Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Changes to Rule 6.51, 2595-2597 [2012-771]

Download as PDF Federal Register / Vol. 77, No. 11 / Wednesday, January 18, 2012 / Notices 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 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 No. SR– NYSEAmex–2011–105 and should be submitted on or before February 8, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–773 Filed 1–17–12; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–66131; File No. SR–C2– 2011–043] Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to Changes to Rule 6.51 January 11, 2012. tkelley on DSK3SPTVN1PROD with NOTICES 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 December 30, 2011, 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. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The filing proposes to make changes to C2’s Automated Improvement Mechanism (‘‘AIM’’) rule. The text of 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 16:07 Jan 17, 2012 II. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 self-regulatory organization 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 BILLING CODE 8011–01–P VerDate Mar<15>2010 the proposed rule change is available on the Exchange’s Web site (https:// www.c2exchange.com), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. Jkt 226001 The purpose of the proposed rule change is to amend C2 Rule 6.51 to (i) allow TPHs to enter Agency Orders for fewer than 50 contracts into AIM at the NBBO; and (ii) allow Initiating TPHs to designate a limit price if it elects to auto-match. This proposed rule change would make AIM more similar to current rules of the Boston Options Exchange Group, LLC (‘‘BOX’’) 3 and the International Securities Exchange, LLC (‘‘ISE’’) 4 relating to the Price Improvement Period (‘‘PIP’’) and Price Improvement Mechanism (‘‘PIM’’), respectively, which are automated price improvement mechanisms.5 AIM allows a TPH to submit an Agency Order along with a contra-side second order (a principal order or a solicited order for the same size as the Agency Order) into an Auction where other participants could compete with the Initiating TPH’s second order to execute against the Agency Order, which guarantees that the Agency Order will receive an execution. Once an 3 See BOX Rules Chapter V, Section 18. ISE Rule 723. 5 AIM, PIP and PIM have certain characteristics in common with each other. All three mechanisms (a) provide for the opportunity for customer price improvement, (b) have certain periods where the initial orders are exposed for potential price improvement, (c) have certain guidelines regarding the types of orders that may be eligible for price improvement, and (d) have certain defined rules related to the allocation of trades within price improvement auctions. 4 See PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 2595 Auction commences, the Initiating TPH cannot cancel it.6 Under this proposal, Agency Orders of all sizes submitted to AIM will be guaranteed execution at a price at least as good as the NBBO while providing the opportunity for execution at a price better than the NBBO. The proposal will incent more TPHs to initiate and participate in Auctions and will allow even broader participation in Auctions by all types of market participants. As a result, C2 expects the proposal will increase the number of and participation in Auctions, which would enhance competition in the Auctions. The Exchange believes that this proposal will ultimately provide additional opportunities for price improvement over the NBBO for its customers. Elimination of Entry Price Restriction on Agency Orders for Fewer Than 50 Contracts C2 Rule 6.51(a)(2) and (3) currently provides that if an Initiating TPH submits an Agency Order to AIM for 50 contracts or more, the Initiating TPH must enter its contra-side second order (or stop the Agency Order) at the better of the NBBO or the Agency Order’s limit price (if the order is a limit order); however, if an Initiating TPH submits an Agency Order to AIM for fewer than 50 contracts, the Initiating TPH must stop the entire Agency Order at the better of the NBBO price improved by one minimum price improvement increment or the Agency Order’s limit price (if the order is a limit order). The Exchange is proposing to eliminate this distinction and allow Initiating TPHs to submit to AIM Agency Orders of any size at the NBBO. The Exchange believes this proposal will increase the likelihood that TPHs will initiate Auctions for Agency Orders for fewer than 50 contracts because the TPH will only be required to guarantee an execution at the NBBO, which will provide additional customer orders with an opportunity for price improvement over the NBBO. The Exchange believes the proposal will also encourage increased participation in AIM by TPHs willing to trade with an Agency Order for fewer than 50 contracts at the NBBO but not better than the NBBO. In support of this proposal, the Exchange notes that both BOX 7 and 6 See C2 Rule 6.51(b)(1)(A). supra note 3; see also Securities Exchange Act Release No. 34–59654 (March 30, 2009), 74 FR 15551 (April 6, 2009) (SR–BX–2009–08) (order approving proposed rule change