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]

Download as PDF cchase on PROD1PC60 with NOTICES 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. VerDate Aug<31>2005 17:06 Jan 04, 2006 Jkt 208001 PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 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’’). E:\FR\FM\05JAN1.SGM 05JAN1 Federal Register / Vol. 71, No. 3 / Thursday, January 5, 2006 / Notices 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 cchase on PROD1PC60 with NOTICES 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 VerDate Aug<31>2005 17:06 Jan 04, 2006 Jkt 208001 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. PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 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. E:\FR\FM\05JAN1.SGM 05JAN1 638 Federal Register / Vol. 71, No. 3 / Thursday, January 5, 2006 / Notices imposed by Article Nine only to the extent and for the time period approved by the Commission.20 cchase on PROD1PC60 with NOTICES 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. VerDate Aug<31>2005 17:06 Jan 04, 2006 Jkt 208001 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. PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 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 E:\FR\FM\05JAN1.SGM Amendment No. 2, at 5–6. SEC Order, at 56960. 05JAN1 Federal Register / Vol. 71, No. 3 / Thursday, January 5, 2006 / Notices 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 cchase on PROD1PC60 with NOTICES 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. VerDate Aug<31>2005 17:06 Jan 04, 2006 Jkt 208001 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. E:\FR\FM\05JAN1.SGM 05JAN1 640 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). VerDate Aug<31>2005 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 (http://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 (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 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 E:\FR\FM\05JAN1.SGM 05JAN1

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]


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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.
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    \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).
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 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.
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    \6\ See Securities Exchange Act Release No. 52497 (September 22, 
2005), 70 FR 56949 (September 29, 2005) (the ``SEC Order'').
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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, 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.
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    \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.
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    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\
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    \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.
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    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\
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    \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\
---------------------------------------------------------------------------

    \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'').
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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).
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

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 (http://
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 (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 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