[Federal Register Volume 75, Number 209 (Friday, October 29, 2010)]
[Notices]
[Pages 66813-66815]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27360]
[[Page 66813]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63175; File No. SR-C2-2010-006]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend the C2 Fees Schedule
October 25, 2010.
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 October 22, 2010, 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 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
C2 proposes to amend its Fees Schedule. The text of the proposed
rule change is available on the Exchange's Web site (http://www.cboe.org/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 self-regulatory organization
included statements concerning the purpose of and basis for the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
C2 proposes to amend its Fees Schedule in preparation for the
Exchange's expected launch on October 29, 2010. In connection with the
commencement of trading, C2 proposes to add a number of fees relating
to activities on the Exchange. Most of the proposed fees are identical
to fees in place at the Chicago Board Options Exchange, Incorporated
(``CBOE'').
Regarding transactions, C2 proposes to impose per contract taker
fees and maker rebates. The amounts of the fees/rebates are based on
order origin code. More specifically, the fee for taking liquidity will
be $0.25 per contract for C2 Market-Makers, $0.15 for public customer
orders, and $0.40 for all other users (including Professional
Customers). The maker rebate will be $0.15 per contract for C2 Market-
Makers, $0.00 for public customers, and $0.10 for all other users. The
Exchange believes that it is appropriate and not unfairly
discriminatory to set a higher rebate level for C2 Market-Makers than
other participants in light of the commitments C2 Market-Makers
undertake for market quality and liquidity. Further, C2 notes that
while public customers do not receive a maker rebate, they are assessed
a significantly lower taker charge than other user types.\3\ These fees
will apply to all multiply-listed, non-proprietary, penny pilot equity
and ETF options classes. Separate fees may be established, pursuant to
a rule filing with the Commission, for other classes eventually traded
on C2. Initially, there will be no fees or rebates for any users for
trades that occur as part of the opening process.
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\3\ The Exchange also notes that a $0.00 rebate for public
customers is not unprecedented (See International Securities
Exchange, Inc. Fee schedule).
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The Exchange also proposes to impose a Linkage Routing Fee of $0.50
per routed contract in addition to the applicable taker fee rate. The
$0.50 portion of the Routing Fee offsets costs incurred by the Exchange
in connection with using an unaffiliated broker-dealer to access other
exchanges and with transaction charges assessed by other exchanges. The
applicable C2 taker fee rate component of the Routing Fee accounts for
the C2 ``execution'' that occurs as part of the linkage process whereby
an away execution obtained by C2's routing broker is put to the
underlying C2 customer on C2 (we note that there is no second print in
connection with this process). C2 further notes that users can route
directly to exchanges posting the best market if desired (or to specify
that C2 not route orders away on their behalf) and that this routing
function is an ``extra'' service provided by C2 to its Permit
Holders.\4\
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\4\ C2 notes that CBOE also adds its ``applicable transaction
fee amount'' to its routing fee (See CBOE Fees Schedule).
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C2 proposes to impose access fees for the two types of access
permits initially available for use on C2. The proposed permit fees
would only be applicable for access to non-proprietary classes (if
proprietary classes are added at a later date, access fees for such
classes would be filed with the Commission). C2 will not assess these
fees for the month of October 2010. The cost will be $5,000 per month
for a Market-Maker Permit. This permit gives the holder the ability to
stream quotes and submit orders into the C2 trade engine. This permit
also provides an appointment credit of 1.0, a quoting and order entry
bandwidth allowance, up to three logins and Trading Permit Holder
status. The quoting bandwidth allowance for a Market-Maker Permit is
equivalent to a maximum of 156,000,000 quotes over the course of a
trading day. The Electronic Access Permit, with a cost of $1,000 per
month, gives the holder the ability to submit agency and qualifying
proprietary orders into the C2 trade engine (but not stream quotes) as
well as an order entry bandwidth allowance, up to three logins and
Trading Permit Holder status. The higher cost of the Market-Maker
Permit is equitable in that it reflects the ability to continuously
stream quotations.
C2 will offer two kinds of bandwidth packets for use to supplement
the standard bandwidth allocation contained in each access permit. The
Quoting and Order Entry Bandwidth Packet (available to Market-Makers)
provides bandwidth equivalent to 1/5th of a C2 Market-Maker Permit. The
Order Entry Bandwidth Packet (available to Electronic Access Permit
holders) provides bandwidth equivalent to one C2 Electronic Access
Permit. C2 proposes a fee of $1,000 per month for each supplemental
bandwidth packet.
The Exchange also proposes to impose Sponsored User fees. The one-
time Registration Fee of $2,500 will be payable by a Trading Permit
Holder for the registration of each of its Sponsored users. This fee is
identical to the CBOE sponsored user fee, and offsets the cost of
processing and registering Sponsored User applications. A Sponsored
User is a person or entity that has entered into a sponsorship
arrangement for purposes of receiving access to the Exchange system.
