Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Order Granting Accelerated Approval to a Proposed Rule Change and Amendments No. 1 and 2 Thereto To Permit Trading Pursuant to Unlisted Trading Privileges of streetTRACKS Gold Shares and To Establish Trading Rules to Trade, Pursuant to Unlisted Trading Privileges, Certain Securities Whose Value Is Linked to the Value of One or More Commodities, 67668-67673 [E6-19733]
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Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices
proposed rule change, as amended, was
published for comment in the Federal
Register on October 13, 2006.4 The
Commission received no comments
regarding the proposal, as amended.
This order approves the proposed rule
change, as amended.
II. Description of the Proposal
Under its current rules, the ISE
generally charges execution and
comparison fees of $.15 and $.03 per
contract, respectively, for Firm
Proprietary orders.5 The ISE states that
it has noted increased volume in certain
customer transactions in Complex
Orders. According to the ISE, customers
that use highly developed trading
systems are able to take liquidity
quickly from ISE’s complex order book.6
To place customer orders on a more
equal footing with broker-dealer orders,
the ISE proposes to amend its Schedule
of Fees to adopt execution and
comparison fees of $.15 and $.03 per
contract, respectively, for customer
Complex Orders that take liquidity from
the ISE’s complex order book.
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III. Discussion
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.7 Specifically, the
Commission finds that the proposal is
consistent with Section 6(b)(4) of the
Act,8 which requires that the rules of an
exchange provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
issuers and other persons using its
facilities. Under its current rules, the
ISE generally charges execution and
comparison fees of $.15 and $.03 per
contract, respectively, for Firm
Orders, and not to Complex Orders that trade with
customer orders in the regular order book.
4 See Securities Exchange Act Release No. 54571
(October 4, 2006), 71 FR 60593.
5 For Firm Proprietary Complex Orders, the
execution fee is charged only for the leg of the trade
with the most contracts.
6 Under the ISE’s proposal, an order takes
liquidity when it interacts with a Complex Order
resident on the ISE’s complex order book. The ISE
determines the liquidity provider and the liquidity
taker based on time, i.e., the order that arrives first
on the ISE’s complex order book is the liquidity
provider. The fees established in the proposal apply
solely to customer Complex Orders that take
liquidity from the ISE’s complex order book, but not
to customer Complex Orders that trade with orders
in the regular order book. Similarly, the fees do not
apply to customer orders in the regular order book
that trade with Complex Orders.
7 In approving this proposed rule change the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. 15 U.S.C. 78c(f).
8 15 U.S.C. 78f(b)(4).
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Proprietary orders. The proposal
establishes execution and comparison
fees of $.15 and $.03 per contract,
respectively, for customer Complex
Orders that take liquidity from the ISE’s
complex order book.9 Accordingly, the
Commission believes that the proposal
provides for the equitable allocation of
fees among members and other persons
using the ISE’s facilities, consistent with
Section 6(b)(4) of the Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,10 that the
proposed rule change (SR–ISE–2006–
56), as amended, is approved.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.11
Nancy M. Morris,
Secretary.
[FR Doc. E6–19734 Filed 11–21–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54765; File No. SR–
NASDAQ–2006–009]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Order Granting Accelerated
Approval to a Proposed Rule Change
and Amendments No. 1 and 2 Thereto
To Permit Trading Pursuant to Unlisted
Trading Privileges of streetTRACKS
Gold Shares and To Establish Trading
Rules to Trade, Pursuant to Unlisted
Trading Privileges, Certain Securities
Whose Value Is Linked to the Value of
One or More Commodities
November 16, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 15,
2006 The NASDAQ Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’), filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by Nasdaq. On October
10, 2006, the Exchange submitted
Amendment No. 1 to the proposal,3 and
on November 14, 2006, the Exchange
9 As with the current execution fee for Firm
Proprietary Complex Orders, the execution fee will
be charged only for the leg of the trade with the
most contracts.
10 15 U.S.C. 78s(b)(2).
11 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 replaced the original filing in
its entirety.
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submitted Amendment No. 2 to the
proposal.4 The Commission is
publishing this notice to solicit
comments on the proposed rule change,
as amended, from interested persons,
and is granting accelerated approval to
the proposal, as amended.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq is making this filing to enable
it to continue trading pursuant to
unlisted trading privileges (‘‘UTP’’) of
streetTRACKS Gold Shares (‘‘Shares’’)
and to add Nasdaq Rule 4630 to
establish trading rules to trade, pursuant
to UTP, certain securities whose value
is linked to the value of one or more
commodities.
The text of the proposed rule change
is below. Proposed new language is in
italics.5
*
*
*
*
*
4630. Trading in Commodity-Based
Trust Shares
(a) Nasdaq will consider for trading
pursuant to unlisted trading privileges,
Commodity-Based Trust Shares that
meet the criteria of this Rule.
(b) Applicability. This Rule is
applicable only to Commodity-Based
Trust Shares. Except to the extent
inconsistent with this Rule, or unless the
context otherwise requires, the
provisions of Rule 4420(l) and all other
Nasdaq Rules shall be applicable to the
trading on Nasdaq of such securities.
Commodity-Based Trust Shares are
included within the definition of
‘‘security’’ or ‘‘securities’’ as such terms
are used in the Nasdaq Rules.
(c) Definitions. The following terms
shall, unless the context otherwise
requires, have the meaning herein
specified:
(1) Commodity-Based Trust Shares.
The term ‘‘Commodity-Based Trust
Shares’’ means a security (a) that is
issued by a trust (‘‘Trust’’) that holds a
specified commodity deposited with the
Trust; (b) that is issued by such Trust in
a specified aggregate minimum number
in return for a deposit of a quantity of
the underlying commodity; and (c) that,
when aggregated in the same specified
minimum number, may be redeemed at
a holder’s request by such Trust which
will deliver to the redeeming holder the
quantity of the underlying commodity.
(2) Commodity. The term
‘‘commodity’’ is defined in Section
1(a)(4) of the Commodity Exchange Act.
4 Amendment No. 2 replaced Amendment No. 1
in its entirety.
5 Changes are marked to the rule text that appears
in the electronic manual of Nasdaq found at https://
www.complinet.com/nasdaq.
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Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices
(d) Information Barriers. A member
acting as a registered market maker in
Commodity-Based Trust Shares is
obligated to establish adequate
information barriers when such market
maker engages in inter-departmental
communications. Members should refer
to NASD/NYSE Joint Memo on Chinese
Wall Policies and Procedures (NASD
Notice to Members 91–45) for guidance
on the ‘‘’minimum elements’’ of
adequate Chinese Wall policy and
procedures.’’ For purposes of
Commodity-Based Trust Shares only,
‘‘inter-departmental communications’’
shall include communications to other
departments within the same firm or the
firm’s affiliates that involve trading in
an underlying commodity, related
commodity futures or options on
commodity futures, or any other related
commodity derivatives.
(e) Market Maker Accounts. A
member acting as a registered market
maker in Commodity-Based Trust
Shares must file with Nasdaq
Regulation in a manner prescribed by
Nasdaq Regulation and keep current a
list identifying all accounts for trading
in an underlying commodity, related
commodity futures or options on
commodity futures, or any other related
commodity derivatives, that the market
maker may have or over which it may
exercise investment discretion. No
market maker shall trade in an
underlying commodity, related
commodity futures or options on
commodity futures, or any other related
commodity derivatives, in an account in
which a market maker, directly or
indirectly, controls trading activities, or
has a direct interest in the profits or
losses thereof, that has not been
reported as required by this Rule.
