Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Continuous Quotes, 42038-42040 [2012-17347]
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Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices
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)(ii) of the Act.11 At any time
within 60 days of the filing of such
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 shall
institute proceedings to determine
whether the proposed rule should be
approved or 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 Exchange
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 rulecomments@sec.gov. Please include File
Number SR–ISE–2012–63 on the subject
line.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–17328 Filed 7–16–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67409; File No. SR–C2–
2012–022]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to Continuous Quotes
July 11, 2012.
Paper Comments
tkelley on DSK3SPTVN1PROD with NOTICES
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 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–ISE–
2012–63 and should be submitted on or
before August 7, 2012.
• 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–ISE–2012–63. 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
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 July 5,
2012, 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 Substance of
the Proposed Rule Change
The Exchange proposes to amend its
Rules relating to continuous quotes. The
text of the proposed rule change is
available on the Exchange’s Web site
(https://www.c2exchange.com/Legal/), at
the Exchange’s Office of the Secretary,
and at the Commission.
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
11 15
U.S.C. 78s(b)(3)(A)(ii).
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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 purpose of the proposed rule
change is to amend Rule 8.5,
‘‘Obligations of Market-Makers,’’ to
reduce to 90% the percentage of time for
which a Market-Maker is required to
provide quotes in an appointed option
class. The proposed rule change is
comparable to the rules of other options
exchanges applicable to equivalent
market participants.3
Rule 8.5(a)(1) provides that during
trading hours, a Market-Maker must
maintain a continuous two-sided market
in 60% of the non-adjusted option
series 4 of each registered class that have
a time to expiration of less than nine
months. For purposes of that obligation,
‘‘continuous’’ means 99% of the time.
The rule also provides that if a technical
failure or limitation of the Exchange’s
system prevents a Market-Maker from
maintaining, or from communicating to
the Exchange, timely and accurate
quotes in a series, the duration of such
failure will not be considered in
determining whether that Market-Maker
3 The continuous quoting obligations for
NASDAQ Options Market (‘‘NOM’’) market-makers
and NASDAQ OMX PHLX LLC (‘‘PHLX’’) streaming
quote trades (‘‘SQTs’’) and remote SQTs (‘‘RSQTs)
are generally as follows: (1) NOM Chapter VII,
Section 6(d)—market-makers must enter continuous
bids and offers in at least 60% of the series in
options in which the market-maker is registered for
90% of the trading day (as a percentage of the total
number of minutes in such trading day) or such
higher percentage as NASDAQ may announce in
advance; and (2) PHLX Rule 1014(b)(ii)(D)(1)—
SQTs and RSQTs must quote two-sided markets in
60% of series of the options in which they are
assigned for at least 90% of the trading day (as a
percentage of the total number of minutes in such
trading day).
4 The rule defines an ‘‘adjusted option series’’ as
an option series wherein, as a result of a corporate
action by the issuer of the underlying security, one
option contract in the series represents the delivery
of other than 100 shares of underlying stock or
Units.
E:\FR\FM\17JYN1.SGM
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Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices
has satisfied the 99% quoting standard
with respect to that series. The
Exchange may consider other
exceptions to this obligation based on
demonstrated legal or regulatory
requirements or other mitigating
circumstances. The Exchange proposes
to amend the continuous quoting
obligation for Market-Makers from 99%
to 90% of the time. The rule will still
provide for automatic exceptions for
technical failures or system limitations
and discretionary exceptions based on
demonstrated legal or regulatory
requirements or other mitigating
circumstances.
The Exchange does not believe that
the proposed rule change would
adversely affect the quality of the
Exchange’s market or lead to a material
decrease in liquidity. Rather, the
Exchange believes that its current
market structure with its high rate of
participation by Market-Makers permits
the lowering of the quoting time
obligation without fear of losing
liquidity. The Exchange Rules impose a
number of other obligations on MarketMakers that will continue to ensure that
they create and maintain a fair and
orderly market in the option classes to
which they are assigned. In particular,
the proposed rule change does not
change a Market-Maker’s obligation to
provide continuous quotes in 60% of
each allocated class. In addition, the
proposed rule change would not excuse
a Market-Maker from its obligation to
submit a single quote or maintain
continuous quotes in one or more series
of a class to which the Market-Maker is
appointed when called upon by an
Exchange official if, in the judgment of
such official, it is necessary to do so in
the interest of maintaining a fair and
orderly market.5
In support of this proposal, the
Exchange notes that other competing
options exchanges impose continuous
quoting obligations on their market
participants that have equivalent rights
and obligations as Market-Makers that
are comparable to the obligations
proposed in this filing:
Percent
series
Percent time
C2 (current rule) .....................................................
