Document ID: SEC-2014-0652-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: C2 Options Exchange, Inc.
Posted Date: 2014-04-21T04:00Z

[Federal Register Volume 79, Number 76 (Monday, April 21, 2014)]
[Notices]
[Pages 22170-22172]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08974]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71950; File No. SR-C2-2014-009]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Its Fees Schedule

April 15, 2014.
    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 April 4, 2014, C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (``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 Options Exchange, Incorporated (the ``Exchange'' or ``C2'') 
proposes to amend its Fees Schedule. 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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fees Schedule. Currently, C2 
Market-Maker fees for simple, non-complex orders in equity options 
classes (both Penny Pilot classes and non-Penny Pilot classes) are 
calculated using a formula.\3\ The maximum fee is $0.85 per contract 
($0.085 for mini-options). The Exchange would like to set a standard 
fee of $0.40 per contract ($0.04 for mini-options) for C2 Market-Makers 
for simple, non-complex orders in Penny Pilot equity options 
classes.\4\ This set rate is lower than the maximum fee in order to 
encourage quoting in such classes, and would lower the fee paid by C2 
Market-Makers trading simple, non-complex orders in Penny Pilot equity 
options classes in the majority of transactions.
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    \3\ Fee = (C2 BBO Market Width at time of execution) x (Market 
Participant Rate) x 50*
    * For mini-options, the multiplier will be 5 instead of 50.
    BBO Market Width: Displayed C2 Ask Price--Displayed C2 Bid 
Price.
    The Market Participant Rate for C2 Market-Makers is 30%.
    For more information, see C2 Fees Schedule, Section 1B.
    \4\ The Exchange proposes to add the statement ``The above fee 
structure calculation does not apply to C2 Market-Makers trading 
Penny Pilot options; such C2 Market-Makers will be assessed a fee of 
$0.40 per contract ($0.04 for mini-options).''
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    In conjunction with the above proposed change, the Exchange also 
proposes to modify the maximum Public Customer Taker Rebate (also for 
simple, non-complex orders in equity options classes) for Penny Pilot 
options.\5\ Currently, the maximum rebate is $0.75 per contract ($0.075 
for mini options), regardless of whether the options being traded are 
Penny Pilot classes or non-Penny Pilot classes. The Exchange does not 
propose to change this maximum rebate with respect to non-Penny Pilot 
options, but does propose to lower the maximum rebate to $0.60 per 
contract ($0.06 for mini-options) for Penny Pilot options. Since the 
Exchange is setting a fixed maximum fee rate for C2 Market-Makers, the 
Exchange desires to ensure that the spread between the maximum fee for 
C2 Market-Makers and maximum Public Customer Taker Rebate is not so 
large as to become economically imprudent for the Exchange.
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    \5\ For more information about the Public Customer Taker Rebate, 
see C2 Fees Schedule, Section 1B.
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    Also in conjunction with the above proposed changes, the Exchange 
also proposes to delete from Section 1B the statement that ``For the 
BAC, MBI, BBRY, DELL and JCP equity options classes, the maximum fee 
will be $0.55 per contract and the maximum rebate will be $0.45 per 
contract.'' This will put BAC, MBI, BBRY, DELL and JCP (the ``Special 
Classes'') on the same competitive footing, from a fees standpoint, as 
all other classes, and the same fees that apply to all other classes 
will apply to the Special Classes. Because the Special Classes are all 
Penny Pilot classes, C2 Market-Maker fees for such trades will be $0.40 
per contract and the maximum Public Customer Taker Rebate for such 
trades will be $0.60 per contract.
    The Exchange also proposes to adopt a fee of $50 per month per 
login ID for PULSe workstation users that elect to access a COB 
Feed.\6\ The COB Feed provides data (which has already been otherwise-
available to PULSe Workstation users) on a data feed that specifically 
provides COB data. In order to improve the provision of this COB data, 
the Exchange has recently contracted an outside vendor to provide the 
COB Feed. The Exchange proposes to assess the new COB Feed Fee in order 
to recoup costs associated with the provision of the COB Feed.
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    \6\ ``COB'' stands for the Exchange's Complex Order Book. For a 
more detailed description of the PULSe workstation and its other 
functionalities, see, e.g., Securities Exchange Act Release Nos. 
63246 (November 4, 2010) 75 FR 69478 (November 12, 2010) (SR-C2-
2010-007), 65279 (September 7, 2011), 76 FR 56824 (September 14, 
2011) (SR-C2-2011-020), 65482 (October 4, 2011), 76 FR 62879 
(October 11, 2011) (SR-C2-2011-028), and 69991 (July 16, 2013), 78 
FR 43956 (July 22, 2013) (SR-C2-2013-026).
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\7\ Specifically, the Exchange believes the proposed rule change is 
consistent with Section 6(b)(4)

