80 FR 21280 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Exchange Opening Procedures

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 74 (April 17, 2015)

Page Range		21280-21283
FR Document		2015-08795
Federal Register, Volume 80 Issue 74 (Friday, April 17, 2015)
[Federal Register Volume 80, Number 74 (Friday, April 17, 2015)]
[Notices]
[Pages 21280-21283]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-08795]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74718; File No. SR-C2-2015-006]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change 
Relating to Exchange Opening Procedures

April 13, 2015.
    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 April 2, 2015, 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\ 15 U.S.C. 78a.
    \3\ 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 amend Rule 6.11 to provide additional 
clarity regarding the Exchange's opening procedures. The text of the 
proposed rule change is provided below. (additions are italicized; 
deletions are [bracketed])

* * * * *

C2 Options Exchange, Incorporated Rules

* * * * *

Rule 6.11. Openings (and sometimes Closings)

    (a)-(d) No change.
    (e) Opening Conditions: Subject to subparagraph (f) below, the 
System will not open a series if one of the following conditions is 
met:
    (1) There is no quote present in the series;
    (2) The opening price is not within an acceptable range (as 
determined by the Exchange) compared to the lowest quote offer and 
the highest quote bid;
    (3) The opening trade would be at a price that is not the NBBO; 
or
    (4) The opening trade would leave a market order imbalance 
(i.e., there are more market orders to buy or to sell for the 
particular series than can be satisfied by the limit orders, quotes 
and market orders on the opposite side); however, in series that 
will open at a minimum price increment (e.g., at a price of $0.05 
or, in penny series, at a price of $0.01), the System will open even 
if a sell market order imbalance exists.
    (f) Presence of Opening Conditions:
    (1) If the condition in paragraph (e)(1) is present, the System 
will check to see if there is an NBBO quote on another market that 
falls within the acceptable opening range. If such an NBBO quote is 
present, the series will open and expose the marketable order(s) at 
the NBBO price. If such an NBBO quote is not present, the System 
will not open the series and will send a notification to 
Participants indicating the reason.
    (2) If the condition in paragraph (e)(2) is present, the System 
will match orders and quotes to the extent possible at a single 
clearing price within the acceptable range and then expose the 
remaining marketable order(s) at the widest price point within the 
acceptable opening range or the NBBO price, whichever is better.
    (3) If the condition in paragraph (e)(3) is present, the System 
will match orders and quotes to the extent possible at a single 
clearing price within the acceptable opening range or the NBBO 
price, whichever is better, and then expose the remaining marketable 
order(s) at the NBBO price.
    (4) If the condition in paragraph (e)(4) is present, the System 
will match orders and quotes to the extent possible at a single 
clearing price and then expose the remaining marketable order(s) at 
the widest price point within the acceptable opening range or the 
NBBO price, whichever is better.
    (g)--(j) No change.
    . . . Interpretations and Policies
    .01-.03 No change.
    .04 Opening Auction Exposure: The Exchange may determine to 
expose orders at the opening via auction including under any of the 
scenarios described in paragraphs (f)(1)-(4) above. In such cases, 
the exposure process will be conducted via the Hybrid Agency Liaison 
(``HAL'') pursuant to Rule 6.18. Any remaining balance of orders not 
executed via HAL on the opening will be booked at their limit price 
to the extent consistent with Rule 6.10 except that any remaining 
balance of orders not executed via HAL on the opening that are 
priced, or would be executed at a price, that is not within an 
acceptable tick distance from the initial HAL price will be 
cancelled. An ``acceptable tick distance'' (``ATD'') shall be 
determined by the Exchange on a series-by-series and premium basis 
and shall be no less than 2 minimum increment ticks. When the HAL 
Opening Auction Exposure procedure is activated, the ATD will be the 
same as the ATD established under Rule 6.17.

