Document ID: SEC-2012-0909-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BOX Options Exchange LLC
Posted Date: 2012-06-11T04:00Z

[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34438-34441]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14070]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67130; File No. SR-BOX-2012-006]

Self-Regulatory Organizations; BOX Options Exchange LLC; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Temporarily Suspend Certain Exchange Rules Concerning Approval of a New 
Options Participant

June 5, 2012.
    Pursuant to Section 19(b)(1) under the Securities Exchange Act of 
1934 (the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on June 5, 2012, BOX Options Exchange LLC (the ``Exchange'') 
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 
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 filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    BOX Options Exchange LLC (the ``Exchange'') is proposing to 
temporarily suspend the requirements of Exchange Rule 2050 and related 
Exchange rules concerning the approval of new Options Participants in 
order to approve Apex Clearing Corporation, f/k/a Ridge Clearing and 
Outsourcing Solutions, Inc. (``Apex Clearing'') as an Options 
Participant on BOX Market LLC, an options trading facility of the 
Exchange (``BOX''), subject to Apex Clearing complying with Exchange 
rules for a new Options Participant within 30 calendar days of the date 
that Apex Clearing is provisionally approved as an Options Participant. 
The Exchange is

[[Page 34439]]

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 
Options Participants by execution of a global agreement thereto. A copy 
of this filing is available on the Exchange's Web site at 
www.boxexchange.com, at the Exchange's principal office, 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 proposes this rule filing to temporarily suspend the 
requirements of Exchange Rule 2050 and related rules regarding the 
approval of BOX Options Participants in order to immediately approve 
Apex Clearing as a BOX Options Participant. 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 Options Participants. The proposed temporary suspension 
is contingent upon Apex having complied with all Exchange Rules for a 
new BOX Options Participant within 30 calendar days of the date Apex 
Clearing is provisionally approved as a BOX Options Participant 
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.\5\ 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'').\6\
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    \5\ 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.
    \6\ 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 BOX 
Options Participant, 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 BOX 
Options Participant. However, because of the expedited nature of the 
transaction, Apex Clearing was unable to fully comply with Exchange 
Rule 2050 and related rules applicable to new BOX Options Participants. 
Because of the need for seamless continuity with respect to the 
Transferring Accounts, Apex Clearing has requested that the Exchange 
temporarily suspend its new Options Participant rules in order to 
enable Apex Clearing's approval as a BOX Options Participant on an 
expedited basis. Pursuant to its request, Apex Clearing will fully 
comply with the Exchange's new Options Participant requirements within 
30 calendar days after the provisional approval.
    Exchange Rule 2050 requires any applications for status as an 
Options Participant to be made to the Exchange and to contain such 
information as may be required by the Exchange rules. When a corporate 
acquisition concerns an asset transfer only, and not an acquisition of 
the corporate entity, BOX Options Participant status cannot be 
transferred to the acquiring entity. The entity that proposes to 
continue acquired business operations of a BOX Options Participant must 
be separately approved as a BOX Options Participant.
    Among other things, to be approved as a BOX Options Participant, 
the applicant must provide:
     An agreement for the applicant to be regulated by the 
Exchange and recognize that the Exchange is obligated to undertake to 
enforce compliance with the provisions of the Exchange Rules, its By-
Laws, its interpretations and policies and with the provisions of the 
Act and regulations thereunder (Exchange Rule 2010).
     A written application with the name and address of the 
applicant as well as an organizational chart and a description of the 
applicant's proposed activities on BOX.
     A list and descriptive identification of those persons 
associated with the applicant who are its executive officers, 
directors, principal shareholders, and general partners (Exchange Rule 
2050(g)).
     An agreement to maintain and make available to the 
Exchange such books and records as may be required to be maintained by 
the Commission or the Exchange Rules (Exchange Rule 2050(a)).
     Such other reasonable information with respect to the 
applicant as the Exchange may require.
    In addition, the Exchange reviews whether the applicant meets 
federal and Exchange 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 an Options 
Participant, the 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 BOX 
Options Participants, the Exchange believes that Apex Clearing should 
be approved immediately as a BOX Options Participant. The Exchange 
notes that Apex Clearing is already a registered broker dealer and 
FINRA member, which are two characteristics that make Apex Clearing 
eligible for becoming a BOX Options Participant. See Exchange Rule 
2020(a).
    The Exchange therefore proposes providing Apex Clearing with a 
temporary suspension of Exchange Rule 2050 and other rules related to 
approval of status as a BOX Options Participant and approval of a 
proposed Options Participant's associated persons, and immediately 
approving Apex Clearing as a BOX Options Participant. 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 BOX Options Participant; and

[[Page 34440]]

     Within 30 calendar days of Apex Clearing's approval as a 
BOX Options Participant under this proposed filing, Apex Clearing and 
its associated persons will have complied with the Exchange's new 
Options Participant requirements as set forth in BOX Rules 2000 Series.
    As proposed, if Apex Clearing does not comply with all applicable 
BOX Options Participant application requirements within 30 calendar 
days of the effective date of this filing, its status as an approved 
BOX Options Participant 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 BOX Options Participants by execution of global 
agreements thereto. Notice of such assumption will be provided to 
impacted Options Participants through issuance of a Regulatory Circular 
prior to the effective date thereof.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \7\ of the Securities Exchange Act of 1934 (the ``Act''), 
in general, and furthers the objectives of Section 6(b)(5) \8\ 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 BOX Options 
Participant will avoid interruption of the services PFSI currently 
provides to other BOX Options Participants. Based on information and 
representations provided by Apex Clearing, a temporary suspension of 
certain Exchange rules is needed based on the expedited nature of the 
transaction to enable seamless continuity with respect to the 
transferring accounts. Consequently, the Exchange believes that 
temporary suspension of its requirements for the applications and 
approval of new BOX Options Participants so that Apex Clearing can be 
approved immediately as a BOX Options Participant 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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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe the proposed rule change will impose 
any burden on competition 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

    The Exchange has neither solicited nor received written comments on 
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 \9\ and Rule 19b-4(f)(6) thereunder.\10\ 
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 \11\ and Rule 19b-
4(f)(6)(iii) thereunder.\12\
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    \9\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \10\ 17 CFR 240.19b-4(f)(6).
    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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) \13\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\14\ 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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    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 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 BOX Options 
Participant. The proposed relief does not exempt Apex Clearing from 
Exchange rule requirements governing Options Participants. 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.\15\
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    \15\ 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-BOX-2012-006 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-BOX-2012-006. This 
file

[[Page 34441]]

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-BOX-2012-006 and should be 
submitted on or before July 2, 2012.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14070 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P