[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34427-34429]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-14076]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67136; File No. SR-EDGX-2012-20]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To 
Temporarily Suspend the Requirements of EDGX Rule 2.6

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, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 is proposing to temporarily suspend the requirements 
of EDGX Rule 2.6 and related EDGX Rules concerning the approval of new 
Members in order to admit Apex Clearing Corporation (``Apex 
Clearing''), f/k/a Ridge Clearing and Outsourcing Solutions, Inc. 
(``Ridge''), as a Member of EDGX, subject to Apex Clearing complying 
with the Exchange's Membership qualification rules within 30 calendar 
days of the effective date of this filing. 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 other EDGX Members by execution 
of a global agreement thereto. The text of the proposed rule change is 
available on the Exchange's Web site at www.directedge.com, at the 
Exchange's principal office, and at the Public Reference Room of the 
Commission.

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 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 is proposing to temporarily suspend the requirements 
of EDGX Rule 2.6 and related rules governing the qualification and 
admission of Members in order to immediately approve Apex Clearing as 
an EDGX Member. The Exchange proposes this temporary suspension on an 
expedited basis to ensure that Apex Clearing can continue the clearing 
operations of PFSI without unnecessary disruption, which could have a 
significant collateral impact on a number of other Members. The 
proposed temporary suspension is contingent upon Apex Clearing having 
complied with all of the Exchange's Membership qualification 
requirements within 30 calendar days of the effective date of 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 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 
currently an EDGX Member, will provide the clearing services and 
execution services currently provided to the Transferring Accounts by 
PFSI. On May 31, 2012, Apex Clearing submitted an application to be 
admitted as an EDGX Member. However because of the expedited nature of 
the transaction, Apex Clearing was unable to fully comply in a timely 
manner with EDGX Rule 2.6 and related Membership rules. Because of the 
need for seamless continuity with respect to the Transferring Accounts, 
Apex Clearing has requested that the Exchange temporarily suspend its 
Membership qualification rules in order to enable Apex Clearing's 
approval as a Member on an expedited basis. Pursuant to its request, 
Apex Clearing has represented that it will fully comply with the 
Exchange's Membership qualification requirements within 30 calendar 
days of the effective date of this filing.
    EDGX Rule 2.6 establishes the requirements for applications for 
Membership with the Exchange and requires prospective Members to submit 
such information as the Exchange may require.
    Among other things, to be approved as an EDGX Member, an applicant 
must:
     Provide the Exchange with an agreement to abide by, comply 
with, and adhere to the provisions of the Exchange's Certificate of 
Incorporation, its By-Laws, the Exchange's Rules, the policies, 
interpretations and guidelines of the Exchange, and all orders and 
decisions of the Exchange's Board and penalties imposed by the Board, 
and any duly authorized committee;\5\
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    \5\ EDGX Rule 2.6(a)(1).
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     Agree to pay such dues, assessments, and other charges in 
the manner and amount as shall from time to time be fixed by the 
Exchange;\6\
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    \6\ EDGX Rule 2.6(a)(2).
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     Agree to maintain and make available to the Exchange, its 
authorized employees and its Board or any duly authorized committee 
such books and records as may be required to be maintained by the 
Commission or the Exchange's Rules;\7\
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    \7\ EDGX Rule 2.6(a)(5).
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     Agree to supply other reasonable information with respect 
to the applicant as the Exchange may require in its Membership 
application (e.g., certificate of incorporation, by-laws, and other 
corporate documents);\8\ and
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    \8\ EDGX Rule 2.6(a)(6).
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     Register all Authorized Traders with the Exchange \9\ in 
compliance with the Exchange's registration requirements as outlined in 
EDGX Rule 2.3(b) through (d).
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    \9\ EDGX Rule 2.3(b).
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    In addition, the Exchange reviews whether the applicant meets 
applicable regulatory capital requirements and whether it has adopted 
controls and

[[Page 34428]]

procedures to comply with Exchange Rules.
    Due to the amount of information an applicant is required to 
provide and have completed prior to being admitted 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 responses 
to requests for information and documentation.
    As proposed, Apex Clearing will continue the clearing and certain 
other operations of PSFI as of June 6, 2012. In order to avoid 
interruption of the services PSFI currently provides to other Exchange 
Members, EDGX believes that Apex Clearing should be approved 
immediately as an EDGX Member. The Exchange notes that Apex Clearing is 
already a registered broker-dealer and FINRA member, which are 
prerequisites for becoming an EDGX Member.\10\
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    \10\ See EDGX Rule 2.5(a).
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    The Exchange therefore proposes to temporarily suspend EDGX Rule 
2.6 and related Membership rules (Rules 2.3 and 2.5), and immediately 
approve Apex Clearing and its associated persons 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 satisfy its capital 
requirements as an EDGX Member; and
     Within 30 calendar days of the effective date of this rule 
filing, Apex Clearing and its associated persons shall have complied 
with the Exchange's Member qualification requirements as set forth in 
EDGX Rules 2.3, 2.5, and 2.6.
    As proposed, if Apex Clearing does not comply with all applicable 
EDGX Member qualification requirements within 30 calendar days of the 
effective date of this filing, its status as an approved EDGX 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 EDGX Members by execution of global agreements 
thereto. Apex Clearing has represented that it will provide notice of 
such assumption 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) \11\ of the Act and furthers the objectives of Section 
6(b)(5) \12\ 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 of a free and open 
market and a national market system and to protect investors and the 
public interest. The Exchange believes that permitting the expeditious 
approval of Apex Clearing as an EDGX Member will avoid interruption of 
the services PSFI currently provides to other Exchange Members. Based 
on information and representations provided by Apex Clearing, a 
temporary suspension of certain EDGX membership rules is needed based 
on the expedited nature of the transaction to enable seamless 
continuity with respect to the Transferring Accounts. Consequently, 
EDGX believes that temporary suspension of its Member qualification 
requirements so that Apex Clearing can be approved immediately as an 
EDGX Member will help to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and is 
therefore consistent with the Act.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 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 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

    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 \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
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 \15\ and Rule 19b-
4(f)(6)(iii) thereunder.\16\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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) \17\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\18\ 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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    \17\ 17 CFR 240.19b-4(f)(6).
    \18\ 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 EDGX 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.\19\
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    \19\ 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

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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-EDGX-2012-20 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-EDGX-2012-20. 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-EDGX-2012-20 and should be 
submitted on or before July 2, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14076 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P