal 
that decision to the Appeals Committee under Chapter 19. Additionally, 
as is described above, these appeal procedures provide for the right to 
a formal Appeals Committee hearing concerning any such decision, and 
the decision of the Appeals Committee may be appealed to the Board of 
Directors. The advanced notice and appeal procedures are intended to 
ensure that DPMs receive appropriate due process with respect to their 
approvals to act as DPMs, as discussed above.

Rule 8.21--Limitations on Dealings of DPMs and Affiliated Persons of 
DPMs \21\
---------------------------------------------------------------------------

    \21\ See CBOE Rule 8.91.
---------------------------------------------------------------------------

    Proposed Rule 8.21 provides that a DPM must maintain information 
barriers that are reasonably designed to prevent the misuse of 
material, non-public information with any affiliates that may conduct a 
brokerage business in option classes allocated to the DPM or act as a 
specialist or market-maker in any security underlying options allocated 
to the DPM, and otherwise comply with the requirements of CBOE Rule 
4.18 (which is incorporated into the Exchange Rules) regarding the 
misuse of material non-public information. A DPM must provide its 
information barriers to the Exchange and obtain prior written approval. 
This provision is meant to prevent a Participant's non-DPM businesses 
from obtaining any benefits as a result of the Participant's status as 
a DPM.

Rule 6.12--Order Execution and Priority \22\
---------------------------------------------------------------------------

    \22\ See CBOE Rules 6.45A(a)(ii)(2) and (iii) and 6.45B(a)(i)(2) 
and (iii).
---------------------------------------------------------------------------

    The proposed rule change amends Rule 6.12 to ensure that the 
Exchange's order execution and priority rule contemplates a 
participation entitlement for DPMs. The proposed rule change provides 
that both PMMs and DPMs may be granted participation rights up to the 
applicable participation right percentage designated in Rule 8.13 and 
8.19, respectively. The Exchange may activate more than one trade 
participation right for an option class (including at different 
priority sequences), however in no case may more than one trade 
participation right be applied on the same trade.\23\ The

[[Page 55263]]

proposed rule change provides that, like for PMMs, (1) a DPM's order or 
quote must be at the best price on the Exchange; (2) a DPM may not be 
allocated a total quantity greater than the quantity that it is quoting 
(including orders not part of quotes) at that price; (3) in 
establishing the counterparties to a particular trade, the DPM's 
participation right must be first counted against its highest priority 
bids or offers; and (4) the DPM's participation right will only apply 
to any remaining balance of an order once all higher priorities are 
satisfied.
---------------------------------------------------------------------------

    \23\ For example, the Exchange may activate both the PMM trade 
participation right of Rule 8.13 and the DPM trade participation 
right of Rule 8.20, along with other priorities that are allowed 
under Rule 6.12(a)(3), for an option class at the following priority 
levels: Public customer has first priority, Market Turner (see Rule 
6.12(b)(1)) has second priority, PMM participation right has third 
priority, and DPM participation right has fourth priority. If a 
PMM's participation right is applied to a trade, then the DPM's 
participation right cannot be applied to that trade, and the trade 
would be allocated as follows: First to any public customers, second 
to the Market Turner, third to the PMM's participation right, and 
the remainder to other orders in price-time priority. However, if a 
PMM's participation right was not applied to the trade, then the 
DPM's participation right could be applied to the trade, and the 
trade would be allocated as follows: First to any public customers, 
second to the Market Turner, third to the DPM's participation right, 
and the remainder to other orders in price-time priority.
---------------------------------------------------------------------------

    The proposed rule change also amends Rule 6.12 to add paragraph 
(b)(2), which will provide for an additional priority overlay for small 
orders that can be applied to each of the three matching algorithms. If 
the small order priority overlay is in effect for an option class,\24\ 
then the following would apply:
---------------------------------------------------------------------------

    \24\ As set forth in Rule 6.12(b), the Exchange may determine to 
apply, on a series-by-series basis, any additional priority overlays 
in subparagraph (b) in a sequence determined by the Exchange.
---------------------------------------------------------------------------

