[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34445-34448]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14066]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67128; File No. SR-NYSEArca-2012-58]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Temporarily 
Suspending the Requirements of NYSE Arca Equities Rule 2.3, NYSE Arca 
Options Rule 2.4 and All Related NYSE Arca Equities and NYSE Arca 
Options Rules Concerning the Approval of New ETP Holders and OTP 
Holders in Order To Approve Apex Clearing Corporation, f/k/a Ridge 
Clearing and Outsourcing Solutions, Inc. as an NYSE Arca ETP Holder and 
OTP Holder, Subject to Apex Clearing Complying With Exchange Rules for 
a New Member Organization Within 30 Calendar Days of the Date That Apex 
Clearing Is Provisionally Approved for Membership

June 5, 2012.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on June 5, 2012, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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 self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 
NYSE Arca Equities Rule 2.3, NYSE Arca Options Rule 2.4 and all related 
NYSE Arca Equities and NYSE Arca Options rules concerning the approval 
of new ETP Holders and OTP Holders in order to approve Apex Clearing 
Corporation, f/k/a Ridge Clearing and Outsourcing Solutions, Inc. 
(``Apex Clearing'') as an NYSE Arca ETP Holder and OTP Holder, subject 
to Apex Clearing complying with Exchange rules for a new member 
organization within 30 calendar days of the date that Apex Clearing is 
provisionally approved for membership. The Exchange is also proposing 
to accept Apex Clearing's assumption of all of the existing clearing 
agreements and arrangements currently

[[Page 34446]]

in effect between Penson Financial Services Inc. (``PFSI'') and various 
other NYSE Arca ETP Holders and OTP Holders by execution of a global 
agreement thereto. The text of the proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, 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 self-regulatory organization 
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 those 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 parts 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 NYSE Arca Equities Rule 2.3, NYSE Arca Options Rule 2.4 
and all related rules regarding the approval of ETP Holders and OTP 
Holders in order to immediately approve Apex Clearing as an NYSE Arca 
ETP Holder and OTP 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 ETP Holders and OTP Holders. The proposed temporary 
suspension is contingent upon Apex Clearing having complied with all 
new ETP Holder and OTP Holder Exchange rules within 30 calendar days of 
the date Apex Clearing is provisionally approved for membership 
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.\4\ 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'').\5\
---------------------------------------------------------------------------

    \4\ 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.
    \5\ See Penson Worldwide, Inc. Form 8-K dated May 31, 2012.
---------------------------------------------------------------------------

    As a result of the transaction, Apex Clearing, which is not an NYSE 
Arca ETP Holder or OTP 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 an 
NYSE Arca ETP Holder and OTP Holder. However because of the expedited 
nature of the transaction, Apex Clearing was unable to fully comply 
with NYSE Arca Equities Rule 2.3, NYSE Arca Options Rule 2.4 and all 
related new member organization 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 membership 
organization rules in order to enable Apex Clearing's approval as an 
ETP Holder and OTP Holder on an expedited basis. Pursuant to its 
request, Apex Clearing will fully comply with the Exchange's new ETP 
Holder and OTP Holder requirements within 30 calendar days after 
provisional approval.
    NYSE Arca Equities Rule 2.3 and NYSE Arca Options Rule 2.4 require 
any person who proposes to form an ETP Holder or OTP Holder to notify 
the Exchange in writing and submit such information as may be required 
by NYSE Arca rules. When a corporate acquisition concerns an asset 
transfer only, and not an acquisition of the corporate entity, NYSE 
Arca ETP Holder or OTP Holder status cannot be transferred to the 
acquiring entity. The entity that proposes to continue the acquired 
business operations of a member organization must be separately 
approved as an NYSE Arca ETP Holder or OTP Holder.
NYSE Arca Equities
    Among other things, to be approved as an NYSE ETP Holder, the 
applicant must:
     Provide the Exchange with a written application with the 
name and address of the applicant as well as a list of all proposed 
parties required to be approved or identified pursuant to NYSE Arca 
Equities Rules 2.3 and 2.13.
     Ensure that all persons associated with the applicant who 
meet the requirements of Allied Persons and Approved Persons under NYSE 
Arca Equities Rule 1, are approved (NYSE Arca Equities Rules 2.3 and 
2.13).
     Submit to the Exchange partnership or corporate documents 
as may be applicable including certificate of incorporation, by-laws, 
and other corporate documents (NYSE Arca Equity Rules 2.3 and 2.16).
    In addition, the Exchange reviews whether the applicant meets 
federal and NYSE Arca capital requirements and whether it has adopted 
controls and procedures to comply with Exchange rules.
NYSE Arca Options
    Among other things, to be approved as an NYSE OTP Holder, the 
applicant must:
     Provide the Exchange with a written application with the 
name and address of the applicant as well as a list of all proposed 
parties required to be approved or identified pursuant to NYSE Arca 
Options Rules 2.2, 2.4 and 2.14.
     Ensure that all persons associated with the applicant who 
meet the requirements of Allied Persons and Approved Persons under NYSE 
Arca Options Rule 1.1, are approved (NYSE Arca Options Rules 2.4 and 
2.14).
     Submit to the Exchange partnership or corporate documents 
as may be applicable including certificate of incorporation, by-laws, 
and other corporate documents (NYSE Arca Options Rules 2.4 and 2.17).
    In addition, the Exchange reviews whether the applicant meets 
federal and NYSE Arca 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 ETP Holder and 
OTP Holder, the ETP Holder and OTP Holder approval process generally 
takes several months 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

