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U.S. Securities and Exchange Commission

SEC Approves Proposal to Establish the Archipelago Exchange as the Equities Trading Facility of the Pacific Exchange, Inc.



The PCX's Archipelago Exchange Becomes the First Fully Electronic National Securities Exchange for Trading Equity Securities since 1976

Washington, DC, October 25, 2001 — The Securities and Exchange Commission today approved the proposal of the Pacific Exchange, Inc. (PCX) to establish the Archipelago Exchange (ArcaEx) as its new, electronic communications and trading facility. The all-electronic ArcaEx facility will operate in place of the trading floor of the PCX's subsidiary, PCX Equities, Inc., with ArcaEx market makers replacing the traditional floor specialists. The ArcaEx facility is the first fully electronic national securities exchange for the trading of equity securities since the Cincinnati Stock Exchange developed its trading system in 1976.

ArcaEx will feature three trading sessions each day: an early trading session, a core trading session, and a late trading session. Members and other users of ArcaEx will submit orders to an electronic file of orders, known as the Arca Book, where all trades will be executed at prices equal to or better than the national best bid or offer.

The Archipelago Exchange LLC, a wholly owned subsidiary of Archipelago Holdings LLC, owns and operates ArcaEx. The PCX currently has a 10% ownership interest in Archipelago Holdings. As a self-regulatory organization under the Exchange Act, the PCX is fully responsible for the trading that will take place through ArcaEx and is obligated to conduct all necessary surveillance and to maintain an audit trail of trading through ArcaEx. In addition, the PCX board must approve all rule changes relating to ArcaEx. Finally, the PCX and its ArcaEx facility are also subject to the Commission's oversight and examination.

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Modified: 10/25/2001