80_FR_79035 80 FR 78793 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Order Granting Approval of a Proposed Rule Change Relating to Complex Orders as Modified by Amendment No. 1

80 FR 78793 - Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Order Granting Approval of a Proposed Rule Change Relating to Complex Orders as Modified by Amendment No. 1

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 242 (December 17, 2015)

Page Range78793-78794
FR Document2015-31681

Federal Register, Volume 80 Issue 242 (Thursday, December 17, 2015) 
[Federal Register Volume 80, Number 242 (Thursday, December 17, 2015)]
[Notices]
[Pages 78793-78794]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-31681]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76621; File No. SR-C2-2015-025]


Self-Regulatory Organizations; C2 Options Exchange, Incorporated; 
Order Granting Approval of a Proposed Rule Change Relating to Complex 
Orders as Modified by Amendment No. 1

December 11, 2015.

I. Introduction

    On October 13, 2015, C2 Options Exchange, Incorporated (the 
``Exchange'' or ``C2'') filed with the Securities and Exchange 
Commission (the ``Commission''), pursuant to Section 19(b)(1) of the 
Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and 
Rule 19b-4 thereunder,\2\ a proposed rule change to: (1) Amend the rule 
provisions regarding the initiation of a complex order auction 
(``COA''), (2) add rule provisions regarding the impact of certain 
incoming orders and changes in the leg markets on an ongoing COA, and 
(3) amend the rule provision related to the size of COA responses. On 
October 26, 2015, the Exchange submitted Amendment No. 1 to the 
proposed rule change. The proposed rule change, as modified by 
Amendment No. 1, was published for comment in the Federal Register on 
November 2, 2015.\3\ The Commission received no comments on the 
proposal. This order grants approval of the proposed rule change, as 
modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No.76274 (October 27, 
2015), 80 FR 67446 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to amend C2 Rule 6.13 and Interpretation and 
Policy .02 regarding the initiation of a COA. Currently, C2 
Participants must affirmatively request that their incoming COA-
eligible orders be COA'd.\4\ The Exchange proposes to amend C2 Rule 
6.13(c)(2) to provide that COA-eligible orders be COA'd by default.\5\ 
Under the proposed rule, Participants would be permitted to request 
that a COA-eligible order not COA (referred to as a ``do-not-COA'' 
request) on an order-by-order basis.\6\ The Exchange believes that 
allowing Participants to make a ``do-not-COA'' request on an order-by-
order basis will better allow them to make decisions regarding the 
handling of their orders based on market conditions at the time they 
submit their orders. An order with a ``do-not-COA'' request, however, 
may still be COA'd after it has rested on the Complex Order Book 
(``COB'') pursuant to Interpretation and Policy .02.\7\
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    \4\ See Notice, supra note 3, at 67446. The Exchange represents 
that all Participants have requested that all of their COA-eligible 
orders process through COA upon entry into the System.
    \5\ Id.
    \6\ Id. In light of this proposed change, the Exchange proposes 
to delete the language in Interpretation and Policy .02(a) that 
indicates Participants may request that complex orders be processed 
by COA on a class-by-class basis, as it is no longer necessary. Id.
    \7\ Id.
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    The Exchange notes that an order with a ``do-not-COA'' request will 
still have execution opportunities. The Exchange explains that a ``do-
not-COA'' order may execute automatically upon entry into the System 
against the leg markets or complex orders on the COB to the extent 
marketable (in accordance with allocation rules set forth in Rule 
6.13).\8\ Further, the Exchange notes that an order on the opposite 
side of, and marketable against, a COA-eligible order may trade against 
the COA-eligible order if the System receives the order while a COA is 
ongoing.\9\
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    \8\ Id. at 67447.
    \9\ Id.
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    Second, the Exchange proposes to add subparagraphs (c)(8)(D) and 
(E) to C2 Rule 6.13 to describe additional circumstances that will 
cause a COA to end early.\10\ Proposed subparagraph (c)(8)(D) will 
provide that if an order with a ``do-not-COA'' request or an order that 
is not COA-eligible is received prior to the expiration of the Response 
Time Interval for the original COA and is on the same side of the