allowing entry of orders into PIP at the NBBO when BOX’s best bid 7 See E:\FR\FM\18JAN1.SGM Continued 18JAN1 2596 Federal Register / Vol. 77, No. 11 / Wednesday, January 18, 2012 / Notices tkelley on DSK3SPTVN1PROD with NOTICES ISE 8 allow entry of orders into PIP and PIM, respectively, at the NBBO without distinguishing between orders of more than or fewer than 50 contracts. Because BOX and ISE are currently able to offer their customers price improvement for orders of fewer than 50 contracts at the NBBO in PIP and PIM, respectively, the Exchange has determined that it is important for competitive purposes that it be able to offer the same opportunities to its customers for price improvement on C2 through AIM. The Exchange notes that certain allocation differences exist between AIM and PIM as well as AIM and PIP. As proposed, our AIM change would make the handling of AIM trades over 50 contracts consistent with AIM trades under 50 contracts.9 However, unlike PIM, which requires auctions to commence at prices better than the ISE best bid or offer and thus precludes an auction initiator from establishing priority ahead of any resting ISE interest, an AIM Auction can begin and conclude at the C2 best bid or offer. This means that, like for orders of 50 or more contracts on C2, the Initiating TPH can trade at a price in which resting interest existed and can establish priority over resting broker-dealer interest. Although PIP allows auctions to occur at the BOX best bid or offer, PIP uses an order allocation structure based on price-time priority sequence with priority for public customer orders (like C2) and secondary priority for non-BOX Participant broker-dealers. On C2, when an Auction concludes at the C2 best bid or offer, first priority is for public customers, second priority is for the Initiating TPH (for 40%), third priority is for nonpublic customer resting orders or quotes that are unchanged from when the Auction began, and last priority is for RFR responses. The Exchange references these differences for informational purposes but does not believe that the differences are material to the Exchange’s goals of handling AIM orders of all sizes the same and allowing Auctions of orders smaller than 50 contracts at the NBBO (like PIP and PIM). The Exchange further notes that certain components of AIM were approved on a pilot basis, including that there is no minimum size requirement for orders to be eligible for the Auction. In connection with the pilot programs, the Exchange will submit to the Commission reports providing detailed AIM Auction and order execution data, including monthly data regarding executions through AIM of Agency Orders for more or fewer than 50 contracts, as supporting evidence that, among other things, there is meaningful competition for all size orders. or offer is inferior to the NBBO with no order size distinction). 8 See supra note 4; see also Securities Exchange Act Release No. 34–57847 (May 21, 2008), 73 FR 30987 (May 29, 2008) (SR–ISE–2008–29) (order approving proposed rule change allowing entry of orders into PIM at the NBBO when ISE’s best bid or offer is inferior to the NBBO with no order size distinction). 9 PIP and PIM also do not distinguish between orders over 50 contracts and orders under 50 contracts. 10 See supra note 3; see also Securities Exchange Act Release No. 34–61805 (March 31, 2010), 75 FR 17454 (April 6, 2010) (SR–BX–2010–22) (order approving implementation of auto-match feature with the option to auto-match up to a designated limit price). 11 See supra note 4; see also Securities Exchange Act Release No. 34–62644 (August 4, 2010), 75 FR 48395 (August 10, 2010) (SR–ISE–2010–61) (order approving implementation of auto-match feature with the option to auto-match up to a designated limit price). VerDate Mar<15>2010 16:07 Jan 17, 2012 Jkt 226001 Addition of Option To Designate AutoMatch Limit Price C2 Rule 6.51(b)(1)(A) currently allows an Initiating TPH to enter its contra-side second order in one of two formats: (1) A specified single price; or (2) a nonprice specific commitment to automatch all Auction responses achieved during the Auction. In this case, the Initiating TPH would have no control over the match price. The Exchange is proposing to provide Initiating TPHs with the additional option to automatch competing prices from other market participants up to a designated limit price. The Initiating TPH will still not be able to cancel the auto-match instruction after an Auction commences and will have no control over the prices at which it receives an allocation of the Auction other than the outside boundary established by the designated limit price. The Exchange notes that when the Initiating TPH selects the auto-match feature prior to the start of an Auction (with or without a designated limit price), the available liquidity at improved prices is increased and competitive final pricing is out of the Initiating TPH’s control. The Exchange believes the proposal will encourage increased participation in AIM because it allows TPHs willing to trade with an Agency Order at a price better than the NBBO, but only up to a certain price, to initiate an Auction. In support of this proposal, the