Document ID: SEC-2012-0905-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: C2 Options Exchange, Inc.
Posted Date: 2012-06-11T04:00Z

[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34429-34431]
From the Federal Register Online via the Government Printing 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

[[Page 34430]]

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 rule-comments@sec.gov. 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