Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to AIM Retained Orders, 52922-52925 [2016-18909]
Download as PDF
<![CDATA[
52922
Federal Register / Vol. 81, No. 154 / Wednesday, August 10, 2016 / Notices
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
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 17 of the Act and
subparagraph (f)(2) of Rule 19b–4 18
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
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) 19 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:
mstockstill on DSK3G9T082PROD with NOTICES
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–NYSEArca–2016–105 on
the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2016–105. 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–
NYSEArca–2016–105, and should be
submitted on or before August 31, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–18910 Filed 8–9–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78478; File No. SR–C2–
2016–014]
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to AIM Retained
Orders
August 4, 2016.
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 27,
2016, 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 Exchange filed the proposal as a
‘‘non-controversial’’ proposed rule
change pursuant to Section
19(b)(3)(A)(iii) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 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 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’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rule 6.51 (Automated Improvement
Mechanism (‘‘AIM’’)) to: (1) Clarify how
orders submitted for electronic crossing
into the AIM auction are treated if an
auction cannot occur; (2) adopt
Interpretation and Policy .10 to Rule
6.51 (AIM Retained Order
Functionality) to describe the
Exchange’s AIM Retained Order
(‘‘A:AIR’’) functionality in the Rules;
and (3) make minor edits to
Interpretation and Policy .04 to Rule
6.13 (Price Check Parameters) relating to
the treatment of complex AIM orders
marked A:AIR and correct certain
typographical errors. The Exchange
notes that this filing is based upon and,
in all material respects, substantially
similar to a recent filing of Chicago
Board Options Exchange, Incorporated
(‘‘CBOE’’) regarding A:AIR
functionality.5 Both AIM and A:AIR
functionality are active on CBOE.
3 15
17 15
U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(2).
19 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
17:34 Aug 09, 2016
20 17
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Jkt 238001
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
5 See Securities Exchange Act Release No. 77848
(May 17, 2016), 81 FR 31978 (May 20, 2016) (SR–
4 17
E:\FR\FM\10AUN1.SGM
10AUN1
Federal Register / Vol. 81, No. 154 / Wednesday, August 10, 2016 / Notices
mstockstill on DSK3G9T082PROD with NOTICES
Under Rule 6.51 (Automated
Improvement Mechanism (‘‘AIM’’)), a
Permit Holder (‘‘Participant’’) that
represents agency orders may
electronically execute an order it
represents as agent (‘‘Agency Order’’)
against principal interest or against a
solicited order provided it submits the
Agency Order for electronic execution
into the AIM auction (‘‘Auction’’) for
processing. Matched Agency Orders
may be processed via AIM subject to
certain eligibility requirements
contained in Rule 6.51(a). Specifically,
to be eligible for processing via AIM, the
Agency Order must be: (1) In a class
designated as eligible for AIM Auctions
as determined by the Exchange and
within the designated Auction order
eligibility size parameters as such size
parameters are determined by the
Exchange; and (2) stopped as principal
or with a solicited order at the better of
the national best bid or offer (‘‘NBBO’’)
or the Agency Order’s limit price (if the
order is a limit order).6 Orders
submitted for crossing into AIM, which
are ineligible for Auction processing
will result in both the Agency Order and
the matching contra order(s) being
cancelled.
Under Rule 6.51(a)(1), an Auction
may be conducted in a class designated
as eligible for Auctions as determined
by the Exchange. Any determinations
made by the Exchange, such as eligible
classes, will be communicated in a
Regulatory Circular pursuant to
Interpretation and Policy .05 to Rule
6.51. Notably, AIM functionality is
currently not activated in any class on
the Exchange.
A:AIR functionality is an
enhancement to AIM, which if
activated, would allow Participants the
flexibility to choose, on an order-byorder basis, whether an Agency Order
should continue into the System 7 for
processing rather than cancel in the
event that an Auction cannot occur.8
CBOE–2016–024) (Order Approving Proposed Rule
Change, as Modified by Amendment No. 2 Thereto,
Relating to AIM Retained Orders). See also
Interpretation and Policy .09 to CBOE Rule 6.74A
(AIM Retained Order Functionality).
6 See Rule 6.51(a).
7 The System refers to the Exchange’s automated
trading system as defined in Rule 1.1 (Definitions).
