Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change and Amendment No. 1 Thereto Relating to the Certificate of Incorporation of PCX Holdings, Inc., 636-641 [E5-8298]
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636
Federal Register / Vol. 71, No. 3 / Thursday, January 5, 2006 / Notices
manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest.
In the September 2004 Order, the
Commission approved a TRACE rule to
expand transaction dissemination to
include secondary market transactions
in all TRACE-eligible securities (except
Rule 144A transactions), with
information on transactions in certain
securities disseminated on a delayed
basis. In that order, the Commission
expressed concern that the remaining
dissemination delays could
unnecessarily restrict the availability of
useful transaction information to
investors. The Commission noted that
the two studies commissioned by NASD
to address the relationship between
transparency and liquidity found no
conclusive evidence that TRACE
dissemination has had an adverse effect
on liquidity. Therefore, the Commission
stated that it expected NASD to submit
a proposed rule change to eliminate the
remaining delays in disseminating
TRACE information no later than
November 1, 2005.21 NASD has done so.
The Commission believes that this
proposal, by eliminating all remaining
delays in the dissemination of
transaction information on TRACEeligible securities (except Rule 144A
transactions), should provide investors
with more up-to-date, and hence more
reliable, transaction information for
these securities and enhance overall
transparency in the corporate bond
market. Enhanced transparency for
these remaining TRACE-eligible
securities should increase the fairness
and efficiency of the debt markets,
thereby promoting the protection of
investors and the public interest. In
regard to the BMA’s comment that
increased transparency has harmed
liquidity in high-yield debt securities,
the Commission notes that the BTRC
has reviewed TRACE statistical data,
econometric analyses, and other
information and has found no
conclusive evidence that the recently
increased levels of transparency in these
securities have adversely affected
corporate bond market liquidity.
Furthermore, the BTRC has
recommended to NASD that information
on all transactions in TRACE-eligible
securities (except Rule 144A
transactions) be disseminated
immediately upon NASD’s receipt of the
transaction report. The Commission has
not been presented with any objective
evidence to support the BMA’s assertion
that immediate dissemination of
transaction information harms liquidity
for high-yield debt securities.
The Commission finds good cause for
approving Amendment No. 1 to the
proposed rule change prior to the
thirtieth day after the date of
publication of notice of filing thereof in
the Federal Register pursuant to Section
19(b)(2) of the Act.22 Amendment No. 1
does not make any substantive changes
to the proposal but rather offers
technical guidance about how
transaction data in the affected TRACEeligible securities will be disseminated
in the few days immediately after the
rule change becomes effective.
Accordingly, the Commission believes
that the accelerated approval of
Amendment No. 1 is appropriate.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,23 that the
proposed rule change (SR–NASD–2005–
120) is approved and that Amendment
No. 1 thereto is hereby approved on an
accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.24
Nancy M. Morris,
Secretary.
[FR Doc. E5–8283 Filed 1–4–06; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–53034; File No. SR–PCX–
2005–139]
Self-Regulatory Organizations; Pacific
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change and Amendment No. 1
Thereto Relating to the Certificate of
Incorporation of PCX Holdings, Inc.
December 28, 2005.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
19, 2005, the Pacific Exchange, Inc.
(‘‘PCX’’ or ‘‘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 PCX. On December 23, 2005, PCX
filed Amendment No. 1 to the proposed
22 15
U.S.C. 78s(b)(2).
23 Id.
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
21 See
69 FR at 55204.
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rule change.3 PCX filed the proposed
rule change pursuant to Section
19(b)(3)(A) of the Act,4 and Rule 19b–
4(f)(6) thereunder,5 which renders the
proposal effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
PCX proposes to submit to the
Commission a proposed rule change to
extend temporary exceptions from the
voting and ownership limitations in the
certificate of incorporation of PCX
Holdings, Inc. (‘‘PCXH’’), a Delaware
corporation and a parent company of
PCX, approved by the Commission in an
order issued on September 22, 2005 (the
‘‘SEC Order’’) 6, so as to allow (a)
Archipelago Holdings, Inc.
(‘‘Archipelago’’), a Delaware corporation
and the ultimate parent company of
PCXH and PCX, to continue to (i) own
Wave Securities, L.L.C. (‘‘Wave’’) until
January 31, 2006 and (ii) own and
operate the ATS Inbound Router
Function (as defined below) of
Archipelago Trading Services, Inc.
(‘‘ATS’’) and the Inbound Router
Clearing Function (as defined below) of
Archipelago Securities, L.L.C.
(‘‘Archipelago Securities’’) until January
31, 2006, and (b) Gerald D. Putnam,
Chairman and Chief Executive Officer of
Archipelago (‘‘Mr. Putnam’’), to own in
excess of 5% of Terra Nova Trading,
L.L.C. (‘‘TNT’’) and continue to serve as
a director of TAL Financial Services
(‘‘TAL’’) until January 31, 2006, in each
case, subject to the conditions set forth
in this filing.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
PCX 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. PCX has prepared
summaries, set forth in Sections A, B,
3 In Amendment No. 1, the Exchange modified
the duration of certain extensions that the Exchange
proposed in the original filing and made certain
technical amendments to the original filing.
4 15 U.S.C. 78s(b)(3)(A).
5 17 CFR 240.19b–4(f)(6).
6 See Securities Exchange Act Release No. 52497
(September 22, 2005), 70 FR 56949 (September 29,
2005) (the ‘‘SEC Order’’).
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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
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a. PCXH Acquisition and the
Amendment of the PCXH Certificate of
Incorporation
Archipelago operates the Archipelago
Exchange (‘‘ArcaEx’’), an open, allelectronic stock market for the trading of
equity securities. On September 26,
2005, Archipelago completed its
acquisition of PCXH and all of its
wholly-owned subsidiaries, including
PCX and PCXE (the ‘‘PCXH
Acquisition’’). The PCXH Acquisition
was accomplished by way of a merger
of PCXH with a wholly-owned
subsidiary of Archipelago, with PCXH
being the surviving corporation in the
merger and becoming a wholly-owned
subsidiary of Archipelago.
The certificate of incorporation of
PCXH (as amended to date, the ‘‘PCXH
Certificate of Incorporation’’) contains
various ownership and voting
restrictions on PCXH’s capital stock,
which are designed to safeguard the
independence of the self-regulatory
functions of PCX and to protect the
Commission’s oversight responsibilities.
In order to allow Archipelago to own
100% of the capital stock of PCXH, prior
to the completion of the PCXH
Acquisition, PCX filed with the
Commission a proposed rule change
which sought to, among other things,
amend the PCXH Certificate of
Incorporation to create an exception
from the voting and ownership
restrictions for Archipelago and certain
of its related persons (the ‘‘Original Rule
Filing’’).7 The Original Rule Filing, as
amended by Amendment No. 1 and
Amendment No. 2 thereto, was
approved by the Commission on
September 22, 20058 and the amended
PCXH Certificate of Incorporation
became effective on September 26, 2005,
upon the closing of the PCXH
Acquisition.
Article Nine of the PCXH Certificate
of Incorporation provides that no
Person,9 either alone or together with its
7 See Pacific Exchange, Inc., Proposed Rule
Change Relating to the Certificate of Incorporation
of PCX Holdings, Inc., PCX Rules, and Bylaws of
Archipelago Holdings, Inc., File No. SR–PCX–2005–
90 (August 1, 2005).
8 See SEC Order.
9 ‘‘Person’’ is defined to mean an individual,
partnership (general or limited), joint stock
company, corporation, limited liability company,
trust or unincorporated organization, or any
governmental entity or agency or political
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Related Persons,10 may own, directly or
indirectly, shares constituting more than
40% of the outstanding shares of any
class of PCXH capital stock,11 and that
no Person, either alone or together with
its Related Persons who is a trading
permit holder of PCX or an equities
trading permit holder of PCXE, may
own, directly or indirectly, shares
constituting more than 20% of any class
of PCXH capital stock.12 Furthermore,
the PCXH Certificate of Incorporation
provides that, for so long as PCXH
controls, directly or indirectly, PCX, no
Person, either alone or with its Related
Persons, may directly or indirectly vote
or cause the voting of shares of PCXH
capital stock or give any proxy or
consent with respect to shares
representing more than 20% of the
voting power of the issued and
outstanding PCXH capital stock.13 The
PCXH Certificate of Incorporation also
places limitations on the right of any
Person, either alone or with its Related
Persons, to enter into any agreement
with respect to the withholding of any
vote or proxy.14
PCX proposed and the Commission
approved an exception from the
ownership and voting limitations
described above to add a new paragraph
at the end of Article Nine of the PCXH
subdivision thereof. PCXH Certificate of
Incorporation, Article Nine, Section 1(b)(iv).
