Document ID: SEC-2013-0496-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: C2 Options Exchange, Inc.
Posted Date: 2013-03-14T04:00Z

[Federal Register Volume 78, Number 50 (Thursday, March 14, 2013)]
[Notices]
[Pages 16320-16324]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05885]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69083; File No. SR-C2-2013-013]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing of Proposed Rule Change Relating to the Regulation NMS 
Plan To Address Extraordinary Market Volatility

March 8, 2013.
    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 March 7, 2013, C2 Options Exchange, Incorporated (``C2'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to modify its rules to address certain option 
order handling procedures and quoting obligations on the Exchange after 
the implementation of the market wide equity Plan to Address 
Extraordinary Market Volatility (the ``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'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

[[Page 16321]]

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 Exchange is proposing to update Exchange rules to correspond 
with the Plan. Specifically, the Exchange is proposing to make proposed 
changes to Exchange Rules Rule 6.10, ``Order Types Defined,'' 6.11, 
``Openings (and sometimes Closings),'' Rule 6.13, ``Complex Order 
Execution,'' Rule 6.15, ``Obvious Error and Catastrophic Errors,'' Rule 
6.18, ``HAL,'' Rule 6.39, ``Equity Market Plan to Address Extraordinary 
Market Volatility,'' Rule 8.5, ``Obligations of Market-Makers, Rule 
8.17, ``DPM Obligations,'' and Rule 8.19, ``DPM Participation 
Entitlements.'' The Exchange believes these modifications will protect 
investors because when an underlying security is in a limit or straddle 
state (collectively referred to in this filing as a ``limit up-limit 
down state''), there will not be a reliable price for the security to 
serve as a benchmark for the price of the option. In addition, the 
width of the markets might be compromised and, thus, the quality of 
execution for retail customers. The Plan is more fully explained below.
    In an attempt to address extraordinary market volatility in NMS 
Stock, and, in particular, events like the severe volatility on May 6, 
2010, the Exchange, in conjunction with the other national securities 
exchanges and the Financial Industry Regulatory Authority, Inc. 
(collectively, ``Participants'') drafted the Plan pursuant to Rule 608 
of Regulation NMS and under the Securities Exchange Act of 1934 (the 
``Act'').\3\ The Plan is primarily designed to, among other things, 
address extraordinary market volatility in NMS stocks, protect 
investors, and promote fair and orderly markets. The Plan provides for 
market-wide limit up-limit down requirements that prevent trades in 
individual NMS Stocks from occurring outside of specified price bands, 
as defined in Section I(N) of the Plan. These requirements would be 
coupled with trading pauses, as defined in Section I(Y) of the Plan, to 
accommodate more fundamental price moves (as opposed to erroneous 
trades or monetary gaps of liquidity).
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 64547 (May 25, 
2011), 76 FR 31647 (June 1, 2011) (File No. 4-631).
---------------------------------------------------------------------------

    The Plan was filed on April 5, 2011 by the Participants for 
publication and comment.\4\ The Participants requested the Commission 
approve the Plan as a one-year pilot. On May 24, 2012, the Participants 
filed an amendment to the Plan which clarified, among other things, the 
calculation of the reference price, as defined in Section I(T) of the 
Plan, potential for order type exemption, and the creation of an 
Advisory Committee.\5\ On May 31, 2012, the Commission approved the 
Plan, as amended, on a one-year pilot basis.\6\
---------------------------------------------------------------------------

    \4\ Id.
    \5\ See Securities and Exchange Act Release No. 67091 (May 31, 
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631).
    \6\ See Securities and Exchange Act Release No. 67091 (May 31, 
2012) 77 FR 33498 (June 6, 2012).
---------------------------------------------------------------------------

