Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Exchange Order Handling, 48510-48513 [2013-19149]
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48510
Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Notices
Decision on the Proposed Amendment
The statute and the implementing
regulation state that PBGC must make
two factual determinations before it
approves a request for an amendment
that adopts a special withdrawal
liability rule. ERISA § 4203(f); 29 CFR
4203.4(a). First, on the basis of a
showing by the plan, PBGC must
determine that the amendment will
apply to an industry that has
characteristics that would make use of
the special rules appropriate. Second,
PBGC must determine that the plan
amendment will not pose a significant
risk to the insurance system. PBGC’s
discussion on each of those issues
follows. After review of the record
submitted by the I.A.M. Fund, and
having received no public comments,
PBGC has entered the following
determinations.
1. What Is the Nature of the Industry?
In determining whether an industry
has the characteristics that would make
an amendment to special rules
appropriate, an important line of
inquiry is the extent to which the I.A.M.
Fund’s contribution base resembles that
found in the construction industry. This
threshold question requires
consideration of the effect of SCA
employer withdrawals on the I.A.M.
Fund’s contribution base. As with
construction-industry employers, when
SCA employers contributing to the
I.A.M. Fund lose their contracts, the
applicable federal or District of
Columbia government agency contracts
with a new employer to contribute at
the same or substantially the same rate
for the same number of contribution
base units as the previous SCA
employer. This is because the SCA
provides that employees must not be
paid less than the wages and fringe
benefits set by the Department of Labor
or as collectively bargained. Over the
past ten years, cessation of contributions
by any individual SCA employer has
not had an adverse impact on the I.A.M.
Fund’s contribution base. Most SCA
employers that have ceased to
contribute have been replaced by
another employer who begins
contributing for the same work.
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2. What Is the Exposure and Risk of Loss
to PBGC and Participants?
Exposure. During the seven year
period from 2004 to 2010, the I.A.M.
Fund’s active participant population
increased by 69% while the number of
retirees increased by 17%. In those same
years, the number of contribution base
units grew strongly and the dollar
amount of contributions doubled.
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Benefits paid exceeded contributions in
every year, but grew only 47%—a
significantly slower than the growth of
contributions.
Risk of loss. The record shows that the
I.A.M. Fund presented a low risk of loss
to PBGC guaranty funds. The I.A.M.
Fund did not have unfunded vested
benefits for withdrawal liability
purposes as of December 31, 2009, and
did not have to assess withdrawal
liability for withdrawals in 2010. The
I.A.M. Fund and the covered industry
have unique characteristics that suggest
that the I.A.M. Fund’s contribution base
is likely to remain stable. Contributions
to the I.A.M. Fund are made with
respect to SCA employers whose
employees work under a contract or
subcontract with federal or District of
Columbia government agencies covered
under the SCA. Consequently, the
I.A.M. Fund’s contribution base is
secure and the departure of one SCA
employer from the I.A.M. Fund is not
likely to have an adverse effect on the
contribution base so long as the
replacement SCA employer contributes
to the I.A.M. Fund for substantially the
same number of contribution case units
at the same or higher contribution rate
as the previous employer.
Conclusion
Based on the facts of this case and the
representations and statements made in
connection with the request for
approval, PBGC has determined that the
plan amendment modifying special
withdrawal liability rules (1) will apply
only to an industry that has
characteristics that would make the use
of special withdrawal liability rules
appropriate, and (2) will not pose a
significant risk to the insurance system.
Therefore, PBGC hereby grants the
I.A.M. Fund’s request for approval of a
plan amendment modifying special
withdrawal liability rules applicable to
SCA employers, as set forth herein.
Should the I.A.M. Fund wish to amend
these rules at any time, PBGC approval
of the amendment will be required.
Issued at Washington, DC, on this 26 day
of July, 2013.
Joshua Gotbaum,
Director, Pension Benefit Guaranty
Corporation.
[FR Doc. 2013–19219 Filed 8–7–13; 8:45 am]
BILLING CODE 7709–02–P
PO 00000
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70102; File No. SR–C2–
2013–028]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to Exchange Order
Handling
August 2, 2013.
