California Approves Pacific Exchange Demutualization Applications

The California Department of Corporations yesterday approved applications of the Pacific Exchange (PCX) for its demutualization proposal. The proposal creates PCX Holdings, Inc., a for-profit shareholder corporation that will own the PCX, which operates an equities options market in San Francisco and regulates the Archipelago Exchange, the second largest stock market in the U.S. The plan was overwhelmingly approved by PCX members this past January and by the Securities and Exchange Commission in May.

We are grateful for California's action. Today marks the culmination of a five-year effort to provide our customers and investors a more nimble, flexible, and responsive corporate structure, one that can take full advantage of strategic opportunities and respond effectively to competitive challenges. When we submitted the current demutualization proposal to our seat owners for consideration, we said we hoped to complete this transaction by the second quarter of the year. We are delighted that we are fulfilling that promise.

A filing will be made with the State of Delaware (where PCX Holdings will be incorporated) in the next few days, so that demutualization can be effective on Tuesday, June 15. At that time, each of the Exchange's 552 seats will be converted to 1,000 shares of common stock in PCX Holdings, Inc. Seat owners will also receive a non-transferable trading right, which can be used to trade on the PCX options floor. Shareholders in PCX Holdings will not pay monthly fees, unless they activate their trading permits.

The applications approved today were filed by the Exchange under the California Corporate Securities Law of 1968, and were required because a majority of the current PCX seat owners are firms and individuals domiciled in California. The Department's approval grants PCX Holdings the right to issue stock without registering the securities with state or federal agencies. Under state law, the Department was required to determine that such offering would be fair to investors.