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with an adequate opportunity to and the ultimate parent company of which sought to, among other things,
compete for those orders. PCXH and PCX, to continue to (i) own amend the PCXH Certificate of
It is therefore ordered, pursuant to and operate the ATS OTC Function (as Incorporation to create an exception
Section 19(b)(2) of the Act,7 that the defined below) of its wholly-owned from the voting and ownership
proposed rule change (SR–PCX–2005– subsidiary, Archipelago Trading restrictions for Archipelago and certain
85), as amended, is approved. Services, Inc. (‘‘Arca Trading’’), and (ii) of its related persons (the ‘‘Original Rule
For the Commission, by the Division of until the closing of the proposed Filing’’).4 The Original Rule Filing, as
Market Regulation, pursuant to delegated business combination of Archipelago amended by Amendment No. 1 and
authority.8 and the New York Stock Exchange, Inc. Amendment No. 2 thereto, was
Jonathan G. Katz, (the ‘‘NYSE’’), a New York not-for-profit approved by the Commission on
Secretary. corporation (the ‘‘Proposed Archipelago September 22, 2005 5 and the amended
NYSE Merger’’), own and operate the PCXH Certificate of Incorporation
[FR Doc. E5–6622 Filed 11–28–05; 8:45 am]
DOT Function (as defined below) of its became effective on September 26, 2005,
BILLING CODE 8010–01–P
wholly-owned subsidiary, Archipelago upon the closing of the PCXH
Securities, L.L.C. (‘‘Archipelago Acquisition.
Securities’’). Article Nine of the PCXH Certificate
SECURITIES AND EXCHANGE of Incorporation provides that no
COMMISSION II. Self-Regulatory Organization’s Person,6 either alone or together with its
[Release No. 34–52811; File No. SR–PCX–
Statement of the Purpose of, and Related Persons,7 may own, directly or
2005–125] Statutory Basis for, the Proposed Rule indirectly, shares constituting more than
Change 40% of the outstanding shares of any
Self-Regulatory Organizations; Pacific In its filing with the Commission, class of PCXH capital stock,8 and that
Exchange, Inc.; Notice of Filing and PCX included statements concerning the no Person, either alone or together with
Order Granting Accelerated Approval purpose of and basis for the proposed its Related Persons who is a trading
of Proposed Rule Change To Extend rule change and discussed any permit holder of PCX or an equities
Certain Exceptions From the Voting comments it received on the proposed trading permit holder of PCXE, may
and Ownership Limitations in the rule change. The text of these statements own, directly or indirectly, shares
Certificate of Incorporation of PCX may be examined at the places specified
Holdings, Inc. in Item III below. The self-regulatory 4 See Pacific Exchange, Inc., Proposed Rule
Items I and II below, which Items have a. PCXH Acquisition and the PCXH Certificate of Incorporation, means (i) with
been prepared by PCX. The Commission Amendment of the PCXH Certificate of respect to any person, all ‘‘affiliates’’ and
Incorporation ‘‘associates’’ of such person (as such terms are
is publishing this notice to solicit defined in Rule 12b–2 under the Act; (ii) with
comments on the proposed rule change On September 26, 2005, Archipelago respect to any person constituting a trading permit
from interested persons, and is completed its acquisition of PCXH and holder of PCX or an equities trading permit holder
approving the proposal on an of PCXE, any broker dealer with which such holder
all of its wholly-owned subsidiaries, is associated; and (iii) any two or more persons that
accelerated basis. including PCX and PCX Equities, Inc. have any agreement, arrangement or understanding
I. Self-Regulatory Organization’s (‘‘PCXE’’) (the ‘‘PCXH Acquisition’’). (whether or not in writing) to act together for the
The PCXH Acquisition was purpose of acquiring, voting, holding or disposing
Statement of the Terms of Substance of of shares of the capital stock of PCXH. PCXH
the Proposed Rule Change accomplished by way of a merger of Certificate of Incorporation, Article Nine, section
PCXH with a wholly-owned subsidiary 1(b)(iv).