* * * * *
    The text of the proposed rule change is also available on the 
Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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 is proposing to adopt Interpretation and Policy .04 to 
Rule 6.11 relating to the Exchange's opening procedures to provide 
additional clarity in the Rules regarding the manner in which 
marketable orders may be exposed at the opening of trading. 
Specifically, proposed Interpretation and Policy .04 to Rule 6.11 would 
provide that the Exchange may determine to expose marketable orders on 
the opening via the Hybrid Agency Liaison (``HAL'') auction procedures 
described in Rule 6.18.\4\ Proposed

[[Page 21281]]

Interpretation and Policy .04 to Rule 6.11 would also provide that any 
remaining balance of orders not executed via HAL on the opening will be 
booked at their limit price to the extent consistent with Rule 6.10 \5\ 
except that any remaining balance of orders not executed via HAL on the 
opening that are priced, or would be executed at a price, that is not 
within an acceptable tick distance from the initial HAL price will be 
cancelled..[sic] \6\ The proposed Interpretation and Policy is 
substantially based, in all material respects, on the HAL Opening 
Procedure set forth in Interpretation and Policy .03 to Chicago Board 
Options Exchange, Incorporated (``CBOE'') Rule 6.2B (Hybrid Opening 
System (``HOSS'')).
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    \4\ Such determination as to whether to expose marketable orders 
on the opening via the HAL auction procedures described in Rule 6.18 
would be made prior to activation and announced via Regulatory 
Circular.
    \5\ Notably, certain order types, or portions thereof, may not, 
by rule, be booked. See, e.g., Rule 6.10(6) (Immediate-or-Cancel 
Order); 6.10(7) (Opening Rotation Order). Accordingly, under 
proposed Interpretation .04 to Rule 6.11, any remaining balance of 
orders not executed via HAL on the opening would be booked at their 
limit price, but only to the extent consistent with Rule 6.10.
    \6\ This includes a market order, which cannot be filled in 
total. In such cases, the remainder of a market order would be 
cancelled when the order cannot be filled on an away exchange and no 
quotes are present on C2.
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    Under the Exchange's current opening procedures, pre-opening orders 
and quotes and orders resting in the book from the prior business day 
are matched in the Exchange's automated trading system (``System'') at 
a single clearing price.\7\ Bids and offers that cannot be matched at a 
single clearing price are left to rest in the book. Subject to certain 
conditions, the System will not open a series for trading if there are 
no quotes in the series, the opening price is not within an acceptable 
range (as determined by the Exchange) compared to the lowest quote 
offer and the highest quote bid \8\ or at a price at or within the 
national best bid or offer (``NBBO''), or the opening trade would leave 
an order imbalance.\9\ If one of these conditions is present at the 
opening, the Exchange will follow the opening procedures set forth in 
Rule 6.11(f) (as described below) to open trading in the affected 
series. Notably, each of the procedures described in Rule 6.11(f) 
explicitly permit the Exchange to expose marketable orders at the 
opening of trading.\10\
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    \7\ In determining the priority of orders and quotes to be 
traded at a single clearing price, the System gives priority to 
market orders first, then to limit orders and quotes whose price is 
better than the opening price, and then to limit orders and quotes 
at the opening price. See Rule 6.11(g)(1).
    \8\ The Exchange will not automatically execute eligible orders 
that are marketable if (1) the width between the national best bid 
and national best offer is not within an acceptable price range (as 
determined by the Exchange on a series by series basis for market 
orders and/or marketable limit orders and announced to the Trading 
Permit Holders via Regulatory Circular), or (2) the execution would 
follow an initial partial execution on the Exchange and would be at 
a subsequent price that is not within an acceptable tick distance 
from the initial execution (as determined by the Exchange on a 
series by series and premium basis for market orders and/or 
marketable limit orders and announced to the Trading Permit Holders 
via Regulatory Circular). The ``acceptable price range'' (``APR'') 
shall be determined by the Exchange on a class-by-class basis and 
shall be no less than: $0.375 between the bid and offer for each 
option contract for which the bid is less than $2, $0.60 where the 
bid is at least $2 but does not exceed $5, $0.75 where the bid is 
