9714 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Exchange notes that it will continue to 

require per Exchange Rule 2.3(c) that all Authorized 

Traders who are to function as Principals on the 

Exchange to [sic] be registered consistent with 

amended paragraph (c)(2) of Rule 2.3. 

4The Commission notes that the Outline and the 

text of the proposed rule change are attached to the 

filing, not to this Notice. 

5See Securities Exchange [sic] Release No. 64958 

(July 25, 2011), 76 FR 45629 (July 29, 2011) (SR– 

NASDAQ–2011–095). See also Securities Exchange 

[sic] Release No. 65041 (August 5, 2011), 76 FR 

49822 (August 11, 2011) (SR–NASDAQ–2011–107). 

6See Securities Exchange [sic] Release No. 65040 

(August 5, 2011), 76 FR 49809 (August 11, 2011) 

(SR–NASDAQ–2011–108). 

7NASDAQ Rule 0120(g) states, ‘‘the term 

customer shall not include a broker or dealer.’’ 

8See Securities Exchange Act Release Nos. 63843 

(February 4, 2011), 76 FR 7884 (February 11, 2011) 

(SR–ISE–2011–155); and 63314 (November 12, 

2010), 75 FR 70957 (November 9, 2010) (SR–CBOE– 

2010–084). 

9See supra note 3. [sic] See also Securities 

Exchange Act Release No. 64699 (June 17, 2011), 76 

FR 36945 (June 23, 2011) (SR–CBOE–2011–056). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66383; File No. SR–EDGX– 

2012–04] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend EDGX Rule 

1.5(q) 

February 10, 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 February 

1, 2012, the EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) filed with the 

Securities and Exchange Commission 

(the ‘‘SEC’’ or the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

EDGX Exchange, Inc. (‘‘EDGX’’ or the 

‘‘Exchange’’), proposes to amend its 

rules regarding registration, 

qualification and continuing education 

requirements for Authorized Traders of 

Members that engage solely in 

proprietary trading. EDGX proposes to 

amend Rules 2.3 and 11.4 and the 

Interpretations to Rule 2.5 to recognize 

a new category of limited representative 

registration for proprietary traders. The 

Exchange proposes to expand its 

registration requirements to include the 

Proprietary Traders Qualification 

Examination (‘‘Series 56’’) as one of the 

applicable qualification examinations as 

determined by the Exchange. The 

Exchange also proposes to permit 

Authorized Traders of Members who 

engage solely in proprietary trading to 

obtain the Series 56 license in order to 

effect transactions on the Exchange. In 

addition, the Exchange proposes to 

amend Rule 2.3 to make it substantially 

similar to the rules of the Financial 

Industry Regulatory Authority 

(‘‘FINRA’’) and other Self-Regulatory 

Organizations (‘‘SROs’’) to require 

Members to register two registered 

Principals.3 The text of the proposed 

Proprietary Traders Qualification 

Examination Content Outline is 

attached as Exhibit 3 and the text of the 

proposed rule changes is attached as 

Exhibit 5.4 These documents are 

available on the Exchange’s Web site at 

www.directedge.com, at the Exchange’s 

principal office, and at the Public 

Reference Room of the Commission. 

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 

self-regulatory organization 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 

Background 

In July 2011, NASDAQ filed a 

proposed rule change with the 

Commission to recognize a new category 

of limited representative registration for 

proprietary traders.5 In addition, in 

August 2011, NASDAQ filed a related 

proposed rule change to use the content 

outline for the Series 56 examination 

that would be applicable to proprietary 

traders.6

For the purposes of this category of 

limited representative registration, 

NASDAQ Rule 1011(o) defines a 

proprietary trading firm as a firm that 

embodies the following characteristics: 

The Member is not required by Section 

15(b)(8) of the Exchange Act (the ‘‘Act’’) 

to become a FINRA member but is a 

member of another registered securities 

exchange not registered solely under 

Section 6(g) of the Act; all funds used 

or proposed to be used by the Member 

for trading are the Member’s own 

capital, traded through the Member’s 

own accounts; the Member does not, 

and will not have ‘‘customers’’; 7 all 

Principals and Authorized Traders of 

the Member acting or to be acting in the 

capacity of a trader must be owners of, 

employees of, or contractors to the 

Member. In addition, NASDAQ Rule 

1032(c) defines a proprietary trader as 

an Authorized Trader whose activities 

in the investment banking or securities 

business are limited solely to 

proprietary trading; passes an 

appropriate qualification examination; 

and is an associated person of a 

proprietary trading firm as defined in 

NASDAQ Rule 1011(o). NASDAQ Rule 

1032(c) identifies the Series 56 as the 

appropriate qualification examination 

for proprietary traders’ limited 

representative registration. Furthermore, 

NASDAQ’s proposed category of limited 

representative registration expressly 

excludes those associated persons that 

deal with the public and states those 

associated persons should continue to 

register as General Securities 

Representatives after obtaining the 

Series 7 license. 