    Under the Plan, Participants are required to adopt certain rules in 
order to comply. Specifically, Section VI of the Plan sets forth the 
limit up-limit down requirements of the Plan, and in particular, that 
all trading centers in NMS Stocks, including both those operated by the 
Participants and those operated by member of Participants, shall 
establish, maintain, and enforce written policies and procedures that 
are reasonably designed to prevent trades at prices that are below the 
lower price band or above the upper price band for an NMS Stock, 
consistent with the Plan. Price Bands will be calculated by Securities 
Information Processors (``SIPs'') responsible for consolidation of 
information for an NMS Stock pursuant to Rule 603(b) of Regulation NMS 
under the Act. As proposed, and approved, the Plan would be 
implemented, as a one year pilot program, in two phases.\7\ Phase I 
would become effective on April 8 and apply to Tier I NMS Stock per 
Appendix A of the Plan, and Phase II would become effective six months 
later, or earlier if announced by the SIPs 30 days prior, and would 
apply to all NMS Stocks.
---------------------------------------------------------------------------

    \7\ Id.
---------------------------------------------------------------------------

    Under the Plan, when one side of the market for an individual 
security is outside the applicable price band, the SIPs will be 
required to disseminate such National Best Bid or National Best Offer 
with an appropriate flag identifying it as non-executable. When the 
other side of the market reaches the applicable Price Band, the market 
for an individual security will enter a limit state. Trading for that 
security will exit the limit state if, within 15 seconds of entering 
the limit state, all limit state quotations were executed or cancelled. 
If the market does not exit a limit state within 15 seconds, then the 
primary listing exchange will declare a five-minute trading pause, 
which will be applicable to all markets trading the security.
    Though the Plan is primarily designed for equity markets, the 
Exchange believes it will, indirectly, potentially impact the options 
markets as well. Thus, as stated above, the Exchange is proposing to 
amend its rules to ensure the option markets are not harmed as a result 
of the Plan's implementation. As such, the Exchange is proposing to 
amend various rules to reflect such changes. The Exchange believes such 
changes will protect participants, the Exchange and investors in 
general.
    First, the Exchange is proposing to add Rule 6.39 to codify the 
changes throughout the Exchange's rules. The Exchange is proposing to 
add the title to ``Equity Market Plan to Address Extraordinary Market 
Volatility'' and add text. Rule 6.39 will define the Plan as it applies 
to the Exchange. In addition, the proposed rule change will describe 
the location of the other rule changes associated with the Plan. In 
essence, the proposed changes to Rule 6.39 will serve as a roadmap for 
the Exchange's universal changes due to the implementation of the Plan. 
The proposed rule changes will list changes to Exchange order types, 
order handling, obvious error, and market-maker quoting obligations 
that the Exchange is proposing to make in connection with the 
implementation of the Plan. These rule changes are more thoroughly 
described in various sections of the Exchange Rulebook, but having one 
place referencing all rules associated with the Plan will serve to 
better protect investors by making the other rules easily located. The 
Exchange believes the proposed changes to Rule 6.39 will describe to 
Trading Permit Holders (``TPHs''), and other participants, where to 
find the changes associated with the Plan and will, thus, attempt to 
maintain a more orderly market.
    Next, the Exchange is proposing to modify its opening procedures 
under Rule 6.11, ``Openings (and sometimes Closings).'' The Exchange is 
proposing to add an Interpretation and Policy .03 to clarify that if 
the underlying security for a class of options enters into a limit up-
limit down state when the class moves to opening rotation, any market 
orders entered that trading day currently opening, prior to the opening 
of that class, will be cancelled. The Exchange believes this change is 
consistent with cancelling market orders in general during a limit up-
limit down period as described in more detail below. The Exchange 
further believes this proposed change will help the Exchange to