more than $5 but does not exceed $10, $1.20 where the bid is more 
than $10 but does not exceed $20, and $1.50 where the bid is more 
than $20. An ``acceptable tick distance'' (``ATD'') shall be no less 
than 2 minimum increment ticks. See Rule 6.17.
    \9\ See Rule 6.11(e).
    \10\ See also Rule 6.11(g)(2).
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    For example, under Rule 6.11(f)(1), if a marketable order is 
resting in the book of a series for which no quotes are disseminated on 
the Exchange, the System will look for another market that is quoting 
the NBBO within an acceptable opening price range. If such quotes 
exist, the System will open the series and expose the marketable order 
at the NBBO. If there are no quotes on C2 and no quotes on any away 
exchange that are within the APR for the series, the System will not 
open the series and will send a notification to participants indicating 
the reason. Thus, assume that the NBBO for a particular option is 
$1.00-$1.20 for 100 contracts on either side. The APR in the series is 
set at $0.50 above the $0.375 minimum APR for series with quote bids 
less than $2.00. There are no quotes in the series on C2, but there is 
a market order to buy 100 contracts in the book. In this case, the 
System would verify that the NBBO quotes on the away exchange were 
within the APR for the series (the midpoint of the NBBO (i.e. $1.00-
$1.20) plus or minus half of the APR (i.e. $0.25 in either direction of 
the midpoint or $0.85-$1.35) and, if within the acceptable opening 
range (i.e. $1.20 is within the APR), expose the marketable buy order 
at the NBO price of $1.20.
    Under Rule 6.11(f)(2), if the opening price is not within an 
acceptable range compared to the lowest quote offer and highest quote 
bid, the System will match orders and quotes to the extent possible at 
a single clearing price within the acceptable range and then expose the 
remaining marketable order(s) at the widest price point within the 
acceptable price range or the NBBO price, whichever is better. For 
example, assume that the NBBO for a particular option is $0.90-$1.50 
for 100 contracts on either side. The highest quote bid and lowest 
quote offer at C2 are $0.80-$1.50 each for 100 contracts. Again, the 
APR for series in which the quote bid is less than $2.00 is $0.50 and 
there is a customer order in the book to buy 100 contracts at the 
market price. In this case, the System would check the marketable price 
of $1.50 for the trade against the APR for the series (i.e. the 
midpoint between the highest bid and lowest offer (i.e. $1.15) plus or 
minus half of the APR (i.e. $0.25) or $0.90-$1.40) and determine that 
the marketable price of $1.50 would not be within the APR. The System 
would then expose the order at the widest point within the APR (i.e. 
$1.40) or the NBBO (i.e. $1.50), whichever is better. Thus, in this 
case the order would be exposed at $1.40 (and booked provided there is 
no contra interest expressed at $1.40 or better during the exposure 
period).
    Similarly, Rule 6.11(f)(3) provides that if the opening trade would 
be at a price that is not the NBBO, the System will match orders and 
quotes to the extent possible at a single clearing price within the APR 
or the NBBO, whichever is better, and then expose the remaining 
marketable order(s) at the NBBO. For example, assume that the NBBO for 
a particular option is $0.05-$1.25 for 100 contracts on either side. 
The highest quote bid and lowest quote offer on C2 are $0.05-$1.75 
respectively, each for 100 contracts. Again, because the quote bid for 
the series is less than $2.00, the APR is $0.50. A customer order to 
buy 100 contracts at the market is resting in the book. In this case, 
the System would be unable to match the market with any quote (i.e. 
$1.75) within the APR (i.e. $1.10 (the midpoint between the highest bid 
and lowest offer (i.e. $0.85) plus or minus half of the APR (i.e. 
$0.25) or $0.60-$1.10) or the NBO of $1.25. Accordingly, the System 
would expose the order at the NBO of $1.25.
    Finally, if the opening trade would leave a market order imbalance, 
the System will match orders and quotes to the extent possible at a 
single clearing price and then expose the remaining marketable order(s) 
at the widest price point within the APR or the NBBO, whichever is 
better pursuant to Rule 6.11(f)(4). For example, assume that the NBBO 
for a particular option is $1.00-$1.20 with quotes for 100 contracts on 
each side. The highest quote bid on CBOE is $1.00 for 100 contracts and 
lowest quote offer is $1.20 for 10 contracts. The quote bid being less 
than $2.00, the APR is $0.50. There is a customer order in the book to 
buy 100 contracts at the market. There are no other quotes or orders in 
the book. In this case, the System would match the