NASDAQ worked with FINRA and 

certain other exchanges, many of which 

have recently enhanced their 

registration requirements to require the 

registration of associated persons,8 to 

develop the content outline and 

qualification examination for 

proprietary traders. The Series 56 

examination program is shared by 

NASDAQ and the following SROs: 

Boston Options Exchange, C2 Options 

Exchange, Incorporated; Chicago Board 

Options Exchange, Incorporated 

(‘‘CBOE’’); Chicago Stock Exchange, 

Incorporated; International Securities 

Exchange, LLC (‘‘ISE’’); NASDAQ OMX 

BX, Inc.; NASDAQ OMX PHLX LLC; 

National Stock Exchange, Incorporated; 

New York Stock Exchange, LLC 

(‘‘NYSE’’); NYSE AMEX, Incorporated; 

and NYSE ARCA, Incorporated. 

Members of FINRA, NASDAQ and the 

SROs referenced above developed 

criteria for the Series 56 examination 

program, which CBOE filed with the 

SEC on June 17, 2011.9

Adoption of Series 56 by the Exchange 

The Exchange believes the Series 56 

will assist the Exchange in ensuring it 

has proper registration, qualification 

and continuing education requirements 

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Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices 9715 

10See note 4. 

11See supra notes 2, 3, 6 and 7. 

12See www.finra.org/Industry/Compliance/ 

Registration/CRD/ 

13The Exchange proposes to communicate this 

amendment to Members by publishing an 

Information Circular on the Exchange’s Web site. 

Existing Members shall receive additional time to 

satisfy this requirement. 

14The Exchange proposes to create an exception 

to Rule 2.3(c)(2) where a Limited Size Proprietary 

Firm must register at least one Principal with the 

Exchange. In addition, the Exchange may waive the 

two Principal requirement in situations that 

indicate conclusively that only one Principal 

associated with the Member should be required. 

15The Commission notes that EDGX is an equities 

exchange. 

16 15 U.S.C. 78f(b). 

17 15 U.S.C. 78f(c)(3)(B). 

for associated persons of Members 

because the Series 56 examination was 

designed to test a candidate’s 

knowledge of proprietary trading in 

general and the industry rules 

applicable to trading of equity securities 

and listed options contracts. The Series 

56 examination covers, among other 

things, recordkeeping and recording 

requirements, types and characteristics 

of securities and investments, trading 

practices and display execution and 

trading systems. While the Series 56 

examination is primarily dedicated to 

topics related to proprietary trading, the 

Series 56 examination also covers some 

general concepts relating to customers. 

The qualification examination 

consists of 100 multiple choice 

questions. Candidates have 150 minutes 

to complete the exam. The content 

outline, which the Exchange attached as 

Exhibit 3,10 describes the following 

topical sections comprising the 

examination: Personnel, Business 

Conduct and Recordkeeping and 

Reporting Requirements, 9 questions; 

Markets, Market Participants, Exchanges 

and SROs, 8 questions; Types and 

Characteristics of Securities and 

Investments, 20 questions; Trading 

Practices and Prohibited Acts, 50 

questions; and Display, Execution, and 

Trading Systems, 13 questions. 

Representatives from the SROs 

mentioned above also intend to meet on 

a periodic basis to evaluate and update, 

as necessary, the Series 56 examination 

program. 

In addition, NASDAQ and some other 

SROs have filed or will file similar 

proposals with the Commission to 

amend current rules to recognize a new 

category of limited representative 

registration for proprietary traders and 

to permit members engaged solely in 

proprietary trading to obtain the Series 

56 license in order to effect trades on 

the applicable exchanges.11 The 

Exchange proposes to implement the 

Series 56 examination program upon 

availability in FINRA’s Web CRD®

system,12 notification to its Members 

and subject to the satisfaction of 

applicable continuing education 

requirements, as described in 

Interpretations .04 and .05 to Rule 2.5. 

The Exchange believes that 

acceptance of the Series 56 qualification 

examination will benefit both the 

Exchange and the applicable proprietary 

traders affected by the proposal. 

