
[Federal Register Volume 77, Number 112 (Monday, June 11, 2012)]
[Notices]
[Pages 34417-34420]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14075]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67135; File No. SR-CBOE-2012-055]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated: Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Regarding the Approval of Trading Permit Holders

June 5, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 
1934, 15 U.S.C. 78s(b)(1), notice is hereby given that on June 5, 2012, 
Chicago Board Options Exchange, Incorporated (``CBOE'' or the 
``Exchange'') 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 CBOE. The Commission is 
publishing this notice to solicit comments on the proposed rule change 
from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (the ``Act''),\1\ the Chicago Board Options 
Exchange, Incorporated (``CBOE'' or the ``Exchange'') proposes to 
temporarily suspend the requirements of CBOE Rules 3.7, 3.9 and related 
CBOE and CBOE Stock Exchange, LLC (``CBSX'') rules concerning the 
approval of new Trading Permit Holders in order to approve Apex 
Clearing, Inc., f/k/a Ridge Clearing and Outsourcing Solutions, Inc. 
(``Apex Clearing'') as a CBOE and CBSX Trading Permit Holder, subject 
to Apex Clearing

[[Page 34418]]

complying with CBOE and CBSX rules for a new Trading Permit Holder 
within 30 calendar days of the date that Apex Clearing is provisionally 
approved as a CBOE and/or CBSX Trading Permit Holder. 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 
CBOE and CBSX Trading Permit Holders by execution of a global agreement 
thereto. The text of the proposed rule change is available on the 
Exchange's Web site (http://www.cboe.org/legal), at the Exchange's 
Office of the Secretary and at the Commission.
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    \1\ 15 U.S.C. 78s(b)(1).
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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, CBOE 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. CBOE 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 CBOE Rules 3.7, 3.9 and related CBOE and CBSX rules 
regarding the approval of Trading Permit Holders in order to 
immediately approve Apex Clearing as a CBOE and CBSX Trading Permit 
Holder.\2\ 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 Trading Permit 
Holders. The proposed temporary suspension is contingent upon Apex 
Clearing having complied with all CBOE and CBSX rules applicable to the 
approval of new Trading Permit Holders within 30 calendar days of the 
date Apex is provisionally approved as a CBOE and CBSX Trading Permit 
Holder pursuant to this filing.
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    \2\ Chapters 50-55 of CBOE's rules set forth the rules 
applicable to CBSX. Appendix A to the rules applicable to CBSX 
incorporates, by reference, numerous CBOE rules that are applicable 
to CBSX, including several rules in Chapter 3 of the CBOE rules 
related to the application process.
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    On May 31, 2012, Apex Clearing Investment LLC (``Apex Holdings''), 
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 (``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 a CBOE 
or CBSX Trading Permit Holder, will provide the clearing and execution 
services currently provided to the Transferring Accounts by PFSI. On 
May 31, 2012, Apex Clearing submitted applications for approval as a 
CBOE and CBSX Trading Permit Holder respectively. However, because of 
the expedited nature of the transaction, Apex Clearing was unable to 
fully comply with CBOE Rules 3.7, 3.9 and related CBOE and CBSX rules 
regarding the approval of new Trading Permit Holders. Because of the 
need for seamless continuity with respect to the Transferring Accounts, 
Apex Clearing has requested that the Exchange temporarily suspend its 
rules related to the approval of new CBOE and CBSX Trading Permit 
Holders in order to enable Apex Clearing's approval as a CBOE and CBSX 
Trading Permit Holder on an expedited basis. Pursuant to its request, 
Apex Clearing will fully comply with the Exchange's requirements for 
new Trading Permit Holders within 30 calendar days after the 
provisional approval.
    CBOE Rule 3.7 sets forth requirements to submit certain documents 
required of Trading Permit Holder applicants, including, among other 
things, (i) a copy of the articles or certificate of incorporation, the 
by-laws of the organization and any amendments to those documents; (ii) 
any other documents relating to the registration, governance, capital 
structure, or ownership of the organization that are requested by the 
exchange; and (iii) a copy of its Form BD. CBOE Rule 3.9 sets forth the 
application procedures and information regarding the approval or 
disapproval of a Trading Permit Holder applicant. CBOE Rule 3.9 
requires, among other things, (i) submission of an application in a 
form and manner prescribed by the Exchange; (ii) any required 
application fees; and (iii) any additional information requested by the 
Exchange in connection with the Exchange's review of the application.
    In addition, the Exchange reviews whether the applicant meets 
federal and CBOE 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 CBOE and CBSX 
Trading Permit Holder, the Trading Permit Holder 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 
Trading Permit Holders, CBOE believes that Apex Clearing should be 
approved immediately as a CBOE and CBSX Trading Permit 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 CBOE Rules 3.7, 3.9 and any additional rules 
related to the approval to operate a CBOE or CBSX Trading Permit Holder 
and approval of a proposed Trading Permit Holder's associated persons 
(as applicable), and immediately approve Apex Clearing as a CBOE and 
CBSX Trading Permit Holder. As proposed this temporary suspension is 
contingent upon:
     Apex providing the Exchange with sufficient information to 
confirm that Apex will meet its capital requirements as a CBOE and CBSX 
Trading Permit Holder; and
     Within 30 calendar days of Apex Clearing's provisional 
approval as CBOE and CBSX Trading Permit Holders under this proposed 
filing, Apex Clearing and its associated persons will have complied 
with the Exchange's requirements for new Trading Permit Holders as set 
forth in CBOE Rules 3.7, 3.9 and any additional rules related to the 
approval to operate a CBOE or CBSX

[[Page 34419]]

Trading Permit Holder and approval of a proposed Trading Permit 
Holder's associated persons (as applicable).
    As proposed, if Apex Clearing does not comply with all applicable 
CBOE and CBSX application requirements within 30 calendar days of the 
date of the provisional approval, its status as an approved CBOE and 
CBSX Trading Permit Holder (as applicable) 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 Trading Permit Holders by execution of global 
agreements thereto. Notice of such assumption will be provided to 
impacted Trading Permit Holders through issuance of an Information 
Circular prior to the effective date thereof.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
Section 6(b) \5\ of the Securities Exchange Act of 1934 (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 a CBOE and CBSX 
Trading Permit Holder will avoid interruption of the services PFSI 
currently provides to other CBOE and CBSX Trading Permit Holders. Based 
on information and representations provided by Apex Clearing, a 
temporary suspension of certain CBOE and CBSX rules related to the 
approval of a Trading Permit Holder is needed based on the expedited 
nature of the transaction to enable seamless continuity with respect to 
the transferring accounts. Consequently, CBOE believes that temporary 
suspension of these requirements so that Apex Clearing can be approved 
immediately as a CBOE and CBSX Trading Permit Holder 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

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of 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 \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) 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 a CBOE and CBSX 
Trading Permit Holder. The proposed relief does not exempt Apex 
Clearing from Exchange rule requirements governing a CBOE and CBSX 
Trading Permit 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.\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 rule-comments@sec.gov. Please include 
File Number SR-CBOE-2012-055 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-CBOE-2012-055. This file

[[Page 34420]]

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-CBOE-2012-055 and should be 
submitted on or before July 2, 2012.
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    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14075 Filed 6-8-12; 8:45 am]
BILLING CODE 8011-01-P