Exchange also notes that both PIP 10 and PIM 11 permit initiating participants to elect to auto-match up to a designated limit price. The Exchange believes that AIM, and in turn the customers that benefit from AIM, would be disadvantaged if TPHs are not provided PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 with the option to auto-match up to a designated limit price because this lack of flexibility reduces the number of Auctions and, as a result, opportunities for price improvement. Because BOX and ISE currently allow initiating participants or members, respectively, the option to auto-match up to the NBBO achieved during an auction or up to a designated limit price, the Exchange believes it is important for competitive purposes that it be able to offer the same opportunities for price improvement on C2 through AIM. The Exchange will provide the Commission with the following data: (1) The percentage of trades effected through AIM in which the Initiating TPH submitted an Agency Order with an auto-match instruction that included a designated limit price and the percentage that did not include a designated limit price; and (2) the average amount of price improvement provided to AIM Agency Orders when the Initiating TPH submitted an automatch instruction that included a designated limit price and the average amount that did not include a designated limit price, versus the average amount of price improvement provided to AIM Agency Orders when the Initiating TPH submitted a single price (no auto-match instruction). After effectiveness of the proposal, and at least one week prior to implementation, C2 will issue a notice to TPHs informing them of the implementation of the additional automatch feature. This will give TPHs an opportunity to make any necessary modifications to coincide with the implementation date. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, in particular, the requirements of Section 6(b) of the Act.12 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 13 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. In particular, the Exchange believes this proposed rule change is a reasonable modification designed to 12 15 13 15 E:\FR\FM\18JAN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(5). 18JAN1 Federal Register / Vol. 77, No. 11 / Wednesday, January 18, 2012 / Notices provide additional flexibility for TPHs to obtain executions on behalf of their customers while continuing to provide meaningful, competitive Auctions. The Exchange also believes that that proposed rule change will ultimately enhance competition in the AIM Auctions and provide customers with additional opportunities for price improvement. These changes are consistent with changes made by other exchanges and they serve to remove impediments to and to perfect the mechanism for a free and open market and a national market system. 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 No written comments were solicited or received with respect to 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: 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–C2–2011–043. 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 (https://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 on official business days between the hours of 10 a.m. and 3 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–C2–2011–043, and should be submitted on or before February 8, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–771 Filed 1–17–12; 8:45 am] BILLING CODE 8011–01–P tkelley on DSK3SPTVN1PROD with NOTICES VerDate Mar<15>2010 16:07 Jan 17, 2012 Jkt 226001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–66129; File No. SR–EDGX– 2011–39] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the EDGX Exchange, Inc. Fee Schedule January 11, 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 December 30, 2011, the EDGX Exchange, Inc. (the ‘‘Exchange’’ or the ‘‘EDGX’’) 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 selfregulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change EDGX Exchange, Inc. (‘‘EDGX’’ or the ‘‘Exchange’’), proposes to amend its fees and rebates applicable to Members 3 of the Exchange pursuant to EDGX Rule 15.1(a) and (c). Text of the proposed rule change is attached as Exhibit 5. 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 self-regulatory organization 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 self-regulatory organization 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 Purpose The Exchange proposes to amend its fee schedule to add footnote b to it to Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–C2–2011–043 on the subject line. 2597 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 A Member is any registered broker or dealer, or any person associated with a registered broker or dealer, that has been admitted to membership in the Exchange. 2 17 14 17 PO 00000 CFR 200.30–3(a)(12). Frm 00090 Fmt 4703 Sfmt 4703 E:\FR\FM\18JAN1.SGM 18JAN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 11 (Wednesday, January 18, 2012)]
[Notices]
[Pages 2595-2597]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-771]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66131; File No. SR-C2-2011-043]

Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing of a Proposed Rule Change Relating to Changes to Rule
6.51

January 11, 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 December 30, 2011, 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 the
Substance of the Proposed Rule Change

The filing proposes to make changes to C2's Automated Improvement
Mechanism (``AIM'') rule. The text of the proposed rule change is
available on the Exchange's Web site (https://www.c2exchange.com), 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 the
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the self-regulatory organization
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 self-regulatory organization
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 purpose of the proposed rule change is to amend C2 Rule 6.51 to
(i) allow TPHs to enter Agency Orders for fewer than 50 contracts into
AIM at the NBBO; and (ii) allow Initiating TPHs to designate a limit
price if it elects to auto-match.
This proposed rule change would make AIM more similar to current
rules of the Boston Options Exchange Group, LLC (``BOX'') \3\ and the
International Securities Exchange, LLC (``ISE'') \4\ relating to the
Price Improvement Period (``PIP'') and Price Improvement Mechanism
(``PIM''), respectively, which are automated price improvement
mechanisms.\5\
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\3\ See BOX Rules Chapter V, Section 18.
\4\ See ISE Rule 723.
\5\ AIM, PIP and PIM have certain characteristics in common with
each other. All three mechanisms (a) provide for the opportunity for
customer price improvement, (b) have certain periods where the
initial orders are exposed for potential price improvement, (c) have
certain guidelines regarding the types of orders that may be
eligible for price improvement, and (d) have certain defined rules
related to the allocation of trades within price improvement
auctions.
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AIM allows a TPH to submit an Agency Order along with a contra-side
second order (a principal order or a solicited order for the same size
as the Agency Order) into an Auction where other participants could
compete with the Initiating TPH's second order to execute against the
Agency Order, which guarantees that the Agency Order will receive an
execution. Once an Auction commences, the Initiating TPH cannot cancel
it.\6\
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\6\ See C2 Rule 6.51(b)(1)(A).
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Under this proposal, Agency Orders of all sizes submitted to AIM
will be guaranteed execution at a price at least as good as the NBBO
while providing the opportunity for execution at a price better than
the NBBO. The proposal will incent more TPHs to initiate and
participate in Auctions and will allow even broader participation in
Auctions by all types of market participants. As a result, C2 expects
the proposal will increase the number of and participation in Auctions,
which would enhance competition in the Auctions. The Exchange believes
that this proposal will ultimately provide additional opportunities for
price improvement over the NBBO for its customers.
Elimination of Entry Price Restriction on Agency Orders for Fewer Than
50 Contracts
C2 Rule 6.51(a)(2) and (3) currently provides that if an Initiating
TPH submits an Agency Order to AIM for 50 contracts or more, the
Initiating TPH must enter its contra-side second order (or stop the
Agency Order) at the better of the NBBO or the Agency Order's limit
price (if the order is a limit order); however, if an Initiating TPH
submits an Agency Order to AIM for fewer than 50 contracts, the
Initiating TPH must stop the entire Agency Order at the better of the
NBBO price improved by one minimum price improvement increment or the
Agency Order's limit price (if the order is a limit order). The
Exchange is proposing to eliminate this distinction and allow
Initiating TPHs to submit to AIM Agency Orders of any size at the NBBO.
The Exchange believes this proposal will increase the likelihood
that TPHs will initiate Auctions for Agency Orders for fewer than 50
contracts because the TPH will only be required to guarantee an
execution at the NBBO, which will provide additional customer orders
with an opportunity for price improvement over the NBBO. The Exchange
believes the proposal will also encourage increased participation in
AIM by TPHs willing to trade with an Agency Order for fewer than 50
contracts at the NBBO but not better than the NBBO.
In support of this proposal, the Exchange notes that both BOX \7\
and

