Document ID: SEC-2015-0806-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: C2 Options Exchange, Inc.
Posted Date: 2015-05-12T04:00Z

[Federal Register Volume 80, Number 91 (Tuesday, May 12, 2015)]
[Notices]
[Pages 27214-27216]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-11379]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74888; File No. SR-C2-2015-011]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating to the Effectiveness of a Permit Holder

May 6, 2015.
    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 5, 2015, 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 adopt a rule relating to the effectiveness 
of a Permit Holder. The text of the proposed rule change is available 
on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 adopt a rule governing the effectiveness 
of Permit Holder status. In particular, the Exchange proposes to add 
language to its rules to codify the requirement that each applicant, to 
be a Permit Holder, must become effective in that status within 90 days 
of the date of the applicant's approval. The Exchange also proposes to 
clarify that a Permit Holder shall become effective upon (i) satisfying 
applicable requirements to obtain a Trading Permit and (ii) the release 
of a Trading Permit to that Permit Holder by the Registration Services 
Department (``RSD'').

[[Page 27215]]

    By way of background, pursuant to C2 Rule 3.1 (Trading Permits), if 
an applicant to become a C2 Permit Holder is already a Trading Permit 
Holder of the Chicago Board Options Exchange, Incorporated (``CBOE 
TPH''), that applicant can take advantage of a streamlined process to 
become a Permit Holder on C2 as compared to an applicant that is not 
already a CBOE TPH. Specifically, a CBOE TPH applicant would need to 
submit certain Exchange forms which indicate its intention to trade on 
the Exchange and which submits it to Exchange jurisdiction, as well as 
complete other operational matters as determined by the Exchange (e.g., 
complete connectivity testing).\3\ If an applicant is not already a 
CBOE Trading Permit Holder (a ``Non-CBOE TPH''), the applicant must 
complete a more involved application process which includes, among 
other things, the submission of an application to the Exchange and 
payment of any applicable application fees.\4\ Additionally, the 
Exchange will investigate each Non-CBOE TPH applicant (with the 
exception of any applicant that was a Permit Holder or that was 
investigated by the Exchange within 9 months prior to the date of 
receipt of that applicant's application). Upon completion of the 
application process for either a CBOE TPH or Non-CBOE TPH applicant, 
RSD determines whether to approve or disapprove the application. The 
Exchange notes however, that even if RSD determines to approve a CBOE 
or Non-CBOE TPH applicant to become a C2 Permit Holder upon completion 
of this process, that applicant is not automatically considered an 
``effective'' Permit Holder (i.e., the applicant is not yet permitted 
to participate on the Exchange in the capacity in which they applied 
and have been approved to act in). Rather, in order to be considered an 
effective Permit Holder, the applicant must satisfy applicable 
requirements to obtain a Trading Permit (i.e., submission of all 
required forms, fees and documentation prescribed by the Exchange, 
completion of any required investigation, satisfaction of applicable 
orientation and/or exam requirements established by the Exchange and 
any other registration and qualification requirements and completion of 
connectivity testing) and (ii) RSD must release a Trading Permit to 
that Permit Holder. In order to provide further transparency in the 
rules, the Exchange proposes to codify these requirements in the rules 
and make it explicitly clear that any applicant to become a C2 Permit 
Holder shall become an effective Permit Holder upon (i) satisfying the 
applicable requirements to obtain a Trading Permit and (ii) the release 
of a Trading Permit to that Permit Holder by RSD (i.e., RSD assigns via 
its Trading Permit System (``TPS'') a permit number to the applicant 
Permit Holder). The Exchange believes the proposed rule change will 
provide additional clarity to the rules and reduce confusion regarding 
the application process.
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    \3\ See C2 Rule 3.1(c)(1).
    \4\ See C2 Rule 3.1(c)(2).
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    The Exchange next notes that there are instances in which an 
applicant (either a CBOE TPH or Non-CBOE TPH) has completed the 
application process and RSD is ready to approve the application, but 
the applicant needs more time before it is ready to become effective 
(i.e., before it is ready to participate on the Exchange in the 
capacity in which they applied and have been approved to act in). For 
example, an applicant may have completed the application process but 
requires more time to resolve logistical issues relating to their 
systems or connectivity before it can participate on the Exchange and 
therefore wishes to hold off on requesting a Trading Permit. As such, 
the Exchange proposes to permit a Permit Holder to become effective as 
a Permit Holder within 90 days from the date RSD approved the applicant 
to become a C2 Permit Holder. If the Permit Holder does not become 
effective within 90 days, the applicant's application will expire. The 
Exchange notes that providing a deadline to become effective also 
obligates applicants to be diligent in resolving any open issues they 
have and ensures finality to the application process. Lastly, the 
Exchange notes that the requirement to go effective within 90 days of 
the date of approval of an application exists on other exchanges as 
well.\5\
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    \5\ See, CBOE Rule 3.10 and ISE Rule 306(g).
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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.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \7\ 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 facilitating 
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) \8\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
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    In particular, the Exchange believes it would be beneficial to 
market participants to expressly state in the rules that any applicant 
to become a C2 Permit Holder shall become an effective Permit Holder 
upon (i) satisfying the applicable requirements to obtain a Trading 
Permit and (ii) the release of a Trading Permit to that Permit Holder 
by RSD. The Exchange believes the proposed rule change will provide 
additional clarity to the rules and reduce confusion regarding the 
application process, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system. The 
Exchange also believes the proposed rule change is beneficial in that 
it provides applicants seeking to become a Permit Holder a reasonable 
time frame to resolve any open issues prior to becoming effective, 
while also requiring applicants to be diligent in resolving such open 
issues in a timely matter and ensuring finality to the application 
process. Additionally, the Exchange believes that the proposed rule 
changes are designed to not permit unfair discrimination among market 
participants, as the proposed changes are applicable to all applicants 
to become Permit Holders.

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. The proposed change does not 
impose any burden on intramarket competition because it applies to all 
applicants to become C2 Permit Holders. The Exchange also does not 
believe that the proposed rule change will impose any burden on 
intermarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Specifically, the Exchange is 
merely attempting to

[[Page 27216]]

add additional transparency to its rules relating to the application 
process as well as provide for a reasonable time frame for C2 Permit 
Holder applicants to become effective on C2 as Permit Holders. The 
Exchange notes that, to the extent that the proposed changes make C2 
more attractive for trading, market participants trading on other 
exchanges are welcome to become Permit Holders and trade at C2 if they 
determine that this proposed rule change has made C2 more attractive or 
favorable.

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) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \9\ and Rule 19b-
4(f)(6) \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)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the 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.
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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-C2-2015-011 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-C2-2015-011. 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 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 Number SR-C2-2015-011, and should be 
submitted on or before June 2, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-11379 Filed 5-11-15; 8:45 am]
 BILLING CODE 8011-01-P