10 The term ‘‘Related Person,’’ as defined in the
PCXH Certificate of Incorporation, means (i) with
respect to any person, all ‘‘affiliates’’ and
‘‘associates’’ of such person (as such terms are
defined in Rule 12b–2 under the Act); (ii) with
respect to any person constituting a trading permit
holder of PCX or an equities trading permit holder
of PCXE, any broker dealer with which such holder
is associated; and (iii) any two or more persons that
have any agreement, arrangement or understanding
(whether or not in writing) to act together for the
purpose of acquiring, voting, holding or disposing
of shares of the capital stock of PCXH. PCXH
Certificate of Incorporation, Article Nine, Section
1(b)(iv).
11 PCXH Certificate of Incorporation, Article
Nine, Section 1(b)(i). However, such restriction may
be waived by the Board of Directors of PCXH
pursuant to an amendment to the Bylaws of PCXH
adopted by the Board of Directors, if, in connection
with the adoption of such amendment, the Board
of Directors adopts a resolution stating that it is the
determination of such Board that such amendment
will not impair the ability of PCX to carry out its
functions and responsibilities as an ‘‘exchange’’
under the Act and is otherwise in the best interests
of PCXH and its stockholders and PCX, and will not
impair the ability of the Commission to enforce said
Act, and such amendment shall not be effective
until approved by said Commission; provided that
the Board of Directors of PCXH shall have
determined that such Person and its Related
Persons are not subject to any applicable ‘‘statutory
disqualification’’ (within the meaning of Section
3(a)(39) of the Act). PCXH Certificate of
Incorporation, Article Nine, Sections 1(b)(i)(B) and
1(b)(i)(C).
12 Id., Article Nine, Section 1(b)(ii).
13 Id., Article Nine, Section 1(c).
14 Id.
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637
Certificate of Incorporation, which
provides that for so long as Archipelago
directly owns all of the outstanding
capital stock of PCXH, these ownership
and voting limitations shall not be
applicable to the ownership and voting
of shares of PCXH by (i) Archipelago,
(ii) any Person which is a Related
Person of Archipelago, either alone or
together with its Related Persons, and
(iii) any other Person to which
Archipelago is a Related Person, either
alone or together with its Related
Persons.15 These exceptions to the
ownership and voting limitations,
however, shall not apply to any
‘‘Prohibited Persons,’’ 16 which is
defined to mean any Person that is, or
that has a Related Person that is (i) an
OTP Holder or an OTP Firm (as defined
in the rules of PCX) 17 or (ii) an ETP
Holder (as defined in the rules of
PCXE),18 unless such Person is also a
‘‘Permitted Person’’ under the PCXH
Certificate of Incorporation.19 The
PCXH Certificate of Incorporation
further provides that any Prohibited
Person not covered by the definition of
a Permitted Person who is subject to and
exceeds the voting and ownership
limitations imposed by Article Nine as
of the date of the closing of the PCXH
Acquisition shall be permitted to exceed
the voting and ownership limitations
15 PCXH Certificate of Incorporation, Article
Nine, Section 4.
16 Id.
17 PCX rules define an ‘‘OTP Holder’’ to mean any
natural person, in good standing, who has been
issued an Options Trading Permit (‘‘OTP’’) by the
Exchange for effecting approved securities
transactions on the Exchange’s trading facilities, or
has been named as a Nominee. PCX Rule 1.1(q). The
term ‘‘Nominee’’ means an individual who is
authorized by an ‘‘OTP Firm’’ (a sole
proprietorship, partnership, corporation, limited
liability company or other organization in good
standing who holds an OTP or upon whom an
individual OTP Holder has conferred trading
privileges on the Exchange’s trading facilities) to
conduct business on the Exchange’s trading
facilities and to represent such OTP Firm in all
matters relating to the Exchange. PCX Rule 1.1(n).
18 PCXE rules define an ‘‘ETP Holder’’ to mean
any sole proprietorship, partnership, corporation,
limited liability company or other organization in
good standing that has been issued an Equity
Trading Permit, a permit issued by the PCXE for
effecting approved securities transactions on the
trading facilities of PCXE. PCXE Rule 1.1(n).
19 ‘‘Permitted Person’’ is defined to mean (A) any
broker or dealer approved by the Commission after
June 20, 2005 to be a facility (as defined in Section
3(a)(2) of the Act) of PCX; (B) any Person that has
been approved by the Commission prior to it
becoming subject to the provisions of Article Nine
of the PCXH Certificate of Incorporation with
respect to the voting and ownership of shares of
PCXH capital stock by such Person; and (C) any
Person that is a Related Person of Archipelago
solely by reason of beneficially owning, either alone
or together with its Related Persons, less than 20%
of the outstanding shares of Archipelago capital
stock. PCXH Certificate of Incorporation, Article
Nine, Section 4.
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imposed by Article Nine only to the
extent and for the time period approved
by the Commission.20
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b. Wave
Wave is an introducing broker for
Archipelago’s institutional customers
and provides such customers with
access to ArcaEx and other market
centers. Because Wave, a broker-dealer
and an ETP Holder of PCXE, is a
wholly-owned subsidiary and,
consequently, a Related Person, of
Archipelago, it falls within the
definition of ‘‘Prohibited Persons’’
under the PCXH Certificate of
Incorporation. Consequently, absent an
exception, Archipelago’s ownership of
PCXH would cause Wave, as an ETP
Holder, to exceed the voting and
ownership limitations imposed by
Article Nine of the PCXH Certificate of
Incorporation. Therefore, in connection
with the PCXH Acquisition, PCX
requested a temporary exception from
the ownership and voting limitations in
the PCX Certificate of Incorporation for
Archipelago’s ownership of Wave until
December 31, 2005, subject to the
condition that during that interim
period Archipelago would continue to
maintain and comply with its current
information barriers between Wave, on
the one hand, and PCX, PCXE and other
subsidiaries of Archipelago that are
facilities of PCX or PCXE, on the other
hand.21
The Commission approved PCX’s rule
proposal regarding Wave (the ‘‘Original
Wave Exception’’).22 In the SEC Order,
the Commission stated that the
affiliation of an exchange with one of its
members that provides inbound access
to the exchange—in direct competition
with other members of the exchange—
raises potential conflicts of interest
between the exchange’s regulatory
responsibilities and its commercial
interests, and the potential for unfair
competitive advantage that the affiliated
member could have by virtue of
informational or operational advantages,
or the ability to receive preferential
treatment.23 However, noting that the
conditions to be imposed during the
interim period were designed to
mitigate potential conflicts of interest
and the potential for unfair competitive
advantage, the Commission concluded
that it would be appropriate and
consistent with the Act to allow a
limited, temporary exception for
Archipelago to continue its ownership
20 Id.
21 See Original Rule Filing, at 36–37 and
Amendment No. 2 to the Original Rule Filing, at 4
(September 16, 2005) (‘‘Amendment No. 2’’).
22 See SEC Order, at 56960.
23 Id. at 56959.
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17:06 Jan 04, 2006
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of Wave.24 In granting the approval for
the Original Wave Exception, the
Commission also noted that in addition
to being a member of PCX, Wave is a
member of the National Association of
Securities Dealers, Inc. (‘‘NASD’’), a
self-regulatory organization (‘‘SRO’’) not
affiliated with Archipelago, and the
NASD has been designated by the
Commission as the ‘‘Designated
Examining Authority’’ for Wave
pursuant to Rule 17d–1 of the Act.25
Furthermore, during the interim period,
Wave would continue to be covered by
the scope of an agreement between
NASD and PCX, which was entered into
pursuant to Rule 17d–2 under the Act 26
(the ‘‘17d–2 Agreement’’) and provides
for a plan concerning the regulatory
responsibilities of NASD with respect to
certain members of PCX, including
Wave.27
c. ATS Inbound Router Function and
the Inbound Router Clearing Function
Archipelago currently owns ATS, a
wholly-owned subsidiary that is a
broker-dealer and an ETP Holder of
PCXE. The business of ATS consists of,
among other things, acting as an
introducing broker for non-ETP Holder
broker or dealer clients for securities
traded on ArcaEx (the ‘‘ATS Inbound
Router Function’’). Archipelago
Securities, a wholly-owned subsidiary
of Archipelago, is a registered brokerdealer, a member of the NASD and an
ETP Holder. In addition to its other
functions, Archipelago Securities
provides clearing functions for trades
executed by the ATS Inbound Router
Function (the ‘‘Inbound Router Clearing
Function’’).