[[Page 16322]]

protect its TPHs from executing skewed orders during limit up-limit 
down periods.
    Next, the Exchange is proposing to modify Exchange Rule 6.18, 
``HAL.'' Exchange Rule 6.18 currently governs the operation of HAL, a 
feature within the System that provides automated order handling in 
designated classes trading on the System for qualifying orders that are 
not automatically executed by the System. The Exchange determines the 
eligible order size, eligible order types, eligible origin code (i.e. 
public customer orders, non-Market-Maker broker-dealer orders and 
Market-Maker broker-dealer orders), and classes in which HAL is 
activated.\8\ When the Exchange receives a qualifying order that is 
marketable against the National Best Bid or Offer (``NBBO'') and/or the 
Exchange's best bid or offer (``BBO''),\9\ HAL electronically exposes 
the order \10\ at the NBBO price to allow Market-Makers appointed in 
that class, as well as all TPHs acting as agent for orders, at the top 
of the Exchange's book in the relevant series (or all TPHs if allowed 
by the Exchange) \11\ to step-up to the NBBO price.
---------------------------------------------------------------------------

    \8\ Rule 6.18.
    \9\ HAL will not electronically expose the order if the 
Exchange's quotation contains resting orders and does not contain 
sufficient Market-Maker quotation interest to satisfy the entire 
order.
    \10\ The duration of the exposure period may not exceed one 
second. Rule 6.18(c) describes the manner in which an exposed order 
is allocated under HAL, and Rule 6.18(d) lists the circumstances in 
which an exposure period would terminate early.
    \11\
---------------------------------------------------------------------------

    Because the underlying security of the option in HAL affects the 
pricing of the eventually executed order, the Exchange is proposing to 
make changes to Rule 6.18 to reflect the implementation of the Plan. 
More specifically, the Exchange is proposing to amend Rule 6.18 to 
modify the behavior of HAL of a market order while the underlying 
security of the option is in a limit up-limit down state. If an 
underlying security shall enter a limit state while a HAL of a market 
order is in process, the auction will end early, upon the entering of 
the state, and any unexecuted portion of a market order shall be 
cancelled. The Exchange believes the proposed rule changes will best 
protect the TPH by ensuring it does not receive an executed order with 
an unanticipated price due to the change in the underlying security. In 
addition, by ending the auction early, the Exchange is providing a 
better chance for the TPH to get its order executed as it is in the 
TPH's interest for an earlier execution versus a later one.
    Next, the Exchange is proposing to modify how an electronic complex 
order request for responses (``RFR'') auction (``COA'') will operate 
while the underlying security of at least one of the options has 
entered a limit state. Exchange Rule 6.13(c) currently describes the 
general COA process. Generally, on a class-by-class basis, the Exchange 
may activate COA, which is a process by which eligible complex orders 
\12\ are given an opportunity for price improvement before being booked 
in the electronic complex order book (``COB'') or once on a PAR 
workstation. On receipt of a COA-eligible order and request from a TPH 
representing the order that it be COA'd, the Exchange will send an RFR 
message to all TPHs who have elected to receive RFR messages.\13\ Each 
Market-Maker with an appointment in the relevant option class and each 
TPH acting as agent for orders resting at the top of the COB in the 
relevant options series may then submit responses to the RFR message 
during the Response Time Interval.\14\ The Exchange is proposing to add 
to the COA rule that if, during COA, the underlying security of a 
market order enters a limit up-limit down state, the COA will end upon 
the entering of that state and the remaining portion of the order will 
cancel.
---------------------------------------------------------------------------

    \12\ An eligible complex order, referred to in Rule 6.13 as a 
``COA-eligible order,'' means a complex order that, as determined by 
the Exchange on a class-by-class basis, is eligible for a COA 
considering the order's marketability (defined as a number of ticks 
away from the current market), size, complex order type and complex 
order origin type (i.e. non-broker-dealer public customer, broker-
dealers that are not Market-Makers or specialists on an options 
exchange, and/or Market-Makers or specialists on an options 
exchange). All determinations by the Exchange on COA-eligible order 
parameters are announced to Trading Permit Holders by Regulatory 
Circular. See Rule 6.18(c)(1)(B) and Interpretation and Policy .01 
to Rule 6.18.
    \13\ See Rule 6.18(c)(3)(B). The RFR message will identify the 
component series, the size of the COA-eligible order and any 
contingencies, but will not identify the side of the market.
    \14\ See Rule 6.18(c)(3). A ``Response Time Interval'' means the 
period of time during which responses to the RFR may be entered, the 
length of which is determined by the Exchange on a class-by-class 
basis but may not exceed three seconds. See Rule 6.18(c)(3)(B).
---------------------------------------------------------------------------