PCX hereby submits to the of Archipelago, with PCXH being the 8 PCXH Certificate of Incorporation, Article Nine,
Commission a proposed rule change to surviving corporation in the merger and section 1(b)(i). However, such restriction may be
extend certain exceptions from the becoming a wholly-owned subsidiary of waived by the Board of Directors of PCXH pursuant
voting and ownership limitations in the to an amendment to the Bylaws of PCXH adopted
Archipelago. by the Board of Directors, if, in connection with the
certificate of incorporation of PCX The certificate of incorporation of adoption of such amendment, the Board of
Holdings, Inc. (‘‘PCXH’’), a Delaware PCXH (as amended to date, the ‘‘PCXH Directors adopts a resolution stating that it is the
corporation and the parent company of Certificate of Incorporation’’) contains determination of such Board that such amendment
PCX, approved by the Commission in an will not impair the ability of PCX to carry out its
various ownership and voting functions and responsibilities as an ‘‘exchange’’
order issued on September 22, 2005,3 so restrictions on PCXH’s capital stock, under the Act and is otherwise in the best interests
as to allow Archipelago Holdings, Inc. which are designed to safeguard the of PCXH and its stockholders and PCX, and will not
(‘‘Archipelago’’), a Delaware corporation independence of the self-regulatory impair the ability of the Commission to enforce said
Act, and such amendment shall not be effective
functions of PCX and to protect the until approved by said Commission; provided that
7 15 U.S.C. 78s(b)(2). Commission’s oversight responsibilities. the Board of Directors of PCXH shall have
8 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
In order to allow Archipelago to own determined that such Person and its Related
100% of the capital stock of PCXH, prior Persons are not subject to any applicable ‘‘statutory
2 17 CFR 240.19b–4.
disqualification’’ (within the meaning of section
3 See Securities Exchange Act Release No. 52497 to the completion of the PCXH 3(a)(39) of the Act). PCXH Certificate of
(September 22, 2005), 70 FR 56949 (September 29, Acquisition, PCX filed with the Incorporation, Article Nine, sections 1(b)(i)(B) and
2005) (‘‘Order Approving SR–PCX–2005–90’’). Commission a proposed rule change 1(b)(i)(C).
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constituting more than 20% of any class PCXE),15 unless such Person is also a Certificate of Incorporation for
of PCXH capital stock.9 Furthermore, ‘‘Permitted Person’’ under the PCXH Archipelago’s ownership and operation
the PCXH Certificate of Incorporation Certificate of Incorporation.16 The of the ATS OTC Function of Arca
provides that, for so long as PCXH PCXH Certificate of Incorporation Trading.19 The Commission approved
controls, directly or indirectly, PCX, no further provides that any Prohibited PCX’s proposal and allowed
Person, either alone or with its Related Person not covered by the definition of Archipelago to continue to own and
Persons, may directly or indirectly vote a Permitted Person who is subject to and operate the ATS OTC Function of Arca
or cause the voting of shares of PCXH exceeds the voting and ownership Trading for a period of 60 days
capital stock or give any proxy or limitations imposed by Article Nine as following the closing of the PCXH
consent with respect to shares of the date of the closing of the PCXH Acquisition.20 The pilot approval was
representing more than 20% of the Acquisition shall be permitted to exceed designed to provide the public and
voting power of the issued and the voting and ownership limitations other interested parties the opportunity
outstanding PCXH capital stock.10 The imposed by Article Nine only to the to comment on the exception before the
PCXH Certificate of Incorporation also extent and for the time period approved exception being made permanent. In the
places limitations on the right of any by the Commission.17 Order Approving SR–PCX–2005–90, the
Person, either alone or with its Related Commission specifically noted that in
b. ATS OTC Function
its adoption of Regulation ATS, it had
Persons, to enter into any agreement Arca Trading is a broker-dealer and an stated that exchanges could form
with respect to the withholding of any ETP Holder of PCXE. The business of subsidiaries that operate ATSs
vote or proxy.11 Arca Trading includes, among other registered as broker-dealers and that
PCX proposed (and the Commission things, the operation of an alternative such subsidiaries would of course be
approved) an exception from the trading system (‘‘ATS’’) (as defined in required to become members of a
ownership and voting limitations Regulation ATS promulgated by the national securities association or
described above by adding a new Commission under the Act) 18 for another national securities exchange.21
paragraph at the end of Article Nine of trading of over-the-counter bulletin
the PCXH Certificate of Incorporation, board securities that are not traded on c. DOT Function of Archipelago
any securities exchange or Nasdaq Securities
which provides that for so long as
Archipelago directly owns all of the (including, for the avoidance of doubt, Archipelago Securities is a registered
outstanding capital stock of PCXH, these The NASDAQ National Market and The broker-dealer, a member of the National
ownership and voting limitations shall NASDAQ SmallCap Market) (such Association of Securities Dealers, Inc.
