Securities Law & Instruments


Exemption pursuant to section15.1 of National Instrument 21-101 Marketplace Operation andsection 12.1 of National Instrument 23-101 Trading Rules fromthe requirement to comply with National Instrument 21-101 andNational Instrument 23-101 until the earlier of September 30,2002 and the date on which Archipelago Canada is in a positionto comply with the requirements of the ATS Rules.













WHEREAS the local securitiesregulatory authority or regulator in each of the Provinces ofOntario, British Columbia and Quebec (each, the "DecisionMaker") has received an application (the "Application")from Wave Securities, L.L.C. (formerly known as ArchipelagoL.L.C.) ("Wave") for a decision under section 15.1of National Instrument 21-101 Marketplace Operation and section12.1 of National Instrument 23-101 Trading Rules that the requirementto comply with National Instrument 21-101 Marketplace Operationand National Instrument 23-101 Trading Rules (together, the"ATS Rules") does not apply to Wave until the earlierof September 30, 2002 and the date on which Archipelago CanadaInc. ("Archipelago Canada") is in a position to complywith the requirements of the ATS Rules;

AND WHEREAS pursuantto the Mutual Reliance Review System for Exemptive Relief Applications(the "System"), the Ontario Securities Commissionis the principal jurisdiction for this Application;

AND WHEREAS Wave hasrepresented to the Decision Makers that:

1. Wave is a limited liabilitycompany organized under the laws of the State of Delawarewith its registered office in Chicago. Wave changed its namefrom Archipelago L.L.C. to Wave Securities, L.L.C. effectiveMarch 21, 2002.

2. Wave is a registered broker-dealerunder the United States Securities Exchange Act of 1934, andis also registered as an "alternative trading system"("ATS") pursuant to Regulation ATS in the UnitedStates.

3. Wave is a member in goodstanding of the National Association of Securities Dealersin the United States and a participant in the Securities InvestorProtection Corporation.

4. Wave owns and operatesan ATS that matches electronic bids and offers for publiclytraded equity securities of U.S. registered companies (the"ARCA System"). Wave has effectively created a nationallimit order book for national markets, including securitieslisted or quoted on the Nasdaq Stock Market, the New YorkStock Exchange and the American Stock Exchange. Subscribersto the ARCA System are broker-dealers and institutional investors.

5. On July 19, 2000, Wavebecame registered with the Ontario Securities Commission asan International Dealer and has been providing access to theARCA System to Ontario residents pursuant to the terms ofsuch registration.

6. In connection with itsInternational Dealer registration, Wave is required to complywith certain terms and conditions of registration (the "Termsand Conditions"), which are attached hereto as ScheduleA.

7. Outside of Ontario, inCanada Wave has been providing access to the ARCA System inBritish Columbia solely to registered investment dealers inreliance on the exemption set out in subsection 45(2)(7) ofthe Securities Act (British Columbia). Wave has also beenproviding access to the ARCA System to one customer in Quebecbut as of July 18, 2002 temporarily suspended this accessawaiting an order granting the exemption.

8. In March 2000, Wave signedan agreement with the Pacific Exchange, Inc. ("PCX")pursuant to which the ARCA System is being transformed intoa new market, which is called the Archipelago Exchange ("ArcaEx").ArcaEx is being operated by Archipelago Exchange L.L.C., awholly-owned subsidiary of Archipelago Holdings, L.L.C. (theparent entity of Wave), as a trading 'facility' (as such termis defined in Section 3(a)(2) of the United States SecuritiesExchange Act of 1934) of PCX Equities Inc. ("PCXE"),a wholly owned subsidiary of PCX, and will replace the equitymarketplace currently offered by PCX (options trading willcontinue on the PCX). ArcaEx will provide automatic orderexecution capabilities for NYSE, Amex, Nasdaq and PCX-tradedequity securities.

9. PCX and PCXE will be responsiblefor regulating the trading activity onArcaEx, and ArchipelagoExchange, L.L.C. will be responsible for the business of ArcaEx.

10. In connection with theseplans, new exchange rules were filed with the SEC in June2000 and SEC approval was granted on October 25, 2001.

11. The transformation ofthe ARCA System into ArcaEx is being carried out by a migrationprocess that began on March 22, 2002, with the migration of28 stocks to ArcaEx and will continue throughout 2002 withthe migration of additional stocks from the ARCA System toArcaEx. As of June 25, 2002, 61 listed stocks have migratedto ArcaEx.

12. On March 18, 2002, ArchipelagoHoldings L.L.C. and REDIBook ECN, LLC., ("RediBook"),closed a business combination announced on November 29, 2001.As a result of the business combination, Wave is now affiliatedwith the operator of the RediBook ATS (the "AcquiredSystem"). The Acquired System is an ATS that matcheselectronic bids and offers for publicly traded equity securitiesof U.S. registered companies, including securities listedor quoted on the Nasdaq Stock Market, the New York Stock Exchangeand the American Stock Exchange. RediBook is a registeredbroker-dealer under the United States Securities ExchangeAct of 1934 and is also registered as an ATS pursuant to RegulationATS in the United States. RediBook is not registered as adealer in any Canadian jurisdiction.

13. Wave undertakes to complywith the Terms and Conditions until September 30, 2002.

14. Archipelago Holdings L.L.C.has established a wholly-owned subsidiary under the laws ofCanada, Archipelago Canada and Archipelago Canada filed anapplication with the Investment Dealers Association (the "IDA")on June 27, 2002 to become registered as a member.

15. As soon as ArchipelagoCanada obtains registration and membership and is able tocomply with the other requirements of the ATS Rules, Wavewill cease to carry on the business of an ATS in the jurisdiction.

