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]

Download as PDF 67668 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. pwalker on PROD1PC61 with NOTICES 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). VerDate Aug<31>2005 22:25 Nov 21, 2006 Jkt 211001 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. PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 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 http:// www.complinet.com/nasdaq. E:\FR\FM\22NON1.SGM 22NON1 pwalker on PROD1PC61 with NOTICES 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 VerDate Aug<31>2005 22:25 Nov 21, 2006 Jkt 211001 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’’). PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 67669 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. E:\FR\FM\22NON1.SGM 22NON1 67670 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices pwalker on PROD1PC61 with NOTICES 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 (http:// www.nasdaq.com) to the Trust Web site (http:// 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 (http:// 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. VerDate Aug<31>2005 22:25 Nov 21, 2006 Jkt 211001 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. PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 (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. E:\FR\FM\22NON1.SGM 22NON1 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices pwalker on PROD1PC61 with NOTICES 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. VerDate Aug<31>2005 22:25 Nov 21, 2006 Jkt 211001 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 PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 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 (http://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 (http://www.sec.gov/ rules/sro.shtml). Copies of the 16 15 17 15 E:\FR\FM\22NON1.SGM U.S.C. 78f. U.S.C. 78f(b)(5). 22NON1 67672 Federal Register / Vol. 71, No. 225 / Wednesday, November 22, 2006 / Notices 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 pwalker on PROD1PC61 with NOTICES 20 15 VerDate Aug<31>2005 22:25 Nov 21, 2006 Jkt 211001 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). PO 00000 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 E:\FR\FM\22NON1.SGM 22NON1 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]


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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.
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    \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.
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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\
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    \5\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://www.complinet.com/
nasdaq.
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* * * * *

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'').
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    \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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    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'').
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    \7\ The World Gold Council is a not-for-profit association 
registered under Swiss law.
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    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 (http://www.nasdaq.com) to the Trust 
Web site (http://www.streettracksgoldshares.com), will provide at no 
charge continuously updated bids and offers indicative of the spot 
price of gold.\8\
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    \8\ The Trust's Web site's gold spot price will be provided by 
The Bullion Desk (http://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.
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    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.
---------------------------------------------------------------------------

(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.
---------------------------------------------------------------------------

    \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\)
---------------------------------------------------------------------------

    \15\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 (http://
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 (http://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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \26\ See supra notes 6 and 23.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\28\
---------------------------------------------------------------------------

    \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