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 25,
2013, 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 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to modify its
rules to address certain option order
handling procedures on the Exchange in
connection with the implementation of
the market wide equity Plan to Address
Extraordinary Market Volatility (the
‘‘Plan’’). The text of the proposed rule
change is available at the Exchange’s
Office of the Secretary, on the
Exchange’s Web site at https://
www.c2exchange.com/Legal/, at the
Commission’s Public Reference Room,
and on the Commission’s Web site at
https://www.sec.gov.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, 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.
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
In an attempt to address extraordinary
market volatility in NMS Stock, and, in
particular, events like the severe
volatility on May 6, 2010, the Exchange,
in conjunction with the other national
securities exchanges and the Financial
Industry Regulatory Authority, Inc.
(collectively, ‘‘Participants’’) drafted the
Plan pursuant to Rule 608 of Regulation
NMS and under the Securities Exchange
Act of 1934 (the ‘‘Act’’).3 The Plan is
primarily designed to, among other
things, address extraordinary market
volatility in NMS stocks, protect
investors, and promote fair and orderly
markets. The Plan provides for marketwide limit up-limit down requirements
that prevent trades in individual NMS
Stocks from occurring outside of
specified price bands, as defined in
Section I(N) of the Plan. These
requirements are coupled with trading
pauses, as defined in Section I(Y) of the
Plan, to accommodate more
fundamental price moves (as opposed to
erroneous trades or monetary gaps of
liquidity).
The Plan was filed on April 5, 2011
by the Participants for publication and
comment.4 The Participants requested
the Commission approve the Plan as a
one-year pilot. On May 24, 2012, the
Participants filed an amendment to the
Plan which clarified, among other
things, the calculation of the reference
price, as defined in Section I(T) of the
Plan, potential for order type
exemption, and the creation of an
Advisory Committee.5 On May 31, 2012,
the Commission approved the Plan, as
amended, on a one-year pilot basis.6
The Plan was implemented on April 8,
2013.
Though the Plan was primarily
designed for equity markets, the
Exchange believed it would impact the
options markets as well. Thus, the
Exchange filed rule changes to amend
the Exchange rules to ensure the option
markets are not compromised as a result
of the Plan’s implementation.7 The
Exchange is proposing to amend these
3 See Securities Exchange Act Release No. 64547
(May 25, 2011), 76 FR 31647 (June 1, 2011) (File
No. 4–631).
4 Id.
5 See Securities and Exchange Act Release No.
67091 (May 31, 2012), 77 FR 33498 (June 6, 2012)
(File No. 4–631).
6 See Securities and Exchange Act Release No.
67091 (May 31, 2012) 77 FR 33498 (June 6, 2012).
7 See Securities and Exchange Act Release No.
34–69345 (April 8, 2013), 78 FR 21985 (April 11,
2013) (SR–C2–2013–013).
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rules to clarify how the openings will
operate on the Exchange in the event of
a limit up-limit down state.
The current rule 6.11, as recently
amended, states that is an underlying
security for an option class enters into
a limit up-limit down state when the
class moves to opening rotation, ‘‘all
market orders in the system will be
cancelled.’’8 The Exchange is proposing
to: (1) Correct the reference to Exchange
Rule 6.3A, (2) add an exception to this
general rule, and (3) provide greater
clarity on the effect of a limit up-limit
down state on an underlying security
after the Rotation Period has begun.
First, the Exchange is proposing to
clarify an incorrect reference in Rule
6.11.03 to Rule 6.3A. The correct
reference should be made to Rule 6.39
which was a recently added rule to
address the Plan. The Exchange believes
that by updating the reference, Permit
Holders will have greater clarity of
which rule is applicable.
Next the Exchange is proposing to
make an exception to the general rule
that all market orders will be cancelled
during the Rotation Period if the
underlying security is in a limit up-limit
down state. The Exchange is proposing
to add language stating that the type of
order described in Exchange Rule
6.12(h), ‘‘No-Bid Series’’ orders, from a
previous day will not cancelled. The
Exchange is proposing to allow such
market orders to remain in the Exchange
Book because these essentially act as
limit orders at the minimum increment.