[[Page 22171]]

of the Act,\8\ which requires that Exchange rules provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its Trading Permit Holders and other persons using its facilities. The 
Exchange believes the proposed change to the C2 Market-Maker fee for 
simple, non-complex orders in Penny Pilot equity options classes is 
reasonable because, in most transactions, it would lower the fee paid 
by C2 Market-Makers trading simple, non-complex orders in Penny Pilot 
equity options classes (and would lower the maximum fee for such 
transactions from $0.85 per contract to $0.40 per contract (and from 
$0.085 to $0.04 for mini-options)). The Exchange believes that the 
proposed change is equitable and not unfairly discriminatory because it 
will apply to all C2 Market-Makers, and C2 Market-Makers take on 
certain obligations, such as quoting obligations, that other market 
participants do not have.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed change to the Public 
Customer Taker Rebate for simple, non-complex orders in Penny Pilot 
equity options classes is reasonable because Public Customers Taking 
liquidity in those Penny Pilot classes will still receive a rebate 
(instead of paying a fee). The Exchange believes that the proposed 
change is equitable and not unfairly discriminatory because it will 
apply to all Public Customer Takers. While the proposed change will 
lower the Public Customer Taker Rebate, Public Customers will still be 
the only market participants that receive said rebate. This is 
equitable and not unfairly discriminatory because the options industry 
has a long history of providing preferential pricing to Public 
Customers in order to encourage Public Customer trading, which benefits 
other market participants (who prefer to trade with Public Customers). 
Further, Public Customers often have less sophisticated trading systems 
and apparatuses than other market participants.
    The Exchange believes that it is equitable and not unfairly 
discriminatory to offer different pricing for Penny Pilot and non-Penny 
Pilot options because Penny Pilot options and non-Penny Pilot options 
offer different pricing, liquidity, spread and trading incentives. The 
spreads in Penny Pilot options are tighter than those in non-Penny 
Pilot options (which trade in $0.05 and $0.10 increments). Further, a 
number of options exchanges offer different pricing for Penny Pilot and 
non-Penny Pilot options.
    The Exchange believes that eliminating separate pricing for the 
Special Classes is reasonable, equitable and not unfairly 
discriminatory because this will place the Special Classes on the same 
competitive footing, from a pricing standpoint, as all other Penny 
Pilot classes, and the same pricing that applies to all other Penny 
Pilot classes will apply to the Special Classes.
    The Exchange believes that the COB Feed Fee is reasonable because, 
in order to improve the provision of this COB data, the Exchange has 
recently contracted an outside vendor to provide the COB Feed, and the 
new COB Feed Fee will help serve to recoup costs associated with the 
provision of the COB Feed. The Exchange believes the COB Feed Fee is 
equitable and not unfairly discriminatory because it will be assessed 
equally to all PULSe workstation users that request the COB Feed.

B. Self-Regulatory Organization's Statement on Burden on Competition

    C2 does not believe that the proposed rule changes will impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the proposed changes 
regarding C2 Market-Maker pricing will apply to all C2 Market-Makers, 
and C2 Market-Makers take on certain obligations, such as quoting 
obligations, that other market participants do not have. The proposed 
changes regarding the Public Customer Taker Rebate will apply to all 
Public Customers. While the proposed change will lower the Public 
Customer Taker Rebate, Public Customers will still be the only market 
participants that receive said rebate. This is not a burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the options industry has 
a long history of providing preferential pricing to Public Customers in 
order to encourage Public Customer trading, which benefits other market 
participants (who prefer to trade with Public Customers). Further, 
Public Customers often have less sophisticated trading systems and 
apparatuses than other market participants. The COB Feed Fee will be 
assessed to all PULSe workstation users who request the COB Feed. C2 
does not believe that the proposed rule changes will impose any burden 
on intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed changes are 
intended to encourage trading on C2 and make C2 a more competitive 
market (and may encourage more competitive pricing from other 
exchanges). To the extent that the proposed changes make C2 a more 
attractive market for market participants at other exchanges, such 
market participants may elect to become C2 market participants. The 
proposed change only affects trading on C2.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \9\ and paragraph (f) of Rule 19b-4 \10\ 
thereunder. 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. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f).
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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-C2-2014-009 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-C2-2014-009. 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

[[Page 22172]]

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 publicly available. All 
submissions should refer to File Number SR-C2-2014-009 and should be 
submitted on or before May 12, 2014.
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    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08974 Filed 4-18-14; 8:45 am]
BILLING CODE 8011-01-P