     Orders for five contracts or fewer will be executed first 
by the DPM that is appointed to the option class; provided, however, 
that, on a quarterly basis, the Exchange will evaluate what percentage 
of the volume executed on the Exchange (excluding volume resulting from 
the execution of orders in C2's Automated Improvement Mechanism 
(``AIM'')--see Rule 6.51) is comprised of orders for five contracts or 
fewer executed by DPMs, and will reduce the size of the orders included 
in this provision if this percentage is over 40%.
     This procedure will only apply to the allocation of 
executions among non-customer orders and Market-Maker quotes existing 
in the Book at the time the Exchange receives the order. No market 
participant will be allocated any portion of an execution unless it has 
an existing interest at the execution price. Moreover, no market 
participant will be able to execute a greater number of contracts than 
is associated with the price of its existing interest. As a result, the 
small order preference contained in this allocation procedure will not 
be a guarantee; the DPM (1) must be quoting at the execution price to 
receive an allocation of any size, and (2) cannot execute a greater 
number of contracts than the size that is associated with its quote.
     If a PMM is not quoting at a price equal to the national 
best bid or offer (the ``NBBO'') at the time a preferred order is 
received, the allocation procedure for small orders described above 
will be applied to the execution of the preferred order (i.e., it will 
be executed first by the DPM). If a PMM is quoting at the NBBO at the 
time the preferred order is received, the allocation procedure in place 
for all other sized orders in the class will be applied to the 
execution of the preferred order, except that any Market Turner status 
will not apply (e.g., if the default matching algorithm is price-time 
with a public customer and participation entitlement overlay, the order 
will execute first against any public customer orders, then the PMM 
would receive its participation entitlement, then the remaining balance 
would be allocated on a price-time basis).
     The small order priority overlay will only be applicable 
to automatic executions and will not be applicable to any auctions.\25\
---------------------------------------------------------------------------

    \25\ In addition to AIM, C2 has various electronic auctions that 
are described under Rules 6.14, ``Simple Auction Liaison,'' and 
6.52, ``Solicitation Auction Mechanism.'' Each of these auctions 
generally allocates executions pursuant to the matching algorithm in 
effect for the options class with certain exceptions noted in the 
respective rules.
---------------------------------------------------------------------------

    Lastly, like the existing priority overlays, the small order 
priority overlay is optional. The Exchange will announce all 
determinations under this Rule by Regulatory Circular.
    As described above, the Exchange believes that because DPMs will 
have unique obligations to the C2 market,\26\ they should be provided 
with certain participation rights. Under the proposed DPM Rules in this 
filing, if the DPM is one of the Participants with a quote at the best 
price, the participation entitlement will generally equal to 50% when 
there is one Market-Maker also quoting at the BBO or 40% when there are 
two or more Market-Makers also quoting at the BBO.\27\ This proposed 
priority overly [sic] will make available an allocation procedure that 
provides that the DPM has precedence to execute orders of five 
contracts or fewer. The Exchange believes that this small order 
priority overlay will not necessarily result in a significant portion 
of the Exchange's volume being executed by the DPM. As stated above, 
the DPM would execute against these small orders only if it is quoting 
at the best price, and only for the number of contracts associated with 
its quotation. Nevertheless, the Exchange will evaluate what percentage 
of the volume executed on the Exchange is comprised of orders for five 
contracts or fewer executed by DPMs, and will reduce the size of the 
orders included in this provision if this percentage is over 40%.
---------------------------------------------------------------------------

    \26\ See proposed Rule 8.17, ``DPM Obligations.''
    \27\ See proposed amendment to Rule 6.12(a) and proposed Rule 
8.19, ``Participation Entitlement of DPMs.''
---------------------------------------------------------------------------

    C2 considered this small order priority overlay as part of its 
balancing of DPM obligations and benefits described above and believes 
this priority overlay, which includes participation rights for DPMs 
only when they are quoting at the best price, helps strike an 
appropriate balance of these obligations and benefits.

Other Changes

Rule 1.1--Definitions

    The proposed rule change amends Rule 1.1 to define the term ``BBO'' 
as the best bid or offer disseminated on the Exchange. The Exchange 
proposes to include this definition to clarify its meaning in the 
Exchange Rules because the term is used throughout the proposed DPM 
Rules as well as other Exchange Rules.

Rule 17.50--Minor Rule Violation Plan \28\
---------------------------------------------------------------------------

    \28\ See CBOE Rule 17.50(g)(14).
---------------------------------------------------------------------------

    The proposed rule change also amends Rule 17.50(g)(14) to add DPM 
quoting obligations to the Exchange's Minor Rule Violation Plan 
(``MRVP'') provision regarding C2 Market-Maker quoting obligations. 
This will allow the Exchange to impose sanctions upon DPMs for failing 
to meet their quoting obligations pursuant to the MRVP, as it does for 
Market-Makers and PMMs. C2 believes these violations are suitable for 
inclusion in the MRVP because they are generally technical in nature, 
allowing C2 to carry out its regulatory responsibilities more quickly 
and efficiently with respect to Market-Maker quoting obligations. For 
violations of DPM's quoting obligations, the Exchange may assess fines 
ranging from $2,000 to $4,000 for a first offense and $4,000 to $5,000 
for a second offense, and may assess a fine of $5,000 or refer to C2's 
Business Conduct Committee any subsequent offenses. The Exchange notes 
that these fine amounts are the same as the amounts currently imposed 
on Market-Makers for violations of their quoting obligations under the 
MRVP.
    C2 will maintain internal guidelines that dictate the sanctions 
that will be imposed for a particular violation (based on the degree of 
the violation). As with all other violations in C2's MRVP, C2