[[Page 2596]]

ISE \8\ allow entry of orders into PIP and PIM, respectively, at the
NBBO without distinguishing between orders of more than or fewer than
50 contracts. Because BOX and ISE are currently able to offer their
customers price improvement for orders of fewer than 50 contracts at
the NBBO in PIP and PIM, respectively, the Exchange has determined that
it is important for competitive purposes that it be able to offer the
same opportunities to its customers for price improvement on C2 through
AIM.
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\7\ See supra note 3; see also Securities Exchange Act Release
No. 34-59654 (March 30, 2009), 74 FR 15551 (April 6, 2009) (SR-BX-
2009-08) (order approving proposed rule change allowing entry of
orders into PIP at the NBBO when BOX's best bid or offer is inferior
to the NBBO with no order size distinction).
\8\ See supra note 4; see also Securities Exchange Act Release
No. 34-57847 (May 21, 2008), 73 FR 30987 (May 29, 2008) (SR-ISE-
2008-29) (order approving proposed rule change allowing entry of
orders into PIM at the NBBO when ISE's best bid or offer is inferior
to the NBBO with no order size distinction).
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The Exchange notes that certain allocation differences exist
between AIM and PIM as well as AIM and PIP. As proposed, our AIM change
would make the handling of AIM trades over 50 contracts consistent with
AIM trades under 50 contracts.\9\ However, unlike PIM, which requires
auctions to commence at prices better than the ISE best bid or offer
and thus precludes an auction initiator from establishing priority
ahead of any resting ISE interest, an AIM Auction can begin and
conclude at the C2 best bid or offer. This means that, like for orders
of 50 or more contracts on C2, the Initiating TPH can trade at a price
in which resting interest existed and can establish priority over
resting broker-dealer interest. Although PIP allows auctions to occur
at the BOX best bid or offer, PIP uses an order allocation structure
based on price-time priority sequence with priority for public customer
orders (like C2) and secondary priority for non-BOX Participant broker-
dealers. On C2, when an Auction concludes at the C2 best bid or offer,
first priority is for public customers, second priority is for the
Initiating TPH (for 40%), third priority is for nonpublic customer
resting orders or quotes that are unchanged from when the Auction
began, and last priority is for RFR responses. The Exchange references
these differences for informational purposes but does not believe that
the differences are material to the Exchange's goals of handling AIM
orders of all sizes the same and allowing Auctions of orders smaller
than 50 contracts at the NBBO (like PIP and PIM).
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\9\ PIP and PIM also do not distinguish between orders over 50
contracts and orders under 50 contracts.
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The Exchange further notes that certain components of AIM were
approved on a pilot basis, including that there is no minimum size
requirement for orders to be eligible for the Auction. In connection
with the pilot programs, the Exchange will submit to the Commission
reports providing detailed AIM Auction and order execution data,
including monthly data regarding executions through AIM of Agency
Orders for more or fewer than 50 contracts, as supporting evidence
that, among other things, there is meaningful competition for all size
orders.
Addition of Option To Designate Auto-Match Limit Price
C2 Rule 6.51(b)(1)(A) currently allows an Initiating TPH to enter
its contra-side second order in one of two formats: (1) A specified
single price; or (2) a non-price specific commitment to auto-match all
Auction responses achieved during the Auction. In this case, the
Initiating TPH would have no control over the match price. The Exchange
is proposing to provide Initiating TPHs with the additional option to
auto-match competing prices from other market participants up to a
designated limit price. The Initiating TPH will still not be able to
cancel the auto-match instruction after an Auction commences and will
have no control over the prices at which it receives an allocation of
the Auction other than the outside boundary established by the
designated limit price.
The Exchange notes that when the Initiating TPH selects the auto-
match feature prior to the start of an Auction (with or without a
designated limit price), the available liquidity at improved prices is
