The proposal will be sent to the Exchange's 552 seat owners for consideration in late October. It must be approved by a super-majority of 75 percent, with a vote tentatively scheduled for early December. The Securities and Exchange Commission must also approve the PCX plan, a process the Exchange said it hopes to conclude in the first half of 2004.
"Demutualization is the right course of action for our seat owners, floor traders, and customers," said Philip D. DeFeo, PCX Chairman and CEO. "Our principal competition comes from a marketplace that abandoned the membership structure that traditionally defined an exchange. Our competitors in the future will not be member organizations. For-profit corporations make decisions faster, implement change faster, are more attractive to investors and strategic partners, and are far more efficient.
"We have already seen the benefits of demutualization in our equities business," DeFeo said. "It is more competitive and more valuable. Demutualizing the entire Exchange should prove equally beneficial."
The PCX demutualized its equities business in 2000, becoming the first U.S. securities exchange to operate as a for-profit company. In partnership with the Archipelago, the Pacific subsequently became the second largest stock exchange in the U.S.
The proposal approved by the PCX Board calls for the creation of a holding company, PCX Holdings, Inc. PCX seat owners would receive shares of PCX Holdings common stock for each seat owned. PCX Holdings would become the parent and sole owner of the Pacific Exchange, Inc., which would operate the options business, hold the self-regulatory organization (SRO) license, and remain the sole shareholder of PCX Equities, Inc.