Cancelling such orders could potentially
cause such orders to lose their priority
with respect to other market orders in
the Exchange Book. The Exchange
believes that though these orders are
essentially treated as limit orders,
because they may have a ‘‘market’’
distinction, alerting Permit Holders of
the behavior of such orders when the
underlying security enters a limit uplimit down state will provide more
clarity. In addition, this behavior is
consistent with how limit orders are
treated in the same situation.
Finally, the Exchange is proposing to
add further clarity to the recently
amended rule to clarify that if a limit
up-limit down state commences after
the Rotation Period has begun for a class
of options, the Rotation Period will
continue normally. More specifically,
the Exchange is proposing to add
language to state that market and limit
orders will continue through the
Rotation Period as they would if there
was not a limit up-limit down state.
Once the Rotation Period has begun for
a class of options, due to how the
8 See
PO 00000
Exchange Rule 6.11.03.
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48511
Exchange System operates, the process
will not be interrupted to modify the
order handling mid-process.
Market orders will continue to
process even though they are normally
returned during a limit up-limit down
state,9 limit orders will process
normally,10 and the Exchange will open
normally if there is a presence of
Opening Conditions.11 Market orders,
though normally returned during a limit
up-limit down state to avoid executions
at unfavorable or unreliable prices, do
not face the same risks when they are
part of the opening process. This is
because preopening orders are matched
with each other and with other interest
during the Rotation Period. Thus,
market orders will trade at the
calculated opening price. Preopening
limit orders will also be filled at the
opening price and cannot be filled
through their limit prices.
The Exchange believes this clarity is
necessary to ensure Permit Holders are
fully aware of special order handling
during limit up-limit down states.
Though the rule currently specifies
what happens to orders on the Exchange
if the limit up-limit down state
commences prior to the Rotation Period
beginning for a class of options, the
Exchange believes it is necessary to
additionally state what would happen if
the Rotation Period had already begun
and the limit up-limit down state
triggers during the time of that process.
The Exchange believes that including
pre-opening market order interest in the
Rotation Period will enhance the
liquidity available during the rotation,
and that the nature of the opening
match process will protect market
orders against anomalous opening
prices that could otherwise be caused by
market conditions associated with a
limit-up limit-down state. This will also
9 See Exchange Rule 6.10(a) which describes how
market orders process.
10 See Exchange Rule 6.10(b) which describes
how limit orders process.
11 See Exchange Rule 6.11(f) which describes how
the Exchange will open in the presence of Opening
Conditions. If a limit up-limit down state
commences after the Rotation Period has begun for
a class of options, options to buy and sell will be
paired to the extent possible. If another market is
displaying a more favorable price, then the
Exchange will open as described in 6.11(f).
Consistent with Rule 6.11(f), the Exchange will link
any unmatched portion of the market order to an
away trading venue. Any portion of a market order
that is unfilled and returned to the Exchange will
be cancelled. Thus, markets orders will not be filled
at an unreliable price because they will either be
paired with other resting orders at the open or
linked to an away trading venue displaying a more
favorable price. The Exchange believes this is
consistent with the treatment of market orders and
ensures they will not be given an unreliable price
despite the limit up-limit down state. Additionally,
because limit orders have a limit price, these orders
will also not fill at an unreliable price.
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Federal Register / Vol. 78, No. 153 / Thursday, August 8, 2013 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
help to ensure the options markets
remain just and equitable with the
implementation of the Plan.
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.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 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)14 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In particular, the Exchange believes
the proposed changes will be in
accordance with the Act as they are
merely intended to ensure the options
markets will continue to remain just and
equitable with the implementation of
the Plan which is intended to reduce the
negative impacts of a sudden,
unanticipated price movement in NMS
stocks. The proposed rule changes
would promote this intention in the
options markets while protecting
investors participating there. More
specifically, the currently proposed
changes will correct and clarify current
Exchange rules promoting the interest of
investors. Finally, creating a more
orderly market will promote just and
equitable principles of trade by allowing
investors to feel more secure in their
participation in the national market
system after the implementation of the
Plan. In addition, the Exchange is
proposing to provide a more robust rule
text by clarifying what occurs if a limit
up-limit down states initiates after the
beginning of the Exchange’s opening
rotation. The Exchange believes that not
cancelling the pre-opening interest will
ensure investors can execute more
interest despite the change in the market
12 15
13 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
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. Specifically, the
Exchange believes the proposed changes
will not impose any burden on
intramarket competition because it
applies to all Permit Holders equally.