Accordingly, pursuant to the amended 

rules, as proposed, the Exchange would 

recognize a new category of limited 

representative registration for 

proprietary traders. In addition, the 

Exchange would expand its registration, 

qualification and continuing education 

requirements to include the Series 56 

examination as one of the applicable 

qualification examinations as 

determined by the Exchange. The 

Exchange would also permit Authorized 

Traders of Members who engage solely 

in proprietary trading to obtain the 

Series 56 license in order to effect 

transactions on the Exchange. The 

Exchange proposes to add Interpretation 

.06 to Rule 2.5 to incorporate the Series 

56 qualification examination as a 

limited representative registration for 

proprietary traders, and proposes to 

identify the characteristics required to 

satisfy the Exchange’s definition of a 

proprietary trading firm and a 

proprietary trader, which are modeled 

after NASDAQ’s rules, as discussed 

above. 

In addition, the Exchange proposes to 

amend Rule 2.3(c)(2) to make it 

substantially similar to the rules of 

FINRA and other SROs to require 

Members to register at least two 

registered Principals.13 The proposed 

amendment applies to firms seeking 

admission as Members and existing 

Members, and states that each Member, 

except a sole proprietorship or a 

proprietary trading firm with 25 or 

fewer Authorized Traders (‘‘Limited 

Size Proprietary Firm’’),14 shall have at 

least two officers or partners who are 

registered as Principals with respect to 

the Member’s equities securities 

business and, at a minimum, one such 

Principal shall be the Member’s Chief 

Compliance Officer (‘‘CCO’’).15

The Exchange proposes additional 

amendments to Rule 2.3(c)(3) and (4) to 

require Members to register a CCO and 

a Financial/Operations Principal 

(‘‘FINOP’’) in order to make the 

Exchange’s rules substantially similar to 

the rules of FINRA and other SROs. In 

addition, this more accurately reflects 

the heightened level of accountability 

inherent in the duty of overseeing 

compliance by a Member of the 

Exchange, and in the oversight and 

preparation of financial reports and the 

oversight of those employed in financial 

and operational capacities at each 

Member firm. The proposed 

amendments state each Member shall 

designate a CCO on the Schedule A of 

Form BD, and requires [sic] the 

individual designated as a CCO to 

register with the Exchange and pass the 

General Securities Principal 

Examination (Series 24). Similarly, the 

proposed amendments to Rule 2.3 

require each Member subject to Rule 

15c3–1 of the Act to designate a FINOP, 

and requires [sic] the individual 

designated as a FINOP to successfully 

complete the Financial and Operations 

Principal Examination (Series 27), and 

register in that capacity with the 

Exchange as prescribed by the 

Exchange. 

The Exchange proposes to make other 

ministerial amendments to Rule 2.3 to 

accommodate the placement of the 

proposed amendments outlined in this 

rule filing. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,16 in general, and furthers the 

objectives of Section 6(c)(3)(B) of the 

Act.17 Under that section, it is the 

Exchange’s responsibility to prescribe 

standards of training, experience, and 

competence for Exchange Members and 

their associated persons, in particular, 

by offering an alternative qualification 

examination for proprietary traders that 

more closely reflects the practical 

knowledge that is a pre-requisite to 

proprietary trading. Pursuant to this 

statutory obligation, the Exchange 

requests to recognize a new category of 

limited representative registration for 

proprietary traders and to permit 

Authorized Traders of Members who 

engage solely in proprietary trading to 

obtain the Series 56 license. The 

Exchange believes the Series 56 

examination establishes that Authorized 

Traders of Members have attained 

specified levels of competence and 

knowledge generally applicable to 

proprietary trading. 

The Exchange believes that the 

requirement that persons functioning in 

certain supervisory capacities, including 

CCO and a FINOP, be registered through 

the WebCRD® system and be subject to 

higher qualification standards 

appropriately reflects the enhanced 

responsibility of their roles and is 

consistent with the Act. The general 

requirement that Members must have a 

minimum of two Principals responsible 

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9716 Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices 

18 15 U.S.C. 78f(b)(5). 

19 15 U.S.C. 78s(b)(3)(A). 

20 17 CFR 240.19b–4. 

21 17 CFR 240.19b–4(f)(6). 

22 17 CFR 240.19b–4(f)(6)(iii). 

23For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. See 15 U.S.C. 78c(f). 

for oversight of Member organization 

activity, who must be registered as such 

and pass a principal exam, should help 

the Exchange strengthen the regulation 

of its Member firms, and prepare those 

individuals for their responsibilities. 

