Document ID: SEC-2017-0543-0001
Agency: sec
Document Type: Notice
Title: Exemption Applications: C2 Options Exchange, Inc.
Posted Date: 2017-04-04T04:00Z

[Federal Register Volume 82, Number 63 (Tuesday, April 4, 2017)]
[Notices]
[Pages 16442-16443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-06571]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80339]

Order Granting Application by C2 Options Exchange, Incorporated 
for an Exemption Pursuant to Section 36(a) of the Exchange Act From the 
Rule Filing Requirements of Section 19(b) of the Exchange Act With 
Respect to Certain Rules Incorporated by Reference

March 29, 2017.
    C2 Options Exchange, Incorporated (``C2'' or ``Exchange'') has 
filed with the Securities and Exchange Commission (``Commission'') an 
application for an exemption under Section 36(a)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'') \1\ from the rule filing 
requirements of Section 19(b) of the Exchange Act \2\ with respect to 
certain rules of the Chicago Board Options Exchange, Incorporated 
(``CBOE'') that the Exchange seeks to incorporate by reference. Section 
36 of the Exchange Act authorizes the Commission to conditionally or 
unconditionally exempt any person, security, or transaction, or any 
class thereof, from any provision of the Exchange Act or rule 
thereunder, if necessary or appropriate in the public interest and 
consistent with the protection of investors.
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    \1\ 15 U.S.C. 78mm(a)(1).
    \2\ 15 U.S.C. 78s(b).
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    Both C2 and CBOE are Participants in the National Market System 
Plan Governing the Consolidated Audit Trail (``CAT NMS Plan'' or 
``Plan'').\3\ Each Participant in the CAT NMS Plan is required to 
enforce compliance by its members with the provisions of the Plan by 
adopting a ``Compliance Rule'' applicable to its members.\4\ On January 
30, 2017, CBOE filed a proposed rule change with the Commission to 
adopt new Section F to Chapter VI of its rules to implement the CAT 
Compliance Rule.\5\ On the same day, C2 filed a proposed rule change 
with the Commission to incorporate by reference, in new Section F of 
Chapter 6 of its rules, the rules contained in Section F of Chapter VI 
of CBOE's rules.\6\
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    \3\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696 (November 23, 2016) (``CAT NMS Plan Approval 
Order''). All capitalized terms not otherwise defined herein shall 
have the meaning ascribed to them in the CAT NMS Plan or CAT NMS 
Plan Approval Order.
    \4\ Id. at 84945, 84950.
    \5\ See Securities Exchange Act Release No. 79950 (February 2, 
2017), 82 FR 9916 (February 8, 2017).
    \6\ See Securities Exchange Act Release No. 79953 (February 3, 
2017), 82 FR 10034 (February 9, 2017). CBOE and C2's proposed rule 
changes were approved by the Commission on March 15, 2017. See 
Securities Exchange Act Release No. 80256, 82 FR 14526 (March 21, 
2017).
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    C2 has requested, pursuant to Rule 0-12 under the Exchange Act,\7\ 
that the Commission grant the Exchange an exemption from the rule 
filing requirements of Section 19(b) of the Exchange Act for changes to 
Section F of Chapter 6 of C2's rules that are effected solely by virtue 
of a change to Section F of Chapter VI of CBOE's rules. Specifically, 
C2 requests that it be permitted to incorporate by reference changes 
made to Section F of Chapter VI of CBOE's rules \8\ without the need 
for C2 to file separately the same proposed rule changes pursuant to 
Section 19(b) of the Exchange Act.\9\ By virtue of these incorporations 
by reference, the requirements applicable to C2 Permit Holders \10\ 
will change when the applicable CBOE rules change, without the need for 
C2 to file separately the same proposed rule changes pursuant to 
Section 19(b) of the Exchange Act.\11\
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    \7\ 17 CFR 240.0-12.
    \8\ C2 Chapter 6, Section F states: ``The rules contained in 
Section F of CBOE Chapter VI relating to the Consolidated Audit 
Trail (CAT) Compliance Rule, as such rules may be in effect from 
time to time, shall apply to C2 and are hereby incorporated into 
this Chapter.''
    \9\ See Letter from Laura G. Dickman, Lead Counsel, CBOE, to 
Brent J. Fields, Secretary, Commission, dated January 30, 2017 (``C2 
Letter'').
    \10\ ``Permit Holder'' means ``the Exchange recognized holder of 
a Trading Permit. A Permit Holder is also known as a Trading Permit 
Holder under the Bylaws. Permit Holders are deemed `members' under 
the Exchange Act.'' C2 Rule 1.1.
    \11\ C2 Letter, supra note 8.
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    The Exchange represents that Section F of Chapter 6 is a category 
of Exchange rules (rather than individual rules within a category) that 
are not trading rules, and that the incorporation by reference of CBOE 
Chapter VI, Section F, which are regulatory rules, is intended to be a 
comprehensive