[[Page 78794]]

market and at a price better than or equal to the starting price, then 
the original COA will end.\11\ Proposed subparagraph (c)(8)(E) will 
provide that if the leg markets were not marketable against a COA-
eligible order when the order entered the System (and thus prior to the 
initiation of a COA) but became marketable with the COA-eligible order 
prior to the expiration of the Response Time Interval, it will cause 
the COA to end.\12\ The Exchange believes that these provisions prevent 
an order that was entered after the initiation of a COA from trading 
ahead of an order with the same price that may have executed or entered 
the COB if it did not COA.\13\ Similarly, the Exchange believes it is 
fair for a COA-eligible order that was entered at a better price than 
an order that was resting in the COB prior to initiation of the COA to 
execute against leg markets that become marketable against the COA-
eligible order and resting order during the COA, because the 
Participant who entered the COA-eligible order was willing to pay a 
better price than that of the resting order.\14\
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    \10\ Id. The proposed rule change makes corresponding changes to 
the heading and introductory paragraph of subparagraph (c)(8). Id.
    \11\ Id.
    \12\ Id. at 67447-8.
    \13\ Id. at 67449.
    \14\ Id.
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    Third, the Exchange proposes to amend subparagraph (c)(3)(A) of C2 
Rule 6.13 to delete the provision that states that RFR responses are 
limited to the size of the COA-eligible order for allocation 
purposes.\15\ The Exchange explains that it is proposing this change 
because if the allocation algorithm for complex orders in a class is 
pro-rata, the System is unable to block RFR responses that are larger 
than the size of the COA-eligible order.\16\ The Exchange notes the 
pursuant to C2 Rule 6.13(c)(7), RFR responses are firm with respect to 
the COA-eligible order for which the responses are submitted, provided 
that responses that exceed the size of a COA-eligible order are also 
eligible to trade with other incoming COA-eligible orders that are 
received during the Response Time Interval.\17\
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    \15\ Id. at 67448.
    \16\ Id. The Exchange represents that this proposed rule change 
will result in the rule regarding RFR responses more accurately 
reflecting current System functionality. Id.
    \17\ Id.
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    Finally, the Exchange proposes to make technical and other 
nonsubstantive changes, which are described in the Notice.\18\
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    \18\ Id.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\19\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\20\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, 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.
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    \19\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \20\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that it is reasonable for C2 to require 
that incoming two-legged COA-eligible orders be COA'd by default unless 
a Participant requests, on an order-by-order basis, that such orders 
not COA. The Commission notes that, should a Participant not wish its 
orders to be COA'd, the proposed rule will allow the Participant to 
request that its orders not be COA'd on an order-by-order basis. In 
addition, the Commission notes that the rules of another options 
exchange provide that certain complex orders be routed to a complex 
order auction unless a member designates that such orders not initiate 
a complex order auction on that exchange.\21\
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    \21\ See NASDAQ OMX PHLX LLC (``PHLX'') Rule 1080, Commentary 
.07(a)(viii) and (e) (describing the complex order live auction 
(``COLA'') process and ``do not auction'' orders).
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    The Commission also believes that it is reasonable for the Exchange 
to add new provisions regarding how incoming orders with ``do-not-COA'' 
requests or that are not COA-eligible, as well as how changes in the 
leg markets, may impact ongoing COAs. Such additions enhance the 
description of current COA functionality and the circumstances that may 
cause a COA to end early to help ensure investors understand how ``do-
not-COA'' orders may impact a COA. As noted above, these rules provide 
that if entry of a ``do-not-COA'' order causes a COA to end, any 
executions that occur following the COA will occur in accordance with 
allocation principles in place, subject to an exception that the 
original COA-eligible order will receive time priority.
    Finally, the Commission believes it is reasonable for C2 to delete 
the provision in its Rules limiting the size of RFR responses to the 
size of the COA-eligible order. The Commission notes that other options 
exchanges do not limit the size of responses to the auctioned order 
sized.\22\
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    \22\ See id. and NYSE MKT Rule 6.80NY(e).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-C2-2015-025), as modified by 
Amendment No. 1, be, and it hereby is, approved.
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    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-31681 Filed 12-16-15; 8:45 am]
 BILLING CODE 8011-01-P

