[Federal Register Volume 75, Number 237 (Friday, December 10, 2010)]
[Notices]
[Pages 77019-77021]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-31049]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63431; File No. SR-C2-2010-009]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Related to the Penny Pilot Program

December 3, 2010.
    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 December 2, 2010, the C2 Options Exchange, Incorporated 
(``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 Exchange has designated the proposal as a ``non-
controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule

[[Page 77020]]

19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its rules relating to the Penny 
Pilot Program. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.org/legal/crclc2rulefiling.aspx), 
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 those 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Rule 6.4--Minimum Increments for 
Bids and Offers to ensure that the C2 rule language regarding the Penny 
Pilot Program tracks that of the language of Chicago Board Options 
Exchange, Incorporated (``CBOE'') regarding CBOE's Penny Pilot Program, 
as relevant to C2. CBOE recently proposed a rule change to amend its 
Rule 6.42 to extend CBOE's Penny Pilot Program's expiration date.\5\ C2 
hereby amends its Rule 6.4 to further clarify and ensure that the C2 
Penny Pilot Program mirrors that of CBOE, as applicable.
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    \5\ See Securities Exchange Act Release No. 34-63386 (November 
29, 2010).
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    CBOE's Penny Pilot Program is scheduled to expire on December 31, 
2010. CBOE proposed to extend the Penny Pilot Program until December 
31, 2011.\6\ C2 desires to clarify that C2 also wants to include 
December 31, 2011 as the expiration date for the C2 Penny Pilot 
Program. Extending the Pilot Program will allow for further analysis of 
the Pilot Program and a determination of how the Pilot Program should 
be structured in the future.
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    \6\ Id.
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    During this extension of the Pilot Program, C2 may replace any 
option class which is currently included in the Pilot Program and which 
is delisted with the next most actively-traded, multiple-listed option 
class that is not yet participating in the Pilot Program (``replacement 
class''). Any replacement class would be determined based on national 
average daily volume in the preceding six months, and would be added on 
the second trading day following January 1, 2011 and July 1, 2011.\7\ 
C2 will announce any replacement classes by circular.
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    \7\ The month immediately preceding their addition to the Pilot 
Program, i.e., December or June, would not be used for purposes of 
the six month analysis. For example, a replacement class to be added 
on the second trading day following January 1 would be identified 
based on OCC volume data from June 1 through November 30.
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    C2 is specifically authorized to act jointly with the other options 
exchanges participating in the Penny Pilot Program in identifying any 
replacement class. C2 will submit to the SEC semi-annual reports that 
will analyze the impact of the Penny Pilot on market quality and 
systems capacity. This report will include, but is not limited to the 
following: (1) Data and analysis of the number of quotations generated 
for options included in the report; (2) an assessment of the quotation 
spreads for the options included in the report; (3) an assessment of 
the impact of the Pilot Program on its automated systems; (4) data 
reflecting the size and depth of markets; and (5) any capacity problems 
or other problems that arose related to the operation of the Pilot 
Program and how the Exchange addressed them.
2. Statutory Basis
    The Exchange believes the rule proposal is consistent with the 
Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations under the Act applicable to a national securities exchange 
and, in particular, the requirements of Section 6(b) of the Act.\8\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with the Section 6(b)(5) Act \9\ requirements that the rules 
of an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts and, in general, to 
protect investors and the public interest. In particular, the proposed 
rule change allows for an extension of the Penny Pilot Program for the 
benefit of market participants.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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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 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) 
thereunder.\11\
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with written notice of its intent to file the proposed rule change, 
along with a brief description and text of the proposed rule change, 
at least five business days prior to the date of filing of the 
proposed rule change, or such shorter time as designated by the 
Commission. C2 has satisfied this requirement.
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    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.

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

    <bullet> Use the Commission's Internet comment form http://www.sec.gov/rules/sro.shtml; or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#7103041d145c121e1c1c141f0502310214125f161e07"><span class="__cf_email__" data-cfemail="1a686f767f37797577777f746e695a697f79347d756c">[email protected]</span></a>. Please include 
File Number SR-C2-2010-009 on the subject line.

[[Page 77021]]

Paper Comments

    <bullet> 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 Number SR-C2-2010-009. This file 
number should be included on the subject line if e-mail 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 a.m. and 3 
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-C2-2010-009 and should be submitted on 
or before January 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-31049 Filed 12-9-10; 8:45 am]
BILLING CODE 8011-01-P


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