[[Page 16443]]

integration of the relevant CBOE rules into C2's rules. The Exchange 
has agreed to provide written notice to its members whenever CBOE 
proposes a change to a CBOE rule that the Exchange has incorporated by 
reference.\12\
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    \12\ The Exchange will provide this notice by posting on its Web 
site, at the same location as it posts its own rule filings as 
required by Rule 19b-4(l), a link to the location on CBOE's Web site 
where the proposed rule change is posted. Id.
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    The Exchange believes this exemption is necessary and appropriate 
to maintain consistency between C2 rules and the relevant CBOE rules, 
thus helping to ensure identical regulation of C2 Permit Holders that 
are also CBOE Trading Permit Holders \13\ with respect to the 
incorporated provisions as well as helping to ensure that C2-only 
Permit Holders are subject to consistent regulation as CBOE Trading 
Permit Holders.\14\ The Exchange believes that, without such an 
exemption, such Permit Holders could be subject to two different 
standards.\15\
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    \13\ ``Trading Permit Holder'' means ``any individual, 
corporation, partnership, limited liability company or other entity 
authorized by the Rules that holds a Trading Permit . . . A Trading 
Permit Holder is a `member' solely for purposes of the [Exchange] 
Act.'' See CBOE Rule 1.1 (citing Section 1.1 of CBOE Bylaws).
    \14\ C2 Letter, supra note 8.
    \15\ Id.
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    The Commission has issued exemptions similar to the Exchange's 
request.\16\ In granting one such exemption in 2010, the Commission 
repeated a prior, 2004 Commission statement that it would consider 
similar future exemption requests from other self-regulatory 
organizations (``SROs''), provided that:
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    \16\ See, e.g., Securities Exchange Act Release Nos. 72650 (July 
22, 2014), 79 FR 44075 (July 29, 2014) (order granting exemptive 
requests from NASDAQ OMX BX, Inc. and the NASDAQ Stock Market LLC 
relating to rules of NASDAQ OMX PHLX LLC incorporated by reference); 
67256 (June 26, 2012), 77 FR 39277, 39286 (July 2, 2012) (order 
approving SR-BX-2012-030 and granting exemptive request relating to 
rules incorporated by reference by the BX Options rules); 61534 
(February 18, 2010), 75 FR 8760 (February 25, 2010) (order granting 
BATS Exchange, Inc.'s exemptive request relating to rules 
incorporated by reference by the BATS Exchange Options Market rules) 
(``BATS Options Market Order''); 67256 (June 26, 2012), 77 FR 39277, 
39286 (July 2, 2012) (order approving SR-BX-2012-030 and granting 
exemptive request relating to rules incorporated by reference by the 
BX Options rules); and 57478 (March 12, 2008), 73 FR 14521, 14539-40 
(March 18, 2008) (order approving SR-NASDAQ-2007-004 and SR-NASDAQ-
2007-080, and granting exemptive request relating to rules 
incorporated by reference by The NASDAQ Options Market).
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     An SRO wishing to incorporate rules of another SRO by 
reference has submitted a written request for an order exempting it 
from the requirement in Section 19(b) of the Exchange Act to file 
proposed rule changes relating to the rules incorporated by reference, 
has identified the applicable originating SRO(s), together with the 
rules it wants to incorporate by reference, and otherwise has complied 
with the procedural requirements set forth in the Commission's release 
governing procedures for requesting exemptive orders pursuant to Rule 
0-12 under the Exchange Act; \17\
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    \17\ See 17 CFR 240.0-12 and Securities Exchange Act Release No. 
39624 (February 5, 1998), 63 FR 8101 (February 18, 1998) 
(``Commission Procedures for Filing Applications for Orders for 
Exemptive Relief Pursuant to Section 36 of the Exchange Act; Final 
Rule'').
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     The incorporating SRO has requested incorporation of 
categories of rules (rather than individual rules within a category) 
that are not trading rules (e.g., the SRO has requested incorporation 
of rules such as margin, suitability, or arbitration); and
     The incorporating SRO has reasonable procedures in place 
to provide written notice to its members each time a change is proposed 
to the incorporated rules of another SRO.\18\
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    \18\ See BATS Options Market Order, supra note 15 (citing 
Securities Exchange Act Release No. 49260 (February 17, 2004), 69 FR 
8500 (February 24, 2004) (order granting exemptive request relating 
to rules incorporated by reference by several SROs) (``2004 
Order'')).
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    The Commission believes that the Exchange has satisfied each of 
these conditions. The Commission also believes that granting the 
Exchange an exemption from the rule filing requirements under Section 
19(b) of the Exchange Act will promote efficient use of Commission and 
Exchange resources by avoiding duplicative rule filings based on 
simultaneous changes to identical rule text sought by more than one 
SRO.\19\ The Commission therefore finds it appropriate in the public 
interest and consistent with the protection of investors to exempt the 
Exchange from the rule filing requirements under Section 19(b) of the 
Exchange Act with respect to the above-described rules it has 
incorporated by reference. This exemption is conditioned upon the 
Exchange promptly providing written notice to its members whenever CBOE 
changes a rule that the Exchange has incorporated by reference.
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    \19\ See BATS Options Market Order, supra note 15, 75 FR at 
8761; see also 2004 Order, supra note 17, 69 FR at 8502.
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    Accordingly, it is ordered, pursuant to Section 36 of the Exchange 
Act,\20\ that the Exchange is exempt from the rule filing requirements 
of Section 19(b) of the Exchange Act solely with respect to changes to 
the rules identified in its request that incorporate by reference 
certain CBOE rules that are the result of changes to such CBOE rules, 
provided that the Exchange promptly provides written notice to its 
members whenever CBOE proposes to change a rule that the Exchange has 
incorporated by reference.
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    \20\ 15 U.S.C. 78mm.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
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    \21\ 17 CFR 200.30-3(a)(76).
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[FR Doc. 2017-06571 Filed 4-3-17; 8:45 am]
 BILLING CODE 8011-01-P