24 Id.
25 Id. Pursuant to Rule 17d–1 under the Act,
where a member of the Securities Investor
Protection Corporation is a member of more than
one SRO, the Commission shall designate to one of
such organizations the responsibility of examining
such member for compliance with the applicable
financial responsibility rules. In making such
designation, the Commission shall take into
consideration the regulatory capabilities and
procedures of the SROs, availability of staff,
convenience of location, unnecessary regulatory
duplication, and such other factors as the
Commission may consider germane to the
protection of investors, the cooperation and
coordination among SROs, and the development of
a national market system for the clearance and
settlement of securities transactions. 17 CFR
240.17d–1.
26 Rule 17d–2 provides that any two or more
SROs may file with the Commission a plan for
allocating among such SROs the responsibilities to
receive regulatory reports from persons who are
members or participants of more than one of such
SROs to examine such persons for compliance, or
to enforce compliance by such persons, with
specified provisions of the Act, the rules and
regulations thereunder, and the rules of such SROs,
or to carry out other specified regulatory functions
with respect to such persons. 17 CFR 240.17d–2.
27 See SEC Order, at 56959.
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Because ATS, a broker-dealer and an
ETP Holder of PCXE, is a wholly-owned
subsidiary and, consequently, a Related
Person, of Archipelago, it falls within
the definition of ‘‘Prohibited Persons’’
under the PCXH Certificate of
Incorporation. Consequently, absent an
exception, Archipelago’s ownership of
PCXH would cause ATS to exceed the
voting and ownership limitations
imposed by Article Nine of the PCXH
Certificate of Incorporation. Likewise,
because Archipelago Securities, a
broker-dealer and an ETP Holder of
PCXE, is a wholly-owned subsidiary
and, consequently, a Related Person, of
Archipelago, and the approvals of
Archipelago Securities set forth
elsewhere in the SEC Order were
limited in scope and did not include its
Inbound Router Clearing Function, it
falls within the definition of ‘‘Prohibited
Persons’’ under the PCXH Certificate of
Incorporation. Consequently, absent an
exception, Archipelago’s ownership of
PCXH would cause Archipelago
Securities to exceed the voting and
ownership limitations imposed by
Article Nine of the PCXH Certificate of
Incorporation.
Therefore, in connection with the
PCXH Acquisition, PCX requested a
temporary exception from the
ownership and voting limitations in the
PCX Certificate of Incorporation for
Archipelago’s ownership and operation
of the ATS Inbound Router Function
and the Inbound Router Clearing
Function until the earlier of (i) the
closing date of the merger of
Archipelago and the NYSE and (ii)
March 31, 2006, subject to the following
conditions: (1) The revenues derived by
Archipelago from the ATS Inbound
Router Function will not exceed 7% of
the consolidated revenues of
Archipelago (determined on a quarterly
basis), (2) the ATS Inbound Router
Function will not accept any new
clients following the closing of
Archipelago’s acquisition of PCXH; and
(3) Archipelago will continue to
maintain and comply with its current
information barrier between the ATS
Inbound Router Function on the one
hand and PCX, PCXE and the other
subsidiaries of Archipelago that are
facilities of PCX or PCXE on the other
hand.28 The Commission approved
PCX’s rule proposal regarding the ATS
Inbound Router Function and the
Inbound Router Clearing Function (the
‘‘Original Inbound Router
Exception’’).29 In the SEC Order, the
Commission stated that the affiliation of
an exchange with one of its members
28 See
29 See
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Amendment No. 2, at 5–6.
SEC Order, at 56960.
05JAN1
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that provides inbound access to the
exchange—in direct competition with
other members of the exchange—raises
potential conflicts of interest between
the exchange’s regulatory
responsibilities and its commercial
interests, and the potential for unfair
competitive advantage that the affiliated
member could have by virtue of
informational or operational advantages,
or the ability to receive preferential
treatment.30 However, noting that the
conditions to be imposed during the
interim period were designed to
mitigate potential conflicts of interest
and the potential for unfair competitive
advantage, the Commission concluded
that it would be appropriate and
consistent with the Act to allow a
limited, temporary exception for
Archipelago to continue its ownership
of the ATS Inbound Router Function
and the Inbound Router Clearing
Function.31 In granting the approval for
the Original Inbound Router Exception,
the Commission also noted that in
addition to being a member of PCX, ATS
is a member of the NASD and the NASD
has been designated by the Commission
as the ‘‘Designated Examining
Authority’’ for ATS pursuant to Rule
17d–1 of the Act.32 Furthermore, during
the interim period, ATS would continue
to be covered by the scope of the 17d–
2 Agreement,33 which provides for a
plan concerning the regulatory
responsibilities of NASD with respect to
certain members of PCX, including
ATS.34
d. TNT
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TNT is a wholly-owned subsidiary of
TAL. Mr. Putnam owns in excess of 5%
of TNT and serves as a director of TAL.
Because TNT, a broker-dealer and an
ETP Holder of PCXE, is a Related Person
of Archipelago by virtue of Mr.
Putnam’s ownership of in excess of 5%
of TNT and service as a director of TAL,
it falls within the definition of
‘‘Prohibited Persons’’ under the PCXH
Certificate of Incorporation.
Consequently, absent an exception,
Archipelago’s ownership of PCXH
would cause TNT to exceed the voting
and ownership limitations imposed by
Article Nine of the PCXH Certificate of
Incorporation. Therefore, in connection
with the PCXH Acquisition, the
Commission approved the Exchange’s
request for a temporary exception for
Mr. Putnam to continue to own in
30 Id.
at 56959.
31 Id.
32 Id. See supra note 25 for a description of Rule
17d–1 under the Act.
33 See supra note 26.
34 See SEC Order, at 56959.
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excess of 5% of TNT and continue to
serve as a director of TAL until
December 31, 2005 (the ‘‘Original TNT
Exception’’).35 In the SEC Order, the
Commission stated that it believes that
such a temporary exception is
appropriate and consistent with the Act
because it will eliminate the affiliation
between TNT and Archipelago but
allow Mr. Putnam a reasonable amount
of time to effectuate such actions
necessary to eliminate the affiliation.36
e. Extension of the Temporary
Exceptions
i. Wave
In accordance with the terms of the
Original Wave Exception, Archipelago
has been working to sell its ownership
interest in Wave by December 31, 2005.
Archipelago expects to enter into a
definitive agreement for the sale of
Wave to a third party prior to December
31, 2005. The definitive agreement will
condition the sale of Wave upon the
satisfaction of certain customary
conditions to closing specified in the
agreement, and Archipelago would
intend to complete the sale as soon as
possible following the satisfaction of
such conditions. The Original Wave
Exception expires on December 31,
2005. In light of the fact that the sale
would not be consummated by
December 31, 2005, the Exchange
hereby proposes to extend the Original
Wave Exception to January 31, 2006,
subject to the same conditions as
applied to the Original Wave Exception
described above. Archipelago and the
Exchange believe that this extension
would be in keeping with the policy
justifications for the Original Wave
Exception outlined above, while
allowing Archipelago to complete the
sale of Wave.
ii. ATS Inbound Router Function and
the Inbound Router Clearing Function
In accordance with the terms of the
Original Inbound Router Exception,
Archipelago has been working to sell its
ownership interest in the ATS Inbound
Router Function. Archipelago expects to
enter into a definitive agreement for the
sale of the ATS Inbound Router
Function to a third party prior to
December 31, 2005. The definitive
agreement will condition the sale of the
ATS Inbound Router Function upon the
satisfaction of certain customary
conditions to closing specified in the
agreement, and Archipelago would
intend to complete the sale as soon as
possible following the satisfaction of
such conditions. The Original Inbound
35 See
36 See
PO 00000
SEC Order, at 56960–61.