The Exchange does not believe the
proposed changes will impose any
burden on intermarket competition as
the changes are merely being made to
protect investors with the
implementation of the Plan. In addition,
the proposed changes will provide
certainty of treatment and execution of
options orders during periods of
extraordinary market volatility.
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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 15 and Rule
19b–4(f)(6) thereunder.16 Because the
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
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.
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
15 15
14 Id.
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conditions after the opening process has
begun. This will also help to ensure the
options markets remain just and
equitable with the implementation of
the Plan.
16 17
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PO 00000
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
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Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 17 of the Act to
determine whether the proposed rule
change 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 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–C2–2013–028 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–C2–2013–028. 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 Section, 100 F Street NE.,
Washington, DC 20549–1090 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also 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
17 15
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U.S.C. 78s(b)(2)(B).
08AUN1
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BILLING CODE 8011–01–P
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
should refer to File Number SR–C2–
2013–028 and should be submitted on
or before August 29, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–19149 Filed 8–7–13; 8:45 am]
[Release No. 34–70098; File No. SR–
NYSEMKT–2013–66]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing of Proposed
Rule Change To Adopt the Text of New
York Stock Exchange Rule 49 as Rule
49—Equities in Order To Authorize
Exchange Officials To Exercise the
Same Emergency Powers As NYSE
Officials May Exercise
August 2, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on July 22,
2013, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
‘‘Exchange’’) 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 self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
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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] the
text of New York Stock Exchange
(‘‘NYSE’’) Rule 49 as Rule 49—Equities
in order to authorize Exchange officials
to exercise the same emergency powers
as NYSE officials may exercise. The text
of the proposed rule change is available
on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, 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
self-regulatory organization included
18 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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1. Purpose
The Exchange proposes to adopt the
text of proposed NYSE Rule 49 as Rule
49—Equities in order to authorize
Exchange officials to exercise the same
emergency powers as NYSE officials
may exercise.4
Background
In 2009, NYSE adopted NYSE Rule 49
to provide NYSE officials with the
authority to declare an emergency
condition 5 with respect to trading on or
through NYSE’s systems and facilities
and to act as necessary in the public
interest and for the protection of
investors.6 The authority in NYSE Rule
49 may be exercised when, due to an
emergency condition, NYSE’s systems
and facilities located at 11 Wall Street,
New York, New York, including the
NYSE Trading Floor, cannot be utilized.
If such an emergency condition is
declared, a qualified NYSE officer may,
among other things, designate NYSE
Arca LLC (‘‘NYSE Arca’’), NYSE’s and
the Exchange’s affiliate, to serve as a
backup facility to receive and process
bids and offers and to execute orders on
behalf of NYSE so that NYSE, as a selfregulatory organization (‘‘SRO’’), can
remain operational.7 NYSE Arca, which
4 See
SR–NYSE–2013–54.
definition of ‘‘emergency’’ is the one used
in Section 12(k)(7) of the Act and is also used by
other exchanges and the Securities and Exchange
Commission (‘‘Commission’’). Section 12(k)(7)
defines an emergency to mean ‘‘(A) a major market
disturbance characterized by or constituting—(i)
sudden and excessive fluctuations of securities
prices generally, or a substantial threat thereof, that
threaten fair and orderly markets; or (ii) a
substantial disruption of the safe or efficient
operation of the national system for clearance and
settlement of transactions in securities, or a
substantial threat thereof; or (B) a major disturbance
that substantially disrupts, or threatens to
substantially disrupt—(i) the functioning of
securities markets, investment companies, or any
other significant portion or segment of the securities
markets; or (ii) the transmission or processing of
securities transactions.’’ 15 U.S.C. 78l(k)(7).