[[Page 21282]]

orders and quotes at $1.20 (within the APR of $0.85-$1.35) and allocate 
10 contracts according to the matching algorithm in effect in the class 
and the applicable rules. The remaining 90 contracts would then be 
exposed at the better of the widest point within the APR or the NBO (in 
this case $1.20). Thus, each of the four scenarios for permitting the 
opening of trading in a series in which one of the four conditions 
described in Rule 6.11(e) is present contemplate exposing marketable 
orders at the NBBO (or, if better, the widest point of the APR).
    Although Rule 6.11 expressly permits exposure of orders on the 
open, Rule 6.11does not set forth a specific process by which orders 
will be exposed or specify how such orders be handled after they are 
exposed.\11\ While the Exchange believes that Rule 6.11(g)(2) makes 
clear that such exposure may be via auction,\12\ the Exchange also 
believes that additional detail should be added to the Rules to further 
clarify the auction process on the opening.\13\ Proposed Interpretation 
and Policy .04 to Rule 6.11 is intended to add this additional detail 
in the Rules. Specifically, the Exchange proposes to amend Rule 6.11 to 
include reference to the Exchange's HAL procedures. The Interpretation 
and Policy would provide that the Exchange could determine to expose 
orders at the opening via auction including under any of the scenarios 
described in paragraphs (f)(1)-(4) above and that in such cases, the 
exposure process would be conducted via HAL pursuant to Rule 6.18.\14\ 
The Exchange notes that proposed Interpretation and Policy .04 to Rule 
6.11, including this provision, is substantially similar in all 
material respects to Interpretation and Policy .03 to CBOE Rule 6.2B, 
setting forth CBOE's HAL Opening Procedures.
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    \11\ See Rule 6.11(g)(2) providing that all orders exposed 
pursuant to Rule 6.11 shall be exposed for a period of time 
designated by the Exchange that does not exceed 1.5 seconds.
    \12\ Under Rule 6.11(g)(2), ``All orders exposed pursuant to 
this Rule [6.11 (Openings (and sometimes closings))] shall be 
exposed for a period of time which shall not exceed 1.5 seconds. 
Once an exposed order has received a response, a matching period 
begins which shall last for a period of time designated by the 
Exchange that shall not exceed 1 second.'' Accordingly, in context, 
the Exchange interprets the term ``expose'' to mean a designated 
period of time in which an interest will be represented to the 
trading crowd in an effort to solicit order responses or contra 
interests to trade against (i.e. an auction).
    \13\ When C2 launched, C2RG10-005 announced that ``upon opening, 
remaining marketable orders will be `linked,' with no exposure 
period, to away exchanges disseminating better prices.'' This 
``linkage'' was originally achieved on C2 by activating the Hybrid 
Agency Liaison (HAL) Opening Procedure (HAL-O) functionality (which 
incorporates the NBBO calculation and linkage processing into the 
opening rotation), but setting the HAL-O timer to zero and also 
restricting Trading Permit Holders (TPHs) from subscribing to 
auctions. In July 2011, the Exchange introduced Complex Order 
Auctions (COA) on C2. At that time, the ability for a TPH to 
subscribe to auctions was made available. This caused a HAL-O 
auction message to be sent to C2 auction subscribers whenever an 
order linked away. Additionally, it is noted that periodically, when 
systems experience heavy processing volumes, latency may cause the 
auction process to last longer than its prescribed timer setting of 
zero. On December 5, 2014, the following notification was posted to 
the Exchange's System Status Web page, ``During periods of heavy 
systems processing at the open, remaining orders marketable against 
the NBBO may be exposed for short periods, generally not to exceed 
110 MS. Until further notice, TPHs should subscribe to the exposure 
process to ensure response capabilities during these times.'' This 
filing proposes to remedy this issue by simply exposing orders at 
the opening to an HAL-O auction process not to exceed 1.5 seconds.
    \14\ See note 3 supra.
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    In addition, the proposed rule would operate in a manner similar to 
the HAL Opening Procedures on CBOE with respect to the handling of 
remaining balances not executed via HAL exposure and provide that any 
remaining balance of orders not executed via HAL on the opening would 
be booked except that any remaining balance of orders not executed via 
HAL on the opening will be booked at their limit price to the extent 
consistent with Rule 6.10 except that any remaining balance of orders 
not executed via HAL on the opening that are priced, or would be 
executed at a price, that is not within an acceptable tick distance 
from the initial HAL price will be cancelled. The ``acceptable tick 
distance'' would be determined by the Exchange on a series-by-series 
and premium basis in increments not less than two minimum increment 
ticks. If the HAL Opening Auction Exposure procedure were activated, 
the acceptable tick distance would be the same as the acceptable tick 
distance established under Rule 6.17. This final provision of the 
Interpretation and Policy is consistent with the Exchange's Price Check 
Parameters rules in Interpretation and Policy .04 to Rule 6.13 and Rule 
6.17 and would simply codify the extension of the Exchange's Market-
Width and Drill-Through Parameters to Rule 6.11. These proposed 
provisions are substantially similar to the HAL Opening Procedures set 
forth in Interpretation and Policy .03 to CBOE Rule 6.2B in all 
material respects other than they do not provide for manual handling of 
orders and in open outcry.
    As proposed, the Exchange is seeking merely to extend the opening 
order exposure procedures already in place on CBOE.\15\ The Exchange 
believes that extending the HAL Opening Procedures to C2 is will 
provide clarity to the Exchange's rules as well as harmonize the 
procedures of the two exchanges, ultimately to the benefit of all 
market participants. The Exchange believes the proposed rule change 
would serve to further enhance the efficiency of opening rotations with 
procedures to accommodate a process for addressing opening quotes, 
acceptable opening ranges, and market order imbalance conditions that 
may occur on the openings, as well as address NBBO condition scenarios 
where the Exchange's opening trade might occur at an improved price 
rather than routing to an away market. Moreover, the Exchange believes 
that exposing orders on the open helps facilitate transactions in 
securities and is consistent with the goals of a free and open market 
and national market system.
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    \15\ See CBOE Rule 6.2B Interpretation and Policy .03.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\16\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \17\ 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) \18\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \16\ 15 U.S.C. 78f(b).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ Id.
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    In particular, the proposed rule change is designed to align the 
Exchange's rules with those of CBOE by extending the procedures of 
CBOE's HAL on the open to C2. The Exchange believes that extending the 
HAL Opening Procedures to C2 is will provide clarity to the Exchange's 
rules as well as harmonize the procedures of the two exchanges, 
ultimately to the benefit of all market participants. The Exchange 
believes the proposed rule change would serve to further enhance