(f) The member acting as a registered
market maker in Commodity-Based
Trust Shares shall make available to
Nasdaq Regulation such books, records
or other information pertaining to
transactions by such entity or registered
or non-registered employee affiliated
with such entity for its or their own
accounts for trading the underlying
physical commodity, related commodity
futures or options on commodity
futures, or any other related commodity
derivatives, as may be requested by
Nasdaq Regulation.
(g) In connection with trading the
underlying physical commodity, related
commodity futures or options on
commodity futures or any other related
commodity derivative (including
Commodity-Based Trust Shares), the
member acting as a market maker in
Commodity-Based Trust Shares shall
not use any material nonpublic
information received from any person
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associated with the member or
employee of such person regarding
trading by such person or employee in
the physical commodity, commodity
futures or options on commodity
futures, or any other related commodity
derivatives.
(h) Nasdaq requires that members
provide all purchasers of newly issued
Commodity-Based Trust Shares a
prospectus for the series of CommodityBased Trust Shares.
(i) Transactions in Commodity-Based
Trust Shares will occur during the
trading hours specified in Rule 4617.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item III below. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
a. streetTRACKS Gold Shares
(1) General Description
The Nasdaq Stock Market, Inc.
(‘‘Nasdaq Market’’), the parent of
Nasdaq, currently trades the Shares.
After Nasdaq begins to operate as an
exchange for trading securities not listed
on Nasdaq, it proposes to continue
trading the Shares pursuant to UTP in
much the same manner as they are being
traded by the Nasdaq Market currently.
Nasdaq’s surveillance procedures
applicable to the Shares will not change
as a result of the transition to exchange
status.
The Commission previously approved
the listing and trading of the Shares on
the New York Stock Exchange
(‘‘NYSE’’).6 The Shares represent units
of fractional undivided beneficial
interest in and ownership of the
streetTRACKS Gold Trust (‘‘Trust’’).
The Trust is an investment trust and
is not managed like a corporation or an
active investment vehicle. The Trust has
no board of directors or officers or
6 See Securities Exchange Act Release No. 50603
(October 28, 2004) 69 FR 64614 (November 5, 2004)
(SR–NYSE–2004–22) (‘‘NYSE Approval Order’’).
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persons acting in a similar capacity. The
Trust is not an investment company
under the Investment Company Act of
1940. The purpose of the Trust is to
hold gold bullion. The investment
objective of the Trust is for the Shares
to reflect the performance of the price of
gold, less the Trust’s expenses.
World Gold Trust Services, LLC, a
wholly owned limited liability company
of the World Gold Council,7 is the
sponsor of the Trust (‘‘Sponsor’’). The
Bank of New York is the trustee; HSBC
Bank USA, an indirect wholly owned
subsidiary of HSBC Holdings plc, is the
custodian (‘‘Custodian’’); and State
Street Global Markets LLC, a wholly
owned subsidiary of State Street
Corporation, is the marketing agent
(‘‘Marketing Agent’’).
Generally, the assets of the Trust (e.g.,
gold bullion) will be sold to pay Trust
expenses and management fees. These
expenses and fees will reduce the value
of an investor’s Shares as gold bullion
is sold to pay such costs. Ordinary
operating expenses of the Trust include:
(a) Fees paid to the Sponsor; (b) fees
paid to the Trustee; (c) fees paid to the
Custodian; (d) fees paid to the
Marketing Agent; and (e) various Trust
administration fees, including printing
and mailing costs, legal and audit fees,
registration fees, and Nasdaq listing
fees. The Trust’s estimated ordinary
operating expenses are accrued daily
and reflected in the net asset value
(‘‘NAV’’) of the Trust.
The Trust will create Shares on a
continuous basis only in aggregations of
100,000 Shares (such aggregation
referred to as a ‘‘Basket’’). Authorized
Participants are the only persons that
may place orders to create and redeem
Baskets by making an in kind deposit of
gold together with, if applicable, a
specified cash payment. Similarly, the
Trust will redeem Shares only in
Baskets, principally in exchange for
gold and, if applicable, a cash payment.
Because the creation and redemption
process facilitates the potential for
arbitrage, the NYSE stated that the
Sponsor believed that the Shares would
not trade at a material discount or
premium to the underlying gold held by
the Trust.
(2) Availability of Information About the
Shares
The global trade in gold consists of
over-the-counter transactions in spot,
forwards, and options and other
derivatives, together with exchangetraded futures and options. The NYSE
7 The World Gold Council is a not-for-profit
association registered under Swiss law.
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Listing Order contains descriptions of
the key components of the gold market.
The last sale price for the Shares is
disseminated over the Consolidated
Tape. Gold pricing information based on
the spot price for a troy ounce of gold
from various financial information
service providers, such as Reuters and
Bloomberg, is available on a 24-hour
basis. Complete real-time data for gold
futures and options prices traded on the
COMEX (a division of the NYMEX) is
available by subscription from Reuters
and Bloomberg. The NYMEX also
provides delayed futures and options
information on current and past trading
sessions and market news free of charge
on its Web site. Nasdaq, via a link from
its own public Web site (https://
www.nasdaq.com) to the Trust Web site
(https://
www.streettracksgoldshares.com), will
provide at no charge continuously
updated bids and offers indicative of the
spot price of gold.8
The Trust Web site also will provide
a calculation of the estimated NAV (also
known as the Intraday Indicative Value
or ‘‘IIV’’) of a Share as calculated by
multiplying the indicative spot price of
gold by the quantity of gold backing
each Share. Comparing the IIV with the
last sale price of the Shares helps an
investor to determine whether, and to
what extent, Shares may be selling at a
premium or a discount to the NAV.
Although provided free of charge, the
indicative spot price and IIV per Share
will be provided on an essentially realtime basis.9 The Trust Web site provides
the NAV of the Trust as calculated each
business day by the Sponsor. In
addition, the Trust Web site contains
the following information, on a perShare basis, for the Trust: (a) The IIV as
of the close of the prior business day
and the midpoint of the bid/ask price 10
in relation to such IIV (‘‘Bid/Ask
Price’’), and a calculation of the
premium or discount of such price
against such IIV; and (b) data in chart
format displaying the frequency
distribution of discounts and premiums
8 The Trust’s Web site’s gold spot price will be
provided by The Bullion Desk (https://
thebulliondesk.com). The Trust’s Web site will
indicate that there are other sources for obtaining
the gold spot price. In the event that the Trust’s
Web site should cease to provide this indicative
spot price from an unaffiliated source (and the
intraday indicative value) of the Shares, Nasdaq
will cease to trade the Shares.
9 The Trust’s Web site, to which the Nasdaq Web
site will link, will disseminate an indicative spot
price of gold and the IIV and indicate that these
values are subject to an average delay of five to ten
seconds.
10 The bid/ask price is determined using the
highest bid and lowest offer on the Consolidated
Tape as of the time of calculation of the closing day
IIV.
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of the Bid/Ask Price against the IIV,
within appropriate ranges, for each of
the four previous calendar quarters. The
Trust Web site also provides the Trust’s
prospectus, as well as the two most
recent reports to stockholders. The Trust
Web site provides the last sale price of
the Shares as traded in the U.S. market,
subject to a 20-minute delay.11 Finally,
the Shares will trade during all hours
that Nasdaq is open, as specified in
Nasdaq Rule 4617.12
(3) Trading Rules
Trading in the Shares will be subject
to Nasdaq’s existing rules governing the
trading of equity securities and will
occur during the hours when other
equity securities are traded on Nasdaq.
The minimum price variation will be as
set forth in the Nasdaq rules specifically
with respect to equity securities listed
on the NYSE.