Federal Register / Vol. 80, No. 242 / Thursday, December 17, 2015 / Notices 78793 a. Are the Currency Rates calculated identifying information from II. Description of the Proposed Rule using arm’s length transactions and, if submissions. You should submit only Change so, are such transactions verified, and information that you wish to make The Exchange proposes to amend C2 how? If quotes are used to calculate the available publicly. All submissions Rule 6.13 and Interpretation and Policy Currency Rates, are those arm’s length should refer to File Number SR– .02 regarding the initiation of a COA. quotes firm? NYSEArca–2015–76 and should be Currently, C2 Participants must b. What concerns, if any, do submitted on or before January 7, 2016. affirmatively request that their incoming commenters have regarding the Index’s Rebuttal comments should be submitted COA-eligible orders be COA’d.4 The susceptibility to manipulation? Exchange proposes to amend C2 Rule by January 21, 2016. 4. Are the requirements of NYSE Arca 6.13(c)(2) to provide that COA-eligible Equities Rule 8.201(g) adequate to allow For the Commission, by the Division of orders be COA’d by default.5 Under the the Exchange to fulfill its regulatory Trading and Markets, pursuant to delegated authority.26 proposed rule, Participants would be obligations or, in light of the Shares’ permitted to request that a COA-eligible exposure to the Reference Currencies, Robert W. Errett, order not COA (referred to as a ‘‘do-not- should those requirements be expanded Deputy Secretary. COA’’ request) on an order-by-order to also apply to market makers’ trading [FR Doc. 2015–31680 Filed 12–16–15; 8:45 am] basis.6 The Exchange believes that accounts for all of the applicable non- BILLING CODE 8011–01–P allowing Participants to make a ‘‘do-not- U.S. currencies, options, futures or COA’’ request on an order-by-order options on futures on such currencies, basis will better allow them to make or any other derivatives based on such SECURITIES AND EXCHANGE decisions regarding the handling of their currencies? Comments may be submitted by any COMMISSION orders based on market conditions at the of the following methods: time they submit their orders. An order [Release No. 34–76621; File No. SR–C2– with a ‘‘do-not-COA’’ request, however, Electronic Comments 2015–025] may still be COA’d after it has rested on • Use the Commission’s Internet the Complex Order Book (‘‘COB’’) comment form (http://www.sec.gov/ Self-Regulatory Organizations; C2 pursuant to Interpretation and Policy rules/sro.shtml); or Options Exchange, Incorporated; .02.7 • Send an email to rule-comments@ Order Granting Approval of a The Exchange notes that an order sec.gov. Please include File Number SR– with a ‘‘do-not-COA’’ request will still Proposed Rule Change Relating to NYSEArca–2015–76 on the subject line. have execution opportunities. The Complex Orders as Modified by Exchange explains that a ‘‘do-not-COA’’ Paper Comments Amendment No. 1 order may execute automatically upon • Send paper comments in triplicate December 11, 2015. entry into the System against the leg to Secretary, Securities and Exchange markets or complex orders on the COB Commission, 100 F Street NE., I. Introduction to the extent marketable (in accordance Washington, DC 20549–1090. with allocation rules set forth in Rule On October 13, 2015, C2 Options 6.13).8 Further, the Exchange notes that All submissions should refer to File Exchange, Incorporated (the ‘‘Exchange’’ Numbers SR–NYSEArca–2015–76. This an order on the opposite side of, and or ‘‘C2’’) filed with the Securities and marketable against, a COA-eligible order file number should be included on the Exchange Commission (the may trade against the COA-eligible subject line if email is used. To help the ‘‘Commission’’), pursuant to Section order if the System receives the order Commission process and review your 19(b)(1) of the Securities Exchange Act while a COA is ongoing.9 comments more efficiently, please use only one method. The Commission will of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Second, the Exchange proposes to add post all comments on the Commission’s Rule 19b–4 thereunder,2 a proposed rule subparagraphs (c)(8)(D) and (E) to C2 Internet Web site (http://www.sec.gov/ change to: (1) Amend the rule Rule 6.13 to describe additional rules/sro.shtml). Copies of the provisions regarding the initiation of a circumstances that will cause a COA to submission, all subsequent complex order auction (‘‘COA’’), (2) add end early.10 Proposed subparagraph amendments, all written statements rule provisions regarding the impact of (c)(8)(D) will provide that if an order with respect to the proposed rule certain incoming orders and changes in with a ‘‘do-not-COA’’ request or an change that are filed with the the leg markets on an ongoing COA, and order that is not COA-eligible is Commission, and all written (3) amend the rule provision related to received prior to the expiration of the communications relating to the the size of COA responses. On October Response Time Interval for the original proposed rule change between the 26, 2015, the Exchange submitted COA and is on the same side of the Commission and any person, other than Amendment No. 1 to the proposed rule 4 See Notice, supra note 3, at 67446. The those that may be withheld from the change. The proposed rule change, as Exchange represents that all Participants have public in accordance with the modified by Amendment No. 1, was requested that all of their COA-eligible orders provisions of 5 U.S.C. 552, will be published for comment in the Federal process through COA upon entry into the System. available for Web site viewing and Register on November 2, 2015.3 The 5 Id. 6 Id. In light of this proposed change, the printing in the Commission’s Public Commission received no comments on Exchange proposes to delete the language in Reference Room, 100 F Street NE., asabaliauskas on DSK5VPTVN1PROD with NOTICES the proposal. This order grants approval Interpretation and Policy .02(a) that indicates Washington, DC 20549, on official of the proposed rule change, as Participants may request that complex orders be business days between the hours of modified by Amendment No. 1. processed by COA on a class-by-class basis, as it is 10:00 a.m. and 3:00 p.m. Copies of these no longer necessary. Id. 7 Id. filings also will be available for 26 17 CFR 200.30–3(a)(57). 8 Id. at 67447. inspection and copying at the principal 1 15 U.S.C. 78s(b)(1). 9 Id. office of the Exchange. All comments 2 17 CFR 240.19b–4. 10 Id. The proposed rule change makes received will be posted without change; 3 See Securities Exchange Act Release No.76274 corresponding changes to the heading and the Commission does not edit personal (October 27, 2015), 80 FR 67446 (‘‘Notice’’). introductory paragraph of subparagraph (c)(8). Id. VerDate Sep<11>2014 16:53 Dec 16, 2015 Jkt 238001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\17DEN1.SGM 17DEN1

