[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34434-34436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14072]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67132; File No. SR-BATS-2012-022]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Relating 
to the Proposed Membership of Apex Clearing

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, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') 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 Exchange. 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 
Exchange Rule 2.6 and related Exchange rules concerning the approval of 
new Members \3\ of the Exchange in order to approve Apex Clearing 
Corporation, f/k/a Ridge Clearing and Outsourcing Solutions, Inc. 
(``Apex Clearing'') as an Exchange Member, subject to Apex Clearing 
complying with Exchange Rules for a new Member within 30 calendar days 
of the date that Apex Clearing is provisionally approved as an Exchange 
Member. 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 Exchange Members by execution of a global agreement 
thereto.
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    \3\ A ``Member'' is defined in Rule 2.5(n) as any registered 
broker or dealer that has been admitted to membership in the 
Exchange.
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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, 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 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 Exchange Rule 2.6 and related rules regarding the 
approval of Members in order to immediately approve Apex Clearing as an 
Exchange 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 Clearing having 
complied with all new Member Exchange Rules within 30 calendar days of 
the date Apex Clearing is provisionally approved as an Exchange 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.\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\
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    \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.
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    As a result of the transaction, Apex Clearing, which is not an 
Exchange Member, 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 
Exchange Member. However because of the expedited nature of the 
transaction, Apex Clearing was unable to fully comply with Exchange 
Rule 2.6 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 Member 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 after 
provisional approval.
    Exchange Rule 2.6 requires any person who proposes to become a 
Member of the Exchange to submit such specified agreements and 
supplementary information as may be required by the Exchange. Among 
other things, to be approved as an Exchange Member, the applicant must:
     Provide the Exchange with a written application with the 
name and address of the applicant as well an agreement to abide by, 
comply with, and adhere to the provisions of the Exchange's Rules 
(Exchange Rule 2.6);
     Submit to the Exchange partnership or corporate documents 
as may be applicable including applicable corporate formation documents 
of the applicant (Exchange Rule 2.6);
     Submit to the Exchange 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 2.6); and
     Register associated persons with the Exchange that satisfy 
the Exchange's registration requirements (Exchange Rule 2.4, 
Interpretation and Policy .01, .03).
    In addition, the Exchange reviews whether the applicant meets 
applicable net capital requirements and conducts other due diligence 
regarding an applicant. Due to the amount of information an applicant 
is required to provide and have completed prior to being approved as an 
Exchange Member, the membership approval process sometimes 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 other Exchange 
Members, the Exchange believes that Apex Clearing should be approved 
immediately as an Exchange Member. The Exchange notes that Apex 
Clearing is already a registered broker

[[Page 34435]]

dealer and FINRA member, which satisfies existing prerequisites for 
becoming an Exchange Member.\6\
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    \6\ Exchange Rule 2.3 requires registration as a broker-dealer 
and membership with at least one other registered national 
securities exchange or association.
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    The Exchange therefore proposes providing Apex Clearing with a 
temporary suspension of Exchange Rule 2.6 and related membership rules 
as they relate to approval to operate an Exchange Member, and 
immediately approving Apex Clearing as a Member. As proposed this 
temporary suspension is contingent upon Apex Clearing and its 
associated persons' compliance with the Exchange's new Member 
requirements as set forth in Chapter II of the Exchange's Rules within 
30 calendar days of Apex Clearing's approval as a Member under this 
proposed filing. As proposed, if Apex Clearing does not comply with all 
applicable Exchange Member application requirements within 30 calendar 
days of the effective date of this filing, its status as an Exchange 
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 Exchange Members by execution of global agreements 
thereto. Notice of such assumption will be provided to impacted Members 
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 an Exchange 
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 Exchange 
membership 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 member organization requirements so that 
Apex Clearing can be approved immediately as an Exchange 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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    \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 that the proposed rule change imposes 
any burden on competition.

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 an Exchange 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.\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 [email protected]. Please include 
File Number SR-BATS-2012-022 on the subject line.

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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-BATS-2012-022. 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-BATS-2012-022 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\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14072 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P