NOM .......................................................................
PHLX (SQTs and RSQTs) .....................................
tkelley on DSK3SPTVN1PROD with NOTICES
As the above table shows, upon
effectiveness of the propose rule change,
Market-Makers will be required to
provide continuous quotes for the same
amount of time in the same percentage
of series as market-makers at these other
exchanges. Additionally, the Exchange
notes that C2’s quoting obligation is
more restrictive than that of other
exchanges, because it applies its
continuous quoting obligation on a
class-by-class basis, whereas the other
exchanges apply their quoting
obligations to all classes collectively. As
a result, C2’s rules ensure that MarketMakers provide liquidity in a significant
number of series in each class in which
they are quoting, whereas the other
exchanges’ rules could result in reduced
or no liquidity in certain classes.6
The Exchange believes that the benefit
to Market-Makers of the slightly reduced
quoting obligation (which still results in
similar quoting times as other exchanges
as shown above) is offset by their
continued responsibility to provide
minimum liquidity in each appointed
class in which they are quoting (a more
restrictive standard than the other
exchanges discussed in this filing) and
to quote upon request, as discussed
above. The Exchange also believes this
proposal will make the quoting time
5 See
Rule 8.5(d).
example, consider a Market-Maker with 10
appointed classes, each of which has 50 series, for
a total of 500 series, quoting in each class during
a regular 390-minute trading day. Market-Makers at
each of C2, NOM and PHLX would be required to
quote in at least 300 series for 90% of the trading
day (351 minutes). However, C2 would require
Market-Makers to quote in at least 30 series in each
6 For
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99 of the time .........................................................
90 of a trading day ................................................
90 of the trading day .............................................
60
60
60
Classes
Class-by-class.
All classes collectively.
All classes collectively.
mitigating circumstances. This proposal
is merely a clarification of the current
requirement for Preferred MarketMakers, which is currently not specified
in the definition of ‘‘continuous’’ in
Rule 8.13(d).
requirements of Market-Makers more
comparable to those at other options
exchanges and is therefore essential for
competitive purposes. C2 believes it is
disadvantageous to C2 Market-Makers if
they are subject to stricter timing
requirements with respect to their
continuous quoting obligations than
market-makers at other options
exchanges.
The proposed rule change also
amends Rule 8.13(d) to clarify that
Preferred Market-Makers 7 must
continue to provide continuous quotes
in at least 90% of the non-adjusted
option series of each class for which it
receives Preferred Market-Maker orders
for 99% of the time. Additionally, the
proposed rule change adds a provision
to Rule 8.13(d) that says if a technical
failure or limitation of the Exchange’s
system prevents a Preferred MarketMaker from maintaining, or from
communicating to the Exchange, timely
and accurate quotes in a series, the
duration of such failure will not be
considered in determining whether that
Preferred Market-Maker has satisfied the
99% quoting standard with respect to
that series, and that the Exchange may
consider other exceptions to this
obligation based on demonstrated legal
or regulatory requirements or other
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.8 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 9 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 promotes just
and equitable principles of trade
because it reduces burdens and
unnecessary restrictiveness on MarketMakers. The Exchange still imposes
many obligations on Market-Makers to
maintain a fair and orderly market in
class; while market-makers at NOM and PHLX
could satisfy their quoting obligations by quoting
in, for example, 40 series in each of 6 classes and
only 15 series in each of 4 classes, or 50 series in
each of 6 classes and no series in the other 4 classes.
7 Rule 8.13(a) provides that the Exchange may
allow, on a class-by-class basis, for the receipt of
marketable orders, through the Exchange’s system
when the Exchange’s disseminated quote is the
national best bid or offer, that carry a designation
from the member transmitting the order that
specifies a Market-Maker in that class as the
‘‘Preferred Market-Maker’’ for that order. The
Exchange currently has no Preferred MarketMakers.