78794 Federal Register / Vol. 80, No. 242 / Thursday, December 17, 2015 / Notices market and at a price better than or consistent with the requirements of the options exchanges do not limit the size equal to the starting price, then the Act and the rules and regulations of responses to the auctioned order original COA will end.11 Proposed thereunder applicable to a national sized.22 subparagraph (c)(8)(E) will provide that securities exchange.19 In particular, the if the leg markets were not marketable Commission finds that the proposed IV. Conclusion against a COA-eligible order when the rule change is consistent with Section It is therefore ordered, pursuant to order entered the System (and thus prior 6(b)(5) of the Act,20 which requires, Section 19(b)(2) of the Act,23 that the to the initiation of a COA) but became among other things, that the rules of a proposed rule change (SR–C2–2015– marketable with the COA-eligible order national securities exchange be 025), as modified by Amendment No. 1, prior to the expiration of the Response designed to prevent fraudulent and be, and it hereby is, approved. Time Interval, it will cause the COA to manipulative acts and practices, to end.12 The Exchange believes that these promote just and equitable principles of For the Commission, by the Division of provisions prevent an order that was trade, to remove impediments to and Trading and Markets, pursuant to delegated authority.24 entered after the initiation of a COA perfect the mechanism of a free and from trading ahead of an order with the open market and a national market Robert W. Errett, same price that may have executed or system, and, in general, to protect Deputy Secretary. entered the COB if it did not COA.13 investors and the public interest. [FR Doc. 2015–31681 Filed 12–16–15; 8:45 am] Similarly, the Exchange believes it is The Commission believes that it is BILLING CODE 8011–01–P fair for a COA-eligible order that was reasonable for C2 to require that entered at a better price than an order incoming two-legged COA-eligible that was resting in the COB prior to orders be COA’d by default unless a SECURITIES AND EXCHANGE initiation of the COA to execute against Participant requests, on an order-by- COMMISSION leg markets that become marketable order basis, that such orders not COA. against the COA-eligible order and The Commission notes that, should a [Release No. 34–76626; File No. SR–CBOE– resting order during the COA, because Participant not wish its orders to be 2015–100] the Participant who entered the COA- COA’d, the proposed rule will allow the eligible order was willing to pay a better Participant to request that its orders not Self-Regulatory Organizations; price than that of the resting order.14 be COA’d on an order-by-order basis. In Chicago Board Options Exchange, Third, the Exchange proposes to addition, the Commission notes that the Incorporated; Order Granting Approval amend subparagraph (c)(3)(A) of C2 rules of another options exchange of a Proposed Rule Change, as Rule 6.13 to delete the provision that provide that certain complex orders be Modified by Amendment No. 1, To List states that RFR responses are limited to routed to a complex order auction and Trade Options That Overlie a the size of the COA-eligible order for unless a member designates that such Reduced Value of the FTSE 100 Index allocation purposes.15 The Exchange orders not initiate a complex order explains that it is proposing this change auction on that exchange.21 December 11, 2015. because if the allocation algorithm for The Commission also believes that it I. Introduction complex orders in a class is pro-rata, the is reasonable for the Exchange to add System is unable to block RFR new provisions regarding how