6 See Securities Exchange Act Release No. 61177
(December 16, 2009), 74 FR 68643 (December 28,
2009) (SR–NYSE–2009–105).
7 NYSE Arca trades equity securities on the
systems and facilities of its wholly owned
5 The
PO 00000
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48513
would continue to operate
simultaneously during the emergency
condition, has a counterpart rule, NYSE
Arca Equities Rule 2.100. To date, NYSE
has not invoked NYSE Rule 49. The
Exchange currently has no counterpart
rule.
On October 29 and 30, 2012, due to
the dangerous conditions that
developed as a result of Superstorm
Sandy, NYSE and the Exchange, as well
as a number of their member
organizations located in the tri-state
area, were unable to open because of the
risk of flooding at their physical
locations. In addition, other brokerdealers and exchanges with facilities in
the area were also faced with significant
staffing challenges because the storm
conditions prevented personnel from
getting to work. As a result, it was
agreed, after consulting with other
exchanges, market participants, and
Commission staff, and in light of
concerns over the physical safety of
personnel and the possibility of
technical issues, that all U.S. equities
and options markets would be closed for
those two days.
NYSE has proposed to amend NYSE
Rule 49 to more effectively delineate the
SRO functions of the Exchange and
NYSE Arca during an emergency
condition, reflect the operational
preferences of the industry, and reflect
the current structure of member
organization connectivity to and system
coding for exchange systems.8 The
current NYSE rule contemplates the
Exchange remaining operational during
the emergency condition and both
NYSE and NYSE Arca performing
certain SRO functions with respect to
the same trading activity that would be
taking place on NYSE Arca. NYSE
believes that a more practical and
effective structure would be to have all
trading activity occurring on NYSE Arca
under that SRO’s authority, with one
exception. NYSE Arca would, on behalf
and at the direction of NYSE,
disseminate certain primary listing
market messages as both NYSE and
NYSE Arca messages so that market
participants’ systems could properly
recognize such messages. NYSE Arca
would do so beginning on the next
trading day following the declaration of
the emergency condition. All trading
volume on NYSE Arca in NYSE-listed
securities during the emergency
condition would be reported as NYSE
subsidiary, NYSE Arca Equities, Inc., referred to as
the ‘‘NYSE Arca Marketplace.’’ For the purposes of
this filing and in the text of proposed Rule 49—
Equities, these shall be referred to collectively as
the systems and facilities of NYSE Arca, or simply
NYSE Arca.
8 See supra [note 4].
E:\FR\FM\08AUN1.SGM
08AUN1
]]>Agencies
[Federal Register Volume 78, Number 153 (Thursday, August 8, 2013)]
[Notices]
[Pages 48510-48513]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19149]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70102; File No. SR-C2-2013-028]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Exchange Order Handling
August 2, 2013.
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 25, 2013, 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 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 modify its rules to address certain option
order handling procedures on the Exchange in connection with the
implementation of the market wide equity Plan to Address Extraordinary
Market Volatility (the ``Plan''). The text of the proposed rule change
is available at the Exchange's Office of the Secretary, on the
Exchange's Web site at https://www.c2exchange.com/Legal/, at the
Commission's Public Reference Room, and on the Commission's Web site at
https://www.sec.gov.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, 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.
[[Page 48511]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
In an attempt to address extraordinary market volatility in NMS
Stock, and, in particular, events like the severe volatility on May 6,
2010, the Exchange, in conjunction with the other national securities
exchanges and the Financial Industry Regulatory Authority, Inc.
(collectively, ``Participants'') drafted the Plan pursuant to Rule 608
of Regulation NMS and under the Securities Exchange Act of 1934 (the
``Act'').\3\ The Plan is primarily designed to, among other things,
address extraordinary market volatility in NMS stocks, protect
investors, and promote fair and orderly markets. The Plan provides for
market-wide limit up-limit down requirements that prevent trades in
individual NMS Stocks from occurring outside of specified price bands,
as defined in Section I(N) of the Plan. These requirements are coupled
with trading pauses, as defined in Section I(Y) of the Plan, to
accommodate more fundamental price moves (as opposed to erroneous
trades or monetary gaps of liquidity).