8 15 U.S.C. 78f(b).
9 15 U.S.C. 78f(b)(5).
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2. Statutory Basis
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Federal Register / Vol. 77, No. 137 / Tuesday, July 17, 2012 / Notices
their appointed classes, which the
Exchange believes eliminates the risk of
a material decrease in liquidity. While
the time during which Market-Makers
must provide continuous quotes will be
slightly reduced, Market-Makers will
still be obligated to provide continuous
electronic quotes for a significant part of
the trading day in 60% of series of each
appointed class. Additionally, all
Market-Makers will continue to be
obligated to quote the series when
requested by an Exchange official, or if
the need otherwise arises. Accordingly,
the proposal supports the quality of C2’s
market by helping to ensure that
Market-Makers will continue to be
obligated to quote in series when
necessary.
The proposed rule change also will
allow the Exchange to require its
Market-Makers to provide continuous
quotes in their appointed classes for a
portion of the trading day that is the
same as that of market-makers at other
exchanges, which the Exchange believes
will help remove impediments to and
promote a free and open market.
Finally, the proposed rule change to
Rule 8.13(d) protects investors and the
public interest by clarifying in the Rules
the continuous quoting obligations of
Preferred Market-Makers.
For the foregoing reasons, the
Exchange believes that the balance
between the benefits provided to
Market-Makers and the obligations
imposed upon Market-Makers by the
proposed rule change is appropriate.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
tkelley on DSK3SPTVN1PROD with NOTICES
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. In this regard and
as indicated above, the Exchange notes
that the proposed rule change is
comparable to current rules at
competing options exchanges related to
market-maker continuous quoting
obligations 10 and will ensure fair
competition among the options
exchanges with respect to these
obligations.
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:
A. Significantly affect the protection
of investors or the public interest;
B. Impose any significant burden on
competition; and
C. 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) 11 of the Act and
Rule 19b–4(f)(6) 12 thereunder.
At any time within 60 days of the
filing of this 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–C2–2012–022 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–C2–2012–022. 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
U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f)(6).
supra note 3.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.13
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–17347 Filed 7–16–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67410; File No. SR–CBOE–
2012–064]
Self-Regulatory Organizations;
Chicago Board Options Exchange,
Incorporated; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating to Continuous
Electronic Quotes
July 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 July 5,
2012, the Chicago Board Options
Exchange, Incorporated (the ‘‘Exchange’’
or ‘‘CBOE’’) 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.
13 17
11 15
10 See
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 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–
2012–022 and should be submitted on
or before August 7, 2012.
PO 00000
Frm 00074
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 77, Number 137 (Tuesday, July 17, 2012)]
[Notices]
[Pages 42038-42040]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17347]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67409; File No. SR-C2-2012-022]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Continuous Quotes
July 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 July 5, 2012, 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend its Rules relating to continuous
quotes. The text of the proposed rule change is available on the
Exchange's Web site (https://www.c2exchange.com/Legal/), at the
Exchange's Office of the Secretary, and at the Commission.
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 purpose of the proposed rule change is to amend Rule 8.5,
``Obligations of Market-Makers,'' to reduce to 90% the percentage of
time for which a Market-Maker is required to provide quotes in an
appointed option class. The proposed rule change is comparable to the
rules of other options exchanges applicable to equivalent market
participants.\3\
---------------------------------------------------------------------------
\3\ The continuous quoting obligations for NASDAQ Options Market
(``NOM'') market-makers and NASDAQ OMX PHLX LLC (``PHLX'') streaming
quote trades (``SQTs'') and remote SQTs (``RSQTs) are generally as
follows: (1) NOM Chapter VII, Section 6(d)--market-makers must enter
continuous bids and offers in at least 60% of the series in options
in which the market-maker is registered for 90% of the trading day
(as a percentage of the total number of minutes in such trading day)
or such higher percentage as NASDAQ may announce in advance; and (2)
PHLX Rule 1014(b)(ii)(D)(1)--SQTs and RSQTs must quote two-sided
markets in 60% of series of the options in which they are assigned
for at least 90% of the trading day (as a percentage of the total
number of minutes in such trading day).