[[Page 55264]]

will retain the ability to refer a violation of DPM quoting obligations 
to its Business Conduct Committee should the circumstances warrant this 
referral.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\29\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \30\ requirements that the rules 
of an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts, to remove 
impediments to and to perfect the mechanism for a free and open market 
and a national market system, and, in general, to protect investors and 
the public interest.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b).
    \30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes that adopting a DPM program 
will protect investors and the public interest, because it will help 
generate greater order flow for the Exchange in appointed classes and 
provide additional incentives for DPMs to trade with that order flow, 
which in turn adds depth and liquidity to C2's market and ultimately 
benefits all market participants. The Exchange believes this deeper 
liquidity will make C2 more competitive with other markets that trade 
those classes, which will also help remove impediments to and perfect 
the mechanism for a free and open market.
    Additionally, the Exchange believes that adopting a DPM program 
will promote just and equitable principles of trade, as it will require 
DPMs to assist in the maintenance of a fair and orderly market, as 
reasonably practicable, and maintain net capital consistent with 
federal requirements for market-makers. These proposed Rules impose 
many obligations on DPMs, including continuous two-sided quoting 
obligations, which will ensure that DPMs provide significant liquidity 
in their allocated classes to the benefit of all C2 market 
participants, and operational capacity requirements, which will ensure 
that DPMs are capable of carrying out their obligations, as well as 
eligibility requirements and market performance standards. The proposed 
Rules also allow the Exchange to impose conditions on DPMs or their 
allocations to further ensure that DPMs are providing appropriate depth 
and liquidity in their allocated classes.
    In light of these obligations, the Exchange also proposed to 
provide DPMs with the benefit of a participation entitlement that may 
receive higher priority for trades than other Participants, subject to 
the requirements set forth in proposed Rule 8.19(b)(1), as well as a 
small order priority overlay, subject to the requirements set forth in 
proposed Rule 6.12(b)(2). While these trade priorities may reduce the 
number of contracts that other Participants may execute in trades in 
which the DPM participation entitlement, or small order priority 
overlay is applied, the Exchange believes this fact is outweighed by 
the benefit of the additional liquidity and more competitive pricing 
that DPMs will provide to the market in their appointed classes, 
ultimately resulting in a net benefit to Exchange customers. These 
trade priorities are part of the balancing of C2's overall market 
structure, which is designed to encourage vigorous price competition 
between Market-Makers on the Exchange, as well as maximize the benefits 
of price competition resulting from the entry of customer and non-
customer orders, while encouraging Participants to provide market 
depth. Therefore, the Exchange believes the obligations proposed to be 
imposed on DPMs are offset by the benefits proposed to be conferred 
upon DPMs.
    In addition, the Exchange believes that the approval and allocation 
procedures and policies will ensure that Participants are approved to 
act as DPMs and securities traded on the Exchange are allocated in an 
equitable manner, and that all DPMs will have a fair opportunity for 
approvals and allocations based on established criteria and procedures. 
The proposed rules that give the Exchange the authority to terminate, 
limit, or condition DPM approvals or reallocate securities will allow 
the Exchange to ensure that its market maintains an uninterrupted high 
level of liquidity for customers in allocated classes, even when 
unusual or changing market circumstances exist. Further, the Exchange 
believes that the advanced notice provisions and appeal procedures that 
the proposed rules put in place for all determinations made by the 
Exchange with respect to DPM approvals and allocations, including 
termination and reallocation decisions, are reasonable procedures that 
will create a fair and equitable decision-making process with respect 
to DPMs.
    The Exchange believes the proposed rule change to add violations of 
DPM quoting obligation to C2's MRVP will strengthen C2's ability to 
carry out its regulatory responsibilities as a self-regulatory 
organization pursuant to the Act and reinforce its surveillance and 
enforcement functions.
    The Exchange believes that adding the definition of BBO to the 
Rules protects investors and the public interest, as it clarifies the 
meaning of this term, which is used throughout the proposed DPM Rules 
and other Exchange Rules, for investors.
    Finally, the Exchange believes that the proposed rule change is 
consistent with the requirements of the Act because, as the Exchange 
notes above, the proposed requirements for DPMs are based primarily on 
existing requirements for DPMs on another exchange (CBOE).

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.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 rule-comments@sec.gov. Please include 
File No. SR-C2-2012-024 on the subject line.

[[Page 55265]]

Paper Comments

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

All submissions should refer to File No. SR-C2-2012-024. 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 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 C2. 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 No. SR-C2-2012-024 and should be submitted on or 
before September 28, 2012.
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-22059 Filed 9-6-12; 8:45 am]
BILLING CODE 8011-01-P