    Next, the Exchange is proposing to amend Exchange Rule 6.15 
relating to the nullification and adjustment of options transactions. 
Under the current rule, an Obvious Pricing Error occurs when the 
execution price of an electronic transaction is above or below the 
Theoretical Price for the series by a specified amount. For purpose of 
the rule, the ``Theoretical Price'' of an option series is currently 
defined, for series traded on at least one other options exchange, as 
the last national best bid price with respect to an erroneous sell 
transaction and the last national best offer price with respect to an 
erroneous buy transaction, just prior to the trade. If there are no 
quotes for comparison, designated help desk personnel \15\ will 
determine the Theoretical Price.
---------------------------------------------------------------------------

    \15\ See Exchange Rule 6.15(a)(3)(B).
---------------------------------------------------------------------------

    Because the theoretical price may be unreliable due to the 
underlying security entering a limit state, the Exchange is proposing 
to amend the Exchange obvious error rules to provide that the Exchange 
may not nullify or adjust trades when the underlying security is in a 
limit up-limit down state. The Exchange is also proposing to add 
language specifying that transactions in options that overlay a 
security that is in a limit state may, however, be reviewed on an 
Exchange motion. The Exchange is also proposing to add language to 
specify that this provision will be on a one year pilot basis to 
coincide with the Plan. The Exchange will provide the Commission with 
data and analysis during the duration of this pilot as requested.\16\ 
The Exchange believes this will best protect the market because it 
allows limit orders to be executed on the Exchange while the underlying 
securities are in limit states regardless of the calculated theoretical 
price.
---------------------------------------------------------------------------

    \16\ Finally, as an administrative change, the Exchange is 
proposing to eliminate a sentence referring to an Interpretation and 
Policy (.08) that no longer exists. The proposed provision will be 
the new Interpretation and Policy (.08) to Rule 6.15.
---------------------------------------------------------------------------

    In addition, the Exchange believes the proposed rule change would 
protect against TPHs getting a potential second look at transactions 
that happened during limit states that could be unfair to other 
participants. The proposed rule change would encourage added liquidity 
on the Exchange as the proposed changes would help to ensure that limit 
orders that are filled during a limit up-limit down state would have 
certainty of execution. By allowing the Exchange to continue to review 
such transactions on their own motion, the Exchange is further 
attempting to protect investors and maintain an orderly market. The 
Exchange believes that the combination of encouraging TPHs to 
participate on the market and allowing a safeguard to erroneous trades 
will provide the best solution during the pilot of the Plan.
    Next, the Exchange is proposing to modify Rule 6.10 and 6.13 and, 
more specifically, how certain Exchange order types will be handled 
while the underlying security of such orders enters into a limit up-
limit down state. The proposed rule change will, among

[[Page 16323]]

other things, address how market orders,\17\ market-on-close,\18\ stop 
orders,\19\ and stock option orders \20\ will function on the Exchange 
upon the implementation of the Plan. More specifically, the Exchange is 
proposing to add language to clarify that: (a) Market orders will be 
returned during limit up-limit down states, (b) market-on-close orders 
will not be elected if the underlying security is in a limit up-limit 
down state, (c) stop orders will be held while the underlying security 
is in a limit up-limit down state, and (d) stock-option orders will 
only execute if the calculated stock price is within the permissible 
Price Bands.\21\ In addition, during a limit up-limit down state, if a 
message is sent to replace a limit order with a market order, the 
resting limit order will be cancelled and the replaced market order 
will also be cancelled.
---------------------------------------------------------------------------