---------------------------------------------------------------------------
Rule 8.5(a)(1) provides that during trading hours, a Market-Maker
must maintain a continuous two-sided market in 60% of the non-adjusted
option series \4\ of each registered class that have a time to
expiration of less than nine months. For purposes of that obligation,
``continuous'' means 99% of the time. The rule also provides that if a
technical failure or limitation of the Exchange's system prevents a
Market-Maker from maintaining, or from communicating to the Exchange,
timely and accurate quotes in a series, the duration of such failure
will not be considered in determining whether that Market-Maker
[[Page 42039]]
has satisfied the 99% quoting standard with respect to that series. The
Exchange may consider other exceptions to this obligation based on
demonstrated legal or regulatory requirements or other mitigating
circumstances. The Exchange proposes to amend the continuous quoting
obligation for Market-Makers from 99% to 90% of the time. The rule will
still provide for automatic exceptions for technical failures or system
limitations and discretionary exceptions based on demonstrated legal or
regulatory requirements or other mitigating circumstances.
---------------------------------------------------------------------------
\4\ The rule defines an ``adjusted option series'' as an option
series wherein, as a result of a corporate action by the issuer of
the underlying security, one option contract in the series
represents the delivery of other than 100 shares of underlying stock
or Units.
---------------------------------------------------------------------------
The Exchange does not believe that the proposed rule change would
adversely affect the quality of the Exchange's market or lead to a
material decrease in liquidity. Rather, the Exchange believes that its
current market structure with its high rate of participation by Market-
Makers permits the lowering of the quoting time obligation without fear
of losing liquidity. The Exchange Rules impose a number of other
obligations on Market-Makers that will continue to ensure that they
create and maintain a fair and orderly market in the option classes to
which they are assigned. In particular, the proposed rule change does
not change a Market-Maker's obligation to provide continuous quotes in
60% of each allocated class. In addition, the proposed rule change
would not excuse a Market-Maker from its obligation to submit a single
quote or maintain continuous quotes in one or more series of a class to
which the Market-Maker is appointed when called upon by an Exchange
official if, in the judgment of such official, it is necessary to do so
in the interest of maintaining a fair and orderly market.\5\
---------------------------------------------------------------------------
\5\ See Rule 8.5(d).
---------------------------------------------------------------------------
In support of this proposal, the Exchange notes that other
competing options exchanges impose continuous quoting obligations on
their market participants that have equivalent rights and obligations
as Market-Makers that are comparable to the obligations proposed in
this filing:
----------------------------------------------------------------------------------------------------------------
Percent
Percent time series Classes
----------------------------------------------------------------------------------------------------------------
C2 (current rule).................. 99 of the time........ 60 Class-by-class.
NOM................................ 90 of a trading day... 60 All classes collectively.
PHLX (SQTs and RSQTs).............. 90 of the trading day. 60 All classes collectively.
----------------------------------------------------------------------------------------------------------------
As the above table shows, upon effectiveness of the propose rule
change, Market-Makers will be required to provide continuous quotes for
the same amount of time in the same percentage of series as market-
makers at these other exchanges. Additionally, the Exchange notes that
C2's quoting obligation is more restrictive than that of other
exchanges, because it applies its continuous quoting obligation on a
class-by-class basis, whereas the other exchanges apply their quoting
obligations to all classes collectively. As a result, C2's rules ensure
that Market-Makers provide liquidity in a significant number of series
in each class in which they are quoting, whereas the other exchanges'
rules could result in reduced or no liquidity in certain classes.\6\
---------------------------------------------------------------------------
\6\ For example, consider a Market-Maker with 10 appointed
classes, each of which has 50 series, for a total of 500 series,
quoting in each class during a regular 390-minute trading day.
Market-Makers at each of C2, NOM and PHLX would be required to quote
in at least 300 series for 90% of the trading day (351 minutes).
However, C2 would require Market-Makers to quote in at least 30
series in each class; while market-makers at NOM and PHLX could
satisfy their quoting obligations by quoting in, for example, 40
series in each of 6 classes and only 15 series in each of 4 classes,
or 50 series in each of 6 classes and no series in the other 4
classes.