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\3\ See Securities Exchange Act Release No. 64547 (May 25,
2011), 76 FR 31647 (June 1, 2011) (File No. 4-631).
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The Plan was filed on April 5, 2011 by the Participants for
publication and comment.\4\ The Participants requested the Commission
approve the Plan as a one-year pilot. On May 24, 2012, the Participants
filed an amendment to the Plan which clarified, among other things, the
calculation of the reference price, as defined in Section I(T) of the
Plan, potential for order type exemption, and the creation of an
Advisory Committee.\5\ On May 31, 2012, the Commission approved the
Plan, as amended, on a one-year pilot basis.\6\ The Plan was
implemented on April 8, 2013.
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\4\ Id.
\5\ See Securities and Exchange Act Release No. 67091 (May 31,
2012), 77 FR 33498 (June 6, 2012) (File No. 4-631).
\6\ See Securities and Exchange Act Release No. 67091 (May 31,
2012) 77 FR 33498 (June 6, 2012).
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Though the Plan was primarily designed for equity markets, the
Exchange believed it would impact the options markets as well. Thus,
the Exchange filed rule changes to amend the Exchange rules to ensure
the option markets are not compromised as a result of the Plan's
implementation.\7\ The Exchange is proposing to amend these rules to
clarify how the openings will operate on the Exchange in the event of a
limit up-limit down state.
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\7\ See Securities and Exchange Act Release No. 34-69345 (April
8, 2013), 78 FR 21985 (April 11, 2013) (SR-C2-2013-013).
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The current rule 6.11, as recently amended, states that is an
underlying security for an option class enters into a limit up-limit
down state when the class moves to opening rotation, ``all market
orders in the system will be cancelled.''\8\ The Exchange is proposing
to: (1) Correct the reference to Exchange Rule 6.3A, (2) add an
exception to this general rule, and (3) provide greater clarity on the
effect of a limit up-limit down state on an underlying security after
the Rotation Period has begun.
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\8\ See Exchange Rule 6.11.03.
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First, the Exchange is proposing to clarify an incorrect reference
in Rule 6.11.03 to Rule 6.3A. The correct reference should be made to
Rule 6.39 which was a recently added rule to address the Plan. The
Exchange believes that by updating the reference, Permit Holders will
have greater clarity of which rule is applicable.
Next the Exchange is proposing to make an exception to the general
rule that all market orders will be cancelled during the Rotation
Period if the underlying security is in a limit up-limit down state.
The Exchange is proposing to add language stating that the type of
order described in Exchange Rule 6.12(h), ``No-Bid Series'' orders,
from a previous day will not cancelled. The Exchange is proposing to
allow such market orders to remain in the Exchange Book because these
essentially act as limit orders at the minimum increment. Cancelling
such orders could potentially cause such orders to lose their priority
with respect to other market orders in the Exchange Book. The Exchange
believes that though these orders are essentially treated as limit
orders, because they may have a ``market'' distinction, alerting Permit
Holders of the behavior of such orders when the underlying security
enters a limit up-limit down state will provide more clarity. In
addition, this behavior is consistent with how limit orders are treated
in the same situation.
Finally, the Exchange is proposing to add further clarity to the
recently amended rule to clarify that if a limit up-limit down state
commences after the Rotation Period has begun for a class of options,
the Rotation Period will continue normally. More specifically, the
Exchange is proposing to add language to state that market and limit
orders will continue through the Rotation Period as they would if there
was not a limit up-limit down state. Once the Rotation Period has begun
for a class of options, due to how the Exchange System operates, the
process will not be interrupted to modify the order handling mid-
process.
Market orders will continue to process even though they are
normally returned during a limit up-limit down state,\9\ limit orders
will process normally,\10\ and the Exchange will open normally if there
is a presence of Opening Conditions.\11\ Market orders, though normally
returned during a limit up-limit down state to avoid executions at
unfavorable or unreliable prices, do not face the same risks when they
are part of the opening process. This is because preopening orders are
matched with each other and with other interest during the Rotation
Period. Thus, market orders will trade at the calculated opening price.