Nasdaq is trading the Shares pursuant
to UTP, but will cease trading in the
Shares during all trading sessions if: (a)
The primary market stops trading the
Shares because of a regulatory halt and/
or a halt because dissemination of the
IIV and/or the unaffiliated gold value
has ceased or Nasdaq no longer provides
a hyperlink to the Trust’s Web site; or
(b) the primary market delists the
Shares. Additionally, Nasdaq may cease
trading the Shares if such other event
shall occur or condition exists which in
the opinion of Nasdaq makes further
dealings on Nasdaq inadvisable.
Because Nasdaq is trading pursuant to
UTP the Shares during its early and late
trading sessions, when the primary
market is closed, Nasdaq will monitor
the unaffiliated value of gold and IIV
per Share and ensure that trading of the
Shares will cease during the early and
late trading sessions, if the unaffiliated
value of gold and IIV per Share (used by
the primary listing exchange) is no
longer calculated or available during the
early and late trading sessions, or
Nasdaq stops providing a hyperlink on
its Web site to such unaffiliated gold
value or IIV per Share.
11 The last sale price of the Shares in the
secondary market is available on a real-time basis
for a fee from regular data vendors.
12 The Nasdaq system operates from 7 a.m. to 8
p.m. (all times herein refer to Eastern Standard
Time) on each business day, unless modified by
Nasdaq. A Nasdaq market maker shall be open for
business as of 9:30 a.m. and shall close no earlier
than 4 p.m. A Nasdaq market maker may
voluntarily open for business prior to 9:30 a.m. and
remain open for business later than 4 p.m. Nasdaq
market makers whose quotes are open prior to 9:30
a.m. or after 4 p.m. are obligated to comply, while
their quotes are open, with all Nasdaq Rules that
are not by their express terms, or by an official
interpretation of Nasdaq, inapplicable to any part of
the 7 a.m. to 9:30 a.m. or 4 p.m. to 8 p.m. period.
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(4) Surveillance
Nasdaq believes its surveillance
procedures are adequate to properly
monitor the trading of the Shares.
Specifically, the NASD relies on its
existing surveillance procedures for
equity securities. After Nasdaq begins to
operate as an exchange for trading
securities not listed on Nasdaq, the
NASD, on behalf of Nasdaq, will
continue to surveil Nasdaq trading,
including Nasdaq trading of the Shares.
Nasdaq’s transition to exchange status
will not result in any change in the
surveillance process with respect to the
Shares.13
In addition, for intermarket
surveillance purposes, Nasdaq entered
into a reciprocal Memorandum of
Understanding with NYMEX, which is a
comprehensive surveillance sharing
arrangement,14 for the sharing of
information related to any financial
instrument based, in whole or in part,
upon an interest in or performance of
gold.
(5) Information Circular
In connection with its commencement
of operations as an exchange for trading
non-Nasdaq securities, Nasdaq will
issue an information circular
(‘‘Circular’’), which, among other things,
will identify certain securities, such as
the Shares, that present special
characteristics and risks associated with
their trading. The Circular will refer to
the information publicly available about
the identified securities, alert members
to possible prospectus delivery
requirements, and remind them of the
suitability rules.
Specifically, the Circular, among
other things, will discuss what the
Shares are, how a Basket is created and
redeemed, the requirement that
members deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction, applicable
Nasdaq rules, dissemination of
information regarding the indicative
price of gold and IIV, trading
information, and the applicability of
suitability rules. The Circular will also
explain that the Trust is subject to
various fees and expenses described in
13 Surveillance of all trading on the Nasdaq
Market, including the trading of Shares, is currently
being conducted by NASD, Inc. Following Nasdaq’s
transition to exchange status, NASD, Inc. will
continue to surveil trading, pursuant to a regulatory
services agreement. Nasdaq is responsible for
NASD, Inc.’s performance under this regulatory
services agreement.
14 Telephone conversation between Jonathan
Cayne, Associate General Counsel, Nasdaq, and
Florence Harmon, Senior Special Counsel, Division
of Market Regulation, Commission, November 15,
2006.
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the Registration Statement, and that the
number of ounces of gold required to
create a Basket or to be delivered upon
a redemption of a Basket will gradually
decrease over time because the Shares
comprising a Basket will represent a
decreasing amount of gold due to the
sale of the Trust’s gold to pay the Trust’s
expenses. The Circular will also
reference the fact that there is no
regulated source of last sale information
regarding physical gold, and that the
Commission has no jurisdiction over the
trading of gold as a physical commodity.
The Circular will also set forth the
procedures for purchases and
redemptions of the Shares in Baskets
and that the Shares are not individually
redeemable but are redeemable only in
Basket-size aggregations or multiples
thereof. The Circular will also advise
members of their suitability obligations
with respect to recommended
transactions to customers in the Shares.
The Circular will also discuss any relief
if granted by the Commission or the staff
from any rules under the Act.
b. Commodity-Based Trust Shares
Nasdaq is also adopting Rule 4630 to
govern the trading, pursuant to UTP, of
Commodity-Based Trust Shares
(including the Shares). Nasdaq currently
does not list (and does not have listing
rules for) Commodity-Based Trust
Shares, but its facilities are currently
being used for the over-the-counter
trading of such securities if they are
listed on the NYSE or the American
Stock Exchange (‘‘Amex’’). Once
Nasdaq’s separation from the NASD is
complete and Nasdaq begins to operate
as a national securities exchange with
respect to securities listed on the NYSE
and Amex, Nasdaq plans to continue
trading NYSE- and Amex-listed
Commodity-Based Trust Shares
pursuant to UTP, subject to Commission
approval of UTP trading of such
securities. (Nasdaq expects to make
appropriate filings with the Commission
under Rule 19b–4.15)
The proposed rule, which is based on
the existing rules of NYSE Arca, Inc. as
adapted for UTP trading only, would
impose certain requirements on any
Nasdaq member registered and acting as
a market maker in Commodity-Based
Trust Shares.
As the proposed rule’s definition of
Commodity-Based Trust Shares reflects,
these securities are structurally similar
to exchange traded funds, except, of
course, that their value is a function of
the value of the underlying
commodities, rather than of an
underlying securities index. The
15 17
CFR 240.19b–4.
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proposed rule will apply to the trading
of Commodity-Based Trust Shares at all
times. The proposed rule establishes the
following requirements for market
makers in Commodity-Based Trust
Shares:
(1) Information Barriers
The proposed rule makes clear that a
member acting as a registered market
maker in Commodity-Based Trust
Shares is obligated to comply with
NASD Notice to Members 91–45
pertaining to limitations on dealings
when such market maker engages in
inter-departmental communications. For
purposes of Commodity-Based Trust
Shares only, ‘‘inter-departmental
communications’’ shall include
communications to other departments
within the same firm or the firm’s
affiliates that involve trading in an
underlying commodity, related
commodity futures or options on
commodity futures, or any other related
commodity derivatives.
(2) Market Maker Accounts
A member acting as a registered
market maker in Commodity-Based
Trust Shares will be required to file and
keep current a list of all accounts for
trading in an underlying commodity,
related commodity futures or options on
commodity futures, or any other related
commodity derivatives, that the market
maker may have or over which it may
exercise investment discretion.
(3) Books and Records
A member acting as a registered
market maker in Commodity-Based
Trust Shares will be required to make
available to Nasdaq Regulation such
books, records or other information
pertaining to transactions in the
underlying physical commodity, related
commodity futures or options on
commodity futures, or any other related
commodity derivatives, as may be
requested by Nasdaq Regulation.