    \17\ See Exchange Rule 6.10 which defines a market order as ``an 
order to buy or sell a stated number of options contracts at the 
best price available at the time of execution.''
    \18\ See Exchange Rule 6.10(c)(2) which defines a market-on-
close order designation as an order ``to be executed as close as 
possible to the closing bell, or during the closing rotation, and 
should be near to or at the closing price for the particular series 
of option contracts.
    \19\ See Exchange Rule 6.10(c)(3) which defines a stop order 
contingency to an order as one that ``to buy or sell when the market 
for a particular option contract reaches a specified price on the 
Exchange.''
    \20\ See Exchange Rule 6.13(a)(2) which defines a stock-option 
order as ``an order to buy or sell a stated number of units of an 
underlying stock or a security convertible into the underlying stock 
* * * coupled with the purchase or sale of options contract(s) on 
the opposite side of the market.''
    \21\ If the calculated price of a stock-option order is not 
within the permissible Price Bands, the stock-option order will be 
routed for manual handling.
---------------------------------------------------------------------------

    When a stock is in a limit or straddle state, while options trading 
will continue, there will not be a reliable price for a security to 
serve as a benchmark for the price of the option. In addition, without 
a reliable underlying stock price, there is an enhanced risk of errors 
and improper executions. With these concerns in mind, the Exchange 
believes that adding a level of certainty for TPHs will encourage 
participation on the Exchange whilst the underlying securities are in 
limit up-limit down states. Thus, the Exchange believes handling these 
certain orders in this way will best protect the investor after the 
implementation of the Plan by not allowing execution at unreasonable 
prices due to the shift in the stock prices.
    Finally, the Exchange is proposing to eliminate all market maker 
obligations for options in which the underlying security is in a limit 
state while the underlying security in is in the limit up-limit down 
state. Currently, Exchange Rules 8.5 and 8.17 impose certain 
obligations on Market-Makers and DPMs, respectively, including 
obligations to provide continuous quotes as follows: \22\
---------------------------------------------------------------------------

    \22\ For purposes of Rules 8.5(a)(1), and 8.17(a)(1), 
``continuous'' means 90% of the time. If a technical failure of 
limitation of the System prevents a Market-Maker from maintaining 
timely and accurate quotes in a series, the duration of such failure 
will not be included in the 90% determination.
---------------------------------------------------------------------------

     Rule 8.5 requires that Market-Makers provide a continuous 
two-sided market in 60% of the non-adjusted option series of the 
Market-Maker's appointed class that have a time to expiration of less 
than nine months;
     Rule 8.17(a)(1) requires DPMs to provide continuous quotes 
in at least the lesser of 99% or 100% minus one call-put pair \23\ of 
the non-adjusted option series of each class allocated to it.
---------------------------------------------------------------------------

    \23\ See Rule 8.17(a)(1) which defines a ``call-up pair'' as 
``one call and one put that cover the same underlying instrument and 
have the same expiration date and exercise price.''
---------------------------------------------------------------------------

    Exchange Rule 8.19 provides that DPMs generally will receive the 
participation entitlements in their assigned classes when quoting at 
the best price if they satisfy their obligations and other conditions 
set forth in the rules. Specifically, Rule 8.19 provides that the DPM 
participation entitlement will be 50% when there is one Market-Maker 
also quoting at the best price on the Exchange and 40% when there are 
two Market-Makers also quoting at the best price on the Exchange.\24\
---------------------------------------------------------------------------

    \24\ The participation entitlements of DPMs are based on the 
number of contracts remaining after all public customer orders in 
the book at the best price on the Exchange have been satisfied. 
Additionally, a DPM may not be allocated a total quantity greater 
than the quantity for which the DPM is quoting at the best price. 
See Rules 8.19(b)(1)(B) and (C).
---------------------------------------------------------------------------

