[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34436-34438]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14071]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67131; File No. SR-ISE-2012-51]


Self-Regulatory Organizations; International Securities Exchange, 
LLC; Notice of Filing of Proposed Rule Change To Temporarily Suspend 
the Requirements of ISE Rule 306 and Related ISE Rules Concerning the 
Approval of New Members of the Exchange

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 International Securities Exchange, LLC (the 
``Exchange'' or the ``ISE'') 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 the self-
regulatory organization. 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.
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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 
ISE Rule 306 and related ISE rules concerning approval of new member 
organizations in order to approve Apex Clearing Corporation, f/k/a 
Ridge Clearing and Outsourcing Solutions, Inc. (``Apex Clearing'') as 
an ISE member organization, 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 as an ISE member 
organization. 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 ISE member organizations by execution of a global 
agreement thereto.
    The text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.ise.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 these statements may be examined at 
the places specified in Item IV below. The self-regulatory organization 
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 ISE Rule 306 and related rules regarding the approval 
of Members of the Exchange in order to immediately approve Apex 
Clearing as an ISE Member. 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 Members. The proposed temporary suspension is 
contingent upon Apex having complied with all new Member Exchange rules 
within 30 calendar days of the date Apex is provisionally approved as 
an ISE Member 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.\3\ 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

[[Page 34437]]

Apex Clearing (the ``Transferring Accounts'').\4\
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    \3\ 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.
    \4\ 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 an ISE 
member organization, will provide the clearing services currently 
provided to the Transferring Accounts by PFSI. On May 31, 2012, Apex 
Clearing submitted an application for approval as an ISE Member. 
However, because of the expedited nature of the transaction, Apex 
Clearing was unable to fully comply with ISE Rule 306 and related new 
Member 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 rules in order to 
enable Apex Clearing's approval as a Member on an expedited basis. 
Pursuant to its request, Apex Clearing will fully comply with the 
Exchange's new member requirements within 30 calendar days of 
provisional approval.
    ISE Rule 306 requires any person who proposes to apply to become a 
Member of the Exchange to file an application with the Exchange submit 
such information as may be required by the application and related ISE 
rules. When a corporate acquisition concerns an asset transfer only, 
and not an acquisition of the corporate entity, ISE membership status 
cannot be transferred to the acquiring entity. The entity that proposes 
to continue acquired business operations of an ISE Member must be 
separately approved as an ISE Member.
    Among other things, to be approved as an ISE Member, the applicant 
must:
     File with the Exchange an application and all documents 
requested therein pursuant to ISE Rule 306.
     Ensure that all persons associated with the applicant who 
meet the requirements of persons associated with Members under ISE Rule 
304, consent to ISE jurisdiction as a Member or associated person.
     Submit to the Exchange partnership or corporate documents 
as may be applicable including certificate of incorporation, by-laws, 
and other corporate documents pursuant to ISE Rule 305.
    In addition, the Exchange reviews whether the applicant meets 
federal and ISE 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 Member, the 
Member 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 
Members, the ISE believes that Apex Clearing should be approved 
immediately as an ISE Member. The Exchange notes that Apex Clearing is 
already a registered broker dealer, a FINRA member and an OCC clearing 
member, which is a prerequisite for becoming an ISE member organization 
that is approved to clear transactions executed on the Exchange.
    The Exchange therefore proposes providing Apex Clearing with a 
temporary suspension of ISE Rule 306 and related membership rules as 
they relate to approval to operate an ISE Member and approval of a 
proposed Member's associated persons, and immediately approve Apex 
Clearing as a Member. 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 ISE Member; and
     Within 30 calendar days of Apex Clearing's approval as an 
ISE Member under this proposed filing, Apex Clearing and its approved 
persons will have complied with the Exchange's new member organization 
requirements as set forth in ISE Rules 304-306.
    As proposed, if Apex Clearing does not comply with all applicable 
ISE member organization application requirements within 30 calendar 
days of the effective date of this filing, its status as an approved 
ISE Member 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 ISE Members by execution of global agreements 
thereto. Notice of such assumption will be provided to impacted Members 
via email.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \5\ of the Act, in general, and furthers the objectives of 
Section 6(b)(5) \6\ 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 ISE Member will avoid interruption of the services PFSI currently 
provides to other Exchange Members. Based on information and 
representations provided by Apex Clearing, a temporary suspension of 
certain ISE membership rules is needed based on the expedited nature of 
the transaction to enable seamless continuity with respect to the 
transferring accounts. Consequently, the ISE believes that temporary 
suspension of its Member requirements so that Apex Clearing can be 
approved immediately as an ISE Member 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not 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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from members or other interested 
parties.

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 \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
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)

[[Page 34438]]

of the Act \9\ and Rule 19b-4(f)(6)(iii) thereunder.\10\
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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) \11\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\12\ 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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    \11\ 17 CFR 240.19b-4(f)(6).
    \12\ 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 an ISE Member. The 
proposed relief does not exempt Apex Clearing from Exchange rule 
requirements governing Members. 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.\13\
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    \13\ 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-ISE-2012-51 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-ISE-2012-51. 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-ISE-2012-51 and should be 
submitted on or before July 2, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14071 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P