This matter primarily involves a number of episodes in which the Respondent Exchanges engaged in business practices without having effective exchange rules in place,3 or operated in a manner that did not comply with the exchange rules then in effect or the federal securities laws. In addition, Archipelago Securities L.L.C. ("ArcaSec"), the wholly-owned routing broker for the Respondent Exchanges, failed to establish, maintain, and enforce policies and procedures in connection with error account trading that were reasonably designed to prevent the misuse of material, nonpublic information by the broker or any person associated with the broker. ArcaSec also violated the Exchange Act and rules thereunder by effecting transactions in securities without sufficient net capital and failing to provide timely notice of the net capital deficiency to the Commission.The Respondent Exchanges devoted insufficient attention to ensuring that the business operations of the exchanges and of their affiliated broker-dealer were conducted in accordance with effective exchange rules and the federal securities laws. In particular, during the relevant periods, the Respondent Exchanges lacked comprehensive and consistently-applied policies and procedures for determining whether new business practices required an exchange rule or rule change and evaluating whether business operations were being conducted fully in accordance with existing exchange rules and the federal securities laws. Further, the exchanges lacked adequate policies and procedures for ensuring that proposed rules and rule changes that were filed with the Commission accurately reflected the manner in which a particular business operation or practice actually would function. Moreover, in certain of the scenarios described below, the Respondent Exchanges continued to operate without effective exchange rules or in violation of an existing rule for extended periods of time because they failed to promptly file appropriate rule proposals for already ongoing exchange operations that required a rule or filed rule proposals despite having been informed informally by the Commission's staff that a particular proposal was likely not consistent with the Exchange Act.