16. Wave acknowledges thatArchipelago Canada shall not open an account for any person,company or entity that did not have an existing and open accounton July 18, 2002.

17. Wave acknowledges thatArchipelago Canada must be in a position to comply with theATS Rules by September 30, 2002 and no further extensionswill be granted.

AND WHEREAS pursuantto the System, this MRRS Decision Document evidences the decisionof each Decision Maker (collectively, the "Decision");

AND WHEREAS each of theDecision Makers is satisfied that the test contained in theATS Rules that provides the Decision Maker with the jurisdictionto make the Decision has been met;

THE DECISION of the DecisionMakers is that Wave is exempt from the requirements of the ATSRules with respect to the operation of the ARCA System in Ontario,British Columbia and Quebec until the earlier of September 30,2002 and the date on which Archipelago Canada is in a positionto comply with all of the requirements of the ATS Rules providedthat Archipelago Canada proceeds as expeditiously as possiblewith its applications for registration as a dealer or the equivalentin each of Ontario, British Columbia and Quebec, applicationfor membership in the IDA and the filing of Form 21-101.F2 InitialOperation Report Alternative Trading System with the DecisionMakers which is required to be filed, in any event, no laterthan August 12th, 2002.

July 25, 2002.

"Randee B. Pavalow"





Wave Securities, L.L.C. (formerlyArchipelago L.L.C.) has been granted registration as an InternationalDealer which permits it to provide Ontario resident DesignatedInstitutions (as defined in s. 204 of the Regulation to theSecurities Act) terminals to trade foreign non-interlistedsecurities, provided it complies with certain Terms and Conditionsset out below.

Part A: Trading Restrictions

In this Part A:

"Canadian issuer"means an issuer incorporated, formed or created under the lawsof Canada or any province or territory of Canada.

"foreign security"means a security issued by an issuer that is not a Canadianissuer.

The registrant shall be permittedto execute orders on behalf of customers resident in Ontariobut only in foreign securities that are not listed and postedon the Toronto Stock Exchange, The Montreal Exchange or theCanadian Venture Exchange ("CDNX").

Part B: Information to beSupplied by the Registrant on a Confidential Basis

The registrant agrees to:

(a) advise the Ontario SecuritiesCommission (the "Commission") of any substantialor material changes to its electronic trading system andbusiness including, but not limited to, substantial or materialchanges in the criteria used to screen potential customers,changes in the algorithm regarding matching orders and complyingwith trading rules (but without prejudice to the registrant'sdiscretion to exercise its business judgement in acceptingand evaluating customers), and whether securities listedonly on any of The Toronto Stock Exchange, The MontrealExchange or CDNX are proposed to be traded through the registrant'selectronic trading system;

(b) furnish, upon the requestof the Commission, access on a confidential basis to filingsand/or copies of filings effected by the registrant withthe Securities and Exchange Commission of the United States("SEC"); the most recent No-Action Letter datedJanuary 12, 2001, its Form BD and its Focus Report and notifythe Commission if it discontinues the filing of any of thesedocuments;

(c) furnish on a quarterlybasis a report identifying Ontario resident customers bycode and listing stocks traded on behalf of Ontario residentcustomers so that compliance with the trading restrictionsset forth in Part A can be monitored. (Ontario residentcustomers may be identified on such quarterly reports byidentification codes only);

(d) make available on aquarterly basis a list of foreign securities and securitiesof Canadian issuers traded through the registrant's electronictrading system which cannot be traded on behalf of the registrant'scustomers resident in Ontario by virtue of the trading restrictionsset forth in Part A;

(e) furnish promptly upona request of the Commission any of the following information:

(i) a complete list ofnames and addresses of Ontario-resident customers on thesystem and their identification codes ("IDs");

(ii) a complete list ofcustomer IDs for Ontario resident customers whose accessto certain securities traded through the registrant'selectronic trading system has been blocked by a mechanism(the "Blocking Mechanism") implemented by virtueof the trading restrictions set forth in Part A;

(iii) a list of identificationacronyms used for Ontario resident customers with Canadianaddresses;

(iv) an exception reportshowing Ontario addresses with IDs out of range or withthe Blocking Mechanism switched off;

(v) a complete descriptionof the controls over and procedures for identifying Ontarioresident customers on the system and implementing theBlocking Mechanism to prevent trading through the registrant'sterminals in both interlisted and Canadian non-interlistedsecurities including specifically, who initially activatesthe switch, who has access to or the ability to changethe setting, and how changes are authorized and logged;

(vi) records of all tradesby Ontario-resident customers including a descriptionof the securities traded;

(vii) identification fromthe trading records of those trades made directly througha terminal of the registrant and those trades which weremade by other means;

(viii) the process andcriteria used by the registrant to screen potential customers,the identification of parties that have not been acceptedas customers and documentation of procedures and reasonsfor accepting or rejecting a specific customer application;

(ix) information regardingthe system's algorithm for matching orders and compliancewith trading rules; and

(x) confirmation of tradesand settlement process including procedures for dealingwith failed trades.

(f) maintain books and recordsnecessary to record properly the registrant's business transactionsand financial affairs and make these available upon requestto staff of the Commission for any valid regulatory purpose.

(g) report all informationto the Securities and Exchange Commission which shall includetransactions involving Ontario resident customer investorsand which can be segregated from other information and madeavailable on that basis.

Part C: Expiration of Termsand Conditions

The Terms and Conditions setforth in Parts A and B shall cease to apply to the registrantupon the expiry of the sixty day period following the date thatProposed National Instrument 21-101 Marketplace Operation becomeseffective.