Document ID: SEC-2012-0903-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Chicago Stock Exchange, Inc.
Posted Date: 2012-06-11T04:00Z

[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34422-34424]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14078]

[[Page 34422]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67138; File No. SR-CHX-2012-10]

Self-Regulatory Organizations; Chicago Stock Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change to Temporarily Suspend the Requirements of CHX Article 3, 
Rule 3 and Related CHX Rules in Order to Approve Apex Clearing 
Corporation as a CHX Participant and Trading Permit Holder

June 5, 2012.
    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 June 5, 2012, the Chicago Stock Exchange, Incorporated 
(``Exchange'' or ``CHX'') 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 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\ which renders the proposal 
effective upon receipt of this filing by the Commission. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to temporarily suspend the requirements of 
CHX Article 3, Rule 3 and related CHX rules concerning the approval of 
new Participants and Trading Permit holders (``TPHs'') in order to 
approve Apex Clearing Corporation, f/k/a Ridge Clearing and Outsourcing 
Solutions, Inc. (``Apex Clearing''), as a CHX Participant and TPH. The 
text of this proposed rule change is available on the Exchange's Web 
site at (www.chx.com), at the Exchange's Office of the Secretary and in 
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 CHX included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received regarding the proposal. The text of 
these statements may be examined at the places specified in Item IV 
below. The CHX 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
    Through this rule filing, CHX proposes to temporarily suspend the 
requirements of CHX Article 3, Rule 3 and related rules as it pertains 
to the application approval process of a CHX Participant \5\ and TPH 
\6\ in order to immediately approve Apex Clearing.\7\ The Exchange 
proposes this temporary suspension on an emergency basis to ensure that 
Apex Clearing can continue the clearing and execution operations of 
Penson Financial Services Inc. (``PFSI'') without unnecessary 
disruption and to limit any significant collateral impact to a number 
of other CHX Participants. The proposed temporary suspension is 
contingent upon Apex Clearing having complied with all Exchange rules 
related to new Participant and TPH applicants within 30 calendar days 
of the date Apex Clearing is provisionally approved as a Participant 
and TPH pursuant to this filing.
---------------------------------------------------------------------------

    \5\ A ``Participant'' means any Participant Firm that holds a 
valid CHX Trading Permit and any person associated with a 
Participant Firm who is registered with the Exchange under Articles 
16 and 17 as a Market Maker Trader or Institutional Broker 
Representative, respectively. A Participant shall be considered a 
``member'' of the Exchange for purposes of the Exchange Act. If a 
Participant is not a natural person, the Participant may also be 
referred to as a ``Participant Firm,'' but unless the context 
requires otherwise, the term Participant shall refer to an 
individual Participant and/or a Participant Firm (See CHX Article 1, 
Rule 1(s)).
    \6\ A ``Trading Permit'' means a permit issued by the Exchange, 
granting the holder a revocable license to execute approved 
securities transactions through the Exchange's Trading Facilities, 
or to have those transactions executed on its behalf (See CHX 
Article 1, Rule 1(aa)).
    \7\ Pursuant to CHX rules, each clearing firm must be a 
Participant of the Exchange (See CHX Article 21, Rule 1(b)).
---------------------------------------------------------------------------

    On May 31, 2012, Apex Clearing Holdings, LLC (``Apex Holdings''), 
Apex Clearing Solutions, 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.\8\ 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 accounts 
along with key personnel to Apex Clearing (the ``Transferring 
Accounts'').\9\
---------------------------------------------------------------------------

    \8\ 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.
    \9\ See Penson Worldwide, Inc. Form 8-K dated May 31, 2012.
---------------------------------------------------------------------------

    As a result of the transaction, Apex Clearing, which is not a CHX 
Participant and TPH, 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 CHX 
Participant and TPH. However, because of the expedited nature of the 
transaction, Apex Clearing was unable to fully comply with CHX Article 
3, Rule 3 and related new Participant/TPH rules. Because of the need 
for seamless continuity with respect to the Transferring Accounts, Apex 
Clearing has requested that the Exchange temporarily suspend its new 
Participant/TPH rules in order to enable Apex Clearing's approval as a 
Participant Firm and TPH on an expedited basis. Pursuant to its 
request, Apex Clearing will fully comply with the Exchange's new 
Participant/TPH requirements within 30 calendar days after provisional 
approval.
    CHX Article 3, Rule 3 requires that an application for a new 
Participant and TPH be made in writing and filed with the Exchange. As 
part of the process, applications must be made in accordance with 
Article 3, Rule 3, and the applicant must provide, among other things, 
the following:
     Written Application for Registration
     Cover Letter: Indicating how and what the TPH will be used 
for, signed by a principal officer, general partner, or managing member 
of the firm.
     For Partnerships: Executed or certified copy of 
Partnership Agreement and all amendments thereto.
     For Corporations: Copy of Articles of Incorporation, and 
all amendments thereto, certified by the corporation's secretary; copy 
of By-Laws, and all amendments thereto, certified by the corporation's 
secretary; and certified copy of resolution authorizing registration of 
the corporation as a Participant.