(4) Material Non-public Information
In connection with trading the
underlying physical commodity, related
commodity futures or options on
commodity futures or any other related
commodity derivatives (including
Commodity-Based Trust Shares), the
member acting as a market maker in
Commodity-Based Trust Shares would
not be permitted to use any material
non-public information received from
any person associated with the member
or employee of such person regarding
trading by such person or employee in
the physical commodity, commodity
futures or options on commodity
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67671
futures, or any other related commodity
derivatives.
2. Statutory Basis
Nasdaq believes that the proposed
rule change is consistent with the
provisions of Section 6 of the Act 16 in
general, and with Section 6(b)(5) of the
Act 17 in particular, in that it is designed
to prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, remove
impediments to a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
Nasdaq does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received from
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change, as amended, is consistent with
the Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2006–009 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Nancy M. Morris, Secretary,
Securities and Exchange Commission,
Station Place, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2006–009. This
file number should be included on the
subject line if e-mail is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
16 15
17 15
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notes that it previously approved the
listing and trading of the Shares on
NYSE 22 and, via UTP, on NYSE Arca.23
The Commission also believes that the
proposal is consistent with Rule 12f–5
under the Act,24 which provides that an
exchange shall not extend UTP to a
security unless the exchange has in
effect a rule or rules providing for
transactions in the class or type of
security to which the exchange extends
UTP. The Exchange represented that it
meets this requirement because it deems
the Shares to be equity securities, thus
rendering trading in the Shares subject
to the existing rules of the Exchange
governing the trading of equity
securities, including rules relating to
trading hours, trading halts, and the
minimum trading increment.
The Commission further believes that
the proposal is consistent with Section
11A(a)(1)(C)(iii) of the Act,25 which sets
forth Congress’s finding that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
IV. Commission’s Findings and Order
to assure the availability to brokers,
Granting Accelerated Approval of
dealers, and investors of information
Proposed Rule Change
with respect to quotations for and
transactions in securities. Quotations for
After careful review, the Commission
and last sale information regarding the
finds that the proposed rule change, as
Shares are disseminated through the
amended, is consistent with the
Consolidated Quotation System.
requirements of the Act and the rules
and regulations thereunder applicable to Furthermore, as noted by the Exchange,
various means exist for investors to
a national securities exchange.18 In
particular, the Commission believes that obtain reliable gold price information
and thereby monitor the underlying spot
the proposal is consistent with Section
market in gold relative to the NAV of
6(b)(5) of the Act,19 which requires that
an exchange have rules designed, among their Shares. Additionally, the Trust’s
Web site provides an continuously
other things, to promote just and
updated IIV (subject to an average delay
equitable principles of trade, to remove
of five to ten seconds). If the Trust
impediments to and perfect the
ceases to maintain or to calculate the IIV
mechanism of a free and open market
or if the value of the index ceases to be
and a national market system, and, in
widely available, the Exchange would
general, to protect investors and the
cease trading the Shares.
public interest. The Commission
The Commission notes that, if the
believes that the proposal will benefit
Shares were to be delisted by NYSE, the
investors by increasing competition
Exchange would no longer have
among markets that trade the Shares.
authority to trade the Shares pursuant to
In addition, the Commission believes
this order.
that the proposal is consistent with
In support of the proposal, the
Section 12(f) of the Act,20 which permits
Exchange made the following
an exchange to trade, pursuant to UTP,
representations:
a security that is listed and traded on
1. The Exchange’s surveillance
another exchange.21 The Commission
procedures are adequate to deter
18 In approving the proposal, the Commission has
manipulation, and its existing
considered its impact on efficiency, competition,
surveillance procedures for
and capital formation. See 15 U.S.C. 78c(f).
investment company units will be
19
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for inspection and copying in
the Commission’s Public Reference
Room. Copies of such filing also will be
available for inspection and copying at
the principal office of Nasdaq. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make publicly available. All
submissions should refer to File
Number SR–NASDAQ–2006–009 and
should be submitted on or before
December 13, 2006.
15 U.S.C. 78f(b)(5).
U.S.C. 78l(f).
21 Section 12(a) of the Act, 15 U.S.C. 78l(a),
generally prohibits a broker-dealer from trading a
security on a national securities exchange unless
the security is registered on that exchange pursuant
to Section 12 of the Act. Section 12(f) of the Act
excludes from this restriction trading in any
security to which an exchange ‘‘extend[s] unlisted
trading privileges.’’ When an exchange extends UTP
to a security, it allows its members to trade the
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20 15
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22:25 Nov 21, 2006
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security as if it were listed and registered on the
exchange even though it is not so listed and
registered.
22 See NYSE Approval Order, supra note 6.
23 See Securities Exchange Act Release No. 51245
(February 23, 2005) 70 FR 10731 (March 4, 2005)
(SR–PCX–2004–117).
24 17 CFR 240.12f–5.
25 15 U.S.C. 78k–1(a)(1)(C)(iii).
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Frm 00132
Fmt 4703
Sfmt 4703
utilized for the Shares. Among other
things, the Exchange entered into a
reciprocal Memorandum of
Understanding with NYMEX for the
sharing of information related to any
financial instrument based, in whole
or in part, upon an interest in or
performance of gold.
2. The Exchange will distribute an
information circular to its members
prior to the commencement of trading
of the Shares on the Exchange that
explains, among other things, the
terms and characteristics of the Shares
and the risks associated with their
trading.
3. The Exchange will require a member
to provide all purchasers of newlyissued Shares on the Exchange to
provide that customer with a product
prospectus, and will note this
prospectus delivery requirement in
the information circular.
4. The Exchange will cease trading the
Shares during the regular market
session (a) If the primary market stops
trading the Shares because of a halt
because the dissemination of the IIV
and/or the unaffiliated underlying
gold spot price has ceased to be
disseminated by the Trust’s Web site
or because of a regulatory halt; or (b)
if the primary market delists the
shares.
5. During its early and late trading
sessions, when the primary market is
closed, the Exchange will monitor the
dissemination of the IIV and the
unaffiliated underlying gold spot
price by the Trust’s Web site, and will
cease trading the Shares if this data
ceases to be available.
6. The Exchange will cease trading the
Shares if the Exchange’s Web site for
any reason ceases to provide a
hyperlink to the Trust’s Web site.
This approval order is conditioned on
the Exchange’s adherence to these
representations.
Finally, the Commission believes that
subsections (d) and (e) of the Exchange’s
proposed Rule 4630, which impose
information barriers and trading
restrictions on a member acting as a
registered market maker in the Shares,
are reasonable and consistent with the
Act. These provisions would require a
member acting as a registered market
maker in the Shares to provide the
Exchange with information relating to
its trading in physical gold, gold futures
contracts, options on gold futures, or
any other gold derivatives. Further, a
member acting as a registered market
maker in the Shares would be
prohibited under these provisions from
using any material nonpublic
information received from any person
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Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices
associated with a member or employee
of such person regarding trading by
such person or employee in physical
gold, gold futures contracts, options on
gold futures, or any other gold
derivatives.
The Commission finds good cause for
approving the proposal, as amended,
prior to the 30th day after the date of
publication of the notice of filing thereof
in the Federal Register. As noted
previously, the Commission previously
found that the listing and trading of the
Shares on NYSE and, pursuant to UTP,
on NYSE Arca is consistent with the
Act.26 The Commission presently is not
aware of any regulatory issue that
should cause the Commission to revisit
these earlier findings. Therefore,
accelerating approval of the proposal
should benefit investors by creating,
without undue delay, additional
competition in the market for the
Shares.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,27 that the
proposed rule change, as amended (SR–
Nasdaq–2006–009), is approved on an
accelerated basis.
For the Commission, by the Division of
Market Regulation, pursuant to delegated
authority.28
Nancy M. Morris,
Secretary.