8 There are a variety of circumstances in which
an AIM order may be submitted to the Exchange for
processing, but an auction may not occur. For
example, a Participant may submit an order for AIM
processing, which is not AIM eligible because one
or more of the conditions required for an AIM
auction to occur pursuant to Rule 6.51(a) is not
present. In addition, an order that is otherwise AIM
eligible may not be able to process for a variety of
reasons, including, but not limited to circumstances
in which AIM functionality is suspended. In either
of such cases, A:AIR functionality may allow the
Agency Order to process despite the overall order
not being AIM eligible.
VerDate Sep<11>2014
17:34 Aug 09, 2016
Jkt 238001
A:AIR functionality essentially allows
for the entry of Agency Orders into AIM
with contingency processing
instructions for handling in the event
that the order cannot be processed via
Auction. For example, using A:AIR
functionality, a Permit Holder enters an
Agency Order to buy 10 standard
contracts at the market along with a
matched solicited contra order to sell 10
standard contracts at $1.21. At the time
the A:AIR order is entered, the NBBO is
$1.00 to $1.20, with a Customer order to
sell 30 contracts at $1.20 resting at the
top of the book alone. Here, the order
would not be eligible for submission
into AIM because the Agency Order was
not stopped with a solicited order
priced better than the NBBO.9 As a
result, pursuant to Rule 6.51(a)(2), the
Auction would not begin. Whereas both
the Agency Order and solicited order
would have cancelled if the order were
not marked A:AIR, in this case, because
the order was marked A:AIR, the
Agency Order would route to the
automated trading system for processing
and trade against the resting Customer—
the solicited order would still be
cancelled. Again, however, had the
Permit Holder not marked this order
A:AIR, both the Agency Order and
solicited order would cancel.
Currently, A:AIR functionality is not
explicitly defined in the Exchange’s
AIM rules.10 Accordingly, this filing is
intended to further codify, clarify, and
describe A:AIR functionality in the
Rules. Specifically, the Exchange
proposes to adopt Interpretation and
Policy .10 to Rule 6.51 (AIM Retained
Order Functionality), under which the
Exchange would define an A:AIR order
as the transmission of two or more
orders for crossing pursuant to Rule
6.51, with the Agency Order priced at
the market or a limit price in the
standard increment for the option series
and marked with a contingency
instruction to route the Agency Order
for processing and cancel any contra
orders if an Auction cannot occur
(including if the conditions described in
Rule 6.51(a) are not met).
Furthermore, to ensure that A:AIR
orders are properly priced to allow the
Exchange to book the Agency Order in
the event an Auction cannot occur,
proposed Interpretation and Policy .10
to Rule 6.51 would provide that orders
marked ‘‘A:AIR’’ with Agency Orders
9 See
Rule 6.51(a)(2).
functionality is generally referred to in
the Rules, although not using that term. See
Interpretation and Policy .04 to Rule 6.13 (Price
Check Parameters) at paragraphs (c)(5), (d), (f)(3),
and (h)(4) referring to orders that instruct the
System to process the Agency Order as an unpaired
order if an AIM Auction cannot be initiated.
10 A:AIR
PO 00000
Frm 00114
Fmt 4703
Sfmt 4703
52923
that are not priced at the market or that
are priced with a limit price not in the
standard increment for the option series
in which they are entered would be
rejected. For example, if a Participant
were to submit a matched Agency Order
into AIM for processing in a class with
a minimum increment of a nickel,
which was stopped with a contra order
at $0.07, both the Agency Order and the
contra order would be rejected because
the order, which is not priced in the
minimum increment for the class,
would not eligible for AIM processing
and because the System would not be
able to book an order at $0.07 in a class
with a minimum increment of a nickel.
Notably, this provision of proposed
Interpretation and Policy .10 to Rule
6.51 is consistent with Exchange rules
that only permit orders at the standard
increment to enter the book.11 Finally,
proposed Interpretation and Policy .10
to Rule 6.51 would provide that A:AIR
order functionality could be made
available on those order management
platforms as determined by the
Exchange and announced via Regulatory
Circular. This provision is intended to
make clear that A:AIR functionality may
not be available on all trading platforms
in use on the Exchange.12
The Exchange also notes that although
orders submitted into AIM, which are
not marked A:AIR and are ineligible for
Auction processing will result in both
the Agency Order and the matching
contra order(s) being cancelled, the
Rules do not explicitly provide as much.
