Federal Register / Vol. 66, No. 122 / Monday, June 25, 2001 / Notices 33733

17 17 CFR 200.30–3(a)(12).

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b–4.

3See letter from Cindy L. Sink, Senior Attorney,

Regulatory Policy, PCX, to Marc F. McKayle,

Special Counsel, Division of Market Regulation,

Commission, dated February 16, 2001

(‘‘Amendment No. 1’’).

4See Securities Exchange Act Release No. 34–

44026 (Feb. 28, 2001), 66 FR 13822.

5See Securities Exchange Act Release No. 34–

43608 (Nov. 21, 2000), 65 FR 78822 (Dec. 15, 2000)

(Notice of File No. SR–PCX–00–25 proposing to

create a new electronic trading facility of the PCXE

called Archipelago Exchange).

6See Amendment No. 1 supra note 3.

7 15 U.S.C. 78f(b).

8 15 U.S.C. 78f(b)(3).

9 15 U.S.C. 78f(b)(3).

10 In approving this rule, the Commission has

considered the proposed rule’s impact on

efficiency, competition, and capital formation, 15

U.S.C. 78c(f).

11 15 U.S.C. 78f(b)(3).

12Securities Exchange Act Release No. 34–42759

(May 5, 2000), 65 FR 30654 (May 12, 2000) (‘‘PCXE

Order’’).

13The Commission has previously stated its belief

that the inclusion of public, non-industry

representatives on exchange oversight bodies is

critical to make certain that an exchange activity

works to protect the public interest in the exchange

governance process. The Commission believes that

public directors can provide unique, unbiased

perspectives, which should enhance the ability of

the PCXE Board to address issues in a

nondiscriminatory fashion and foster the integrity

of PCXE. See PCXE Order, supra note 12.

14 15 U.S.C. 78f(b)(3).

15 15 U.S.C. 78s(b)(2).

16 17 CFR 200.30–3(a)(12).

For the Commission, by the Division of

market Regulation, pursuant to delegated

authority.17

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15851 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No 34–44442; File No. SR–PCX–

01–03]

Self-Regulatory Organizations, Pacific

Exchange, Inc.; Order Granting

Approval To Proposed Rule Change To

Permit an Officer or Director of a

Facility of PCX Equities To Serve on

the PCX Equities Board of Directors

June 18, 2001.

I. Introduction

On January 9, 2001, the Pacific

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’),

pursuant to section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a

proposed rule change to amend the

bylaws of its wholly-owned subsidiary,

PCX Equities, Inc. (‘‘PCXE’’ or

‘‘Corporation’’) to permit an officer or

director of a facility to PCXE to serve on

its Board of Director (‘‘Board’’). On

February 20, 2001, PCX filed

Amendment No. 1 to the proposal.3 The

proposed rule change and Amendment

No. 1 was published for comment in the

Federal Register on March 7, 2001.4 The

Commission received no comments on

the proposal. This order approves the

proposed rule change, as amended.

II. Description of the Proposal

In a related filing, PCX has proposed

to create a new electronic trading

facility of the PCXE called Archipelago

Exchange.5 Under that proposal,

Archipelago Exchange, L.L.C. (‘‘Arca’’),

a subsidiary of Archipelago Holdings.

L.L.C. (‘‘Archipelago’’), would operate

as a facility of the PCXE pursuant to

Commission approval and various

agreements between PCX, PCXE and

Archipelago. In this proposal, the PCX

proposes to amend the PCXE Bylaws to

permit an officer or director of a facility

of PCXE to serve on its Board. The

proposed rule change would permit an

Archipelago officer or director to serve

on the PCXE Board.

Specifically, the proposed

amendment to the bylaw states that

‘‘(a)n officer or director of a facility of

the Corporation may serve on the Board

of Directors.’’ Although the proposal

would permit an officer or director of a

PCXE facility to serve on the PCXE

Board, the proposal will not alter any of

the PCXE Board composition or

nomination requirements.6 The PCXE

Board will continue to be comprised of

fifty percent public directors (i.e., not a

broker or dealer in securities or affiliate

thereof) and at least twenty percent of

the directors (but no fewer than two

directors) will be nominees of the ETP/

Equity ASAP Nomination Committee. In

addition, the PCXE Board will continue

to consist of not less then ten or more

than twelve directors.

III. Discussion

After careful review, the Commission

finds that the proposed rule change is

consistent with the requirements of the

Act and the rules and regulations

thereunder applicable to a national

securities exchange. The Commission

finds that the proposed rule change is

consistent with section 6(b) of the Act,7

in general, and furthers the objectives of

section 6(b)(3),8 in particular, in that it

is consistent with the fair representation

principles set forth in the Act. Under

section 6(b)(3) of the Act,9 the rules of

an exchange must assure that its

members are fairly represented in the

selection of its directors and in the

administration of its affairs.10 The fair

representation requirement of section

6(b)(3) 11 allows statutory members to

have a voice in an exchange’s use of its

self-regulatory authority. Moreover, this

statutory requirement helps to ensure

that members are protected from unfair,

unfettered actions by an exchange

pursuant to its rule, and that, in general,

an exchange is administered in a way

that is equitable to all those who trade

on its market or through its facilities.

The proposed rule change will allow

an officer or a director of a facility of the

Corporation to be on the PCXE Board,

but will not alter the composition or

nomination requirements for the PCXE

Board that the Commission approved

and found to be consistent with the Act

in the order establishing the PCXE.12

Under the proposal, the PCXE Board

will continue to consist of fifty percent

public directors 13 and at least twenty

percent of the directors (but no fewer

than two directors) will be nominees of

the ETP/Equity ASAP Nomination

Committee. In addition, the PCXE Board

will continue to consist of not less than

ten or more than twelve directors.

Presently, the PCXE Board consists of

ten directors, however, the Exchange

has represented that requirements set

forth by the bylaws, rules and statues

will continue to be met whether the

Board’s size continues to be ten

directors or is expanded to twelve

directors. Thus, the PCXE Board will be

structured in a manner that satisfies

both the fair representation and public

participation requirements of section

6(b)(3) of the Act.14

IV. Conclusion

It is therefore ordered, pursuant to

section 19(b)(2) of the Act,15 that the

proposed rule change (SR–PCX–91–03)

is approved. For the Commission, by the

Division of Market Regulation, pursuant

to delegated authority.16

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–15799 Filed 6–22–01; 8:45 am]

BILLING CODE 8010–01–M