[FR Doc. E6–19733 Filed 11–21–06; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–54768; File No. SR–NASD–
2006–110]
Self-Regulatory Organizations;
National Association of Securities
Dealers, Inc.; Notice of Filing and
Order Granting Accelerated Approval
of a Proposed Rule Change and
Amendment No. 1 Thereto to Establish
a Two-Year Pilot Program Exempting
from TRACE Reporting Transactions in
Bonds Traded on a Facility of NYSE
pwalker on PROD1PC61 with NOTICES
November 16, 2006.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 19, 2006, the National
Association of Securities Dealers, Inc.
(‘‘NASD’’) filed with the Securities and
26 See
supra notes 6 and 23.
U.S.C. 78s(b)(2).
28 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
27 15
VerDate Aug<31>2005
22:25 Nov 21, 2006
Jkt 211001
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have substantially
been prepared by NASD. On September
27, 2006, NASD filed Amendment No.
1 to the proposed rule change.3 The
Commission is publishing this notice to
solicit comments 4 on the proposed rule
change, as amended, from interested
persons and is approving the proposal
on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
NASD is proposing to amend: (1)
NASD Rule 6230, to initiate a two-year
pilot program exempting certain
TRACE-eligible securities from
reporting requirements that otherwise
would apply; and (2) NASD Rules 6210
and 6230, to reflect the registration of
The NASDAQ Stock Market LLC as a
national securities exchange. Below is
the text of the proposed rule change, as
amended. Proposed new language is
italicized; proposed deletions are in
[brackets].
*
*
*
*
*
6200. TRADE REPORTING AND
COMPLIANCE ENGINE (TRACE)
*
*
*
*
*
6210. Definitions
The terms used in this Rule 6200
Series shall have the same meaning as
those defined in NASD’s By-Laws and
Rules unless otherwise specified.
(a) No Change.
(b) No Change.
(c) The term ‘‘reportable TRACE
transaction’’ shall mean any secondary
market transaction in a TRACE-eligible
security except transactions in TRACEeligible securities that are listed on a
national securities exchange registered
under Section 6 of the Securities
Exchange Act of 1934, when such
transactions are executed on, and
reported to the exchange and the
transaction information is disseminated
publicly[, or transactions in TRACEeligible securities that are listed and
quoted on the Nasdaq Stock Market, Inc.
3 Amendment No. 1, which replaces and
supersedes the original filing in its entirety, made
various technical changes to the proposal and
replaced a reference in the proposed rule text to
NYSE’s Automated Bond System with a reference
to ‘‘a facility of NYSE.’’
4 The Commission received one comment on the
proposed rule change prior to issuance of this
notice and order. See comment from Ron Klein,
Chairman, CEO, General Associates, Inc., dated
October 16, 2006. The commenter asked various
questions regarding the status of the filing, which
are resolved by the Commission’s action in this
notice and order.
PO 00000
Frm 00133
Fmt 4703
Sfmt 4703
67673
(Nasdaq), when such transactions are
reported to Nasdaq and the transaction
information is disseminated publicly].
(d)–(j) No Change.
*
*
*
*
*
6230. Transaction Reporting
(a) through (d) No Change.
(e) Transactions Exempt from Reporting
The following types of transactions
shall not be reported:
(1) Transactions that are part of a
primary distribution by an issuer.
(2) Transactions in TRACE-eligible
securities that are listed on a national
securities exchange, when such
transactions are executed on and
reported to the exchange and the
transaction information is disseminated
publicly[, and transactions in TRACEeligible securities that are listed and
quoted on Nasdaq, when such
transactions are reported to Nasdaq and
the transaction information is
disseminated publicly].
(3) Transactions where the buyer and
the seller have agreed to trade at a price
substantially unrelated to the current
market for the TRACE-eligible security
(e.g., to allow the seller to make a gift).
(4) For the duration of a two-year pilot
program, effective upon the later of
either: 1) approval of this rule by the
Commission, or 2) execution by NASD
and the New York Stock Exchange
(‘‘NYSE’’) of a data sharing agreement
addressing data related to transactions
covered by this Rule, transactions in
TRACE-eligible securities that are
executed on a facility of NYSE in
accordance with NYSE Rules 1400 and
1401 and reported to NYSE in
accordance with NYSE’s applicable
trade reporting rules and disseminated
publicly by NYSE.
(f) No Change.
*
*
*
*
*
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
NASD included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item III below. NASD has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
E:\FR\FM\22NON1.SGM
22NON1
]]>Agencies
[Federal Register Volume 71, Number 225 (Wednesday, November 22, 2006)]
[Notices]
[Pages 67668-67673]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-19733]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54765; File No. SR-NASDAQ-2006-009]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Order Granting Accelerated Approval to a Proposed
Rule Change and Amendments No. 1 and 2 Thereto To Permit Trading
Pursuant to Unlisted Trading Privileges of streetTRACKS Gold Shares and
To Establish Trading Rules to Trade, Pursuant to Unlisted Trading
Privileges, Certain Securities Whose Value Is Linked to the Value of
One or More Commodities
November 16, 2006.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 15, 2006 The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange''), filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by Nasdaq. On October 10,
2006, the Exchange submitted Amendment No. 1 to the proposal,\3\ and on
November 14, 2006, the Exchange submitted Amendment No. 2 to the
proposal.\4\ The Commission is publishing this notice to solicit
comments on the proposed rule change, as amended, from interested
persons, and is granting accelerated approval to the proposal, as
amended.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 replaced the original filing in its
entirety.
\4\ Amendment No. 2 replaced Amendment No. 1 in its entirety.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq is making this filing to enable it to continue trading
pursuant to unlisted trading privileges (``UTP'') of streetTRACKS Gold
Shares (``Shares'') and to add Nasdaq Rule 4630 to establish trading
rules to trade, pursuant to UTP, certain securities whose value is
linked to the value of one or more commodities.
The text of the proposed rule change is below. Proposed new
language is in italics.\5\
---------------------------------------------------------------------------
\5\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at https://www.complinet.com/
nasdaq.
---------------------------------------------------------------------------
* * * * *
4630. Trading in Commodity-Based Trust Shares
(a) Nasdaq will consider for trading pursuant to unlisted trading
privileges, Commodity-Based Trust Shares that meet the criteria of this
Rule.
(b) Applicability. This Rule is applicable only to Commodity-Based
Trust Shares. Except to the extent inconsistent with this Rule, or
unless the context otherwise requires, the provisions of Rule 4420(l)
and all other Nasdaq Rules shall be applicable to the trading on Nasdaq
of such securities. Commodity-Based Trust Shares are included within
the definition of ``security'' or ``securities'' as such terms are used
in the Nasdaq Rules.
(c) Definitions. The following terms shall, unless the context
otherwise requires, have the meaning herein specified:
(1) Commodity-Based Trust Shares. The term ``Commodity-Based Trust
Shares'' means a security (a) that is issued by a trust (``Trust'')
that holds a specified commodity deposited with the Trust; (b) that is
issued by such Trust in a specified aggregate minimum number in return
for a deposit of a quantity of the underlying commodity; and (c) that,
when aggregated in the same specified minimum number, may be redeemed
at a holder's request by such Trust which will deliver to the redeeming
holder the quantity of the underlying commodity.
(2) Commodity. The term ``commodity'' is defined in Section 1(a)(4)
of the Commodity Exchange Act.