Accordingly, the Exchange proposes to
add language to Rule 6.51(a) to provide
that in the event that a Participant
submits a matched Agency Order for
electronic execution into the Auction
that is ineligible for processing because
it does not meet the conditions
described in paragraph (a), both the
Agency Order and any solicited contra
orders will be cancelled unless marked
as an AIM Retained order pursuant to
proposed Interpretation and Policy .10
to Rule 6.51.13
11 See
Rule 6.4.
functionality is not currently supported
on the PULSe trader workstation. PULSe is an order
handling tool used for the manual handling of
orders. Thus, when ineligible AIM orders would be
rejected back to PULSe users, a person is present
to decide how best to handle such orders. PULSe
users can either re-route such orders to be booked
or for alternative electronic processing on the
Exchange.
13 Notably, the A:AIR functionality may be
primarily used by smart router technology to ensure
that ineligible AIM orders are submitted into the
System for processing and not cancelled. Whereas
traditional brokers and dealers are equipped to
manually handle cancelled orders that are returned
to them and may revise the cancelled orders’ terms
or contact their customers for further instructions,
12 A:AIR
E:\FR\FM\10AUN1.SGM
Continued
10AUN1
52924
Federal Register / Vol. 81, No. 154 / Wednesday, August 10, 2016 / Notices
mstockstill on DSK3G9T082PROD with NOTICES
The Exchange also proposes to make
minor changes to Interpretation and
Policy .04 to Rule 6.13 regarding price
reasonability checks on complex orders
to harmonize references to A:AIR
functionality in Rule 6.13 with the
language in proposed Interpretation and
Policy .10 to Rule 6.51. Specifically, the
Exchange proposes to modify
Interpretation and Policy .04(c)(5), (d),
(f)(3), and (h)(4) to Rule 6.13 (Price
Check Parameters) to change references
to AIM orders that instruct the System
to process the Agency Order as an
unpaired order if an AIM auction cannot
be initiated, to instead refer to A:AIR
orders as defined in proposed
Interpretation and Policy .10 to Rule
6.51. These changes are non-substantive
and intended only to harmonize existing
references to A:AIR functionality
currently in the Rules with the
definition of A:AIR orders set forth in
proposed Interpretation and Policy .10
to Rule 6.51. The proposed rule change
also makes non-substantive changes in
these paragraphs to capitalize the
defined term Agency Order, consistent
with Rule 6.51.
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.14 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 15 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) 16 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
that A:AIR functionality makes the
Exchange’s price improvement
mechanisms [sic] easier to use and
smart routers are generally all electronic
algorithmic systems that may not allow for manual
handling of cancelled orders.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(5).
16 Id.
VerDate Sep<11>2014
17:34 Aug 09, 2016
Jkt 238001
minimizes the risk of orders being
mishandled on the Exchange. The
A:AIR functionality provides
opportunities for execution of Customer
orders that a Participant submits for
crossing via AIM that cannot be
auctioned. The Exchange believes that
this functionality mitigates the risk that
inadvertent mishandling of Agency
Orders (i.e. Customer orders) will cause
marketable Customer orders to go
unfilled. The Exchange believes that
such outcomes serve to protect
investors’ interests by helping to ensure
that ineligible AIM Agency Orders are
processed in accordance with customer
instructions rather than cancelled.
Accordingly, the Exchange believes that
the proposed rule change is consistent
with the purposes of the Act.
In addition, the Exchange believes
that A:AIR functionality promotes
competition amongst market
participants by allowing more orders to
be processed. Finally, the proposed rule
change seeks to provide additional
clarity and completeness in the Rules
regarding functionalities that may be
made available on the Exchange. The
Exchange is continuously updating the
Rules to provide additional detail,
clarity, and transparency regarding its
operations and trading systems. The
Exchange believes that the adoption of
detailed, clear, and transparent rules
reduces burdens on competition and
promotes just and equitable principles
of trade.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange notes that price improvement
mechanism enhancements such as
A:AIR functionality are widely used
across the national options exchanges.
The Exchange believes that offering
additional functionalities and
enhancements to its price improvement
mechanisms [sic] promotes intermarket
competition. The exchanges have
developed these mechanisms in order to
provide market participants diverse
opportunities to seek valuable price
improvement and as a means to
compete with one another for order
flow. The U.S. options exchanges are
continuously making enhancements and
adding functionalities to their price
improvement mechanisms in order to
provide more competitive marketplaces
for market participants and better
compete with one another. The
Exchange believes that enhancements to
such mechanisms promote intermarket
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
competition for order flow between the
exchanges. A:AIR functionality is
simply one of many enhancements that
the Exchange has made to AIM for this
purpose.
