[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34429-34431]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14074]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67134; File No. SR-C2-2012-018]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated:
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding the Approval of Trading Permit Holders
June 5, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on June 5, 2012,
C2 Options Exchange, Incorporated (``C2'' or the ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by C2. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Pursuant to the provisions of Section 19(b)(1) of the Securities
Exchange Act of 1934 (the ``Act''),\1\ the Exchange proposes to
temporarily suspend the requirements of C2 Rule 3.1 and related C2
rules concerning the approval of new Permit Holders in order to approve
Apex Clearing, Inc., f/k/a Ridge Clearing and Outsourcing Solutions,
Inc. (``Apex Clearing'') as a C2 Permit Holder, subject to Apex
Clearing complying with Exchange rules for a new Permit Holder within
30 calendar days of the date that Apex Clearing is provisionally
approved as a C2 Permit Holder. The Exchange is also proposing to
accept Apex Clearing's assumption of all of the existing clearing
agreements and arrangements currently in effect between Penson
Financial Services Inc. (``PFSI'') and various other C2 Permit Holders
by execution of a global agreement thereto. The text of the proposed
rule change is available on the Exchange's Web site (http://www.C2exchange.com), at the Exchange's Office of the Secretary and at
the Commission.
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\1\ 15 U.S.C. 78s(b)(1).
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II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, C2 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. C2 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 proposes this rule filing to temporarily suspend the
requirements of C2 Rule 3.1 and related rules regarding the approval of
Permit Holders in order to immediately approve Apex Clearing as a C2
Permit Holder. The Exchange proposes this temporary suspension on an
emergency basis to ensure that Apex Clearing can continue the clearing
operations of PFSI without unnecessary disruption, which could have a
significant collateral impact to a number of other Permit Holders. The
proposed temporary suspension is contingent upon Apex having complied
with all new Permit Holder Exchange rules within 30 calendar days of
the date Apex is provisionally approved as a C2 Permit Holder pursuant
to this filing.
On May 31, 2012, Apex Clearing Holdings, LLC (``Apex Holdings''),
Apex Clearing Solutions, LLC, Broadridge Financial Solutions, Inc.
(``Broadridge''), PFSI and Penson Worldwide, Inc. (``PWI'') (together,
the ``Parties'') consummated a transaction resulting in a change in
ownership of Apex Clearing.\2\ Broadridge, Apex Holdings, PWI and PFSI
each made capital investments in Apex Holdings, the holding company
parent of Apex Clearing. PFSI also assigned all of its U.S. clearing
contracts and all customer and introducing broker proprietary
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accounts along with key personnel to Apex Clearing (the ``Transferring
Accounts'').\3\
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\2\ Prior to the Transaction, Apex Clearing's name was Ridge
Clearing & Outsourcing Solutions, Inc. Prior to the transaction,
Ridge Clearing & Outsourcing Solutions, Inc. contributed its
outsourcing operations and all associated personnel and systems to
its affiliated entity, Broadridge Securities Processing Solutions,
LLC (``BSPS'') where it will continue to provide operations support
and outsourcing services to a number of broker-dealers, including
Apex Clearing.
\3\ See Penson Worldwide, Inc. Form 8-K dated May 31, 2012.
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As a result of the transaction, Apex Clearing, which is not a C2
Permit Holder, will provide the clearing and execution services
currently provided to the Transferring Accounts by PFSI. On May 31,
2012, Apex Clearing submitted an application for approval as a C2
Permit Holder. However, because of the expedited nature of the
transaction, Apex Clearing was unable to fully comply with C2 Rule 3.1
and related new Permit Holder rules. Because of the need for seamless
continuity with respect to the Transferring Accounts, Apex Clearing has
requested that the Exchange temporarily suspend its rules applicable to
new Permit Holders in order to enable Apex Clearing's approval as a
Permit Holder on an expedited basis. Pursuant to its request, Apex
Clearing will fully comply with the Exchange's new Permit Holder
requirements within 30 calendar days after the provisional approval.
C2 Rule 3.1 sets forth the application process for becoming a C2
Permit Holder, including the requirements for Trading Permit Holders at
the Chicago Board Options Exchange, Incorporated (``CBOE''). A CBOE
Trading Permit Holder in good standing is eligible to receive one
Trading Permit. CBOE Trading Permit Holder applicants are not required
to complete and submit an Exchange application but are instead required
to complete and submit only Exchange forms concerning electing to trade
on the Exchange, submitting to Exchange jurisdiction and operational
matters need to be completed and tendered.
C2 Rule 3.1 requires non-CBOE Trading Permit Holders to submit,
among other things, (i) an application in accordance with such
procedures as shall be established by the Exchange and (ii) any
additional information requested by the Exchange in connection with the
Exchange's review of the application. The Exchange may approve an
application submitted pursuant to C2 Rule 3.1 only if any investigation
has been completed, and any applicable orientation and/or exam
requirements established by the Exchange have been satisfied.
