
[Federal Register Volume 81, Number 2 (Tuesday, January 5, 2016)]
[Notices]
[Pages 288-290]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-33115]



[[Page 288]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76788; File No. SR-C2-2015-036]


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

December 29, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 16, 2015, C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (``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 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, effective 
December 16, 2015.\3\ Currently, in all equity, multiply-listed index 
(excluding RUT), ETF and ETN options, if a quote is updated such that 
it executes against a resting complex order or if a simple, non-complex 
order (``simple order'') is submitted such that it executes against a 
resting complex order, that order or quote is treated as a ``Taker'' 
and assessed the Taker fees listed in section 1A of the C2 Fees 
Schedule. The remaining leg(s) are treated as ``Makers'' and assessed 
the rebates listed in section 1A of the Fees Schedule, and the complex 
order is also treated as ``Maker'' and assessed the fees (or rebates) 
listed in section 1B of the Fees Schedule. By way of background, when a 
market participant submits an order, they likely do not know whether it 
will trade with a simple or complex order. As the simple order book 
displays the market for all resting orders and quotes, a market 
participant would readily know however, whether their simple order or 
quote would make a resting simple order in that series on the opposite 
side marketable and execute (thereby being a ``Taker''). Conversely, 
the market participant would likely not know whether their simple order 
or quote would make a resting complex order with a leg in that series 
marketable (thereby being a ``Taker''). More specifically, while the 
Complex Order Book (``COB'') displays the market of resting complex 
orders along with the legs that comprise a complex order, market 
participants cannot as easily and readily discern whether an incoming 
simple order or quote will trigger a resting complex order execution. 
Rather, in order to determine whether such an execution would occur, a 
market participant would have to simultaneously compare both the COB 
and simple order book and analyze the various markets on the different 
legs in the simple order book to determine whether or not their simple 
order or quote would make a resting complex order marketable (and 
therefore execute). As many market participants cannot easily make this 
determination upon submission of their simple order or quote, the 
majority of market participants are surprised when their order or quote 
triggers a resting complex order making them a Taker (when they 
otherwise expected to be a Maker based on the simple order book). The 
Exchange additionally notes that while the order or quote that triggers 
the execution of a resting complex order is charged Taker fees, any 
remaining simple orders or quotes that also trade against that resting 
complex order are still treated as Maker and as such receive the Maker 
rebates set forth in section 1A of the C2 Fees Schedule.
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    \3\ The Exchange initially filed the proposed fee change on 
December 3, 2015 (SR-C2-2015-035). On December 16, 2015, the 
Exchange withdrew that filing and submitted this filing.
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    In light of the above, the Exchange proposes to amend the Fees 
Schedule to provide that for all equity, multiply-listed index 
(excluding RUT), ETF and ETN options classes, transactions in which 
simple orders or quotes execute against a resting complex order, no 
fees or rebates will be assessed to any component of the resting 
complex order or the simple orders or quotes. In conjunction with the 
proposed change, the Exchange proposes to clarify in section 1B of the 
C2 Fees Schedule that for transactions in which resting simple orders 
or quotes execute against an incoming marketable complex order, each 
component of the complex order will be assessed the complex order fees 
listed in section 1B of the C2 Fees Schedule, while the simple orders 
and quotes will be assessed the transaction fees listed in section 1A 
of the C2 Fees Schedule. Particularly, the Exchange notes that it does 
not wish to assess transaction fees on any simple orders or quotes that 
make a resting complex order marketable because, as discussed above, 
the sender of a simple order or quote would likely not know at the time 
of submission whether that order or quote would trigger the execution 
of a resting complex order and be assessed Taker fees instead of 
receive Maker rebates as otherwise expected. Additionally, when a 
Market-Maker updates a quote, that improved quote may make a resting 
complex order marketable unexpectedly. Upon execution of that 
transaction that Market-Maker would then be assessed fees as a Taker. 
In order to avoid discouraging Market-Makers from improving their 
markets (so as to avoid transaction fees as a Taker) the Exchange 
proposes to waive transaction fees in these instances as well. As the 
Exchange would not be assessing transaction fees on the simple order or 
quote that triggers the execution of a resting complex order, the 
Exchange similarly also proposes to not assess a fee or provide a 
rebate on the components of the resting complex order that executed 
against the simple order or updated quote. Additionally, since the 
Exchange is not generating any fees on these transactions, the Exchange 
proposes to not provide rebates to the other simple order(s) or 
quote(s) that execute against the resting complex order.

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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.\4\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \5\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Additionally, 
the Exchange believes the proposed rule change is consistent with 
section 6(b)(4) of the Act,\6\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its Trading Permit Holders and other persons using 
its facilities.
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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 market-participants won't be assessed fees for transactions in 
which a simple order or quote triggers the execution of a resting 
complex order. The Exchange also believes it's reasonable, equitable 
and not unfairly discriminatory to not assess transaction fees for 
these transactions because market participants will likely not know 
whether their submitted order or quote will trade against a resting 
complex order resulting in that market participant being assessed Taker 
fees when they might otherwise have expected to be treated as a Maker 
based on the resting simple orders and quotes. Also as mentioned above, 
the Exchange does not want to discourage Market-Makers from improving 
their quotes by charging Taker fees when they unexpectedly execute 
against a resting complex order. The Exchange believes it's reasonable, 
equitable and not unfairly discriminatory to not provide rebates to the 
Makers in these transactions, as the Exchange is not generating a fee 
from these transactions. Finally, the Exchange believes the proposed 
change is equitable and not unfairly discriminatory because it applies 
to all market participants.

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 the proposed rule change applies to all 
Permit Holders and because the Exchange wants to encourage liquidity 
and price improvement. The Exchange does not believe that the proposed 
change will impose any burden on intermarket competition because it 
only effects trading on C2. 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. 
Additionally, the Exchange notes that it operates in a highly 
competitive market, comprised of thirteen options exchanges, in which 
market participants can easily and readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or rebates to be inadequate.

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 rule-comments@sec.gov. Please include 
File Number SR-C2-2015-036 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-C2-2015-036. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-C2-2015-036 and should be 
submitted on or before January 26, 2016.


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-33115 Filed 1-4-16; 8:45 am]
 BILLING CODE 8011-01-P


