Document ID: SEC-2012-0217-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: C2 Options Exchange, Inc.
Posted Date: 2012-02-07T05:00Z

[Federal Register Volume 77, Number 25 (Tuesday, February 7, 2012)]
[Notices]
[Pages 6166-6167]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2669]

[[Page 6166]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66286; File No. SR-C2-2012-005]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Minor Rule Violation Plan

February 1, 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 26, 2012, the 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 amend its rules to incorporate violations 
of C2's Market-Maker continuous quoting obligations into its Minor Rule 
Violation Plan. 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.

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 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
    Chicago Board Options Exchange, Incorporated's (``CBOE'') Minor 
Rule Violation Plan imposes sanctions for various technical rule 
violations, including violations of CBOE's Market-Maker quoting 
obligations.\3\ Chapter 17 of the C2 rules incorporates by reference 
CBOE Chapter XVII, including its Minor Rule Violation Plan (CBOE Rule 
17.50). CBOE Rule 17.50(g)(14) applies to violations of CBOE's Market-
Maker quoting obligations. As a result, this subparagraph is 
inapplicable to C2, and C2's Minor Rule Violation Plan does not cover 
C2's Market-Maker continuous quoting obligations.
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    \3\ See CBOE Rule 17.50(g)(14).
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    C2 Rules 8.5(a)(1) and 8.13(d) require C2 Market-Makers and 
Preferred Market-Makers (collectively referred to in this filing as 
``Market-Makers''), respectively, to meet specified continuous quoting 
obligations. The purpose of the proposed rule change is to amend C2 
Chapter 17 to incorporate violations of these continuous quoting 
obligations into C2's Minor Rule Violation Plan, which will allow C2 to 
impose sanctions upon its Market-Makers for failing to meet such 
obligations. C2 believes that these violations are suitable for 
incorporation into its Minor Rule Violation Plan because they are 
generally technical in nature. Further, incorporating these violations 
into the Minor Rule Violation Plan will allow C2 to carry out its 
regulatory responsibilities more quickly and efficiently.
    C2 is proposing to adopt ranges for the sanction levels to be 
imposed according to the degree of the violation(s). Specifically, C2 
is proposing to assess fines ranging from $2,000 to $4,000 for a first 
offense and $4,000 to $5,000 for a second offense. Any subsequent 
offenses will be subject to a fine of $5,000 or referred to C2's 
Business Conduct Committee. C2 will maintain internal guidelines that 
will dictate the sanction that will be imposed for a particular 
violation (based on the degree of the violation). As with all other 
violations incorporated into C2's Minor Rule Violation Plan, C2 retains 
the ability to refer a violation of Market-Maker continuous quoting 
obligations to its Business Conduct Committee should the circumstances 
warrant such a referral.
    In support of this proposal, the Exchange notes that several other 
self-regulatory organizations impose sanctions on their market-makers 
for violations of their respective continuous quoting obligations 
pursuant to their respective minor rule violation plans.\4\
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    \4\ See, e.g., CBOE Rule 17.50(g)(14); Boston Options Exchange 
Group LLC (``BOX'') Chapter X, Section 2(d); NYSE Amex LLC (``NYSE 
Amex'') Rules 476A and 590(g); and NYSE Arca, Inc. (``NYSE Arca'') 
Rule 10.12(h)(39) and (k)(i)(39).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to the Exchange and, in particular, the requirements of 
Section 6(b) of the Act.\5\ Specifically, the Exchange believes the 
proposed rule change is consistent with the Section 6(b)(5) \6\ 
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.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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    In particular, C2 believes that the proposed rule change will 
strengthen its ability to carry out its oversight responsibilities as a 
self-regulatory organization pursuant to the Act and reinforce its 
surveillance and enforcement functions. This proposed rule change will 
also promote consistency in the minor rule violation programs and 
reporting obligations of option exchanges.

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 not necessary or appropriate in furtherance of 
the purposes of the Act. As indicated above, the Exchange notes that 
several other self-regulatory organizations impose sanctions on market-
makers for violations of their respective quoting obligations pursuant 
to their respective minor rule violation plans.\7\
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    \7\ See supra note 4.
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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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
by its terms, become operative for 30 days after the date on which it 
was filed, or such shorter time as the Commission may designate, it has 
become effective

[[Page 6167]]

pursuant to Section 19(b)(3)(A) \8\ of the Act and Rule 19b-4(f)(6) \9\ 
thereunder.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii) 
under the Act, the Exchange is required to give the Commission 
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. 
The Exchange 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

     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-C2-2012-005 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-C2-2012-005. 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 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-C2-2012-005 and should be 
submitted on or before February 28, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2669 Filed 2-6-12; 8:45 am]
BILLING CODE 8011-01-P