The proposal calls for creation of a new for-profit, shareholder-owned corporation, PCX Holdings, Inc., which will own the Pacific Exchange and its subsidiary, PCX Equities, Inc. PCX seat owners will receive 1,000 shares of PCX Holdings common stock for each seat owned, as well as a non-transferable trading right. The Exchange's seat owners approved the demutualization plan this past January, by an overwhelming vote of 443 to 51.
"We are delighted to receive the SEC's endorsement for our demutualization proposal," said Philip D. DeFeo, PCX Chairman and CEO. "The holding company structure we designed is a groundbreaking development for a U.S. securities exchange. The Commission and its staff worked very hard with us to ensure that it will operate in the best interests of public investors, while also providing the new company the flexibility to enter new business ventures that may lie outside the traditional activities of an exchange."
DeFeo said that he intends to capture fully all of the advantages demutualization offers. "We will make decisions and implement change faster," he said. "We will operate more efficiently and better serve customer needs. We gain the ability to attract outside capital and strategic partners. And we will align the interests of all our constituencies - shareholders, floor traders, customers, and management - so that the Exchange moves forward with a single purpose.
The Pacific's proposal has one final regulatory requirement to meet: securing approval from the California Department of Corporations. A public hearing will be held at the Department's San Francisco office on June 9 to determine the fairness of the proposal to existing seat owners. If the Corporations Commissioner approves the plan following the hearing, it will become effective shortly thereafter.