---------------------------------------------------------------------------
The Exchange believes that the benefit to Market-Makers of the
slightly reduced quoting obligation (which still results in similar
quoting times as other exchanges as shown above) is offset by their
continued responsibility to provide minimum liquidity in each appointed
class in which they are quoting (a more restrictive standard than the
other exchanges discussed in this filing) and to quote upon request, as
discussed above. The Exchange also believes this proposal will make the
quoting time requirements of Market-Makers more comparable to those at
other options exchanges and is therefore essential for competitive
purposes. C2 believes it is disadvantageous to C2 Market-Makers if they
are subject to stricter timing requirements with respect to their
continuous quoting obligations than market-makers at other options
exchanges.
The proposed rule change also amends Rule 8.13(d) to clarify that
Preferred Market-Makers \7\ must continue to provide continuous quotes
in at least 90% of the non-adjusted option series of each class for
which it receives Preferred Market-Maker orders for 99% of the time.
Additionally, the proposed rule change adds a provision to Rule 8.13(d)
that says if a technical failure or limitation of the Exchange's system
prevents a Preferred Market-Maker from maintaining, or from
communicating to the Exchange, timely and accurate quotes in a series,
the duration of such failure will not be considered in determining
whether that Preferred Market-Maker has satisfied the 99% quoting
standard with respect to that series, and that the Exchange may
consider other exceptions to this obligation based on demonstrated
legal or regulatory requirements or other mitigating circumstances.
This proposal is merely a clarification of the current requirement for
Preferred Market-Makers, which is currently not specified in the
definition of ``continuous'' in Rule 8.13(d).
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\7\ Rule 8.13(a) provides that the Exchange may allow, on a
class-by-class basis, for the receipt of marketable orders, through
the Exchange's system when the Exchange's disseminated quote is the
national best bid or offer, that carry a designation from the member
transmitting the order that specifies a Market-Maker in that class
as the ``Preferred Market-Maker'' for that order. The Exchange
currently has no Preferred Market-Makers.
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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.\8\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \9\ 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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes this proposed rule change
promotes just and equitable principles of trade because it reduces
burdens and unnecessary restrictiveness on Market-Makers. The Exchange
still imposes many obligations on Market-Makers to maintain a fair and
orderly market in
[[Page 42040]]
their appointed classes, which the Exchange believes eliminates the
risk of a material decrease in liquidity. While the time during which
Market-Makers must provide continuous quotes will be slightly reduced,
Market-Makers will still be obligated to provide continuous electronic
quotes for a significant part of the trading day in 60% of series of
each appointed class. Additionally, all Market-Makers will continue to
be obligated to quote the series when requested by an Exchange
official, or if the need otherwise arises. Accordingly, the proposal
supports the quality of C2's market by helping to ensure that Market-
Makers will continue to be obligated to quote in series when necessary.
The proposed rule change also will allow the Exchange to require
its Market-Makers to provide continuous quotes in their appointed
classes for a portion of the trading day that is the same as that of
market-makers at other exchanges, which the Exchange believes will help
remove impediments to and promote a free and open market.
Finally, the proposed rule change to Rule 8.13(d) protects
investors and the public interest by clarifying in the Rules the
continuous quoting obligations of Preferred Market-Makers.
For the foregoing reasons, the Exchange believes that the balance
between the benefits provided to Market-Makers and the obligations
imposed upon Market-Makers by the proposed rule change is appropriate.
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. In this regard and as indicated above, the
Exchange notes that the proposed rule change is comparable to current
rules at competing options exchanges related to market-maker continuous
quoting obligations \10\ and will ensure fair competition among the
options exchanges with respect to these obligations.
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\10\ See supra note 3.
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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:
A. Significantly affect the protection of investors or the public
interest;
B. Impose any significant burden on competition; and
C. 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) \11\ of the Act
and Rule 19b-4(f)(6) \12\ thereunder.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6).
At any time within 60 days of the filing of this 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-C2-2012-022 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-C2-2012-022. 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, 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 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-C2-2012-022 and should be
submitted on or before August 7, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17347 Filed 7-16-12; 8:45 am]
BILLING CODE 8011-01-P