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 written 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) of the
Act 17 and Rule 19b–4(f)(6) 18
thereunder. At any time within 60 days
of the filing of the proposed rule change,
the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
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–C2–2016–014 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
17 15
18 17
E:\FR\FM\10AUN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
10AUN1
Federal Register / Vol. 81, No. 154 / Wednesday, August 10, 2016 / Notices
All submissions should refer to File
Number SR–C2–2016–014. 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 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–
2016–014, and should be submitted on
or before August 31, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–18909 Filed 8–9–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32208; 812–14661]
TrimTabs ETF Trust, et al.; Notice of
Application
August 4, 2016.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application for an
order under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
2(a)(32), 5(a)(1), 22(d), and 22(e) of the
Act and rule 22c–1 under the Act, under
mstockstill on DSK3G9T082PROD with NOTICES
AGENCY:
19 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:34 Aug 09, 2016
Jkt 238001
sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and
17(a)(2) of the Act, and under section
12(d)(1)(J) for an exemption from
sections 12(d)(1)(A) and 12(d)(1)(B) of
the Act. The requested order would
permit (a) actively-managed series of
certain open-end management
investment companies (‘‘Funds’’) to
issue shares redeemable in large
aggregations only (‘‘Creation Units’’); (b)
secondary market transactions in Fund
shares to occur at negotiated market
prices rather than at net asset value
(‘‘NAV’’); (c) certain Funds to pay
redemption proceeds, under certain
circumstances, more than seven days
after the tender of shares for
redemption; (d) certain affiliated
persons of a Fund to deposit securities
into, and receive securities from, the
Fund in connection with the purchase
and redemption of Creation Units; (e)
certain registered management
investment companies and unit
investment trusts outside of the same
group of investment companies as the
Funds (‘‘Funds of Funds’’) to acquire
shares of the Funds; and (f) certain
Funds (‘‘Feeder Funds’’) to create and
redeem Creation Units in-kind in a
master-feeder structure.
TrimTabs ETF Trust (the
‘‘Trust’’), a Delaware statutory trust that
is registered under the Act as an openend management investment company
with multiple series, TrimTabs Asset
Management, LLC (the ‘‘Initial
Adviser’’), a Delaware limited liability
company registered as an investment
adviser under the Investment Advisers
Act of 1940, and Foreside Fund
Services, LLC (the ‘‘Distributor’’), a
Delaware limited liability company and
broker-dealer registered under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’).
FILING DATES: The application was filed
on June 8, 2016, and amended on July
1, 2016.
HEARING OR NOTIFICATION OF HEARING: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on August 29, 2016, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit, or for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
APPLICANTS:
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
52925
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
ADDRESSES: Secretary, Securities and
Exchange Commission, 100 F Street NE.,
Washington, DC 20549–1090;
Applicants: The Trust and the Initial
Adviser, 1345 Avenue of the Americas,
Fl. 2, New York, NY 10105; the Initial
Distributor, 3 Canal Plaza, Suite 100,
Portland, ME 04101.
FOR FURTHER INFORMATION CONTACT: HaeSung Lee, Attorney-Adviser, at (202)
551–7345, or Mary Kay Frech, Branch
Chief, at (202) 551–6821 (Division of
Investment Management, Chief
Counsel’s Office).
SUPPLEMENTARY INFORMATION: The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or for an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
Summary of the Application
1. Applicants request an order that
would allow Funds to operate as
actively-managed exchange traded
funds (‘‘ETFs’’).1 Fund shares will be
purchased and redeemed at their NAV
in Creation Units only. All orders to
purchase Creation Units and all
redemption requests will be placed by
or through an ‘‘Authorized Participant’’,
which will have signed a participant
agreement with the Distributor. Shares
will be listed and traded individually on
a national securities exchange, where
share prices will be based on the current
bid/offer market. Certain Funds may
operate as Feeder Funds in a masterfeeder structure. Any order granting the
requested relief would be subject to the
terms and conditions stated in the
application.
