Document ID: SEC-2010-1529-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: C2 Options Exchange
Posted Date: 2010-10-07T04:00Z

[Federal Register: October 7, 2010 (Volume 75, Number 194)]
[Notices]               
[Page 62159-62160]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07oc10-89]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63021; File No. SR-C2-2010-004]

 
Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Adopt Certain Rule Language Contained in CBOE Rules

September 30, 2010.
    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 September 22, 2010, C2 Options Exchange, Incorporated 
(``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 Exchange filed the proposal as a ``non-controversial'' 
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 
\3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt certain rules in place at the 
Chicago Board Options Exchange, Incorporated (``CBOE''). The text of 
the proposed rule change is available on the Exchange's Web site 
(http://www.cboe.org/Legal), at the Exchange's Office of the Secretary, 
at the Commission's Public Reference Room, and on the Commission's Web 
site at http://www.sec.gov.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, C2 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In 2009, C2 was registered as a national securities exchange under 
Section 6 of the Exchange Act.\5\ C2 has yet to commence trading 
options, however a launch is anticipated in October 2010. The purpose 
of this filing is to modify certain C2 rules to match changes that have 
been made to corresponding CBOE rules, and to also adopt certain 
provisions from CBOE Rules 3.1 and 8.3 regarding trading permits and 
market maker appointments, respectively.
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    \5\ See Exchange Act Release No. 61152 (Dec. 10, 2009), 74 FR 
66699 (Dec. 16, 2009).
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    The Exchange proposes to amend Rule 1.1 to adopt the definitions of 
the terms ``Professional'' and ``Voluntary Professional'' in a 
substantially similar manner as they have recently been adopted for use 
on CBOE. Thus, C2 will allow users that fall into the customer range to 
elect to have orders treated, for purposes of certain C2 rules, as 
broker dealers. Further, when a person or entity that is not a broker-
dealer places more than 390 orders per day on average during a calendar 
month for its own beneficial account(s), such person will be deemed a 
``Professional'' under the Rules and will be treated in the same manner 
as a broker-dealer for purposes of certain designated C2 rules.
    The Exchange proposes to amend Rule 3.1 to allow C2 to establish 
different types and terms of trading permits, and to establish 
guidelines and standards governing the Exchange's authority regarding 
these trading permits. The proposed changes merely adopt certain 
language contained in CBOE Rule 3.1.
    The Exchange also proposes to amend Interpretation .03 to Rule 3.5 
to expand the ability of the Exchange to waive the requirement to 
conduct a hearing under Rule 3.5 if the Exchange intends to grant a 
Permit Holder's application to continue holding a Trading Permit or an 
associated person's application for continued association with a Permit 
Holder.
    The Exchange also proposes to modify Rule 6.10 regarding order 
types to (i) make clear that the Exchange has the flexibility to make 
order types available on a class-by-class basis (this language is 
identical to language contained in CBOE Rule 6.53); (ii) add the 
Intermarket Sweep Order (identical to the CBOE version); add the AIM 
Sweep Order (identical to the CBOE version); add the Sweep and AIM 
Order (identical to the CBOE version); and add the C2-Only Order 
(identical to the CBOE version except it is called C2-Only instead of 
CBOE-Only).
    The Exchange also proposes to amend Rule 6.32 regarding trading 
pauses to conform Rule 6.32 to comparable rules on CBOE and other 
exchanges.
    The Exchange also proposes to amend Rule 8.2 to adopt language from 
CBOE Rule 8.3 (Appointment of Market-Makers) to provide a structure for 
C2 Market-Makers to register in option classes. As proposed, approved 
C2 Market-Makers will receive an option class registration credit of 
1.0. Like on CBOE, a Market-Maker can use that credit to register in 
option classes (each class will have a designated registration cost). 
For now, C2 is designating every option traded on C2, except SPX, VIX, 
OEX, DJX, and XSP, to have a registration cost of .001 (with that cost 
structure, C2 Market-Makers should be able to register in every option 
class anticipated to be listed on C2, except for the specific classes 
listed above, with the registration credit of 1.0). If C2 determines to 
commence trading of SPX, VIX, OEX, DJX, and XSP options, it will file a 
proposed rule change to adopt registration costs for those products.
    Lastly, the Exchange proposes to amend C2 Chapter 24 to clarify 
that CBOE Rule 24.20 (SPX Combination Orders) shall not apply to C2. 
CBOE Rule 24.20 relates to open-outcry trading of SPX combos on CBOE 
and is therefore not applicable to C2.

[[Page 62160]]

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') \6\ and the rules and 
regulations thereunder and, in particular, the requirements of Section 
6(b) of the Act.\7\ Specifically, the Exchange believes the proposed 
rule change is consistent with the Section 6(b)(5) \8\ 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. Updating the C2 rules to keep them 
in line with those of CBOE provides for consistency in rules.
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    \6\ 15 U.S.C. 78s(b)(1). [sic]
    \7\ 15 U.S.C. 78f(b).
    \8\ 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 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 neither solicited nor received comments on the 
proposal.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change: (1) Does not 
significantly affect the protection of investors or the public 
interest; (2) does not impose any significant burden on competition; 
and (3) by its terms does not become operative for 30 days after the 
date of this filing, or such shorter time as the Commission may 
designate if consistent with the protection of investors and the public 
interest, the proposed rule change has become effective pursuant to 
Section 19(b)(3)(A) of the Act \9\ and Rule 19b-4(f)(6) thereunder.\10\
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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to provide the Commission 
with 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. C2 has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange requests that the Commission waive 
the 30-day operative delay, as specified in Rule 19b-4(f)(6)(iii),\11\ 
which would make the rule change effective and operative upon filing. 
The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\12\ The Commission notes the proposal is substantively 
identical to SRO rules that were approved by the Commission, and does 
not raise any new regulatory issues. For these reasons, the Commission 
designates the proposed rule change as operative upon filing.
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    \11\ 17 CFR 240.19b-4(f)(6)(iii).
    \12\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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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 e-mail to rule[dash]comments@sec.gov. Please 
include File Number SR-C2-2010-004 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-C2-2010-004. This file 
number should be included on the subject line if e-mail 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-C2-2010-004 and should be 
submitted on or before October 28, 2010.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25247 Filed 10-6-10; 8:45 am]
BILLING CODE 8011-01-P