SEC Order, at 56960.
Frm 00060
Fmt 4703
Sfmt 4703
639
Router Exception expires on the earlier
of (i) the closing date of the merger of
Archipelago and the NYSE and (ii)
March 31, 2006. Given the uncertainty
regarding the potential closing date of
the merger of Archipelago and the
NYSE, the Exchange hereby proposes to
extend the expiration date of the
Original Inbound Router Exception to
January 31, 2006 subject to the same
conditions as applied to the Original
Inbound Router Exception described
above.37 Archipelago and the Exchange
believe that this extension would be in
keeping with the policy justifications for
the Original Inbound Router Exception
outlined above, while allowing
Archipelago to complete the sale of the
ATS Inbound Router Function.
iii. TNT
In accordance with the terms of the
Original TNT Exception, Mr. Putnam
has been working to eliminate the
affiliation. Mr. Putnam expects to enter
into a definitive agreement to reduce his
ownership in TNT by January 31, 2006.
The definitive agreement will condition
the transaction upon the satisfaction of
certain customary conditions to closing
specified in the agreement, and Mr.
Putnam would intend to complete the
transaction as soon as possible
following the satisfaction of such
conditions; once the transaction is
completed, Mr. Putnam would also
cease serving as a director of TAL. The
Original TNT Exception expires on
December 31, 2005. In light of the fact
that the transactions would not be
consummated by December 31, 2005,
the Exchange hereby proposes to extend
the Original TNT Exception until
January 31, 2006, subject to the same
conditions as applied to the Original
TNT Exception described above.38 In
proposing such extension, Archipelago
and the Exchange note that the NASD is
the ‘‘Designated Examining Authority’’
for TNT pursuant to Rule 17d–1 of the
Act. Furthermore, during the interim
period, TNT would continue to be
covered by the scope of the 17d–2
Agreement, which provides for a plan
concerning the regulatory
responsibilities of NASD with respect to
certain members of PCX, including
TNT. Archipelago and the Exchange
believe that this extension would be in
37 The Exchange clarified that it proposes to
extend the Original Inbound Router Exception to
January 31, 2006. Telephone conversation between
Janet Angstadt, Deputy General Counsel and
Assistant Corporate Secretary, PCX and Heather
Seidel, Senior Special Counsel, Division of Market
Regulation, Commission, on December 28, 2005
(‘‘Telephone Conversation’’).
38 The Exchange acknowledges that the Original
TNT Exception was not subject to any conditions.
Telephone Conversation.
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Federal Register / Vol. 71, No. 3 / Thursday, January 5, 2006 / Notices
keeping with the policy justifications for
the Original TNT Exception outlined
above, while allowing Mr. Putnam a
reasonable amount of time to effectuate
the actions necessary to eliminate the
affiliation between TNT and
Archipelago.
2. Statutory Basis
The Exchange believes that the
proposed rule change in this filing, as
amended, is consistent with Section 6(b)
of the Act,39 in general, and furthers the
objectives of Section 6(b)(1),40 in
particular, in that it enables the
Exchange to be so organized so as to
have the capacity to be able to carry out
the purposes of the Act and to comply,
and (subject to any rule or order of the
Commission pursuant to Section 17(d)
or 19(g)(2) of the Act) to enforce
compliance by its exchange members
and persons associated with its
exchange members, with the provisions
of the Act, the rules and regulations
thereunder, and the rules of the
Exchange. The Exchange also believes
that this filing, as amended, furthers the
objectives of Section 6(b)(5),41 in
particular, because the rules
summarized herein would create a
governance and regulatory structure
with respect to the operation of the
business of PCX that is designed to help
prevent fraudulent and manipulative
acts and practices; to promote just and
equitable principals of trade; to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities; and 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.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change, as amended,
will impose any burden on competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
cchase on PROD1PC60 with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments on the proposed
rule change were neither solicited nor
received.
39 15
U.S.C. 78f(b).
40 15 U.S.C. 78f(b)(1).
41 15 U.S.C. 78f(b)(5).
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17:06 Jan 04, 2006
Jkt 208001
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change, as amended, does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
for 30 days from the date on which it
was filed, or such shorter time as the
Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 42 and Rule 19b–
4(f)(6) thereunder.43
At any time within 60 days of the
filing of the proposed rule change, the
Commission may summarily abrogate
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.44
PCX has asked the Commission to
waive the 30-day operative delay. The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Because the Original
Wave Exception and the Original TNT
Exception each expire on December 31,
2005, and the Original Inbound Router
Exception expires on the earlier of (i)
the closing date of the merger of
Archipelago and the NYSE (which date
is uncertain) and (ii) March 31, 2006,
such waiver will allow each of Wave,
ATS (with respect to the ATS Inbound
Router Function), Archipelago
Securities (with respect to the Inbound
Router Clearing Function), and TNT to
remain in compliance with the voting
and ownership limitations in the PCXH
Certificate of Incorporation. The
Commission notes that the Exchange
has represented that Archipelago
expects to enter into a definitive
agreement for the sale of Wave and for
the sale of the ATS Inbound Router
42 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). Pursuant to Rule 19b–
4(f)(6)(iii) under the Act, the Exchange is required
to give the Commission written notice of its intent
to file the proposed rule change, along with a brief
description and text of 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
has determined to waive this requirement.
44 The effective date of the original proposed rule
change is December 19, 2005, and the effective date
of the amendment is December 23, 2005. For
purposes of calculating the 30-day operative delay
and the 60-day period within which the
Commission may summarily abrogate the proposed
rule change, as amended, under Section 19(b)(3)(C)
of the Act, the Commission considers the period to
commence on December 23, 2005, the date on
which the Exchange submitted Amendment No. 1.
See 15 U.S.C. 78s(b)(3)(C).
43 17
PO 00000
Frm 00061
Fmt 4703
Sfmt 4703
Function by December 31, 2005, and
that Mr. Putnam expects to enter into a
definitive agreement to reduce his
ownership in TNT by January 31, 2006.
Therefore, the time period for each of
the extensions is short and will
terminate on January 31, 2006. In
addition, the Commission notes that the
following protections are and will
continue to be in place during the
interim period: (i) Wave, ATS, and TNT
are members of the NASD as well as
PCX, (ii) the NASD is the Designated
Examining Authority for Wave, ATS,
and TNT pursuant to Rule 17d–1 of the
Act, and (iii) Wave, ATS, and TNT are,
and will continue to be during the
extension, covered by the scope of the
17d–2 Agreement. Further,
Archipelago’s ownership and operation
of Wave, the ATS Inbound Router
Function of ATS, and the Inbound
Router Clearing Function of Archipelago
Securities will continue to be subject to
the same conditions as the Original
Wave Exception and the Original
Inbound Router Exception, as described
above and as approved by the
Commission in the SEC Order.
For these reasons, the Commission
designates the proposal to be effective
and operative upon filing with the
Commission.45
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–PCX–2005–139 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–9303. All
submissions should refer to File
Number SR–PCX–2005–139. This file
number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
45 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).
E:\FR\FM\05JAN1.SGM
05JAN1
Federal Register / Vol. 71, No. 3 / Thursday, January 5, 2006 / Notices
post all comments on the Commission’s
Internet Web site (https://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 inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of the PCX. 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–PCX–2005–139 and should
be submitted on or before January 26,
2006.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.46
Nancy M. Morris,
Secretary.
[FR Doc. E5–8298 Filed 1–4–06; 8:45 am]
Advisory Commission on Public
Diplomacy; Notice of Meeting
[Public Notice 5268]
cchase on PROD1PC60 with NOTICES
Culturally Significant Objects Imported
for Exhibition Determinations: ‘‘The
Dead Sea Scrolls’’
SUMMARY: Notice is hereby given of
the following determinations: Pursuant
to the authority vested in me by the Act
of October 19, 1965 (79 Stat. 985; 22
U.S.C. 2459), Executive Order 12047 of
March 27, 1978, the Foreign Affairs
Reform and Restructuring Act of 1998
(112 Stat. 2681, et seq.; 22 U.S.C. 6501
note, et seq.), Delegation of Authority
No. 234 of October 1, 1999, Delegation
of Authority No. 236 of October 19,
1999, as amended, and Delegation of
Authority No. 257 of April 15, 2003 [68
FR 19875], I hereby determine that the
objects to be included in the exhibition
‘‘The Dead Sea Scrolls’’, imported from
abroad for temporary exhibition within
the United States, are of cultural
significance. The objects are imported
pursuant to loan agreements with the
foreign owners or custodians. I also
VerDate Aug<31>2005
17:06 Jan 04, 2006
Jkt 208001
BILLING CODE 4710–05–P
[Public Notice 5251]
DEPARTMENT OF STATE
CFR 200.30–3(a)(12).
