EDGX also proposes amendments to maintain transparency into who is accessing the Exchange's System.17
Sponsoring Members will need to maintain a list of Sponsored Participants authorized to access the Exchange's System pursuant to Rule 11.3, update that list as necessary, and provide the list to the Exchange upon request.18
In addition, the Exchange proposes to require that Sponsoring Members shall comply with all requirements of Rule 15c3-5 under the Act19
with regard to market access arrangements with Sponsored Participants.20
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1 thereto, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.21
In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,22
which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.
The Commission finds that the instant proposed rule change is consistent with the Act. The Commission notes that the Exchange believes the proposal should serve to eliminate potential confusion regarding the obligations of Sponsoring Members and Sponsored Participants under Exchange rules. In addition, the Commission notes that the Exchange proposes to require Sponsoring Members to comply with Rule 15c3-5 under the Act23
with regard to market access arrangements with Sponsored Participants.24
In this regard, the Commission notes that although the proposal relates to obligations ofSponsoring Members and Sponsored Participants under the Exchange's rules, the financial and regulatory risk management controls and supervisory procedures required by Rule 15c3-5 under the Act25
apply broadly to all forms of market access by broker-dealers that are exchange members or alternative trading system ("ATS") subscribers, including sponsored access, direct market access, and more traditional agency brokerage arrangements with customers, as well as proprietary trading.26
The application of appropriate risk management controls and supervisory procedures required by Rule 15c3-5 under the Act27
is critically important to maintaining a robust market infrastructure supporting the protection of investors, investor confidence, and fair, orderly, and efficient markets for all participants.IV. Conclusion
It is therefore ordered,pursuant to Section 19(b)(2) of the Act,28
that the proposed rule change (SR-EDGX-2012-24), as modified by Amendment No. 1 thereto, is approved.
2917 CFR 200.30-3(a)(12).
Kevin M. O'Neill,