[[Page 21283]]

the efficiency of opening rotations with procedures to accommodate a 
process for addressing opening quotes, acceptable opening ranges, and 
market order imbalance conditions that may occur on the openings, as 
well as address NBBO condition scenarios where the Exchange's opening 
trade might occur at an improved price rather than routing to an away 
market. The proposed rule change will increase competition on C2 by 
providing an opportunity for market participants to benefit from 
additional exposure of orders and participation in auctions at the 
open. Furthermore, the Exchange believes that exposing orders on the 
open helps facilitate transactions in securities and is consistent with 
the goals of a free and open market and national market system.

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 does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed change will 
be equally applied and will equally affect all market participants' 
orders that qualify for the HAL function. Moreover, the Exchange 
believes that the proposed rule change will increase competition 
amongst exchanges and market participants. The proposed will expose 
allow orders to be exposed to meaningful price improvement mechanisms 
at the opening of trading. The HAL on the opening procedure will allow 
C2 TPHs to compete with quotes on other exchanges and step up to the 
best national prices offered before orders are linked away. This price 
improvement process will not only ensure that orders on C2 are afforded 
the best prices available, but also afford additional opportunities to 
C2 TPH to compete with quotes on away exchanges at the opening of 
trading. The Exchange believes that price improvement mechanisms 
increase competition in the marketplace and increase opportunities for 
orders to receive best execution at the Exchange.

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: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 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 
\19\ and Rule 19b-4(f)(6)(iii) thereunder.\20\
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-C2-2015-006 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.


All submissions should refer to File Number SR-C2-2015-006. 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-C2-2015-006 and should be 
submitted on or before May 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-08795 Filed 4-16-15; 8:45 am]
 BILLING CODE 8011-01-P
21280 Federal Register / Vol. 80, No. 74 / Friday, April 17, 2015 / Notices