[[Page 34447]]

other Exchange ETP Holders and OTP Holders, the NYSE believes that Apex 
Clearing should be approved immediately as an NYSE Arca ETP Holder and 
OTP 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 NYSE Arca Rule 2.3, NYSE Arca Options Rule 2.4 
and related membership rules as they relate to approval to operate an 
NYSE Arca ETP Holder and OTP Holder and approval of Allied Persons and 
Approved Persons, and immediately approve Apex Clearing as an ETP 
Holder and OTP Holder. 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 an NYSE Arca ETP Holder and OTP Holder; and
     Within 30 calendar days of Apex Clearing's approval as an 
NYSE Arca ETP Holder and OTP Holder under this proposed filing, Apex 
Clearing and its Allied Persons and Approved Persons will have complied 
with the Exchange's new ETP Holder and OTP Holder requirements as set 
forth in NYSE Arca Equities Rules 2.3 and 2.13 and NYSE Arca Options 
Rules 2.4 and 2.14.
    As proposed, if Apex Clearing does not comply with all applicable 
NYSE Arca ETP Holder and OTP Holder application requirements within 30 
calendar days of the effective date of this filing, its status as an 
approved NYSE ETP Holder or OTP Holder will no longer be effective.
    In addition, the Exchange proposes to accept Apex Clearing to 
assume all existing clearing agreements and arrangements currently in 
effect with other NYSE ETP Holders and OTP Holders by execution of 
global agreements thereto.\6\ Notice of such assumption will be 
provided to impacted ETP Holders and OTP Holders through issuance of a 
Trader and/or Information Notices prior to the effective date thereof.
---------------------------------------------------------------------------

    \6\ NYSE Arca Equities Rule 7.14(b) and NYSE Arca Options Rule 
6.66(a).
---------------------------------------------------------------------------

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 an NYSE Arca 
ETP Holder and OTP Holder will avoid interruption of the services PFSI 
currently provides to other Exchange ETP Holders and OTP Holders. Based 
on information and representations provided by Apex Clearing, a 
temporary suspension of certain NYSE Arca membership rules is needed 
based on the expedited nature of the transaction to enable seamless 
continuity with respect to the transferring accounts. Consequently, 
NYSE Arca believes that temporary suspension of its ETP Holder and OTP 
Holder requirements so that Apex Clearing can be approved immediately 
as an NYSE Arca ETP Holder and OTP Holder will help to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and is consistent with the Act.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 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 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 \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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6)(iii).
---------------------------------------------------------------------------

    The Exchange has asked the Commission to 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 an 
NYSE Arca ETP Holder and OTP Holder. The proposed relief does not 
exempt Apex Clearing from Exchange rule requirements governing NYSE 
Arca ETP Holders and OTP 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.\15\
---------------------------------------------------------------------------

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

    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

[[Page 34448]]

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-NYSEArca-2012-58 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-NYSEArca-2012-58. 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-NYSEArca-2012-58 and should 
be submitted on or before July 2, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14066 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P