[[Page 67669]]
(d) Information Barriers. A member acting as a registered market
maker in Commodity-Based Trust Shares is obligated to establish
adequate information barriers when such market maker engages in inter-
departmental communications. Members should refer to NASD/NYSE Joint
Memo on Chinese Wall Policies and Procedures (NASD Notice to Members
91-45) for guidance on the ``'minimum elements'' of adequate Chinese
Wall policy and procedures.'' For purposes of Commodity-Based Trust
Shares only, ``inter-departmental communications'' shall include
communications to other departments within the same firm or the firm's
affiliates that involve trading in an underlying commodity, related
commodity futures or options on commodity futures, or any other related
commodity derivatives.
(e) Market Maker Accounts. A member acting as a registered market
maker in Commodity-Based Trust Shares must file with Nasdaq Regulation
in a manner prescribed by Nasdaq Regulation and keep current a list
identifying all accounts for trading in an underlying commodity,
related commodity futures or options on commodity futures, or any other
related commodity derivatives, that the market maker may have or over
which it may exercise investment discretion. No market maker shall
trade in an underlying commodity, related commodity futures or options
on commodity futures, or any other related commodity derivatives, in an
account in which a market maker, directly or indirectly, controls
trading activities, or has a direct interest in the profits or losses
thereof, that has not been reported as required by this Rule.
(f) The member acting as a registered market maker in Commodity-
Based Trust Shares shall make available to Nasdaq Regulation such
books, records or other information pertaining to transactions by such
entity or registered or non-registered employee affiliated with such
entity for its or their own accounts for trading the underlying
physical commodity, related commodity futures or options on commodity
futures, or any other related commodity derivatives, as may be
requested by Nasdaq Regulation.
(g) In connection with trading the underlying physical commodity,
related commodity futures or options on commodity futures or any other
related commodity derivative (including Commodity-Based Trust Shares),
the member acting as a market maker in Commodity-Based Trust Shares
shall not use any material nonpublic information received from any
person associated with the member or employee of such person regarding
trading by such person or employee in the physical commodity, commodity
futures or options on commodity futures, or any other related commodity
derivatives.
(h) Nasdaq requires that members provide all purchasers of newly
issued Commodity-Based Trust Shares a prospectus for the series of
Commodity-Based Trust Shares.
(i) Transactions in Commodity-Based Trust Shares will occur during
the trading hours specified in Rule 4617.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below. Nasdaq has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
a. streetTRACKS Gold Shares
(1) General Description
The Nasdaq Stock Market, Inc. (``Nasdaq Market''), the parent of
Nasdaq, currently trades the Shares. After Nasdaq begins to operate as
an exchange for trading securities not listed on Nasdaq, it proposes to
continue trading the Shares pursuant to UTP in much the same manner as
they are being traded by the Nasdaq Market currently. Nasdaq's
surveillance procedures applicable to the Shares will not change as a
result of the transition to exchange status.
The Commission previously approved the listing and trading of the
Shares on the New York Stock Exchange (``NYSE'').\6\ The Shares
represent units of fractional undivided beneficial interest in and
ownership of the streetTRACKS Gold Trust (``Trust'').
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 50603 (October 28,
2004) 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) (``NYSE
Approval Order'').
---------------------------------------------------------------------------
The Trust is an investment trust and is not managed like a
corporation or an active investment vehicle. The Trust has no board of
directors or officers or persons acting in a similar capacity. The
Trust is not an investment company under the Investment Company Act of
1940. The purpose of the Trust is to hold gold bullion. The investment
objective of the Trust is for the Shares to reflect the performance of
the price of gold, less the Trust's expenses.
World Gold Trust Services, LLC, a wholly owned limited liability
company of the World Gold Council,\7\ is the sponsor of the Trust
(``Sponsor''). The Bank of New York is the trustee; HSBC Bank USA, an
indirect wholly owned subsidiary of HSBC Holdings plc, is the custodian
(``Custodian''); and State Street Global Markets LLC, a wholly owned
subsidiary of State Street Corporation, is the marketing agent
(``Marketing Agent'').
---------------------------------------------------------------------------
\7\ The World Gold Council is a not-for-profit association
registered under Swiss law.
---------------------------------------------------------------------------
Generally, the assets of the Trust (e.g., gold bullion) will be
sold to pay Trust expenses and management fees. These expenses and fees
will reduce the value of an investor's Shares as gold bullion is sold
to pay such costs. Ordinary operating expenses of the Trust include:
(a) Fees paid to the Sponsor; (b) fees paid to the Trustee; (c) fees
paid to the Custodian; (d) fees paid to the Marketing Agent; and (e)
various Trust administration fees, including printing and mailing
costs, legal and audit fees, registration fees, and Nasdaq listing
fees. The Trust's estimated ordinary operating expenses are accrued
daily and reflected in the net asset value (``NAV'') of the Trust.
The Trust will create Shares on a continuous basis only in
aggregations of 100,000 Shares (such aggregation referred to as a
``Basket''). Authorized Participants are the only persons that may
place orders to create and redeem Baskets by making an in kind deposit
of gold together with, if applicable, a specified cash payment.
Similarly, the Trust will redeem Shares only in Baskets, principally in
exchange for gold and, if applicable, a cash payment. Because the
creation and redemption process facilitates the potential for
arbitrage, the NYSE stated that the Sponsor believed that the Shares
would not trade at a material discount or premium to the underlying
gold held by the Trust.
(2) Availability of Information About the Shares
The global trade in gold consists of over-the-counter transactions
in spot, forwards, and options and other derivatives, together with
exchange-traded futures and options. The NYSE
[[Page 67670]]
Listing Order contains descriptions of the key components of the gold
market.
The last sale price for the Shares is disseminated over the
Consolidated Tape. Gold pricing information based on the spot price for
a troy ounce of gold from various financial information service
providers, such as Reuters and Bloomberg, is available on a 24-hour
basis. Complete real-time data for gold futures and options prices
traded on the COMEX (a division of the NYMEX) is available by
subscription from Reuters and Bloomberg. The NYMEX also provides
delayed futures and options information on current and past trading
sessions and market news free of charge on its Web site. Nasdaq, via a
link from its own public Web site (https://www.nasdaq.com) to the Trust
Web site (https://www.streettracksgoldshares.com), will provide at no
charge continuously updated bids and offers indicative of the spot
price of gold.\8\
---------------------------------------------------------------------------
\8\ The Trust's Web site's gold spot price will be provided by
The Bullion Desk (https://thebulliondesk.com). The Trust's Web site
will indicate that there are other sources for obtaining the gold
spot price. In the event that the Trust's Web site should cease to
provide this indicative spot price from an unaffiliated source (and
the intraday indicative value) of the Shares, Nasdaq will cease to
trade the Shares.
---------------------------------------------------------------------------
The Trust Web site also will provide a calculation of the estimated
NAV (also known as the Intraday Indicative Value or ``IIV'') of a Share
as calculated by multiplying the indicative spot price of gold by the
quantity of gold backing each Share. Comparing the IIV with the last
sale price of the Shares helps an investor to determine whether, and to
what extent, Shares may be selling at a premium or a discount to the
NAV. Although provided free of charge, the indicative spot price and
IIV per Share will be provided on an essentially real-time basis.\9\
The Trust Web site provides the NAV of the Trust as calculated each
business day by the Sponsor. In addition, the Trust Web site contains
the following information, on a per-Share basis, for the Trust: (a) The
IIV as of the close of the prior business day and the midpoint of the
bid/ask price \10\ in relation to such IIV (``Bid/Ask Price''), and a
calculation of the premium or discount of such price against such IIV;
and (b) data in chart format displaying the frequency distribution of
discounts and premiums of the Bid/Ask Price against the IIV, within
appropriate ranges, for each of the four previous calendar quarters.