Dated: December 28, 2005.
C. Miller Crouch,
Principal Deputy Assistant Secretary for
Educational and Cultural Affairs, Department
of State.
[FR Doc. E5–8308 Filed 1–4–06; 8:45 am]
DEPARTMENT OF STATE
BILLING CODE 8010–01–P
46 17
determine that the exhibition or display
of the exhibit objects at Discovery Place,
Charlotte, NC, from on or about
February 17, 2006, until on or about
May 29, 2006, at Pacific Science Center,
Seattle, WA, from on or about
September 20, 2006, until on or about
January 7, 2007, and at possible
additional venues yet to be determined,
is in the national interest. Public Notice
of these Determinations is ordered to be
published in the Federal Register.
FOR FURTHER INFORMATION
CONTACT: For further information,
including a list of the exhibit objects,
contact Richard Lahne, AttorneyAdviser, Office of the Legal Adviser,
U.S. Department of State (telephone:
202/453–8058. The address is U.S.
Department of State, SA–44, 301 4th
Street, SW. Room 700, Washington, DC
20547–0001.
The U.S. Advisory Commission on
Public Diplomacy will hold a meeting at
the U.S. Department of State at 2201 C
Street, NW., Washington, DC on January
18, 2006 in Room 1408 from 10 a.m. to
11 a.m. The Commissioners will discuss
progress made in evaluating public
diplomacy programs with senior
officials of the department.
The Commission was reauthorized
pursuant to Public Law 109–108
(H.R.2862, Science, State, Justice,
Commerce, and Related agencies
Appropriations Act, 2006). The U.S.
Advisory Commission on Public
Diplomacy is a bipartisan Presidentially
appointed panel created by Congress in
1948 to provide oversight of U.S.
Government activities intended to
understand, inform and influence
foreign publics. The Commission
reports its findings and
recommendations to the President, the
Congress and the Secretary of State and
the American people. Current
Commission members include Barbara
M. Barrett of Arizona, who is the
Chairman; Harold Pachios of Maine;
Ambassador Penne Percy Korth of
Washington, DC; Ambassador Elizabeth
Bagley of Washington, DC; Charles
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
641
‘‘Tre’’ Evers of Florida; Jay T. Snyder of
New York; and Maria Sophia Aguirre of
Washington, DC.
For more information, please contact
Athena Katsoulos at (202) 203–7880.
Dated: December 16, 2005.
Athena Katsoulos,
Executive Director, ACPD, Department of
State.
[FR Doc. E5–8307 Filed 1–4–06; 8:45 am]
BILLING CODE 4710–11–P
DEPARTMENT OF TRANSPORTATION
Office of the Secretary
[Docket Nos. OST–2005–20924 and OST–
2005–20925]
Applications of Cargo 360, Inc. for
Certificate Authority
AGENCY:
Department of Transportation.
Notice of Order to Show Cause
(Order 2005–12–19).
ACTION:
SUMMARY: The Department of
Transportation is directing all interested
persons to show cause why it should
not issue orders finding Cargo 360, Inc.,
fit, willing, and able, and awarding it
certificates of public convenience and
necessity to engage in interstate and
foreign scheduled air transportation of
property and mail.
Persons wishing to file
objections should do so no later than
January 12, 2006.
DATES:
Objections and answers to
objections should be filed in Dockets
OST–2005–20924 and OST–2005–20925
and addressed to U.S. Department of
Transportation, Docket Operations, (M–
30, Room PL–401), 400 Seventh Street,
SW., Washington, DC 20590, and should
be served upon the parties listed in
Attachment A to the order.
ADDRESSES:
Ms.
Lauralyn J. Remo, Air Carrier Fitness
Division (X–56, Room 6401), U.S.
Department of Transportation, 400
Seventh Street, SW., Washington, DC
20590, (202) 366–9721.
FOR FURTHER INFORMATION CONTACT:
Dated: December 29, 2005.
Michael W. Reynolds,
Acting Assistant Secretary for Aviation and
International Affairs.
[FR Doc. 06–66 Filed 1–4–06; 8:45 am]
BILLING CODE 4910–62–P
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]]>Agencies
[Federal Register Volume 71, Number 3 (Thursday, January 5, 2006)]
[Notices]
[Pages 636-641]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E5-8298]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-53034; File No. SR-PCX-2005-139]
Self-Regulatory Organizations; Pacific Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change and
Amendment No. 1 Thereto Relating to the Certificate of Incorporation of
PCX Holdings, Inc.
December 28, 2005.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 19, 2005, the Pacific Exchange, Inc. (``PCX'' or
``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 PCX. On December 23, 2005,
PCX filed Amendment No. 1 to the proposed rule change.\3\ PCX filed the
proposed rule change pursuant to Section 19(b)(3)(A) of the Act,\4\ and
Rule 19b-4(f)(6) thereunder,\5\ which renders the proposal effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change, as amended,
from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange modified the duration of
certain extensions that the Exchange proposed in the original filing
and made certain technical amendments to the original filing.
\4\ 15 U.S.C. 78s(b)(3)(A).
\5\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
PCX proposes to submit to the Commission a proposed rule change to
extend temporary exceptions from the voting and ownership limitations
in the certificate of incorporation of PCX Holdings, Inc. (``PCXH''), a
Delaware corporation and a parent company of PCX, approved by the
Commission in an order issued on September 22, 2005 (the ``SEC Order'')
\6\, so as to allow (a) Archipelago Holdings, Inc. (``Archipelago''), a
Delaware corporation and the ultimate parent company of PCXH and PCX,
to continue to (i) own Wave Securities, L.L.C. (``Wave'') until January
31, 2006 and (ii) own and operate the ATS Inbound Router Function (as
defined below) of Archipelago Trading Services, Inc. (``ATS'') and the
Inbound Router Clearing Function (as defined below) of Archipelago
Securities, L.L.C. (``Archipelago Securities'') until January 31, 2006,
and (b) Gerald D. Putnam, Chairman and Chief Executive Officer of
Archipelago (``Mr. Putnam''), to own in excess of 5% of Terra Nova
Trading, L.L.C. (``TNT'') and continue to serve as a director of TAL
Financial Services (``TAL'') until January 31, 2006, in each case,
subject to the conditions set forth in this filing.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 52497 (September 22,
2005), 70 FR 56949 (September 29, 2005) (the ``SEC Order'').
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, PCX 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. PCX has prepared summaries, set forth in Sections A, B,
[[Page 637]]
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
a. PCXH Acquisition and the Amendment of the PCXH Certificate of
Incorporation
Archipelago operates the Archipelago Exchange (``ArcaEx''), an
open, all-electronic stock market for the trading of equity securities.
On September 26, 2005, Archipelago completed its acquisition of PCXH
and all of its wholly-owned subsidiaries, including PCX and PCXE (the
``PCXH Acquisition''). The PCXH Acquisition was accomplished by way of
a merger of PCXH with a wholly-owned subsidiary of Archipelago, with
PCXH being the surviving corporation in the merger and becoming a
wholly-owned subsidiary of Archipelago.
The certificate of incorporation of PCXH (as amended to date, the
``PCXH Certificate of Incorporation'') contains various ownership and
voting restrictions on PCXH's capital stock, which are designed to
safeguard the independence of the self-regulatory functions of PCX and
to protect the Commission's oversight responsibilities. In order to
allow Archipelago to own 100% of the capital stock of PCXH, prior to
the completion of the PCXH Acquisition, PCX filed with the Commission a
proposed rule change which sought to, among other things, amend the
PCXH Certificate of Incorporation to create an exception from the
voting and ownership restrictions for Archipelago and certain of its
related persons (the ``Original Rule Filing'').\7\ The Original Rule
Filing, as amended by Amendment No. 1 and Amendment No. 2 thereto, was
approved by the Commission on September 22, 2005\8\ and the amended
PCXH Certificate of Incorporation became effective on September 26,
2005, upon the closing of the PCXH Acquisition.