The nature of the firm, however, may 

dictate that more than two Principals 

are needed to provide appropriate 

supervision. In addition, the 

requirement for each Member to have a 

CCO who must register and pass the 

Series 24 exam and a FINOP who must 

register and pass the Series 27 exam is 

appropriate based on the heightened 

level of accountability inherent in the 

duty of overseeing compliance by a 

Member of the Exchange, and in the 

oversight and preparation of financial 

reports and the oversight of those 

employed in financial and operational 

capacities at each Member firm. 

The Exchange believes that this 

proposal will enhance its ability to 

ensure an effective supervisory structure 

for those conducting business on the 

Exchange. The requirements apply 

broadly and are intended to help close 

a regulatory gap which has resulted in 

varying registration, qualification, and 

supervision requirements across 

markets. The Exchange believes that the 

changes proposed to its rules will 

strengthen its regulatory structure and 

should enhance the ability of its 

Authorized Traders and Members to 

comply with the Exchange’s rules as 

well as with the federal securities laws. 

In addition, the Exchange believes 

that the proposed rule change is 

consistent with the principles of Section 

11A(a)(1)(C)(ii) of the Act in that it seeks 

to assure fair competition among 

brokers and dealers and among 

exchange markets. The Exchange 

believes that the proposed rule will 

promote uniformity of regulation across 

markets, thus reducing opportunities for 

regulatory arbitrage. EDGX’s proposed 

rule change helps ensure that all 

persons conducting a securities business 

through EDGX are appropriately 

supervised, as the Commission expects 

of all SROs. 

The proposed changes are also 

consistent with Section 6(b)(5) of the 

Act,18 because they would promote just 

and equitable principles of trade, 

remove impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system, and, in 

general, protect investors and the public 

interest, by enabling such persons to 

qualify for registration with the 

Exchange by offering an alternative 

qualification examination that 

specifically addresses industry topics 

that establish the foundation for the 

regulatory and procedural knowledge 

necessary for such persons electing to 

register as Proprietary Traders. 

Similarly, including new requirements 

for Members to maintain at least two 

Principals, a CCO and a FINOP, 

harmonizes the Exchange’s rules with 

substantially similar rules of FINRA and 

other SROs. Accordingly, the 

modifications to EDGX Rules 2.3 and 

11.4 and the Interpretations to Rule 2.5 

promote just and equitable principles of 

trade, remove impediments to, and 

perfect the mechanism of, a free and 

open market and a national market 

system. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

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 has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has designated this rule 

filing as non-controversial under 

Section 19(b)(3)(A) of the Act 19 and 

paragraph (f)(6) of Rule 19b–4 

thereunder.20 The Exchange asserts that 

the proposed rule changes: (1) Will not 

significantly affect the protection of 

investors or the public interest; (2) will 

not impose any significant burden on 

competition; (3) and will not become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate. In 

addition, the Exchange provided the 

Commission with written notice of its 

intent to file the proposed rule changes, 

along with a brief description and text 

of the proposed rule changes, at least 

five business days prior to the date of 

filing.21 For the foregoing reasons, this 

rule filing qualifies for immediate 

effectiveness as a ‘‘noncontroversial’’ 

rule change under paragraph (f)(6) of 

Rule 19b–4 because the Series 56 

qualification examination has been 

adopted or will be adopted for use by 

NASDAQ and other SROs. The Series 56 

examination also reflects a collaborative 

effort to adopt an appropriate 

qualification examination for a new 

registration category. In addition, the 

Exchange’s proposal to include new 

requirements for Members to maintain 

at least two Principals, a CCO and a 

FINOP, harmonizes the Exchange’s rules 

with substantially similar rules of 

FINRA and other SROs. 

The rule changes as proposed will 

allow the Exchange to recognize a new 

category of limited representative 

registration for proprietary traders. The 

Exchange believes that Authorized 

Traders of Members who engage solely 

in proprietary trading, obtain the Series 

56 license, and wish to register with 

EDGA would be disadvantaged by 

having to wait for the proposed rule 

changes to become operative. 

Accordingly, because the Exchange 

believes that implementation of the 

standards proposed in this filing is 

important to its maintenance of a fair 

and orderly market and is noncontroversial, the Exchange requested 

that the Commission waive the 30-day 

pre-operative waiting period contained 

in Rule 19b–4(f)(6)(iii) under the Act.22

Waiver of this requirement will allow 

the Exchange to make the examination 

available as soon as possible to coincide 

with its availability on other exchanges. 