The Trust Web site also provides the Trust's prospectus, as well as the
two most recent reports to stockholders. The Trust Web site provides
the last sale price of the Shares as traded in the U.S. market, subject
to a 20-minute delay.\11\ Finally, the Shares will trade during all
hours that Nasdaq is open, as specified in Nasdaq Rule 4617.\12\
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\9\ The Trust's Web site, to which the Nasdaq Web site will
link, will disseminate an indicative spot price of gold and the IIV
and indicate that these values are subject to an average delay of
five to ten seconds.
\10\ The bid/ask price is determined using the highest bid and
lowest offer on the Consolidated Tape as of the time of calculation
of the closing day IIV.
\11\ The last sale price of the Shares in the secondary market
is available on a real-time basis for a fee from regular data
vendors.
\12\ The Nasdaq system operates from 7 a.m. to 8 p.m. (all times
herein refer to Eastern Standard Time) on each business day, unless
modified by Nasdaq. A Nasdaq market maker shall be open for business
as of 9:30 a.m. and shall close no earlier than 4 p.m. A Nasdaq
market maker may voluntarily open for business prior to 9:30 a.m.
and remain open for business later than 4 p.m. Nasdaq market makers
whose quotes are open prior to 9:30 a.m. or after 4 p.m. are
obligated to comply, while their quotes are open, with all Nasdaq
Rules that are not by their express terms, or by an official
interpretation of Nasdaq, inapplicable to any part of the 7 a.m. to
9:30 a.m. or 4 p.m. to 8 p.m. period.
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(3) Trading Rules
Trading in the Shares will be subject to Nasdaq's existing rules
governing the trading of equity securities and will occur during the
hours when other equity securities are traded on Nasdaq. The minimum
price variation will be as set forth in the Nasdaq rules specifically
with respect to equity securities listed on the NYSE.
Nasdaq is trading the Shares pursuant to UTP, but will cease
trading in the Shares during all trading sessions if: (a) The primary
market stops trading the Shares because of a regulatory halt and/or a
halt because dissemination of the IIV and/or the unaffiliated gold
value has ceased or Nasdaq no longer provides a hyperlink to the
Trust's Web site; or (b) the primary market delists the Shares.
Additionally, Nasdaq may cease trading the Shares if such other event
shall occur or condition exists which in the opinion of Nasdaq makes
further dealings on Nasdaq inadvisable.
Because Nasdaq is trading pursuant to UTP the Shares during its
early and late trading sessions, when the primary market is closed,
Nasdaq will monitor the unaffiliated value of gold and IIV per Share
and ensure that trading of the Shares will cease during the early and
late trading sessions, if the unaffiliated value of gold and IIV per
Share (used by the primary listing exchange) is no longer calculated or
available during the early and late trading sessions, or Nasdaq stops
providing a hyperlink on its Web site to such unaffiliated gold value
or IIV per Share.
(4) Surveillance
Nasdaq believes its surveillance procedures are adequate to
properly monitor the trading of the Shares. Specifically, the NASD
relies on its existing surveillance procedures for equity securities.
After Nasdaq begins to operate as an exchange for trading securities
not listed on Nasdaq, the NASD, on behalf of Nasdaq, will continue to
surveil Nasdaq trading, including Nasdaq trading of the Shares.
Nasdaq's transition to exchange status will not result in any change in
the surveillance process with respect to the Shares.\13\
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\13\ Surveillance of all trading on the Nasdaq Market, including
the trading of Shares, is currently being conducted by NASD, Inc.
Following Nasdaq's transition to exchange status, NASD, Inc. will
continue to surveil trading, pursuant to a regulatory services
agreement. Nasdaq is responsible for NASD, Inc.'s performance under
this regulatory services agreement.
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In addition, for intermarket surveillance purposes, Nasdaq entered
into a reciprocal Memorandum of Understanding with NYMEX, which is a
comprehensive surveillance sharing arrangement,\14\ for the sharing of
information related to any financial instrument based, in whole or in
part, upon an interest in or performance of gold.
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\14\ Telephone conversation between Jonathan Cayne, Associate
General Counsel, Nasdaq, and Florence Harmon, Senior Special
Counsel, Division of Market Regulation, Commission, November 15,
2006.
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(5) Information Circular
In connection with its commencement of operations as an exchange
for trading non-Nasdaq securities, Nasdaq will issue an information
circular (``Circular''), which, among other things, will identify
certain securities, such as the Shares, that present special
characteristics and risks associated with their trading. The Circular
will refer to the information publicly available about the identified
securities, alert members to possible prospectus delivery requirements,
and remind them of the suitability rules.
Specifically, the Circular, among other things, will discuss what
the Shares are, how a Basket is created and redeemed, the requirement
that members deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction,
applicable Nasdaq rules, dissemination of information regarding the
indicative price of gold and IIV, trading information, and the
applicability of suitability rules. The Circular will also explain that
the Trust is subject to various fees and expenses described in
[[Page 67671]]
the Registration Statement, and that the number of ounces of gold
required to create a Basket or to be delivered upon a redemption of a
Basket will gradually decrease over time because the Shares comprising
a Basket will represent a decreasing amount of gold due to the sale of
the Trust's gold to pay the Trust's expenses. The Circular will also
reference the fact that there is no regulated source of last sale
information regarding physical gold, and that the Commission has no
jurisdiction over the trading of gold as a physical commodity.
The Circular will also set forth the procedures for purchases and
redemptions of the Shares in Baskets and that the Shares are not
individually redeemable but are redeemable only in Basket-size
aggregations or multiples thereof. The Circular will also advise
members of their suitability obligations with respect to recommended
transactions to customers in the Shares. The Circular will also discuss
any relief if granted by the Commission or the staff from any rules
under the Act.
b. Commodity-Based Trust Shares
Nasdaq is also adopting Rule 4630 to govern the trading, pursuant
to UTP, of Commodity-Based Trust Shares (including the Shares). Nasdaq
currently does not list (and does not have listing rules for)
Commodity-Based Trust Shares, but its facilities are currently being
used for the over-the-counter trading of such securities if they are
listed on the NYSE or the American Stock Exchange (``Amex''). Once
Nasdaq's separation from the NASD is complete and Nasdaq begins to
operate as a national securities exchange with respect to securities
listed on the NYSE and Amex, Nasdaq plans to continue trading NYSE- and
Amex-listed Commodity-Based Trust Shares pursuant to UTP, subject to
Commission approval of UTP trading of such securities. (Nasdaq expects
to make appropriate filings with the Commission under Rule 19b-4.\15\)
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\15\ 17 CFR 240.19b-4.
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The proposed rule, which is based on the existing rules of NYSE
Arca, Inc. as adapted for UTP trading only, would impose certain
requirements on any Nasdaq member registered and acting as a market
maker in Commodity-Based Trust Shares.
As the proposed rule's definition of Commodity-Based Trust Shares
reflects, these securities are structurally similar to exchange traded
funds, except, of course, that their value is a function of the value
of the underlying commodities, rather than of an underlying securities
index. The proposed rule will apply to the trading of Commodity-Based
Trust Shares at all times. The proposed rule establishes the following
requirements for market makers in Commodity-Based Trust Shares:
(1) Information Barriers
The proposed rule makes clear that a member acting as a registered
market maker in Commodity-Based Trust Shares is obligated to comply
with NASD Notice to Members 91-45 pertaining to limitations on dealings
when such market maker engages in inter-departmental communications.
For purposes of Commodity-Based Trust Shares only, ``inter-departmental
communications'' shall include communications to other departments
within the same firm or the firm's affiliates that involve trading in
an underlying commodity, related commodity futures or options on
commodity futures, or any other related commodity derivatives.