increased and competitive final pricing is out of the Initiating TPH's
control. The Exchange believes the proposal will encourage increased
participation in AIM because it allows TPHs willing to trade with an
Agency Order at a price better than the NBBO, but only up to a certain
price, to initiate an Auction.
In support of this proposal, the Exchange also notes that both PIP
\10\ and PIM \11\ permit initiating participants to elect to auto-match
up to a designated limit price. The Exchange believes that AIM, and in
turn the customers that benefit from AIM, would be disadvantaged if
TPHs are not provided with the option to auto-match up to a designated
limit price because this lack of flexibility reduces the number of
Auctions and, as a result, opportunities for price improvement. Because
BOX and ISE currently allow initiating participants or members,
respectively, the option to auto-match up to the NBBO achieved during
an auction or up to a designated limit price, the Exchange believes it
is important for competitive purposes that it be able to offer the same
opportunities for price improvement on C2 through AIM.
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\10\ See supra note 3; see also Securities Exchange Act Release
No. 34-61805 (March 31, 2010), 75 FR 17454 (April 6, 2010) (SR-BX-
2010-22) (order approving implementation of auto-match feature with
the option to auto-match up to a designated limit price).
\11\ See supra note 4; see also Securities Exchange Act Release
No. 34-62644 (August 4, 2010), 75 FR 48395 (August 10, 2010) (SR-
ISE-2010-61) (order approving implementation of auto-match feature
with the option to auto-match up to a designated limit price).
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The Exchange will provide the Commission with the following data:
(1) The percentage of trades effected through AIM in which the
Initiating TPH submitted an Agency Order with an auto-match instruction
that included a designated limit price and the percentage that did not
include a designated limit price; and (2) the average amount of price
improvement provided to AIM Agency Orders when the Initiating TPH
submitted an auto-match instruction that included a designated limit
price and the average amount that did not include a designated limit
price, versus the average amount of price improvement provided to AIM
Agency Orders when the Initiating TPH submitted a single price (no
auto-match instruction).
After effectiveness of the proposal, and at least one week prior to
implementation, C2 will issue a notice to TPHs informing them of the
implementation of the additional auto-match feature. This will give
TPHs an opportunity to make any necessary modifications to coincide
with the implementation date.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the requirements of the Act and the rules and regulations thereunder
applicable to a national securities exchange and, in particular, the
requirements of Section 6(b) of the Act.\12\ Specifically, the Exchange
believes the proposed rule change is consistent with the Section
6(b)(5) \13\ 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.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes this proposed rule change is a
reasonable modification designed to

[[Page 2597]]

provide additional flexibility for TPHs to obtain executions on behalf
of their customers while continuing to provide meaningful, competitive
Auctions. The Exchange also believes that that proposed rule change
will ultimately enhance competition in the AIM Auctions and provide
customers with additional opportunities for price improvement. These
changes are consistent with changes made by other exchanges and they
serve to remove impediments to and to perfect the mechanism for a free
and open market and a national market system.

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

No written comments were solicited or received with respect to 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-C2-2011-043 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-C2-2011-043. 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 (https://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 on
official business days between the hours of 10 a.m. and 3 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-C2-2011-043, and should be submitted on or before
February 8, 2012.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-771 Filed 1-17-12; 8:45 am]
BILLING CODE 8011-01-P

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