The Commission believes that waiver of 

the 30-day operative delay is consistent 

with the protection of investors and the 

public interest because the proposal 

makes the registration, qualification and 

continuing education requirements of 

EDGX comparable to those of the other 

exchanges and will enable EDGX to 

recognize the Series 56 exam as a valid 

qualification for proprietary traders.23

Therefore, the Commission designates 

the proposal operative upon filing. 

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. 

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Federal Register / Vol. 77, No. 33 / Friday, February 17, 2012 / Notices 9717 

24 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See C2 Rule 6.51. 

4See C2 Rule 6.51(a)(2). The Commission notes 

that if the Agency Order is for less than 50 

contracts, the Initiating Participant must submit the 

Agency Order at the better of the NBBO price 

improved by one minimum price improvement 

increment, which increment shall be determined by 

the Exchange but may not be smaller than one cent; 

or the Agency Order’s limit price (if the order is a 

limit order). See C2 Rule 6.51(a)(3). 

5See C2 Rule 6.51(b)(1)(A). 

6See C2 Rule 6.51(b)(1). Several types of events 

will cause an Auction to conclude. See C2 Rule 

6.51(b)(2). 

7The Exchange notes that Chapter V, Section 

18(f)(v), The Price Improvement Period (‘‘PIP’’), of 

the Rules of the Boston Exchange Group, LLC 

includes a similar provision that permits an options 

participant initiating a PIP auction to designate a 

lower amount for which it will retain certain 

priority and trade allocation privileges upon the 

conclusion of the PIP auction than the 40% of the 

PIP order to which the initiating options participant 

is otherwise entitled pursuant to PIP’s allocation 

order. 

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 rulecomments@sec.gov. Please include File 

No. SR–EDGX–2012–04 on the subject 

line. 

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 

Number SR–EDGX–2012–04. 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 

a.m. and 3 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–EDGX– 

2012–04 and should be submitted by 

March 9, 2012. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.24

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2012–3707 Filed 2–16–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66384; File No. SR–C2– 

2012–006] 

Self-Regulatory Organizations; C2 

Options Exchange, Incorporated; 

Notice of Filing of a Proposed Rule 

Change Relating to Its Automated 

Improvement Mechanism 

February 13, 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 January 

31, 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, II, and III below, which Items 

have been substantially prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to amend its 

rules relating to its Automated 

Improvement Mechanism (‘‘AIM’’). The 

text of the proposed rule change is 

available on the Exchange’s Web site 

(http://www.c2exchange.com), 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 the 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization 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 self-regulatory organization 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 purpose of this proposed rule 

change is to amend C2 Rule 6.51 to 

permit an Initiating Participant to elect 

to have last priority in AIM’s order 

allocation. AIM allows a Participant to 

submit an Agency Order along with a 

contra-side second order (a principal 

order or a solicited order for the same 

size as the Agency Order) into an 

Auction where other participants could 

compete with the Initiating Participant’s 

second order to execute against the 

Agency Order, which guarantees that 

the Agency Order will receive an 

execution.3 Initiating Participants must 

submit the Agency Order at the better of 

the NBBO or the Agency Order’s limit 

price (if the order is a limit order).4

Once an Auction commences, the 

Initiating Participant cannot cancel it.5

Upon receipt of an Agency Order (and 

the Initiating Participant’s second 

order), the Exchange will commence the 

Auction by issuing a Request For 

Response (‘‘RFR’’) detailing the side and 

size of the Agency Order. The RFR 

period will last for one (1) second.6 At 

the conclusion of an Auction, an 

Agency Order will be allocated at the 

best price(s) in accordance with the 

applicable matching algorithm rules for 

that class, subject to the allocation 

provisions of Rule 6.51(b)(3). 

Under this proposal, when submitting 

an Agency Order to initiate an Auction 

against a single-price submission, the 

Initiating Participant will have the 

opportunity to elect to have last priority 

in AIM’s order allocation. If the 

Initiating Participant makes this 

election, the Initiating Participant 

would be allocated only the amount of 

contracts remaining, if any, after the 

Agency Order is allocated to all other 

Auction participants willing to trade 

with the Agency Order at the singleprice submission price.7 If it makes this 

election, the Initiating Participant may 

not be allocated any contracts, or may 

be allocated fewer contracts than it 

mstockstill on DSK4VPTVN1PROD with NOTICES