2. Each Fund will consist of a
portfolio of securities and other assets
and investment positions (‘‘Portfolio
Holdings’’). Each Fund will disclose on
its Web site the identities and quantities
of the Portfolio Holdings that will form
1 Applicants request that the order apply to an
initial series and any future series of the Trust
offering exchange-traded Shares, as well as other
existing or future open-end management companies
or existing or future series thereof offering
exchange-traded Shares (and their respective
existing or future Master Funds, as defined below)
that may utilize active management investment
strategies (collectively, ‘‘Future Funds’’). Any
Future Fund will (a) be advised by the Initial
Adviser or an entity controlling, controlled by, or
under common control with the Initial Adviser
(each, an ‘‘Adviser’’), and (b) comply with the terms
and conditions of the application.
E:\FR\FM\10AUN1.SGM
10AUN1
]]>Agencies
[Federal Register Volume 81, Number 154 (Wednesday, August 10, 2016)]
[Notices]
[Pages 52922-52925]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18909]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78478; File No. SR-C2-2016-014]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to AIM Retained Orders
August 4, 2016.
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 27, 2016, 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 Exchange filed the proposal as a ``non-controversial''
proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act
\3\ and Rule 19b-4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
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's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rule 6.51 (Automated Improvement
Mechanism (``AIM'')) to: (1) Clarify how orders submitted for
electronic crossing into the AIM auction are treated if an auction
cannot occur; (2) adopt Interpretation and Policy .10 to Rule 6.51 (AIM
Retained Order Functionality) to describe the Exchange's AIM Retained
Order (``A:AIR'') functionality in the Rules; and (3) make minor edits
to Interpretation and Policy .04 to Rule 6.13 (Price Check Parameters)
relating to the treatment of complex AIM orders marked A:AIR and
correct certain typographical errors. The Exchange notes that this
filing is based upon and, in all material respects, substantially
similar to a recent filing of Chicago Board Options Exchange,
Incorporated (``CBOE'') regarding A:AIR functionality.\5\ Both AIM and
A:AIR functionality are active on CBOE.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 77848 (May 17,
2016), 81 FR 31978 (May 20, 2016) (SR-CBOE-2016-024) (Order
Approving Proposed Rule Change, as Modified by Amendment No. 2
Thereto, Relating to AIM Retained Orders). See also Interpretation
and Policy .09 to CBOE Rule 6.74A (AIM Retained Order
Functionality).
---------------------------------------------------------------------------
[[Page 52923]]
Under Rule 6.51 (Automated Improvement Mechanism (``AIM'')), a
Permit Holder (``Participant'') that represents agency orders may
electronically execute an order it represents as agent (``Agency
Order'') against principal interest or against a solicited order
provided it submits the Agency Order for electronic execution into the
AIM auction (``Auction'') for processing. Matched Agency Orders may be
processed via AIM subject to certain eligibility requirements contained
in Rule 6.51(a). Specifically, to be eligible for processing via AIM,
the Agency Order must be: (1) In a class designated as eligible for AIM
Auctions as determined by the Exchange and within the designated
Auction order eligibility size parameters as such size parameters are
determined by the Exchange; and (2) stopped as principal or with a
solicited order at the better of the national best bid or offer
(``NBBO'') or the Agency Order's limit price (if the order is a limit
order).\6\ Orders submitted for crossing into AIM, which are ineligible
for Auction processing will result in both the Agency Order and the
matching contra order(s) being cancelled.
---------------------------------------------------------------------------
\6\ See Rule 6.51(a).
---------------------------------------------------------------------------
Under Rule 6.51(a)(1), an Auction may be conducted in a class
designated as eligible for Auctions as determined by the Exchange. Any
determinations made by the Exchange, such as eligible classes, will be
communicated in a Regulatory Circular pursuant to Interpretation and
Policy .05 to Rule 6.51. Notably, AIM functionality is currently not
activated in any class on the Exchange.
A:AIR functionality is an enhancement to AIM, which if activated,
would allow Participants the flexibility to choose, on an order-by-
order basis, whether an Agency Order should continue into the System
\7\ for processing rather than cancel in the event that an Auction
cannot occur.\8\ A:AIR functionality essentially allows for the entry
of Agency Orders into AIM with contingency processing instructions for
handling in the event that the order cannot be processed via Auction.
For example, using A:AIR functionality, a Permit Holder enters an
Agency Order to buy 10 standard contracts at the market along with a
matched solicited contra order to sell 10 standard contracts at $1.21.
