80 FR 21288 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Change the Close of Trading Hours on the Last Day of Trading in Expiring Quarterly Index Expirations

SECURITIES AND EXCHANGE COMMISSION

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

[Federal Register Volume 80, Number 74 (Friday, April 17, 2015)]
[Notices]
[Pages 21288-21290]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-08796]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74719; File No. SR-C2-2015-008]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Change the Close of Trading Hours on the Last Day of Trading in 
Expiring Quarterly Index Expirations

April 13, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder, \2\ notice is hereby given 
that, on April 9, 2015 C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (``SEC'' or ``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.
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    \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).
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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 C2 Rule 6.1 (Days and Hours of 
Business) to change the close of trading hours from 3:15 p.m. (Chicago 
time) to 3:00 p.m. (Chicago time) on the last day of trading in 
expiring Quarterly Index Expirations (``QIXs''). The text of the 
proposed rule change is available on the Exchange's Web site (http://www.c2exchange.com/Legal/), at the Exchange's Office of the Secretary, 
and at the Commission's Public Reference Room.

[[Page 21289]]

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
    This filing is based on existing Chicago Board Options Exchange, 
Incorporated (``CBOE'') Rule 24.6.01.\5\
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    \5\ CBOE Rule 24.6.01 provides, ``On the last trading day, 
transactions in expiring Quarterly Index Expirations (QIXs) may be 
effected on the Exchange during Extended Trading Hours and during 
the Regular Trading Hours of 8:30 a.m. (Chicago time) to 3:00 p.m. 
(Chicago time). This Interpretation and Policy .01 applies to all 
outstanding expiring QIXs that expire at the end of the second 
calendar quarter in 2009 and thereafter.'' See also Securities 
Exchange Act Release Nos.[sic] 59676 (April 1, 2009), 74 FR 16018 
(April 8, 2009) (Notice of Filing and Immediate Effectiveness of 
Proposed Rule Change to Change the Close of Trading Hours on the 
Last Day of Trading in Expiring Quarterly Index Expirations) (SR-
CBOE-2009-020).
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    The majority of C2's Rules are the same as CBOE's Rules and were 
adopted as part of the Securities and Exchange Commission's (``SEC'' or 
``Commission'') order approving C2's application for registration as a 
national securities exchange.\6\ CBOE Rule 24.9(c) permits CBOE to list 
QIXs, which are cash-settled options on certain specified broad-based 
indices that expire on the first business day of the month following 
the end of a calendar quarter. QIXs trade simultaneously with, not 
independent of, standard options on the same underlying index. QIXs are 
subject to the same rules that currently govern the trading of standard 
index options, including sales practice rules, margin requirements, and 
floor trading proceedings. Contract terms for QIXs are similar to 
traditional index options, with one general exception: the exercise 
settlement value is based on the index value derived from the closing 
prices of component stocks. In addition, the contract multiplier for 
QIXs may be set at 500 rather than the customary 100. Positions in QIXs 
are aggregated with option contracts on the same broad-based index and 
are subject to the applicable overall position limit.
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    \6\ See Securities Exchange Act Release No. 61152 (December 10, 
2009), 74 FR 66699, 66709-10 (December 16, 2009) (In the Matter of 
the Application of C2 Options Exchange, Incorporated for 
Registration as a National Securities Exchange Findings, Opinion, 
and Order of the Commission (File No. 10-191). In the Order, the 
Commission granted C2's request for exemption, pursuant to Section 
36 of the Securities Exchange Act of 1934 (the ``Act''), from the 
rule filing requirements of Section 19(b) of the Act with respect to 
the rules that C2 proposed to incorporate by reference. The 
exemption was conditioned upon C2 providing written notice to its 
members whenever CBOE proposes to change a rule that C2 has 
incorporated by reference. In the Order, the Commission stated its 
belief that ``this exemption is appropriate in the public interest 
and consistent with the protection of investors because it will 
promote more efficient use of Commission and SRO resources by 
avoiding duplicative rule flings based on simultaneous changes to 
identical rules sought by more than one SRO.''
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    C2 Chapter 24 provides, in relevant part, ``[t]he rules contained 
in CBOE Chapter XXIV, as such rules may be in effect from time to time, 
shall apply to C2 and are hereby incorporated into this Chapter.'' 
Accordingly, C2 may list QIXs. However, C2 Chapter 24, in relevant 
part, expressly provides that certain Rules from CBOE Chapter XXIV 
shall not apply to C2, including CBOE Rule 24.6 (Days and Hours of 
Business). CBOE Rule 24.6 has a provision that permits the Exchange to 
close trading in expiring QIXs at 3:00 p.m. (Chicago time), which C2 
now proposes to add as new Interpretation and Policy .03 to C2 Rule 
6.1.
    In support of this rule change, C2 states that generally, QIXs are 
priced in the market based on corresponding futures values. On the last 
day of trading, the closing prices of the component stocks (which are 
used to derive the exercise settlement value) are known at 3 p.m. 
(Chicago time) (or soon after) when the equity markets close. Despite 
the fact that the exercise settlement value is fixed after 3 p.m. 
(Chicago time), trading in expiring QIXs continues, however, for an 
additional fifteen minutes until 3:15 p.m. (Chicago time) and are not 
priced on corresponding futures values, but rather the known cash 
value. At the same time, the prices of non-expiring QIX series continue 
to move and be priced in response to changes in corresponding futures 
prices.
    Because of the potential pricing divergence that could occur 
between 3:00 and 3:15 p.m. on the final trading day in expiring QIXs 
(e.g., switch from pricing off of futures to cash), the Exchange 
believes that, in order to mitigate potential investor confusion, it is 
appropriate to stop trading expiring QIX contracts at 3 p.m. (Chicago 
time) on the last day of trading. C2 notes that, as of the date of this 
filing, there are no outstanding QIXs currently listed for trading on 
C2.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act \7\ and the rules and regulations thereunder and, in 
particular, the requirements of Section 6(b) of the Act.\8\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \9\ requirements that the rules of 
an exchange be designed to promote just and equitable principles of 
trade, to prevent fraudulent and manipulative acts, to remove 
impediments to and to perfect the mechanism for a free and open market 
and a national market system, and, in general, to protect investors and 
the public interest. Preventing continued trading in a product after 
the exercise settlement value has been fixed eliminates potential 
confusion and thereby protects investors and the public interest.
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    \7\ 15 U.S.C. 78s(b)(1).
    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. In this regard and as indicated above, the Exchange notes that 
the rule change is based on existing CBOE Rules. Closing expiring QIXs 
listed on C2 at 3:00 p.m. (Chicago time) on their last trading day will 
align this practice with the existing practice on CBOE.

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

[[Page 21290]]

Act \10\ and Rule 19b-4(f)(6) \11\ 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.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4(f)(6).
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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 email to [email protected]. Please include 
File Number SR-C2-2015-008 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-C2-2015-008. 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-C2-2015-008 and should be 
submitted on or before May 8, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-08796 Filed 4-16-15; 8:45 am]
 BILLING CODE 8011-01-P