(2) Market Maker Accounts
A member acting as a registered market maker in Commodity-Based
Trust Shares will be required to file and keep current a list of all
accounts for trading in an underlying commodity, related commodity
futures or options on commodity futures, or any other related commodity
derivatives, that the market maker may have or over which it may
exercise investment discretion.
(3) Books and Records
A member acting as a registered market maker in Commodity-Based
Trust Shares will be required to make available to Nasdaq Regulation
such books, records or other information pertaining to transactions in
the underlying physical commodity, related commodity futures or options
on commodity futures, or any other related commodity derivatives, as
may be requested by Nasdaq Regulation.
(4) Material Non-public Information
In connection with trading the underlying physical commodity,
related commodity futures or options on commodity futures or any other
related commodity derivatives (including Commodity-Based Trust Shares),
the member acting as a market maker in Commodity-Based Trust Shares
would not be permitted to use any material non-public information
received from any person associated with the member or employee of such
person regarding trading by such person or employee in the physical
commodity, commodity futures or options on commodity futures, or any
other related commodity derivatives.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the provisions of Section 6 of the Act \16\ in general, and with
Section 6(b)(5) of the Act \17\ in particular, in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, remove impediments to a free
and open market and a national market system, and, in general, to
protect investors and the public interest.
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\16\ 15 U.S.C. 78f.
\17\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will result
in any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received from Members, Participants, or Others
Written comments were neither solicited nor received.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change, as amended, is consistent with the Act. Comments may be
submitted by any of the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2006-009 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2006-009. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
[[Page 67672]]
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for inspection and copying in the Commission's
Public Reference Room. Copies of such filing also will be available for
inspection and copying at the principal office of Nasdaq. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make publicly available. All
submissions should refer to File Number SR-NASDAQ-2006-009 and should
be submitted on or before December 13, 2006.
IV. Commission's Findings and Order Granting Accelerated Approval of
Proposed Rule Change
After careful review, 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.\18\ In particular, the Commission believes that
the proposal is consistent with Section 6(b)(5) of the Act,\19\ which
requires that an exchange have rules designed, among other things, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest. The Commission believes that the proposal will benefit
investors by increasing competition among markets that trade the
Shares.
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\18\ In approving the proposal, the Commission has considered
its impact on efficiency, competition, and capital formation. See 15
U.S.C. 78c(f).
\19\ 15 U.S.C. 78f(b)(5).
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In addition, the Commission believes that the proposal is
consistent with Section 12(f) of the Act,\20\ which permits an exchange
to trade, pursuant to UTP, a security that is listed and traded on
another exchange.\21\ The Commission notes that it previously approved
the listing and trading of the Shares on NYSE \22\ and, via UTP, on
NYSE Arca.\23\ The Commission also believes that the proposal is
consistent with Rule 12f-5 under the Act,\24\ which provides that an
exchange shall not extend UTP to a security unless the exchange has in
effect a rule or rules providing for transactions in the class or type
of security to which the exchange extends UTP. The Exchange represented
that it meets this requirement because it deems the Shares to be equity
securities, thus rendering trading in the Shares subject to the
existing rules of the Exchange governing the trading of equity
securities, including rules relating to trading hours, trading halts,
and the minimum trading increment.
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\20\ 15 U.S.C. 78l(f).
\21\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally
prohibits a broker-dealer from trading a security on a national
securities exchange unless the security is registered on that
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act
excludes from this restriction trading in any security to which an
exchange ``extend[s] unlisted trading privileges.'' When an exchange
extends UTP to a security, it allows its members to trade the
security as if it were listed and registered on the exchange even
though it is not so listed and registered.
\22\ See NYSE Approval Order, supra note 6.
\23\ See Securities Exchange Act Release No. 51245 (February 23,
2005) 70 FR 10731 (March 4, 2005) (SR-PCX-2004-117).
\24\ 17 CFR 240.12f-5.
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The Commission further believes that the proposal is consistent
with Section 11A(a)(1)(C)(iii) of the Act,\25\ which sets forth
Congress's finding that it is in the public interest and appropriate
for the protection of investors and the maintenance of fair and orderly
markets to assure the availability to brokers, dealers, and investors
of information with respect to quotations for and transactions in
securities. Quotations for and last sale information regarding the
Shares are disseminated through the Consolidated Quotation System.
Furthermore, as noted by the Exchange, various means exist for
investors to obtain reliable gold price information and thereby monitor
the underlying spot market in gold relative to the NAV of their Shares.
Additionally, the Trust's Web site provides an continuously updated IIV
(subject to an average delay of five to ten seconds). If the Trust
ceases to maintain or to calculate the IIV or if the value of the index
ceases to be widely available, the Exchange would cease trading the
Shares.
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\25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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The Commission notes that, if the Shares were to be delisted by
NYSE, the Exchange would no longer have authority to trade the Shares
pursuant to this order.
In support of the proposal, the Exchange made the following
representations:
1. The Exchange's surveillance procedures are adequate to deter
manipulation, and its existing surveillance procedures for investment
company units will be utilized for the Shares. Among other things, the
Exchange entered into a reciprocal Memorandum of Understanding with
NYMEX for the sharing of information related to any financial
instrument based, in whole or in part, upon an interest in or
performance of gold.
2. The Exchange will distribute an information circular to its members
prior to the commencement of trading of the Shares on the Exchange that
explains, among other things, the terms and characteristics of the
Shares and the risks associated with their trading.
3. The Exchange will require a member to provide all purchasers of
newly-issued Shares on the Exchange to provide that customer with a
product prospectus, and will note this prospectus delivery requirement
in the information circular.
4. The Exchange will cease trading the Shares during the regular market
session (a) If the primary market stops trading the Shares because of a
halt because the dissemination of the IIV and/or the unaffiliated
underlying gold spot price has ceased to be disseminated by the Trust's
Web site or because of a regulatory halt; or (b) if the primary market
delists the shares.
5. During its early and late trading sessions, when the primary market
is closed, the Exchange will monitor the dissemination of the IIV and
the unaffiliated underlying gold spot price by the Trust's Web site,
and will cease trading the Shares if this data ceases to be available.
6. The Exchange will cease trading the Shares if the Exchange's Web
site for any reason ceases to provide a hyperlink to the Trust's Web
site.
This approval order is conditioned on the Exchange's adherence to these
representations.
Finally, the Commission believes that subsections (d) and (e) of
the Exchange's proposed Rule 4630, which impose information barriers
and trading restrictions on a member acting as a registered market
maker in the Shares, are reasonable and consistent with the Act. These
provisions would require a member acting as a registered market maker
in the Shares to provide the Exchange with information relating to its
trading in physical gold, gold futures contracts, options on gold
futures, or any other gold derivatives. Further, a member acting as a
registered market maker in the Shares would be prohibited under these
provisions from using any material nonpublic information received from
any person
[[Page 67673]]
associated with a member or employee of such person regarding trading
by such person or employee in physical gold, gold futures contracts,
options on gold futures, or any other gold derivatives.
The Commission finds good cause for approving the proposal, as
amended, prior to the 30th day after the date of publication of the
notice of filing thereof in the Federal Register. As noted previously,
the Commission previously found that the listing and trading of the
Shares on NYSE and, pursuant to UTP, on NYSE Arca is consistent with
the Act.\26\ The Commission presently is not aware of any regulatory
issue that should cause the Commission to revisit these earlier
findings. Therefore, accelerating approval of the proposal should
benefit investors by creating, without undue delay, additional
competition in the market for the Shares.
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\26\ See supra notes 6 and 23.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\27\ that the proposed rule change, as amended (SR-Nasdaq-2006-
009), is approved on an accelerated basis.
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\27\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
[FR Doc. E6-19733 Filed 11-21-06; 8:45 am]
BILLING CODE 8011-01-P