The purposes of this meeting are to I. Self-Regulatory Organization’s .04 Opening Auction Exposure: The
take action on the minutes of previous Statement of the Terms of Substance of Exchange may determine to expose orders at
Board meetings, to provide the the Proposed Rule Change the opening via auction including under any
of the scenarios described in paragraphs
Chairperson’s report, to provide the The Exchange proposes to amend (f)(1)–(4) above. In such cases, the exposure
Executive Director’s report, to provide a Rule 6.11 to provide additional clarity process will be conducted via the Hybrid
partner report, to present ‘‘Strategy regarding the Exchange’s opening Agency Liaison (‘‘HAL’’) pursuant to Rule
2020,’’ to provide an update on the New procedures. The text of the proposed 6.18. Any remaining balance of orders not
Presidio Parklands Project, to take rule change is provided below. executed via HAL on the opening will be
action on a budget adjustment, and to booked at their limit price to the extent
(additions are italicized; deletions are consistent with Rule 6.10 except that any
receive public comment in accordance [bracketed]) remaining balance of orders not executed via
with the Trust’s Public Outreach Policy. HAL on the opening that are priced, or would
Individuals requiring special * * * * * be executed at a price, that is not within an
accommodation at this meeting, such as C2 Options Exchange, Incorporated Rules acceptable tick distance from the initial HAL
needing a sign language interpreter, * * * * * price will be cancelled. An ‘‘acceptable tick
should contact Mariella deMey at Rule 6.11. Openings (and sometimes
distance’’ (‘‘ATD’’) shall be determined by
415.561.5300 prior to May 7, 2015. the Exchange on a series-by-series and
Closings) premium basis and shall be no less than 2
DATES: The meeting will begin at 6:30 (a)–(d) No change. minimum increment ticks. When the HAL
p.m. on Thursday, May 14, 2015. (e) Opening Conditions: Subject to Opening Auction Exposure procedure is
ADDRESSES: The meeting will be held at subparagraph (f) below, the System will not activated, the ATD will be the same as the
open a series if one of the following ATD established under Rule 6.17.
the Observation Post, 211 Lincoln conditions is met:
Boulevard, Presidio of San Francisco. (1) There is no quote present in the series; * * * * *
FOR FURTHER INFORMATION CONTACT: (2) The opening price is not within an The text of the proposed rule change
Karen Cook, General Counsel, the acceptable range (as determined by the is also available on the Exchange’s Web
Presidio Trust, 103 Montgomery Street, Exchange) compared to the lowest quote offer site (http://www.cboe.com/AboutCBOE/
P.O. Box 29052, San Francisco,
and the highest quote bid; CBOELegalRegulatoryHome.aspx), at
(3) The opening trade would be at a price the Exchange’s Office of the Secretary,
California 94129–0052, Telephone: that is not the NBBO; or
415.561.5300. and at the Commission’s Public
(4) The opening trade would leave a market Reference Room.
Dated: April 13, 2015. order imbalance (i.e., there are more market
Karen A. Cook,
orders to buy or to sell for the particular II. Self-Regulatory Organization’s
series than can be satisfied by the limit Statement of the Purpose of, and
General Counsel. orders, quotes and market orders on the Statutory Basis for, the Proposed Rule
[FR Doc. 2015–08920 Filed 4–16–15; 8:45 am] opposite side); however, in series that will Change
BILLING CODE 4310–4R–P open at a minimum price increment (e.g., at
a price of $0.05 or, in penny series, at a price In its filing with the Commission, the
of $0.01), the System will open even if a sell Exchange included statements
market order imbalance exists. concerning the purpose of, and basis for
(f) Presence of Opening Conditions: the proposed rule change and discussed
SECURITIES AND EXCHANGE (1) If the condition in paragraph (e)(1) is
COMMISSION any comments it received on the
present, the System will check to see if there proposed rule change. The text of these
is an NBBO quote on another market that
falls within the acceptable opening range. If statements may be examined at the
[Release No. 34–74718; File No. SR–C2–
such an NBBO quote is present, the series places specified in Item IV below. The
2015–006]
will open and expose the marketable order(s) Exchange has prepared summaries, set
Self-Regulatory Organizations; C2 at the NBBO price. If such an NBBO quote forth in sections A, B, and C below, of
Options Exchange, Incorporated; is not present, the System will not open the the most significant aspects of such
series and will send a notification to statements.
Notice of Filing and Immediate Participants indicating the reason.
Effectiveness of Proposed Rule (2) If the condition in paragraph (e)(2) is A. Self-Regulatory Organization’s
Change Relating to Exchange Opening present, the System will match orders and Statement of the Purpose of, and
Procedures quotes to the extent possible at a single Statutory Basis for, the Proposed Rule
clearing price within the acceptable range Change
April 13, 2015. and then expose the remaining marketable
Pursuant to Section 19(b)(1) 1 of the order(s) at the widest price point within the 1. Purpose
Securities Exchange Act of 1934 (the acceptable opening range or the NBBO price, The Exchange is proposing to adopt
‘‘Act’’) 2 and Rule 19b-4 thereunder,3 whichever is better.
(3) If the condition in paragraph (e)(3) is
Interpretation and Policy .04 to Rule
notice is hereby given that, on April 2, 6.11 relating to the Exchange’s opening
present, the System will match orders and
2015, C2 Options Exchange, quotes to the extent possible at a single procedures to provide additional clarity
Incorporated (the ‘‘Exchange’’ or ‘‘C2’’) clearing price within the acceptable opening in the Rules regarding the manner in
filed with the Securities and Exchange range or the NBBO price, whichever is better, which marketable orders may be
Commission (the ‘‘Commission’’) the and then expose the remaining marketable exposed at the opening of trading.
proposed rule change as described in order(s) at the NBBO price. Specifically, proposed Interpretation
Items I and II below, which Items have (4) If the condition in paragraph (e)(4) is and Policy .04 to Rule 6.11 would
been prepared by the Exchange. The present, the System will match orders and
provide that the Exchange may
quotes to the extent possible at a single
tkelley on DSK3SPTVN1PROD with NOTICES