incoming On October 30, 2015, the Chicago responses that are larger than the size of orders with ‘‘do-not-COA’’ requests or Board Options Exchange, Incorporated the COA-eligible order.16 The Exchange that are not COA-eligible, as well as (‘‘Exchange’’ or ‘‘CBOE’’) filed with the notes the pursuant to C2 Rule 6.13(c)(7), how changes in the leg markets, may Securities and Exchange Commission RFR responses are firm with respect to impact ongoing COAs. Such additions (‘‘Commission’’), pursuant to Section the COA-eligible order for which the enhance the description of current COA 19(b)(1) of the Securities Exchange Act responses are submitted, provided that functionality and the circumstances that of 1934 (‘‘Act’’) 1 and Rule 19b–4 responses that exceed the size of a COA- may cause a COA to end early to help thereunder,2 a proposed rule change to eligible order are also eligible to trade ensure investors understand how ‘‘do- list and trade options that overlie a with other incoming COA-eligible not-COA’’ orders may impact a COA. As reduced value of the FTSE 100 Index. orders that are received during the noted above, these rules provide that if The proposed rule change was Response Time Interval.17 entry of a ‘‘do-not-COA’’ order causes a published for comment in the Federal Finally, the Exchange proposes to COA to end, any executions that occur Register on November 10, 2015.3 On make technical and other following the COA will occur in December 10, 2015, the Exchange filed nonsubstantive changes, which are accordance with allocation principles in Amendment No. 1 to the proposed rule described in the Notice.18 place, subject to an exception that the change.4 This order grants approval of original COA-eligible order will receive III. Discussion and Commission time priority. 22 See id. and NYSE MKT Rule 6.80NY(e). Findings Finally, the Commission believes it is 23 15 U.S.C. 78s(b)(2). After careful review, the Commission reasonable for C2 to delete the provision 24 17 CFR 200.30–3(a)(12). finds that the proposed rule change is in its Rules limiting the size of RFR 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. responses to the size of the COA-eligible 11 Id. 3 See Securities Exchange Act Release No. 76353 order. The Commission notes that other (November 4, 2015), 80 FR 69751 (‘‘Notice’’). asabaliauskas on DSK5VPTVN1PROD with NOTICES 12 Id. at 67447–8. 4 Amendment No. 1 makes certain technical 13 Id. at 67449. 19 In approving this proposal, the Commission has 14 Id. modifications to Exhibit 5 to reflect the current considered the proposed rule’s impact on CBOE rulebook and to remove a reference to ‘‘(1/ 15 Id. at 67448. efficiency, competition, and capital formation. See 10th)’’ that was inadvertently included. It also 16 Id. The Exchange represents that this proposed 15 U.S.C. 78c(f). revises rule text to make additional technical edits. rule change will result in the rule regarding RFR 20 15 U.S.C. 78f(b)(5). As the changes made by Amendment No. 1 are responses more accurately reflecting current System 21 See NASDAQ OMX PHLX LLC (‘‘PHLX’’) Rule technical in nature and do not materially alter the functionality. Id. 1080, Commentary .07(a)(viii) and (e) (describing substance of the proposed rule change or raise any 17 Id. the complex order live auction (‘‘COLA’’) process novel regulatory issues, Amendment No. 1 is not 18 Id. and ‘‘do not auction’’ orders). subject to notice and comment. VerDate Sep<11>2014 16:53 Dec 16, 2015 Jkt 238001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\17DEN1.SGM 17DEN1


Document Created: 2018-03-02 09:19:06
Document Modified: 2018-03-02 09:19:06
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation80 FR 78793 
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