    Because prices may be skewed due to the underlying security being 
in a limit up-limit down state, the Exchange is proposing to eliminate 
all Market-Maker quoting obligations in series of options that the 
underlying security is currently in a limit up-limit down state. 
Because of the direct relationship between an options price and the 
price of the associated underlying security, the Exchange believes 
eliminating all Market-Maker obligations in connection with the 
implementation of the Plan is the most effective way to ensure the 
options markets will not be compromised. Because a bid or offer of an 
underlying security may not be executable due to a limit or straddle 
state, the ability to hedge the purchase or sale of an option may not 
be possible or, in the least, is at risk. Because of this reason, the 
Exchange is anticipating that Exchange Market-Makers will be forced to 
change behaviors. In addition, the Exchange believes other options 
markets will be implementing similar changes. In an effort to protect 
the investors in the options market while the underlying security is in 
a limit up-limit down state, the Exchange believes that eliminating 
quoting obligations is the more effective way for this protection.
    The Exchange, however, is proposing that Market-Makers may still 
receive participation entitlements pursuant to the proposed rules in 
all series in their assigned classes in which they are quoting, even in 
series in which they are not required to provide continuous electronic 
quotes under the Exchange Rules. Market-Makers already receive 
participation entitlements in series they are not required to quote. 
For example, a DPM is currently required to provide continuous quotes 
in at least 99% of the non-adjusted option series or 100% of the non-
adjusted series minus one call-put pair of each option class allocated 
to it for 90% of the trading day.\25\ If the DPM elects to quote in 
100% of the non-adjusted series in an option class allocated to it, it 
will receive a participation entitlement in all of those series when 
quoting at the best price, including the 1% of the series in which it 
is not required to quote in. Thus, under the proposed rule change, the 
market would continue to function as it does now. The Exchange believes 
this benefit is appropriate, as it incentivizes Market-Makers to quote 
in as many series as possible in their appointed classes, even those 
series in which the Rules do not require them to continuously quote. 
Thus, under the proposed rule change, the market would continue to 
function as it does now with respect to how entitlements are allocated 
to Market-Makers. The Exchange believes this benefit is appropriate, as 
it incentivizes Market-Makers to quote in as many series as possible in 
their appointed classes, even those series in which the underlying 
security has entered into a limit up-limit down state. The Exchange is 
attempting to better encourage Market-Makers to quote though they will 
not be obligated to. If they do choose to quote, the Exchange believes 
they should be entitled to receive the Entitlement for such quoting as 
appropriate.
---------------------------------------------------------------------------

    \25\ See Rule 8.17(a).
---------------------------------------------------------------------------

    The Exchange believes the combination of these modifications will 
protect investors because when an underlying security is in a limit or 
straddle state, there will not be a reliable price for the security to 
serve as a benchmark for the price of the option.

[[Page 16324]]

In addition, the width of the markets might be compromised and, thus, 
the quality of execution for retail customers. At the same time, the 
Exchange believes the proposed rule change will create more certainty 
on the options markets encouraging more investors to participate 
despite the changes associated with the Plan.
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.\26\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \27\ 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 facilitation 
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 the 
Section 6(b)(5) \28\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed changes will be 
in accordance with the Act as they are merely intended to ensure the 
options markets will continue to remain just and equitable with the 
implementation of the Plan which is intended to reduce the negative 
impacts of a sudden, unanticipated price movement in NMS stocks. The 
proposed rule changes would promote this intention in the options 
markets while protecting investors participating there. In addition, 
similar rule changes will be adopted by other markets in the national 
market system in a coordinated manner promoting the public interest. 
Creating a more orderly market will promote just and equitable 
principles of trade by allowing investors to feel more secure in their 
participation in the national market system after the implementation of 
the Plan.

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. Specifically, the Exchange 
believes the proposed changes will not impose any burden on intramarket 
competition because it applies to all TPHs equally. The Exchange does 
not believe the proposed changes will impose any burden on intermarket 
competition as the changes are merely being made to protect investors 
with the implementation of the Plan. In addition, the propose changes 
will provide certainty of treatment and execution of options orders 
during periods of extraordinary market volatility.

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 (i) as the Commission may 
designate up to 90 days of such date 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 such 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-C2-2013-013 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 No. SR-C2-2013-013. 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 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 No. SR-C2-2013-013 and should be 
submitted on or before March 29, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05885 Filed 3-13-13; 8:45 am]
BILLING CODE 8011-01-P