Commission is publishing this notice to determine to expose marketable orders
clearing price and then expose the remaining
solicit comments on the proposed rule marketable order(s) at the widest price point on the opening via the Hybrid Agency
change from interested persons. within the acceptable opening range or the Liaison (‘‘HAL’’) auction procedures
NBBO price, whichever is better. described in Rule 6.18.4 Proposed
1 15 U.S.C. 78s(b)(1). (g)—(j) No change.
2 15 U.S.C. 78a. . . . Interpretations and Policies 4 Such determination as to whether to expose
3 17 CFR 240.19b–4. .01–.03 No change. marketable orders on the opening via the HAL

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Federal Register / Vol. 80, No. 74 / Friday, April 17, 2015 / Notices 21281

Interpretation and Policy .04 to Rule national best bid or offer (‘‘NBBO’’), or on either side. The highest quote bid
6.11 would also provide that any the opening trade would leave an order and lowest quote offer at C2 are $0.80–
remaining balance of orders not imbalance.9 If one of these conditions is $1.50 each for 100 contracts. Again, the
executed via HAL on the opening will present at the opening, the Exchange APR for series in which the quote bid
be booked at their limit price to the will follow the opening procedures set is less than $2.00 is $0.50 and there is
extent consistent with Rule 6.10 5 except forth in Rule 6.11(f) (as described a customer order in the book to buy 100
that any remaining balance of orders not below) to open trading in the affected contracts at the market price. In this
executed via HAL on the opening that series. Notably, each of the procedures case, the System would check the
are priced, or would be executed at a described in Rule 6.11(f) explicitly marketable price of $1.50 for the trade
price, that is not within an acceptable permit the Exchange to expose against the APR for the series (i.e. the
tick distance from the initial HAL price marketable orders at the opening of midpoint between the highest bid and
will be cancelled..[sic] 6 The proposed trading.10 lowest offer (i.e. $1.15) plus or minus
Interpretation and Policy is For example, under Rule 6.11(f)(1), if half of the APR (i.e. $0.25) or $0.90–
substantially based, in all material a marketable order is resting in the book $1.40) and determine that the
respects, on the HAL Opening of a series for which no quotes are marketable price of $1.50 would not be
Procedure set forth in Interpretation and disseminated on the Exchange, the within the APR. The System would then
Policy .03 to Chicago Board Options System will look for another market that expose the order at the widest point
Exchange, Incorporated (‘‘CBOE’’) Rule is quoting the NBBO within an within the APR (i.e. $1.40) or the NBBO
6.2B (Hybrid Opening System acceptable opening price range. If such (i.e. $1.50), whichever is better. Thus, in
(‘‘HOSS’’)). quotes exist, the System will open the this case the order would be exposed at
Under the Exchange’s current opening series and expose the marketable order $1.40 (and booked provided there is no
procedures, pre-opening orders and at the NBBO. If there are no quotes on contra interest expressed at $1.40 or
quotes and orders resting in the book C2 and no quotes on any away exchange better during the exposure period).
from the prior business day are matched that are within the APR for the series, Similarly, Rule 6.11(f)(3) provides
in the Exchange’s automated trading the System will not open the series and that if the opening trade would be at a
system (‘‘System’’) at a single clearing will send a notification to participants price that is not the NBBO, the System
price.7 Bids and offers that cannot be indicating the reason. Thus, assume that will match orders and quotes to the
matched at a single clearing price are the NBBO for a particular option is extent possible at a single clearing price
left to rest in the book. Subject to certain $1.00–$1.20 for 100 contracts on either within the APR or the NBBO, whichever
conditions, the System will not open a side. The APR in the series is set at is better, and then expose the remaining
series for trading if there are no quotes $0.50 above the $0.375 minimum APR marketable order(s) at the NBBO. For
in the series, the opening price is not for series with quote bids less than example, assume that the NBBO for a
within an acceptable range (as $2.00. There are no quotes in the series particular option is $0.05–$1.25 for 100
determined by the Exchange) compared on C2, but there is a market order to buy contracts on either side. The highest
to the lowest quote offer and the highest 100 contracts in the book. In this case, quote bid and lowest quote offer on C2