not be applicable to the ownership and function was referred to as the ‘‘ATS and an ETP Holder of PCXE. Among
voting of shares of PCXH by (i) OTC Function’’ in the Order Approving other things, Archipelago Securities
Archipelago, (ii) any Person that is a SR–PCX–2005–90). Because Arca engages in the business of providing
Related Person of Archipelago, either Trading is a broker-dealer and an ETP broker-dealer clients with direct
alone or together with its Related Holder, and a wholly-owned subsidiary connectivity, through the NYSE
Persons, and (iii) any other Person to and, consequently, a Related Person, of Designated Order Turnaround System,
which Archipelago is a Related Person, Archipelago, it falls within the to the NYSE (such function was referred
definition of ‘‘Prohibited Persons.’’ to as the ‘‘DOT Function’’ in the Order
either alone or together with its Related
Absent an exception, Archipelago’s Approving SR–PCX–2005–90). Because
Persons.12 These exceptions to the
ownership of PCXH would cause Arca Archipelago Securities is a broker-dealer
ownership and voting limitations,
Trading to exceed the voting and and an ETP Holder, and a wholly-
however, shall not apply to any
ownership limitations imposed by owned subsidiary and, consequently, a
‘‘Prohibited Persons,’’ 13 which is Article Nine of the PCXH Certificate of Related Person, of Archipelago, it falls
defined to mean any Person that is, or Incorporation. Therefore, in connection within the definition of ‘‘Prohibited
that has a Related Person that is (i) an with the PCXH Acquisition, PCX Persons.’’ Absent an exception,
OTP Holder or an OTP Firm (as defined requested an exception on a pilot basis Archipelago’s ownership of PCXH
in the rules of PCX) 14 or (ii) an ETP for Arca Trading from the ownership would cause Archipelago Securities to
Holder (as defined in the rules of and voting limitations in the PCX exceed the voting and ownership
limitations imposed by Article Nine of
9 PCXH Certificate of Incorporation, Article Nine, 15 PCXE rules define an ‘‘ETP Holder’’ to mean
section 1(b)(ii).
the PCXH Certificate of Incorporation.
any sole proprietorship, partnership, corporation,
10 PCXH Certificate of Incorporation, Article
limited liability company or other organization in
Therefore, in connection with the PCXH
Nine, section 1(c). good standing that has been issued an Equity Acquisition, PCX requested an
11 Id. Trading Permit, a permit issued by the PCXE for exception on a pilot basis for
12 PCXH Certificate of Incorporation, Article effecting approved securities transactions on the Archipelago Securities from the
Nine, Section 4. trading facilities of PCXE. PCXE Rule 1.1(n).