Preopening limit orders will also be filled at the opening price and
cannot be filled through their limit prices.
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\9\ See Exchange Rule 6.10(a) which describes how market orders
process.
\10\ See Exchange Rule 6.10(b) which describes how limit orders
process.
\11\ See Exchange Rule 6.11(f) which describes how the Exchange
will open in the presence of Opening Conditions. If a limit up-limit
down state commences after the Rotation Period has begun for a class
of options, options to buy and sell will be paired to the extent
possible. If another market is displaying a more favorable price,
then the Exchange will open as described in 6.11(f). Consistent with
Rule 6.11(f), the Exchange will link any unmatched portion of the
market order to an away trading venue. Any portion of a market order
that is unfilled and returned to the Exchange will be cancelled.
Thus, markets orders will not be filled at an unreliable price
because they will either be paired with other resting orders at the
open or linked to an away trading venue displaying a more favorable
price. The Exchange believes this is consistent with the treatment
of market orders and ensures they will not be given an unreliable
price despite the limit up-limit down state. Additionally, because
limit orders have a limit price, these orders will also not fill at
an unreliable price.
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The Exchange believes this clarity is necessary to ensure Permit
Holders are fully aware of special order handling during limit up-limit
down states. Though the rule currently specifies what happens to orders
on the Exchange if the limit up-limit down state commences prior to the
Rotation Period beginning for a class of options, the Exchange believes
it is necessary to additionally state what would happen if the Rotation
Period had already begun and the limit up-limit down state triggers
during the time of that process. The Exchange believes that including
pre-opening market order interest in the Rotation Period will enhance
the liquidity available during the rotation, and that the nature of the
opening match process will protect market orders against anomalous
opening prices that could otherwise be caused by market conditions
associated with a limit-up limit-down state. This will also
[[Page 48512]]
help to ensure the options markets remain just and equitable with the
implementation of the Plan.
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.\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 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)\14\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ Id.
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In particular, the Exchange believes the proposed changes will be
in accordance with the Act as they are merely intended to ensure the
options markets will continue to remain just and equitable with the
implementation of the Plan which is intended to reduce the negative
impacts of a sudden, unanticipated price movement in NMS stocks. The
proposed rule changes would promote this intention in the options
markets while protecting investors participating there. More
specifically, the currently proposed changes will correct and clarify
current Exchange rules promoting the interest of investors. Finally,
creating a more orderly market will promote just and equitable
principles of trade by allowing investors to feel more secure in their
participation in the national market system after the implementation of
the Plan. In addition, the Exchange is proposing to provide a more
robust rule text by clarifying what occurs if a limit up-limit down
states initiates after the beginning of the Exchange's opening
rotation. The Exchange believes that not cancelling the pre-opening
interest will ensure investors can execute more interest despite the
change in the market conditions after the opening process has begun.
This will also help to ensure the options markets remain just and
equitable with the implementation of the Plan.
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. Specifically, the Exchange
believes the proposed changes will not impose any burden on intramarket
competition because it applies to all Permit Holders equally. The
Exchange does not believe the proposed changes will impose any burden
on intermarket competition as the changes are merely being made to
protect investors with the implementation of the Plan. In addition, the
proposed changes will provide certainty of treatment and execution of
options orders during periods of extraordinary market volatility.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \15\ and Rule 19b-4(f)(6) thereunder.\16\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A)(iii).
\16\ 17 CFR 240.19b-4(f)(6).
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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 under
Section 19(b)(2)(B) \17\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\17\ 15 U.S.C. 78s(b)(2)(B).
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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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-C2-2013-028 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-C2-2013-028. 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 Section, 100 F Street
NE., Washington, DC 20549-1090 on official business days between the
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing will also 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
[[Page 48513]]
should refer to File Number SR-C2-2013-028 and should be submitted on
or before August 29, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19149 Filed 8-7-13; 8:45 am]
BILLING CODE 8011-01-P