quote bid 8 or at a price at or within the the System would verify that the NBBO are $0.05–$1.75 respectively, each for
quotes on the away exchange were 100 contracts. Again, because the quote
auction procedures described in Rule 6.18 would be within the APR for the series (the bid for the series is less than $2.00, the
made prior to activation and announced via midpoint of the NBBO (i.e. $1.00–$1.20) APR is $0.50. A customer order to buy
Regulatory Circular.
5 Notably, certain order types, or portions thereof,
plus or minus half of the APR (i.e. $0.25 100 contracts at the market is resting in
may not, by rule, be booked. See, e.g., Rule 6.10(6) in either direction of the midpoint or the book. In this case, the System would
(Immediate-or-Cancel Order); 6.10(7) (Opening $0.85–$1.35) and, if within the be unable to match the market with any
Rotation Order). Accordingly, under proposed acceptable opening range (i.e. $1.20 is quote (i.e. $1.75) within the APR (i.e.
Interpretation .04 to Rule 6.11, any remaining within the APR), expose the marketable $1.10 (the midpoint between the highest
balance of orders not executed via HAL on the
opening would be booked at their limit price, but buy order at the NBO price of $1.20. bid and lowest offer (i.e. $0.85) plus or
only to the extent consistent with Rule 6.10. Under Rule 6.11(f)(2), if the opening minus half of the APR (i.e. $0.25) or
6 This includes a market order, which cannot be price is not within an acceptable range $0.60–$1.10) or the NBO of $1.25.
filled in total. In such cases, the remainder of a compared to the lowest quote offer and Accordingly, the System would expose
market order would be cancelled when the order
cannot be filled on an away exchange and no quotes
highest quote bid, the System will the order at the NBO of $1.25.
are present on C2. match orders and quotes to the extent Finally, if the opening trade would
7 In determining the priority of orders and quotes possible at a single clearing price within leave a market order imbalance, the
to be traded at a single clearing price, the System the acceptable range and then expose System will match orders and quotes to
gives priority to market orders first, then to limit the remaining marketable order(s) at the the extent possible at a single clearing
orders and quotes whose price is better than the
opening price, and then to limit orders and quotes
widest price point within the acceptable price and then expose the remaining
at the opening price. See Rule 6.11(g)(1). price range or the NBBO price, marketable order(s) at the widest price
8 The Exchange will not automatically execute whichever is better. For example, point within the APR or the NBBO,
eligible orders that are marketable if (1) the width assume that the NBBO for a particular whichever is better pursuant to Rule
between the national best bid and national best option is $0.90–$1.50 for 100 contracts 6.11(f)(4). For example, assume that the
offer is not within an acceptable price range (as
determined by the Exchange on a series by series NBBO for a particular option is $1.00–
basis for market orders and/or marketable limit class-by-class basis and shall be no less than: $0.375 $1.20 with quotes for 100 contracts on
orders and announced to the Trading Permit between the bid and offer for each option contract each side. The highest quote bid on
Holders via Regulatory Circular), or (2) the for which the bid is less than $2, $0.60 where the
bid is at least $2 but does not exceed $5, $0.75
CBOE is $1.00 for 100 contracts and
execution would follow an initial partial execution
tkelley on DSK3SPTVN1PROD with NOTICES

on the Exchange and would be at a subsequent where the bid is more than $5 but does not exceed lowest quote offer is $1.20 for 10
price that is not within an acceptable tick distance $10, $1.20 where the bid is more than $10 but does contracts. The quote bid being less than
from the initial execution (as determined by the not exceed $20, and $1.50 where the bid is more $2.00, the APR is $0.50. There is a
Exchange on a series by series and premium basis than $20. An ‘‘acceptable tick distance’’ (‘‘ATD’’)
shall be no less than 2 minimum increment ticks.
customer order in the book to buy 100
for market orders and/or marketable limit orders
and announced to the Trading Permit Holders via See Rule 6.17. contracts at the market. There are no
Regulatory Circular). The ‘‘acceptable price range’’ 9 See Rule 6.11(e). other quotes or orders in the book. In
(‘‘APR’’) shall be determined by the Exchange on a 10 See also Rule 6.11(g)(2). this case, the System would match the

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Document Created: 2015-12-18 11:20:07
Document Modified: 2015-12-18 11:20:07
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 21280