---------------------------------------------------------------------------
\7\ See Pacific Exchange, Inc., Proposed Rule Change Relating to
the Certificate of Incorporation of PCX Holdings, Inc., PCX Rules,
and Bylaws of Archipelago Holdings, Inc., File No. SR-PCX-2005-90
(August 1, 2005).
\8\ See SEC Order.
---------------------------------------------------------------------------
Article Nine of the PCXH Certificate of Incorporation provides that
no Person,\9\ either alone or together with its Related Persons,\10\
may own, directly or indirectly, shares constituting more than 40% of
the outstanding shares of any class of PCXH capital stock,\11\ and that
no Person, either alone or together with its Related Persons who is a
trading permit holder of PCX or an equities trading permit holder of
PCXE, may own, directly or indirectly, shares constituting more than
20% of any class of PCXH capital stock.\12\ Furthermore, the PCXH
Certificate of Incorporation provides that, for so long as PCXH
controls, directly or indirectly, PCX, no Person, either alone or with
its Related Persons, may directly or indirectly vote or cause the
voting of shares of PCXH capital stock or give any proxy or consent
with respect to shares representing more than 20% of the voting power
of the issued and outstanding PCXH capital stock.\13\ The PCXH
Certificate of Incorporation also places limitations on the right of
any Person, either alone or with its Related Persons, to enter into any
agreement with respect to the withholding of any vote or proxy.\14\
---------------------------------------------------------------------------
\9\ ``Person'' is defined to mean an individual, partnership
(general or limited), joint stock company, corporation, limited
liability company, trust or unincorporated organization, or any
governmental entity or agency or political subdivision thereof. PCXH
Certificate of Incorporation, Article Nine, Section 1(b)(iv).
\10\ The term ``Related Person,'' as defined in the PCXH
Certificate of Incorporation, means (i) with respect to any person,
all ``affiliates'' and ``associates'' of such person (as such terms
are defined in Rule 12b-2 under the Act); (ii) with respect to any
person constituting a trading permit holder of PCX or an equities
trading permit holder of PCXE, any broker dealer with which such
holder is associated; and (iii) any two or more persons that have
any agreement, arrangement or understanding (whether or not in
writing) to act together for the purpose of acquiring, voting,
holding or disposing of shares of the capital stock of PCXH. PCXH
Certificate of Incorporation, Article Nine, Section 1(b)(iv).
\11\ PCXH Certificate of Incorporation, Article Nine, Section
1(b)(i). However, such restriction may be waived by the Board of
Directors of PCXH pursuant to an amendment to the Bylaws of PCXH
adopted by the Board of Directors, if, in connection with the
adoption of such amendment, the Board of Directors adopts a
resolution stating that it is the determination of such Board that
such amendment will not impair the ability of PCX to carry out its
functions and responsibilities as an ``exchange'' under the Act and
is otherwise in the best interests of PCXH and its stockholders and
PCX, and will not impair the ability of the Commission to enforce
said Act, and such amendment shall not be effective until approved
by said Commission; provided that the Board of Directors of PCXH
shall have determined that such Person and its Related Persons are
not subject to any applicable ``statutory disqualification'' (within
the meaning of Section 3(a)(39) of the Act). PCXH Certificate of
Incorporation, Article Nine, Sections 1(b)(i)(B) and 1(b)(i)(C).
\12\ Id., Article Nine, Section 1(b)(ii).
\13\ Id., Article Nine, Section 1(c).
\14\ Id.
---------------------------------------------------------------------------
PCX proposed and the Commission approved an exception from the
ownership and voting limitations described above to add a new paragraph
at the end of Article Nine of the PCXH Certificate of Incorporation,
which provides that for so long as Archipelago directly owns all of the
outstanding capital stock of PCXH, these ownership and voting
limitations shall not be applicable to the ownership and voting of
shares of PCXH by (i) Archipelago, (ii) any Person which is a Related
Person of Archipelago, either alone or together with its Related
Persons, and (iii) any other Person to which Archipelago is a Related
Person, either alone or together with its Related Persons.\15\ These
exceptions to the ownership and voting limitations, however, shall not
apply to any ``Prohibited Persons,'' \16\ which is defined to mean any
Person that is, or that has a Related Person that is (i) an OTP Holder
or an OTP Firm (as defined in the rules of PCX) \17\ or (ii) an ETP
Holder (as defined in the rules of PCXE),\18\ unless such Person is
also a ``Permitted Person'' under the PCXH Certificate of
Incorporation.\19\ The PCXH Certificate of Incorporation further
provides that any Prohibited Person not covered by the definition of a
Permitted Person who is subject to and exceeds the voting and ownership
limitations imposed by Article Nine as of the date of the closing of
the PCXH Acquisition shall be permitted to exceed the voting and
ownership limitations
[[Page 638]]
imposed by Article Nine only to the extent and for the time period
approved by the Commission.\20\
---------------------------------------------------------------------------
\15\ PCXH Certificate of Incorporation, Article Nine, Section 4.
\16\ Id.
\17\ PCX rules define an ``OTP Holder'' to mean any natural
person, in good standing, who has been issued an Options Trading
Permit (``OTP'') by the Exchange for effecting approved securities
transactions on the Exchange's trading facilities, or has been named
as a Nominee. PCX Rule 1.1(q). The term ``Nominee'' means an
individual who is authorized by an ``OTP Firm'' (a sole
proprietorship, partnership, corporation, limited liability company
or other organization in good standing who holds an OTP or upon whom
an individual OTP Holder has conferred trading privileges on the
Exchange's trading facilities) to conduct business on the Exchange's
trading facilities and to represent such OTP Firm in all matters
relating to the Exchange. PCX Rule 1.1(n).
\18\ PCXE rules define an ``ETP Holder'' to mean any sole
proprietorship, partnership, corporation, limited liability company
or other organization in good standing that has been issued an
Equity Trading Permit, a permit issued by the PCXE for effecting
approved securities transactions on the trading facilities of PCXE.
PCXE Rule 1.1(n).
\19\ ``Permitted Person'' is defined to mean (A) any broker or
dealer approved by the Commission after June 20, 2005 to be a
facility (as defined in Section 3(a)(2) of the Act) of PCX; (B) any
Person that has been approved by the Commission prior to it becoming
subject to the provisions of Article Nine of the PCXH Certificate of
Incorporation with respect to the voting and ownership of shares of
PCXH capital stock by such Person; and (C) any Person that is a
Related Person of Archipelago solely by reason of beneficially
owning, either alone or together with its Related Persons, less than
20% of the outstanding shares of Archipelago capital stock. PCXH
Certificate of Incorporation, Article Nine, Section 4.
\20\ Id.
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b. Wave
Wave is an introducing broker for Archipelago's institutional
customers and provides such customers with access to ArcaEx and other
market centers. Because Wave, a broker-dealer and an ETP Holder of
PCXE, is a wholly-owned subsidiary and, consequently, a Related Person,
of Archipelago, it falls within the definition of ``Prohibited
Persons'' under the PCXH Certificate of Incorporation. Consequently,
absent an exception, Archipelago's ownership of PCXH would cause Wave,
as an ETP Holder, to exceed the voting and ownership limitations
imposed by Article Nine of the PCXH Certificate of Incorporation.
Therefore, in connection with the PCXH Acquisition, PCX requested a
temporary exception from the ownership and voting limitations in the
PCX Certificate of Incorporation for Archipelago's ownership of Wave
until December 31, 2005, subject to the condition that during that
interim period Archipelago would continue to maintain and comply with
its current information barriers between Wave, on the one hand, and
PCX, PCXE and other subsidiaries of Archipelago that are facilities of
PCX or PCXE, on the other hand.\21\
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\21\ See Original Rule Filing, at 36-37 and Amendment No. 2 to
the Original Rule Filing, at 4 (September 16, 2005) (``Amendment No.
2'').