At the time the A:AIR order is entered, the NBBO is $1.00 to $1.20,
with a Customer order to sell 30 contracts at $1.20 resting at the top
of the book alone. Here, the order would not be eligible for submission
into AIM because the Agency Order was not stopped with a solicited
order priced better than the NBBO.\9\ As a result, pursuant to Rule
6.51(a)(2), the Auction would not begin. Whereas both the Agency Order
and solicited order would have cancelled if the order were not marked
A:AIR, in this case, because the order was marked A:AIR, the Agency
Order would route to the automated trading system for processing and
trade against the resting Customer--the solicited order would still be
cancelled. Again, however, had the Permit Holder not marked this order
A:AIR, both the Agency Order and solicited order would cancel.
---------------------------------------------------------------------------
\7\ The System refers to the Exchange's automated trading system
as defined in Rule 1.1 (Definitions).
\8\ There are a variety of circumstances in which an AIM order
may be submitted to the Exchange for processing, but an auction may
not occur. For example, a Participant may submit an order for AIM
processing, which is not AIM eligible because one or more of the
conditions required for an AIM auction to occur pursuant to Rule
6.51(a) is not present. In addition, an order that is otherwise AIM
eligible may not be able to process for a variety of reasons,
including, but not limited to circumstances in which AIM
functionality is suspended. In either of such cases, A:AIR
functionality may allow the Agency Order to process despite the
overall order not being AIM eligible.
\9\ See Rule 6.51(a)(2).
---------------------------------------------------------------------------
Currently, A:AIR functionality is not explicitly defined in the
Exchange's AIM rules.\10\ Accordingly, this filing is intended to
further codify, clarify, and describe A:AIR functionality in the Rules.
Specifically, the Exchange proposes to adopt Interpretation and Policy
.10 to Rule 6.51 (AIM Retained Order Functionality), under which the
Exchange would define an A:AIR order as the transmission of two or more
orders for crossing pursuant to Rule 6.51, with the Agency Order priced
at the market or a limit price in the standard increment for the option
series and marked with a contingency instruction to route the Agency
Order for processing and cancel any contra orders if an Auction cannot
occur (including if the conditions described in Rule 6.51(a) are not
met).
---------------------------------------------------------------------------
\10\ A:AIR functionality is generally referred to in the Rules,
although not using that term. See Interpretation and Policy .04 to
Rule 6.13 (Price Check Parameters) at paragraphs (c)(5), (d),
(f)(3), and (h)(4) referring to orders that instruct the System to
process the Agency Order as an unpaired order if an AIM Auction
cannot be initiated.
---------------------------------------------------------------------------
Furthermore, to ensure that A:AIR orders are properly priced to
allow the Exchange to book the Agency Order in the event an Auction
cannot occur, proposed Interpretation and Policy .10 to Rule 6.51 would
provide that orders marked ``A:AIR'' with Agency Orders that are not
priced at the market or that are priced with a limit price not in the
standard increment for the option series in which they are entered
would be rejected. For example, if a Participant were to submit a
matched Agency Order into AIM for processing in a class with a minimum
increment of a nickel, which was stopped with a contra order at $0.07,
both the Agency Order and the contra order would be rejected because
the order, which is not priced in the minimum increment for the class,
would not eligible for AIM processing and because the System would not
be able to book an order at $0.07 in a class with a minimum increment
of a nickel. Notably, this provision of proposed Interpretation and
Policy .10 to Rule 6.51 is consistent with Exchange rules that only
permit orders at the standard increment to enter the book.\11\ Finally,
proposed Interpretation and Policy .10 to Rule 6.51 would provide that
A:AIR order functionality could be made available on those order
management platforms as determined by the Exchange and announced via
Regulatory Circular. This provision is intended to make clear that
A:AIR functionality may not be available on all trading platforms in
use on the Exchange.\12\
---------------------------------------------------------------------------
\11\ See Rule 6.4.
\12\ A:AIR functionality is not currently supported on the PULSe
trader workstation. PULSe is an order handling tool used for the
manual handling of orders. Thus, when ineligible AIM orders would be
rejected back to PULSe users, a person is present to decide how best
to handle such orders. PULSe users can either re-route such orders
to be booked or for alternative electronic processing on the
Exchange.
---------------------------------------------------------------------------
The Exchange also notes that although orders submitted into AIM,
which are not marked A:AIR and are ineligible for Auction processing
will result in both the Agency Order and the matching contra order(s)
being cancelled, the Rules do not explicitly provide as much.