In addition, the Exchange reviews whether the applicant meets
federal and C2 capital requirements and whether it has adopted controls
and procedures to comply with Exchange rules.
Due to the amount of information an applicant is required to
provide and have completed prior to being approved as a Permit Holder,
the Permit Holder approval process generally takes several weeks to
complete. The length of time varies based on the timing of the
applicant's response to requests for information and documentation.
As proposed, Apex Clearing will continue the clearing and certain
other operations of PFSI as of June 6, 2012. In order to avoid
interruption of the services PFSI currently provides to other Exchange
Permit Holders, C2 believes that Apex Clearing should be approved
immediately as a C2 Permit Holder. The Exchange notes that Apex
Clearing is already a registered broker dealer and FINRA member.
The Exchange therefore proposes providing Apex Clearing with a
temporary suspension of C2 Rule 3.1 and any additional rules as they
relate to approval to operate a C2 Permit Holder and approval of a
proposed Permit Holder's associated persons (as applicable), and
immediately approve Apex as a Permit Holder. As proposed this temporary
suspension is contingent upon:
Apex providing the Exchange with sufficient information to
confirm that Apex will meet its capital requirements as a C2 Permit
Holder; and
Within 30 calendar days of Apex Clearing's provisional
approval as a C2 Permit Holder under this proposed filing, Apex
Clearing and its approved persons will have complied with the
Exchange's requirements for new Permit Holders as set forth in C2 Rule
3.1 and any additional rules related to the approval to operate a C2
Permit Holder and approval of a proposed Permit Holder's associated
persons (as applicable).
As proposed, if Apex Clearing does not comply with all applicable
C2 Permit Holder application requirements within 30 calendar days of
the date of the provisional approval, its status as an approved C2
Permit Holder will no longer be effective.
In addition, the Exchange proposes to permit Apex Clearing to
assume all existing clearing agreements and arrangements currently in
effect with other C2 Permit Holders by execution of global agreements
thereto. Notice of such assumption will be provided to impacted Trading
Permit Holders through issuance of an Information Circular prior to the
effective date thereof.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
Section 6(b) \4\ of the Securities Exchange Act of 1934 (the ``Act''),
in general, and furthers the objectives of Section 6(b)(5) \5\ in
particular in that it is 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. The Exchange believes that
permitting the expeditious approval of Apex Clearing as a C2 Permit
Holder will avoid interruption of the services PFSI currently provides
to other Exchange Permit Holders. Based on information and
representations provided by Apex Clearing, a temporary suspension of
certain C2 rules related to the approval of a Permit Holder is needed
based on the expedited nature of the transaction to enable seamless
continuity with respect to the transferring accounts. Consequently, C2
believes that temporary suspension of these requirements so that Apex
can be approved immediately as a C2 Permit Holder will help to foster
cooperation and coordination with persons engaged in facilitating
transactions in securities and is consistent with the Act.
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\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
C2 does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \6\ and Rule 19b-4(f)(6) thereunder.\7\
Because the 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 prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if
[[Page 34431]]
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 \8\ and Rule 19b-4(f)(6)(iii) thereunder.\9\
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\6\ 15 U.S.C. 78s(b)(3)(A)(iii).
\7\ 17 CFR 240.19b-4(f)(6).
\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 240.19b-4(f)(6)(iii). 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 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 Commission is waiving this five-day pre-filing
requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) \10\ normally
does not become operative prior to 30 days after the date of the
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\11\ the Commission
may designate a shorter time if such action is consistent with the
protection of investors and the public interest.
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\10\ 17 CFR 240.19b-4(f)(6).
\11\ 17 CFR 240.19b-4(f)(6)(iii).
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The Exchange has asked the Commission to waive the five-day pre-
filing requirement and the 30-day operative delay so that the proposed
rule change may become operative immediately upon filing. The
Commission notes that the Exchange is proposing that certain of its
rules relating to membership requirements be temporarily suspended so
that Apex Clearing can be provisionally approved as a C2 Trading Permit
Holder. The proposed relief does not exempt Apex Clearing from Exchange
rule requirements governing C2 Trading Permit Holders. Apex Clearing
would have a 30 calendar day grace period within which to apply for and
be approved under relevant Exchange rules. Moreover, the Commission
believes that waiver of the 30-day operative delay is appropriate to
ensure a smooth transition of PFSI operations to Apex Clearing. In
particular, given the rapidity with which events have developed, waiver
of the 30-day operative delay is necessary to avoid significant
disruption to PFSI's existing customers and the market generally.
Therefore, the Commission believes that waiving the 30-day operative
delay is consistent with the protection of investors and the public
interest and designates the proposed rule change as operative upon
filing.\12\
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\12\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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 shall institute proceedings to
determine whether the proposed rule 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-C2-2012-018 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-C2-2012-018. 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 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-C2-2012-018 and should be
submitted on or before July 2, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14074 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P