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The Commission approved PCX's rule proposal regarding Wave (the
``Original Wave Exception'').\22\ In the SEC Order, the Commission
stated that the affiliation of an exchange with one of its members that
provides inbound access to the exchange--in direct competition with
other members of the exchange--raises potential conflicts of interest
between the exchange's regulatory responsibilities and its commercial
interests, and the potential for unfair competitive advantage that the
affiliated member could have by virtue of informational or operational
advantages, or the ability to receive preferential treatment.\23\
However, noting that the conditions to be imposed during the interim
period were designed to mitigate potential conflicts of interest and
the potential for unfair competitive advantage, the Commission
concluded that it would be appropriate and consistent with the Act to
allow a limited, temporary exception for Archipelago to continue its
ownership of Wave.\24\ In granting the approval for the Original Wave
Exception, the Commission also noted that in addition to being a member
of PCX, Wave is a member of the National Association of Securities
Dealers, Inc. (``NASD''), a self-regulatory organization (``SRO'') not
affiliated with Archipelago, and the NASD has been designated by the
Commission as the ``Designated Examining Authority'' for Wave pursuant
to Rule 17d-1 of the Act.\25\ Furthermore, during the interim period,
Wave would continue to be covered by the scope of an agreement between
NASD and PCX, which was entered into pursuant to Rule 17d-2 under the
Act \26\ (the ``17d-2 Agreement'') and provides for a plan concerning
the regulatory responsibilities of NASD with respect to certain members
of PCX, including Wave.\27\
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\22\ See SEC Order, at 56960.
\23\ Id. at 56959.
\24\ Id.
\25\ Id. Pursuant to Rule 17d-1 under the Act, where a member of
the Securities Investor Protection Corporation is a member of more
than one SRO, the Commission shall designate to one of such
organizations the responsibility of examining such member for
compliance with the applicable financial responsibility rules. In
making such designation, the Commission shall take into
consideration the regulatory capabilities and procedures of the
SROs, availability of staff, convenience of location, unnecessary
regulatory duplication, and such other factors as the Commission may
consider germane to the protection of investors, the cooperation and
coordination among SROs, and the development of a national market
system for the clearance and settlement of securities transactions.
17 CFR 240.17d-1.
\26\ Rule 17d-2 provides that any two or more SROs may file with
the Commission a plan for allocating among such SROs the
responsibilities to receive regulatory reports from persons who are
members or participants of more than one of such SROs to examine
such persons for compliance, or to enforce compliance by such
persons, with specified provisions of the Act, the rules and
regulations thereunder, and the rules of such SROs, or to carry out
other specified regulatory functions with respect to such persons.
17 CFR 240.17d-2.
\27\ See SEC Order, at 56959.
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c. ATS Inbound Router Function and the Inbound Router Clearing Function
Archipelago currently owns ATS, a wholly-owned subsidiary that is a
broker-dealer and an ETP Holder of PCXE. The business of ATS consists
of, among other things, acting as an introducing broker for non-ETP
Holder broker or dealer clients for securities traded on ArcaEx (the
``ATS Inbound Router Function''). Archipelago Securities, a wholly-
owned subsidiary of Archipelago, is a registered broker-dealer, a
member of the NASD and an ETP Holder. In addition to its other
functions, Archipelago Securities provides clearing functions for
trades executed by the ATS Inbound Router Function (the ``Inbound
Router Clearing Function'').
Because ATS, a broker-dealer and an ETP Holder of PCXE, is a
wholly-owned subsidiary and, consequently, a Related Person, of
Archipelago, it falls within the definition of ``Prohibited Persons''
under the PCXH Certificate of Incorporation. Consequently, absent an
exception, Archipelago's ownership of PCXH would cause ATS to exceed
the voting and ownership limitations imposed by Article Nine of the
PCXH Certificate of Incorporation. Likewise, because Archipelago
Securities, a broker-dealer and an ETP Holder of PCXE, is a wholly-
owned subsidiary and, consequently, a Related Person, of Archipelago,
and the approvals of Archipelago Securities set forth elsewhere in the
SEC Order were limited in scope and did not include its Inbound Router
Clearing Function, it falls within the definition of ``Prohibited
Persons'' under the PCXH Certificate of Incorporation. Consequently,
absent an exception, Archipelago's ownership of PCXH would cause
Archipelago Securities to exceed the voting and ownership limitations
imposed by Article Nine of the PCXH Certificate of Incorporation.
Therefore, in connection with the PCXH Acquisition, PCX requested a
temporary exception from the ownership and voting limitations in the
PCX Certificate of Incorporation for Archipelago's ownership and
operation of the ATS Inbound Router Function and the Inbound Router
Clearing Function until the earlier of (i) the closing date of the
merger of Archipelago and the NYSE and (ii) March 31, 2006, subject to
the following conditions: (1) The revenues derived by Archipelago from
the ATS Inbound Router Function will not exceed 7% of the consolidated
revenues of Archipelago (determined on a quarterly basis), (2) the ATS
Inbound Router Function will not accept any new clients following the
closing of Archipelago's acquisition of PCXH; and (3) Archipelago will
continue to maintain and comply with its current information barrier
between the ATS Inbound Router Function on the one hand and PCX, PCXE
and the other subsidiaries of Archipelago that are facilities of PCX or
PCXE on the other hand.\28\ The Commission approved PCX's rule proposal
regarding the ATS Inbound Router Function and the Inbound Router
Clearing Function (the ``Original Inbound Router Exception'').\29\ In
the SEC Order, the Commission stated that the affiliation of an
exchange with one of its members
[[Page 639]]
that provides inbound access to the exchange--in direct competition
with other members of the exchange--raises potential conflicts of
interest between the exchange's regulatory responsibilities and its
commercial interests, and the potential for unfair competitive
advantage that the affiliated member could have by virtue of
informational or operational advantages, or the ability to receive
preferential treatment.\30\ However, noting that the conditions to be
imposed during the interim period were designed to mitigate potential
conflicts of interest and the potential for unfair competitive
advantage, the Commission concluded that it would be appropriate and
consistent with the Act to allow a limited, temporary exception for
Archipelago to continue its ownership of the ATS Inbound Router
Function and the Inbound Router Clearing Function.\31\ In granting the
approval for the Original Inbound Router Exception, the Commission also
noted that in addition to being a member of PCX, ATS is a member of the
NASD and the NASD has been designated by the Commission as the
``Designated Examining Authority'' for ATS pursuant to Rule 17d-1 of
the Act.\32\ Furthermore, during the interim period, ATS would continue
to be covered by the scope of the 17d-2 Agreement,\33\ which provides
for a plan concerning the regulatory responsibilities of NASD with
respect to certain members of PCX, including ATS.\34\
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\28\ See Amendment No. 2, at 5-6.
\29\ See SEC Order, at 56960.
\30\ Id. at 56959.
\31\ Id.
\32\ Id. See supra note 25 for a description of Rule 17d-1 under
the Act.
\33\ See supra note 26.
\34\ See SEC Order, at 56959.
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d. TNT
TNT is a wholly-owned subsidiary of TAL. Mr. Putnam owns in excess
of 5% of TNT and serves as a director of TAL. Because TNT, a broker-
dealer and an ETP Holder of PCXE, is a Related Person of Archipelago by
virtue of Mr. Putnam's ownership of in excess of 5% of TNT and service
as a director of TAL, it falls within the definition of ``Prohibited
Persons'' under the PCXH Certificate of Incorporation. Consequently,
absent an exception, Archipelago's ownership of PCXH would cause TNT to
exceed the voting and ownership limitations imposed by Article Nine of
the PCXH Certificate of Incorporation. Therefore, in connection with
the PCXH Acquisition, the Commission approved the Exchange's request
for a temporary exception for Mr. Putnam to continue to own in excess
of 5% of TNT and continue to serve as a director of TAL until December
31, 2005 (the ``Original TNT Exception'').\35\ In the SEC Order, the
Commission stated that it believes that such a temporary exception is
appropriate and consistent with the Act because it will eliminate the
affiliation between TNT and Archipelago but allow Mr. Putnam a
reasonable amount of time to effectuate such actions necessary to
eliminate the affiliation.\36\
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\35\ See SEC Order, at 56960-61.
\36\ See SEC Order, at 56960.