The Sponsored User Program is governed by C2 Rule 3.15.
The Exchange proposes to assess the Sales Value Fee to each Trading
Permit
[[Page 66814]]
Holder for sales of securities on C2 with respect to which C2 is
obligated to pay a fee to the SEC under Section 31 of the Exchange Act.
To the extent there may be any excess monies collected for the Sales
Value Fee, C2 may retain those monies to help fund its general
operating expenses. The Sales Value Fee is collected indirectly from
Trading Permit Holders through their clearing firms by OCC on behalf of
C2 with respect to options sales and options exercises. The amount of
the Sales Value Fee for options sales and options exercises is equal to
(i) the Section 31 fee rate multiplied by (ii) the Trading Permit
Holder's aggregate dollar amount of covered sales resulting from
options transactions occurring on the Exchange during any computational
period. This fee is identical to the Sales Value Fee in place at CBOE.
The Exchange proposes to impose a number of regulatory fees. The
Firm Designated Examining Authority Fee of $0.40 per $1,000 of gross
revenue (as reported on the quarterly FOCUS Report, Form X-17A-5)
excludes commodity commission revenue. This fee is also subject to a
monthly minimum fee of $1,000 for clearing firms and $275 for non-
clearing firms. This fee is identical to a related fee on CBOE.
The Exchange proposes a number of fees to be collected and retained
by FINRA via the Web CRD SM registration system for the
registration of associated persons of Exchange Trading Permit Holders
that are not also FINRA members. The FINRA Non-Member Processing Fee
($85.00) is for all Initial, Transfer, Relicense, and Dual Registration
Form U-4 filings. This fee will also be generated upon refiling to Web
CRD SM of C2-only registered individuals. The FINRA
Disclosure Processing Fee (U-4, U-5, and amendments) ($95.00) is for
all registration, transfer, or termination filings with new or amended
disclosure information or that require certification as well as any
amendment to disclosure information. The FINRA Annual System Processing
Fee ($30.00) will be assessed only during renewals. There will also be
fingerprint processing fees of $30.25 per card (initial submission),
$13.00 per card (second submission), $30.25 per card (third submission)
and $13.00 per card submitted by Trading Permit Holders on behalf of
their associated person who have had their prints processed through a
SRO other than FINRA. These fees are identical to fees in place at
CBOE.
The Exchange proposes to assess a number of Communication Review
Fees. For printed material reviewed, the proposed fee would be $150 per
submission for regular review and $1,000 for expedited review, with a
$25 per page surcharge for each page reviewed in excess of five pages
($50 per page for expedited review). For video and audio media
reviewed, the proposed fee would be $150 per submission for regular
review and $1,000 for expedited review, with a $25 per minute surcharge
for each minute of tape reviewed in excess of five minutes ($50 per
minute for expedited review). Expedited review will be completed within
five business days, not including the date the item is received by the
Exchange, unless a shorter or longer period is agreed to by the
Exchange. The Exchange may, in its sole discretion, refuse requests for
expedited review. These fees are identical to fees in place at CBOE.
C2 proposes a Continuing Education Fee of $100 per session assessed
as to each individual who is required to complete the Regulatory
Element of the Continuing Education Requirements pursuant to Rule 9.3A.
For Ad Hoc Information Services Requests, the Exchange will assess a
fee equal to the costs of production of such information.
The Exchange also proposes Connectivity Fees of $40.00 per month
for each of a network access port charge, a CMI Client application
server, and a FIX port, with the charge going up to $80.00 per month
for Sponsored Users. The Exchange believes it is equitable and
reasonable to charge higher connectivity fees to Sponsored Users than
it charges to Permit Holders because Permit Holders are subject to dues
and other fees through their membership to help offset the Exchange's
systems expenses.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\5\ in general, and furthers the objectives of Section 6(b)(4) \6\
of the Act in particular, in that it is designed to provide for the
equitable allocation of reasonable dues, fees, and other charges among
C2 Trading Permit Holders and other persons using Exchange facilities.
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\5\ 15 U.S.C. 78f(b).
\6\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
C2 does not believe that the proposed rule change will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The proposed rule change is designated by the Exchange as
establishing or changing a due, fee, or other charge, thereby
qualifying for effectiveness on filing pursuant to Section
19(b)(3)(A)(ii) \7\ of the Act and subparagraph (f)(2) of Rule 19b-4
\8\ 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.
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\7\ 15 U.S.C. 78s(b)(3)(A)(ii).
\8\ 17 CFR 240.19b-4(f)(2).
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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 (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-C2-2010-006 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-C2-2010-006. This file
number should be included on the subject line if e-mail 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule
[[Page 66815]]
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 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-C2-2010-006 and should be submitted on or before
November 19, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\9\
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\9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27360 Filed 10-28-10; 8:45 am]
BILLING CODE 8011-01-P