June 29, 2005

Alden Adkins
Chief Regulatory Officer
Pacific Exchange, Inc.
115 Sansome Street
San Francisco, CA 94104

Re: Exemption from Rules 11Ac1-1, 11Ac1-2, and 11Ac1-4

Dear Mr. Adkins:

By letter dated June 29, 2005, the Pacific Exchange, Inc. ("PCX"), through its wholly owned subsidiary PCX Equities, Inc., requested that the Securities and Exchange Commission ("Commission") extend the exemption from Rules 11Ac1-1, 11Ac1-2, and 11Ac1-4 under the Securities Exchange Act of 1934 that permits Archipelago Exchange, a facility of PCX ("ArcaEx"), ETP Holders of ArcaEx, and vendors that disseminate ArcaEx quotation information to enter, execute, and report quotations in exchange-listed securities and Nasdaq National Market and SmallCap securities in increments less than $0.01 per share, although such quotations are disseminated in rounded, penny increments without a rounding identifier.¹ This exemption was an expansion of a similar exemption the Commission granted to PCX with respect to securities priced less than $1.00 per share.²

Based on the representations in your requests for relief and contingent upon PCX's compliance with the conditions stated in your incoming letter and prior requests for relief, the Commission finds that the requested exemption is consistent with the public interest, the protection of investors, and the removal of impediments to, and perfection of the mechanism of, a national market system. The Commission hereby grants an extension of the exemption until August 29, 2005, the effective date for Rule 612 of Regulation NMS.³ This exemption is expressly contingent upon PCX's continuing compliance with the conditions detailed in your incoming letter and prior requests for relief. In light of the implementation of Rule 612, the Commission does not intend to grant additional extensions of this exemption.

Endnotes

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¹ See Letter to Mai S. Shiver, Director of Regulatory Policy, PCX, from David S. Shillman, Associate Director, Division of Market Regulation, Commission, dated February 10, 2005 ("February 2005 Letter").

² See Letter to Mai S. Shiver, Director of Regulatory Policy, PCX, from David S. Shillman, Associate Director, Division, Commission, dated September 24, 2004 ("Initial Exemption Letter").

³ In the February 2005 Letter, the Commission stated that the Commission may modify, withdraw, or extend the exemption, depending upon the action taken by the Commission on proposed Regulation NMS. Regulation NMS was approved by the Commission on April 6, 2005 and published in the Federal Register on June 29, 2005. Rule 612 of Regulation NMS as adopted will, among other things, prohibit market participants from displaying, ranking, or accepting quotations in NMS stocks that are priced in an increment of less than $0.01 per share, unless the price of the quotation is less than $1.00. If the price of the quotation is less than $1.00, the minimum increment is $0.0001. See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496.

Incoming Letter:

The Incoming Letter is in Acrobat format.

http://www.sec.gov/divisions/marketreg/mr-noaction/pei070105.htm