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e. Extension of the Temporary Exceptions
i. Wave
In accordance with the terms of the Original Wave Exception,
Archipelago has been working to sell its ownership interest in Wave by
December 31, 2005. Archipelago expects to enter into a definitive
agreement for the sale of Wave to a third party prior to December 31,
2005. The definitive agreement will condition the sale of Wave upon the
satisfaction of certain customary conditions to closing specified in
the agreement, and Archipelago would intend to complete the sale as
soon as possible following the satisfaction of such conditions. The
Original Wave Exception expires on December 31, 2005. In light of the
fact that the sale would not be consummated by December 31, 2005, the
Exchange hereby proposes to extend the Original Wave Exception to
January 31, 2006, subject to the same conditions as applied to the
Original Wave Exception described above. Archipelago and the Exchange
believe that this extension would be in keeping with the policy
justifications for the Original Wave Exception outlined above, while
allowing Archipelago to complete the sale of Wave.
ii. ATS Inbound Router Function and the Inbound Router Clearing
Function
In accordance with the terms of the Original Inbound Router
Exception, Archipelago has been working to sell its ownership interest
in the ATS Inbound Router Function. Archipelago expects to enter into a
definitive agreement for the sale of the ATS Inbound Router Function to
a third party prior to December 31, 2005. The definitive agreement will
condition the sale of the ATS Inbound Router Function upon the
satisfaction of certain customary conditions to closing specified in
the agreement, and Archipelago would intend to complete the sale as
soon as possible following the satisfaction of such conditions. The
Original Inbound Router Exception expires on the earlier of (i) the
closing date of the merger of Archipelago and the NYSE and (ii) March
31, 2006. Given the uncertainty regarding the potential closing date of
the merger of Archipelago and the NYSE, the Exchange hereby proposes to
extend the expiration date of the Original Inbound Router Exception to
January 31, 2006 subject to the same conditions as applied to the
Original Inbound Router Exception described above.\37\ Archipelago and
the Exchange believe that this extension would be in keeping with the
policy justifications for the Original Inbound Router Exception
outlined above, while allowing Archipelago to complete the sale of the
ATS Inbound Router Function.
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\37\ The Exchange clarified that it proposes to extend the
Original Inbound Router Exception to January 31, 2006. Telephone
conversation between Janet Angstadt, Deputy General Counsel and
Assistant Corporate Secretary, PCX and Heather Seidel, Senior
Special Counsel, Division of Market Regulation, Commission, on
December 28, 2005 (``Telephone Conversation'').
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iii. TNT
In accordance with the terms of the Original TNT Exception, Mr.
Putnam has been working to eliminate the affiliation. Mr. Putnam
expects to enter into a definitive agreement to reduce his ownership in
TNT by January 31, 2006. The definitive agreement will condition the
transaction upon the satisfaction of certain customary conditions to
closing specified in the agreement, and Mr. Putnam would intend to
complete the transaction as soon as possible following the satisfaction
of such conditions; once the transaction is completed, Mr. Putnam would
also cease serving as a director of TAL. The Original TNT Exception
expires on December 31, 2005. In light of the fact that the
transactions would not be consummated by December 31, 2005, the
Exchange hereby proposes to extend the Original TNT Exception until
January 31, 2006, subject to the same conditions as applied to the
Original TNT Exception described above.\38\ In proposing such
extension, Archipelago and the Exchange note that the NASD is the
``Designated Examining Authority'' for TNT pursuant to Rule 17d-1 of
the Act. Furthermore, during the interim period, TNT would continue to
be covered by the scope of the 17d-2 Agreement, which provides for a
plan concerning the regulatory responsibilities of NASD with respect to
certain members of PCX, including TNT. Archipelago and the Exchange
believe that this extension would be in
[[Page 640]]
keeping with the policy justifications for the Original TNT Exception
outlined above, while allowing Mr. Putnam a reasonable amount of time
to effectuate the actions necessary to eliminate the affiliation
between TNT and Archipelago.
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\38\ The Exchange acknowledges that the Original TNT Exception
was not subject to any conditions. Telephone Conversation.
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2. Statutory Basis
The Exchange believes that the proposed rule change in this filing,
as amended, is consistent with Section 6(b) of the Act,\39\ in general,
and furthers the objectives of Section 6(b)(1),\40\ in particular, in
that it enables the Exchange to be so organized so as to have the
capacity to be able to carry out the purposes of the Act and to comply,
and (subject to any rule or order of the Commission pursuant to Section
17(d) or 19(g)(2) of the Act) to enforce compliance by its exchange
members and persons associated with its exchange members, with the
provisions of the Act, the rules and regulations thereunder, and the
rules of the Exchange. The Exchange also believes that this filing, as
amended, furthers the objectives of Section 6(b)(5),\41\ in particular,
because the rules summarized herein would create a governance and
regulatory structure with respect to the operation of the business of
PCX that is designed to help prevent fraudulent and manipulative acts
and practices; to promote just and equitable principals of trade; to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities; and 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.
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\39\ 15 U.S.C. 78f(b).
\40\ 15 U.S.C. 78f(b)(1).
\41\ 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, as
amended, 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
Written comments on the proposed rule change were neither solicited
nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change, as amended, does not:
(i) Significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \42\ and Rule 19b-
4(f)(6) thereunder.\43\
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\42\ 15 U.S.C. 78s(b)(3)(A).
\43\ 17 CFR 240.19b-4(f)(6). Pursuant to Rule 19b-4(f)(6)(iii)
under the Act, the Exchange is required to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of 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 has determined to waive this requirement.
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At any time within 60 days of the filing of the proposed rule
change, the Commission may summarily abrogate 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.\44\
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\44\ The effective date of the original proposed rule change is
December 19, 2005, and the effective date of the amendment is
December 23, 2005. For purposes of calculating the 30-day operative
delay and the 60-day period within which the Commission may
summarily abrogate the proposed rule change, as amended, under
Section 19(b)(3)(C) of the Act, the Commission considers the period
to commence on December 23, 2005, the date on which the Exchange
submitted Amendment No. 1. See 15 U.S.C. 78s(b)(3)(C).
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PCX has asked the Commission to waive the 30-day operative delay.
The Commission believes that waiving the 30-day operative delay is
consistent with the protection of investors and the public interest.
Because the Original Wave Exception and the Original TNT Exception each
expire on December 31, 2005, and the Original Inbound Router Exception
expires on the earlier of (i) the closing date of the merger of
Archipelago and the NYSE (which date is uncertain) and (ii) March 31,
2006, such waiver will allow each of Wave, ATS (with respect to the ATS
Inbound Router Function), Archipelago Securities (with respect to the
Inbound Router Clearing Function), and TNT to remain in compliance with
the voting and ownership limitations in the PCXH Certificate of
Incorporation. The Commission notes that the Exchange has represented
that Archipelago expects to enter into a definitive agreement for the
sale of Wave and for the sale of the ATS Inbound Router Function by
December 31, 2005, and that Mr. Putnam expects to enter into a
definitive agreement to reduce his ownership in TNT by January 31,
2006. Therefore, the time period for each of the extensions is short
and will terminate on January 31, 2006. In addition, the Commission
notes that the following protections are and will continue to be in
place during the interim period: (i) Wave, ATS, and TNT are members of
the NASD as well as PCX, (ii) the NASD is the Designated Examining
Authority for Wave, ATS, and TNT pursuant to Rule 17d-1 of the Act, and
(iii) Wave, ATS, and TNT are, and will continue to be during the
extension, covered by the scope of the 17d-2 Agreement. Further,
Archipelago's ownership and operation of Wave, the ATS Inbound Router
Function of ATS, and the Inbound Router Clearing Function of
Archipelago Securities will continue to be subject to the same
conditions as the Original Wave Exception and the Original Inbound
Router Exception, as described above and as approved by the Commission
in the SEC Order.
For these reasons, the Commission designates the proposal to be
effective and operative upon filing with the Commission.\45\
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\45\ 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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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-PCX-2005-139 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-9303. All submissions should refer to
File Number SR-PCX-2005-139. This file number should be included on the
subject line if e-mail is used. To help the Commission process and
review your comments more efficiently, please use only one method. The
Commission will
[[Page 641]]
post all comments on the Commission's Internet Web site (https://
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 inspection and copying in the Commission's Public
Reference Room. Copies of such filing also will be available for
inspection and copying at the principal office of the PCX. 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-PCX-2005-139 and should be
submitted on or before January 26, 2006.
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\46\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\46\
Nancy M. Morris,
Secretary.
[FR Doc. E5-8298 Filed 1-4-06; 8:45 am]
BILLING CODE 8010-01-P