16 ‘‘Permitted Person’’ is defined to mean (A) any
ownership and voting limitations for
13 Id.
14 PCX rules define an ‘‘OTP Holder’’ to mean any broker or dealer approved by the Commission after Archipelago’s ownership and operation
natural person, in good standing, who has been June 20, 2005 to be a facility (as defined in Section
issued an Options Trading Permit (‘‘OTP’’) by the 3(a)(2) of the Act) of PCX; (B) any Person that has 19 See Amendment No. 2 to the Original Rule
Exchange for effecting approved securities been approved by the Commission prior to it Filing (File Number SR–PCX–2005–90), at 6
transactions on the Exchange’s trading facilities, or becoming subject to the provisions of Article Nine (September 16, 2005) (‘‘Amendment No. 2’’).
has been named as a Nominee. PCX Rule 1.1(q). The of the PCXH Certificate of Incorporation with 20 See Order Approving SR–PCX–2005–90, at
term ‘‘Nominee’’ means an individual who is respect to the voting and ownership of shares of 56960.
authorized by an ‘‘OTP Firm’’ (a sole PCXH capital stock by such Person; and (C) any 21 Id. at 56959. The Commission also noted in the
proprietorship, partnership, corporation, limited Person that is a Related Person of Archipelago Order Approving SR–PCX–2005–90 that in
liability company or other organization in good solely by reason of beneficially owning, either alone adopting Regulation ATS, the Commission stated
standing who holds an OTP or upon whom an or together with its Related Persons, less than 20% that any subsidiary or affiliate ATS could not
individual OTP Holder has conferred trading of the outstanding shares of Archipelago capital integrate, or otherwise link the ATS with the
privileges on the Exchange’s trading facilities) to stock. PCXH Certificate of Incorporation, Article exchange, including using the premises or property
conduct business on the Exchange’s trading Nine, section 4. of such exchange for effecting or reporting a
17 Id.
facilities and to represent such OTP Firm in all transaction, without being considered a facility of
matters relating to the Exchange. PCX Rule 1.1(n). 18 17 CFR 242.300 through 17 CFR 242.303. the exchange. Id.
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securities exchange.28 In particular, the Commission did not receive any which will better position Sceptor to
Commission finds that the proposal is comment with respect to Archipelago’s obtain growth capital.
consistent with section 6(b)(1) of the ownership and operation of the ATS The financing is brought within the
Act,29 which requires a national OTC Function of Arca Trading and the purview of Sec. 107.730(a)(1) of the
securities exchange to be so organized DOT Function of Archipelago Regulations because Shalom Equity
and have the capacity to be able to carry Securities. Fund Limited, an Associate of L Capital
out the purposes of the Act and to For the foregoing reasons, the Partners SBIC, L.P. owns 42% of the
enforce compliance by its members and Commission finds that the proposed existing and outstanding stock of
persons associated with its members rule change is consistent with the Sceptor.
with the provisions of the Act, the rules requirements of the Act the rules and Therefore, this transaction is
or regulations thereunder, and the rules regulations thereunder, and finds that considered a financing of an Associate
of the exchange. The Commission also good cause exists to accelerate approval requiring prior SBA approval.
finds that the proposal is consistent of the proposed rule change, pursuant to Notice is hereby given that any
with section 6(b)(5) of the Act,30 which section 19(b)(2) of the Act.33 interested person may submit written
requires, among other things, that the comments on the transaction, within 15
rules of an exchange be designed to V. Conclusion days of the date of this publication, to
promote just and equitable principles of It Is Therefore Ordered, pursuant to the Associate Administrator for
trade, to facilitate transactions in section 19(b)(2) of the Act,34 that the Investment, U.S. Small Business
securities, to remove impediments to proposed rule change (SR–PCX–2005– Administration, 409 Third Street, SW.,
and perfect the mechanisms of a free 125) is approved on an accelerated Washington, DC 20416.
and open market and a national market basis. Specifically, a permanent Dated: November 22, 2005.
system, and, in general, to protect exception for the ATS OTC Function of Jaime Guzman-Fournier,
investors and the public interest. Arca Trading is approved; and the Associate Administrator, for Investment.
Pursuant to section 19(b)(2) of the exception for the DOT Function of
Act,31 the Commission may not approve [FR Doc. E5–6633 Filed 11–28–05; 8:45 am]
Archipelago Securities is approved on a
any proposed rule change, or pilot basis until the closing date of the BILLING CODE 8025–01–P
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