Document ID: SEC-2012-0818-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: C2 Options Exchange, Inc.
Posted Date: 2012-05-23T04:00Z

[Federal Register Volume 77, Number 100 (Wednesday, May 23, 2012)]
[Notices]
[Pages 30571-30572]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-12440]

[[Page 30571]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67008; File No. SR-C2-2012-011]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing of a Proposed Rule Change Relating to the Adoption of 
a Disaster Recovery Rule

May 17, 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 May 14, 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 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

    C2 proposes to adopt a disaster recovery facility. 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 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to adopt new Rule 6.45, which would allow for 
the operation of a Disaster Recovery Facility (``DRF'') in the event a 
disaster or other unusual circumstance renders the C2 trading system 
inoperable. The purpose of the DRF is to allow C2 to continue to trade 
exclusively-listed option classes until the Exchange's main trading 
system is again available (currently, only one exclusively-listed 
product trades on C2: Standard & Poor's 500 Index options with third-
Friday-of-the-month expiration dates for which the exercise settlement 
value is based on the index value derived from the closing prices of 
component securities (SPXPM)). An exclusively-listed option is an 
option that trades exclusively on C2 because C2 has an exclusive 
license to list and trade such option, or has proprietary rights in the 
interest underlying the option.\3\ The DRF will provide a venue for 
exclusively-listed options to continue to trade so investors may open 
and close positions in those options in the event the main C2 system 
becomes inoperable.
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    \3\ Exclusively-listed options are different than ``singly-
listed options'' which are options that are not exclusively-listed 
options but that are listed by an exchange and by not any other 
national securities exchange. C2 does not currently trade any 
singly-listed options and will take measures to ensure that it does 
not trade singly-listed options in the future.
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    C2 intends to utilize hardware located in the Chicago Board Options 
Exchange, Incorporated (``CBOE'') building in Chicago, IL to run the 
DRF. C2's main trade engine is currently located on the East coast. As 
proposed, trading on the DRF would be identical to trading on C2. All 
C2 trading rules would continue to apply (including rules applicable to 
market-making) and the C2 fee schedule would continue to apply. Thus, 
the transition to the DRF would be relatively seamless for users. The 
Exchange is conducting testing with C2 Trading Permit Holders 
(``TPHs'') to facilitate their readiness to trade on the DRF (a 
certification process is also employed). To that end, DRF test plan 
documents are currently available to all TPHs.\4\
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    \4\ Completion of the test plan generally prepares a TPH to be 
ready to trade on the DRF if necessary.
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    The Exchange expects the DRF to be continuously usable and 
available, as needed. In connection with the commencement of trading on 
the DRF, C2 would announce its activation and identify the classes that 
would be available for trading. As previously mentioned, all classes 
traded via the DRF would be subject to all applicable C2 rules 
including non-trading rules. As soon as C2's main trading system 
becomes operable, the Exchange would resume trading on the main C2 
platform and cease trading on the DRF.
    Proposed Rule 6.45 also provides that TPHs shall take such action 
as instructed by the Exchange to accommodate the Exchange's ability to 
trade options via the DRF. As mentioned above, such actions will 
include an Exchange certification process to ensure that TPHs are 
prepared to migrate to the DRF when necessary. All C2 TPHs, including 
those that may only be a C2 TPH (and not a CBOE trading permit holder) 
will have access to the DRF.
    The Exchange expects the DRF to be operational shortly, and it will 
be continuously maintained so that it would always be available if 
needed. The Exchange has written supervisory procedures that cover 
activation and use of the DRF. To the extent trading on the DRF is ever 
necessary, those procedures will help ensure that the transition to the 
DRF is handled efficiently and effectively. Lastly, the Exchange 
represents that it and CBOE have the necessary systems capacity to 
handle trading associated with the DRF including the extra quotation 
traffic that would be processed through the hardware located in the 
CBOE building.
2. Statutory Basis
    The basis under the Securities Exchange Act of 1934 (the ``Act'') 
for this proposed rule change is the requirement under Section 6(b)(5) 
\5\ that an exchange have rules that are designed to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to promote just and equitable principles of 
trade, and to remove impediments to and perfect the mechanism for a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. In particular, the Exchange 
believes that providing a venue for C2 TPHs to continue to trade 
options that are only available for trading on C2 in the event the C2 
system is rendered inoperable, facilitates transactions in securities 
and helps remove impediments to a free and open market and a national 
market system. This protects investors and serves the public interest 
in that investors with open positions will have the ability to trade 
out of those positions if C2 is unavailable, which is also consistent 
with Section 6(b) of the Act.
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    \5\ 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

[[Page 30572]]

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 
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 Number SR-C2-2012-011 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-C2-2012-011. 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-C2-2012-011 and should be 
submitted on or before June 13, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-12440 Filed 5-22-12; 8:45 am]
BILLING CODE 8011-01-P