[[Page 34423]]

     For Limited Liability Companies: Operation Agreement and 
Articles of Organization or Certificate of Formation.
     For all Applicants: Current executed Statement of 
Financial Condition and attached balance sheet pursuant to SEC Exchange 
Act Rule 15b1-2; Copies of FOCUS Part II or Part IIA Reports for the 
most recent 6 month period; Copy of most recent Confidential Annual CPA 
Audit prepared by firm's independent accountant; Executed copy of 15b1-
2 Information Sheet, Designation of Recipient For Service of Notice, 
Executed and notarized copy of Form BD (SEC registration statement), 
and amendments; names of subordinated lenders, if any; complete Forms 
U-4 for all general partners, members of principal officers of 
designated members (only page 2 of form U-4 for members designated to 
other SRO's).
     If CHX is not the DEA for the Applicant: A copy of letter 
from the Applicant to their DEA, granting the DEA permission to provide 
information to the CHX, pursuant to their application for a trading 
permit.
     If Applicant is a FINRA Member: A copy of the FINRA 
Membership Agreement.
    In addition, the Exchange reviews whether the applicant meets 
federal and CHX capital requirements and whether it has adopted 
controls and procedures to comply with Exchange rules.
    Due to the amount of information an applicant is generally required 
to provide and have completed prior to being approved as a Participant 
and TPH, the application approval process generally takes a few 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 execution 
operations of PFSI as of the open of trading on June 6, 2012. In order 
to avoid interruption of these services PFSI currently provides, CHX 
believes that Apex Clearing should be approved immediately as a CHX 
Participant and TPH. The Exchange therefore proposes providing Apex 
Clearing with a temporary suspension of CHX Article 3, Rule 3 and other 
relevant rules as they relate to approval to operate as a CHX 
Participant and TPH and immediately approve Apex Clearing as a 
Participant and TPH. As proposed this temporary suspension is 
contingent upon:
     Apex Clearing providing the Exchange with sufficient 
information to confirm that Apex Clearing will meet its capital 
requirements as a CHX Participant and TPH; and
     Within 30 calendar days of Apex Clearing's approval as a 
Participant and TPH under this proposed filing, Apex Clearing and its 
approved persons will have complied with the Exchange's new 
Participant/TPH application rules and policies.
    As proposed, if Apex Clearing does not comply with all applicable 
CHX Participant/TPH requirements within the aforementioned 30-day 
timeframe, its status as an approved CHX Participant and TPH 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 CHX Participants by execution of global agreements 
thereto. Notice of such assumption will be provided to the impacted 
Participants through the issuance of CHX Information Memorandums prior 
to the effective date thereof.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \10\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \11\ 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 CHX 
Participant and TPH will, among other things, avoid interruption of the 
services PFSI currently provides to other Exchange Participants. Based 
on information and representations provided by Apex Clearing, a 
temporary suspension of certain CHX Participant/TPH application rules 
is necessary based on the expedited nature of the transaction to ensure 
a seamless continuity with respect to the transferring accounts. 
Consequently, CHX believes a temporary suspension of its Participant/
TPH application rule requirements so that Apex Clearing can be approved 
immediately as CHX Participant and TPH will help foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities and is consistent with the Act.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f(b).
    \11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange 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.

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

    No written comments were either solicited or received.

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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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 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 \14\ and Rule 19b-
4(f)(6)(iii) thereunder.\15\
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \16\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\17\ the Commission 
may designate a shorter time if such action is consistent with the 
protection of investors and the public interest.
---------------------------------------------------------------------------

    \16\ 17 CFR 240.19b-4(f)(6).
    \17\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    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

[[Page 34424]]

as a CHX Participant and TPH. The proposed relief does not exempt Apex 
Clearing from Exchange rule requirements governing Participants and 
TPHs. 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.\18\
---------------------------------------------------------------------------

    \18\ 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).
---------------------------------------------------------------------------

    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-CHX-2012-10 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-CHX-2012-10. 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-CHX-2012-10 and should be 
submitted on or before July 2, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14078 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P