Self-Regulatory Organizations; Pacific Exchange, Inc; Order Approving Proposed Rule Change and Amendment No. 1 Thereto Relating to Initial Listing Requirements for Securities Listed Under the Tier I and Tier II Designations

On November 4, 2003, the Pacific Exchange, Inc. (“PCX” or “Exchange”), through its wholly owned subsidiary, PCX Equities, Inc. (“PCXE”), filed with the Securities and Exchange Commission (“Commission”), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”) and Rule 19b-4 thereunder, a proposed rule change to amend PCXE Rules 5.2(c)(4) and 5.2(k)(4) to replace the term “non-recurring” with the term “income from continuing operations,” a term which is recognized under Generally Accepted Accounting Principles (“GAAP”). The proposed rule change also amends PCXE Rule 5.2(c)(4) to eliminate the requirement that an issuer have net income of at least $400,000, excluding non-recurring and extraordinary items. The Exchange submitted an amendment to the proposed rule change on December 17, 2003. The proposed rule change, as amended, was published for comment in the Federal Register on January 9, 2004. The Commission received no comment letters on the proposal.

The Commission finds that the proposed rule change, as amended, is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange and, particularly, section 6(b)(5) of the Act. The Commission believes that amending PCXE Rules 5.2(c)(4) and 5.2(k)(4) to replace the term “non-recurring” with the term “income from continuing operations,” a term which is recognized under GAAP, promotes just and equitable principles of trade and is not designed to permit unfair discrimination among issuers. The Commission notes that removing from PCXE Rule 5.2(c)(4) the requirement that an issuer have net income of at least $400,000, excluding non-recurring and extraordinary items, conforms to the initial listing requirements of another exchange. The Commission further notes that the proposed rule change merely clarifies the Exchange's current listing standards and is not designed to make the Exchange's listing standards more or less restrictive or alter the method upon which the Exchange calculates whether an issuer satisfies these standards.

It is therefore ordered, pursuant to section 19(b)(2) of the Act, that the proposed rule change, as amended, (SR-PCX-2003-62) is approved.