Accordingly, the Exchange proposes to add language to Rule 6.51(a) to
provide that in the event that a Participant submits a matched Agency
Order for electronic execution into the Auction that is ineligible for
processing because it does not meet the conditions described in
paragraph (a), both the Agency Order and any solicited contra orders
will be cancelled unless marked as an AIM Retained order pursuant to
proposed Interpretation and Policy .10 to Rule 6.51.\13\
---------------------------------------------------------------------------
\13\ Notably, the A:AIR functionality may be primarily used by
smart router technology to ensure that ineligible AIM orders are
submitted into the System for processing and not cancelled. Whereas
traditional brokers and dealers are equipped to manually handle
cancelled orders that are returned to them and may revise the
cancelled orders' terms or contact their customers for further
instructions, smart routers are generally all electronic algorithmic
systems that may not allow for manual handling of cancelled orders.
---------------------------------------------------------------------------
[[Page 52924]]
The Exchange also proposes to make minor changes to Interpretation
and Policy .04 to Rule 6.13 regarding price reasonability checks on
complex orders to harmonize references to A:AIR functionality in Rule
6.13 with the language in proposed Interpretation and Policy .10 to
Rule 6.51. Specifically, the Exchange proposes to modify Interpretation
and Policy .04(c)(5), (d), (f)(3), and (h)(4) to Rule 6.13 (Price Check
Parameters) to change references to AIM orders that instruct the System
to process the Agency Order as an unpaired order if an AIM auction
cannot be initiated, to instead refer to A:AIR orders as defined in
proposed Interpretation and Policy .10 to Rule 6.51. These changes are
non-substantive and intended only to harmonize existing references to
A:AIR functionality currently in the Rules with the definition of A:AIR
orders set forth in proposed Interpretation and Policy .10 to Rule
6.51. The proposed rule change also makes non-substantive changes in
these paragraphs to capitalize the defined term Agency Order,
consistent with Rule 6.51.
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.\14\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \15\ 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) \16\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
---------------------------------------------------------------------------
In particular, the Exchange believes that A:AIR functionality makes
the Exchange's price improvement mechanisms [sic] easier to use and
minimizes the risk of orders being mishandled on the Exchange. The
A:AIR functionality provides opportunities for execution of Customer
orders that a Participant submits for crossing via AIM that cannot be
auctioned. The Exchange believes that this functionality mitigates the
risk that inadvertent mishandling of Agency Orders (i.e. Customer
orders) will cause marketable Customer orders to go unfilled. The
Exchange believes that such outcomes serve to protect investors'
interests by helping to ensure that ineligible AIM Agency Orders are
processed in accordance with customer instructions rather than
cancelled. Accordingly, the Exchange believes that the proposed rule
change is consistent with the purposes of the Act.
In addition, the Exchange believes that A:AIR functionality
promotes competition amongst market participants by allowing more
orders to be processed. Finally, the proposed rule change seeks to
provide additional clarity and completeness in the Rules regarding
functionalities that may be made available on the Exchange. The
Exchange is continuously updating the Rules to provide additional
detail, clarity, and transparency regarding its operations and trading
systems. The Exchange believes that the adoption of detailed, clear,
and transparent rules reduces burdens on competition and promotes just
and equitable principles of trade.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that
price improvement mechanism enhancements such as A:AIR functionality
are widely used across the national options exchanges. The Exchange
believes that offering additional functionalities and enhancements to
its price improvement mechanisms [sic] promotes intermarket
competition. The exchanges have developed these mechanisms in order to
provide market participants diverse opportunities to seek valuable
price improvement and as a means to compete with one another for order
flow. The U.S. options exchanges are continuously making enhancements
and adding functionalities to their price improvement mechanisms in
order to provide more competitive marketplaces for market participants
and better compete with one another. The Exchange believes that
enhancements to such mechanisms promote intermarket competition for
order flow between the exchanges. A:AIR functionality is simply one of
many enhancements that the Exchange has made to AIM for this purpose.
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 written 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) of the Act \17\ and
Rule 19b-4(f)(6) \18\ thereunder. At any time within 60 days of the
filing of the proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission will institute proceedings to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
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-C2-2016-014 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
[[Page 52925]]
All submissions should refer to File Number SR-C2-2016-014. 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 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-C2-2016-014, and should be
submitted on or before August 31, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18909 Filed 8-9-16; 8:45 am]
BILLING CODE 8011-01-P
