80 FR 45006 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rules Related to Obvious Errors

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 144 (July 28, 2015)

[Federal Register Volume 80, Number 144 (Tuesday, July 28, 2015)]
[Notices]
[Pages 45006-45008]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-18538]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75513; File No. SR-C2-2015-018]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change 
To Amend Exchange Rules Related to Obvious Errors

July 23, 2015.
    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 15, 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\ 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 seeks to amend its rules related to obvious errors. 
The text of the proposed rule change is provided below.
    (additions are italicized; deletions are [bracketed])
* * * * *

C2 Options Exchange, Incorporated Rules

* * * * *

Rule 6.15 Nullification and Adjustment of Options Transactions 
Including Obvious Errors

* * * * *
    .06 Verifiable Disruptions or Malfunctions of Exchange Systems: 
Electronic transactions arising out of a ``verifiable disruption or 
malfunction'' in the use or operation of any Exchange automated 
quotation, dissemination, execution, or communication system will 
either be nullified or adjusted by an Official. Transactions that 
qualify for price adjustment will be adjusted to Theoretical Price, 
as defined in paragraph (b) above.
* * * * *

    The text of the proposed rule change is also available on the 
Exchange's Web

[[Page 45007]]

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 seeking to amend its rules related to obvious 
errors. Specifically, the Exchange is seeking to add Interpretation and 
Policy .06 to provide the Exchange the ability to nullify or adjust 
transactions arising out of a verifiable disruption or malfunction of 
Exchange systems.
    Similar to Chicago Board Options Exchange, Inc. (``CBOE'') Rule 
6.25.05, the proposed rule would allow an Exchange Official to nullify 
or adjust a transaction that arises out of a verifiable disruption or 
malfunction in the use or operation of any Exchange automated 
quotation, dissemination, execution, or communication system.\3\ For 
example, if a malfunctioning exchange system caused orders to be 
generated and executed without instructions from a Trading Permit 
Holder, the proposed rule would allow the Exchange to nullify the 
transactions. Transactions that qualify for price adjustment will be 
adjusted to Theoretical Price, as defined in paragraph (b) of Rule 
6.15.
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    \3\ The proposed rule removes reference to open outcry as C2 is 
an all-electronic exchange.
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    The Exchange believes that it is appropriate to provide the 
flexibility and authority provided for in the proposed rule so as not 
to limit the Exchange's ability to plan for and respond to unforeseen 
systems problems or malfunctions. The proposed rule change would 
provide the Exchange with the same authority that other Exchanges have 
to nullify or adjust trades in the event of a ``verifiable disruption 
or malfunction'' in the use or operation of its systems.\4\ For this 
reason, the Exchange believes that, in the interest of maintaining a 
fair and orderly market and for the protection of investors, authority 
to nullify or adjust trades in these circumstances, consistent with the 
authority on other exchanges, is warranted.
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    \4\ See CBOE Rule 6.25.05, NASDAQ OMX PHLX, LLC (``Phlx'') Rule 
1092(k) and NYSE Arca, Inc. (``Arca'') Rule 6.89.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \6\ 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) \7\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
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    In particular, the Exchange believes that the proposed rule change 
would remove impediments to and perfect the mechanism of a free and 
open market and national market system and promote a fair and orderly 
market because it would provide authority for the Exchange to nullify 
or adjust trades that may have resulted from a verifiable systems 
disruption or malfunction. The Exchange believes that it is appropriate 
to provide the flexibility and authority provided for in the proposed 
rule so as not to limit the Exchange's ability to plan for and respond 
to unforeseen systems problems or malfunctions that may result in harm 
to the public. Allowing for the nullification or modification of 
transactions that result from verifiable disruptions and/or 
malfunctions of Exchanges systems will offer market participants on C2 
a level of relief presently not available. The Exchange notes that the 
proposed rule change is based on CBOE rules and is substantially 
similar to rules of Phlx, and Arca.

B. Self-Regulatory Organization's Statement on Burden on Competition

    C2 does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. Rather, the Exchange believes 
that the proposed rule change is pro-competitive because it will align 
the Exchange's rules with the rules of other markets, including CBOE, 
Arca, and Phlx. By adopting the proposed rule, the Exchange will be in 
a position to treat transactions that are a result of a verifiable 
systems issue or malfunction in a manner similar to other exchanges.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    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 \8\ and 
Rule 19b-4(f)(6) \9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and the text of 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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[[Page 45008]]

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-C2-2015-018 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-C2-2015-018. 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 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-C2-2015-018, and should be 
submitted on or before August 18, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18538 Filed 7-27-15; 8:45 am]
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