Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Trade the Shares of the PowerShares DB U.S. Dollar Index Bullish Fund and the PowerShares DB U.S. Dollar Index Bearish Fund Pursuant to Unlisted Trading Privileges, 13843-13846 [E7-5348]

Download as PDF Federal Register / Vol. 72, No. 56 / Friday, March 23, 2007 / Notices (B) Self-Regulatory Organization’s Statement on Burden on Competition DTC does not believe that the proposed rule change would have any impact or impose any burden on competition. (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments relating to the proposed rule change have not yet been solicited or received. DTC will notify the Commission of any written comments received by DTC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing rule change changes fees charged clearing members by DTC, it has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 8 and Rule 19b–4(f)(2) 9 thereunder. At any time within sixty days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: sroberts on PROD1PC70 with NOTICES 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–DTC–2007–02 on the subject line. Paper Comments • Send paper comments in triplicate to Nancy M. Morris, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–DTC–2007–02. 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 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 Section, 100 F Street, NE., Washington, DC 20549. Copies of such filing also will be available for inspection and copying at the principal office of DTC and on DTC’s Web site at http://www.dtc.org. 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 available publicly. All submissions should refer to File Number SR–DTC–2007–02 and should be submitted on or before April 13, 2007. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.10 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–5351 Filed 3–22–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55489; File No. SR– NASDAQ–2007–023] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change To Trade the Shares of the PowerShares DB U.S. Dollar Index Bullish Fund and the PowerShares DB U.S. Dollar Index Bearish Fund Pursuant to Unlisted Trading Privileges March 19, 2007. 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 March 9, 2007, 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 10 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 8 15 U.S.C. 78s(b)(3)(A)(ii). 9 17 CFR 240.19b–4(f)(2). VerDate Aug<31>2005 16:41 Mar 22, 2007 1 15 Jkt 211001 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 13843 below, which Items have been substantially prepared by the Exchange. This Order provides notice of the proposed rule change and approves the proposed rule change on an accelerated basis. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Nasdaq proposes to trade shares of the PowerShares DB U.S. Dollar Index Bullish Fund (the ‘‘Bullish Fund’’) and the PowerShares DB U.S. Dollar Index Bearish Fund (the ‘‘Bearish Fund,’’ and together with the Bullish Fund, the ‘‘Funds’’) pursuant to unlisted trading privileges (‘‘UTP’’). The text of the proposed rule change is available at Nasdaq, the Commission’s Public Reference Room, and nasdaq.complinet.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange 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. The Exchange 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 Pursuant to Nasdaq Rule 4630, which permits the Exchange to approve for UTP trading a ‘‘commodity-related security’’ that is issued by a trust, partnership, commodity pool, or similar entity that invests in any combination of commodities, futures contracts, options on futures contracts, forward contracts, commodity swaps, or other related derivatives, the Exchange proposes to trade pursuant to UTP the shares of the Funds (the ‘‘Shares’’). The Shares represent beneficial ownership interests in the corresponding common units of beneficial interests of the DB U.S. Dollar Index Master Bullish Fund and the DB U.S. Dollar Index Master Bearish Fund, respectively (collectively, the ‘‘Master Funds’’). A proposal to list and trade the Shares by the American Stock Exchange E:\FR\FM\23MRN1.SGM 23MRN1 13844 Federal Register / Vol. 72, No. 56 / Friday, March 23, 2007 / Notices sroberts on PROD1PC70 with NOTICES LLC (‘‘Amex’’) has been approved by the Commission.3 The overall investment objective of each of the Funds and the Master Funds is to reflect the performance of their respective benchmark index, less expenses, plus the excess, if any, of the corresponding Master Fund’s interest income from its holdings of U.S. Treasury and other high-credit-quality, short-term fixed income securities over its expenses. The Bullish Fund seeks to track the ‘‘Long Index’’ by investing in long positions in futures contracts (‘‘DX Contracts’’) on the U.S. Dollar Index (‘‘USDX’’), and the Bearish Fund seeks to track the ‘‘Short Index’’ by investing in short positions in DX Contracts on the USDX.4 Both the Long Index and Short Index (collectively, the ‘‘Indexes’’) are designed to reflect the return from investing in the first-to-expire DX Contract. DX Contracts are traded through the FINEX currency markets of the New York Board of Trade (‘‘NYBOT’’). The use of a long position in a DX Contract in the construction of the Long Index causes the Long Index level to rise as a result of any upward price movement in the DX Contract. Conversely, the use of a short position in a DX Contract in the construction of the Short Index causes the Short Index level to rise as a result of any downward price movement in the DX Contract. As a result, the performance of the Long Index and Short Index would reflect any rise or fall of the USD versus the underlying basket of Index Currencies.5 Deutsche Bank AG London (the ‘‘Index Sponsor’’) calculates the values of the Indexes during the trading day and such values are disseminated at least every 15 seconds through the facilities of the Consolidated Tape (‘‘CT’’), major market data vendors, the Web site of DB Commodity Services LLC, as operator of the Funds and 3 See Securities Exchange Act Release No. 55292 (February 14, 2007), 72 FR 8406 (February 26, 2007) (SR–Amex–2006–86) (‘‘Amex Order’’); Securities Exchange Act Release No. 55110 (January 16, 2007), 72 FR 3171 (January 24, 2007) (SR–Amex–2006–86) (‘‘Amex Notice’’). 4 The USDX, which is composed of six underlying foreign currencies (Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krona, and Swiss Franc, collectively, the ‘‘Index Currencies’’), is composed of notional amounts of each Index Currency reflecting a geometric average of the change in the Index Currencies’ exchange rates against the U.S. Dollar (‘‘USD’’) relative to those as of March 1973. The value of the USDX reflects a general indication of the international value of the USD by averaging the exchange rates between the USD and the Index Currencies. 5 The calculation methodologies of each Index, as well as the structure and operation of the Funds and the creation and redemption procedures for the Shares, are described in greater detail in the Amex Notice. VerDate Aug<31>2005 16:41 Mar 22, 2007 Jkt 211001 Master Funds (the ‘‘Managing Owner’’), and the Index Sponsor’s Web site. Amex also disseminates for each of the Funds on a per-Share basis an updated ‘‘Indicative Fund Value,’’ which reflects the cash required for creations and redemptions for each Fund, adjusted to reflect the price changes of the DX Contracts and the holdings of U.S. Treasury securities and other highcredit-quality, short-term fixed income securities, at least every 15 seconds between 9:30 a.m. to 4:15 p.m. Eastern Time (‘‘ET’’). Shortly after 4 p.m. ET each business day, the Bank of New York (the ‘‘Administrator’’), determines the net asset value (‘‘NAV’’) for each of the Funds and disseminates such NAV per Share to all market participants at the same time.6 On each business day, the Administrator makes available immediately prior to 9:30 a.m. ET the most recent Cash Deposit Amount 7for the creation of a Basket,8 and Amex disseminates the current value of the Cash Deposit Amount on a per-Share basis at least every 15 seconds throughout the trading day. The daily settlement prices of the DX Contracts, specific contract specifications, and delayed futures contract information on current and past trading sessions, including futures quotes and last sale information, are publicly available on NYBOT’s Web site and on the Web sites of various market data vendors, news publications, automated quotation systems, or other financial information services. Information regarding the Shares is available through Amex, the Index Sponsor, and various independent sources. Specifically, Amex disseminates on a daily basis for each of the Funds information with respect to the daily trading volume of each of the Shares, the number of Shares outstanding, the closing prices of each Fund’s Shares, the corresponding NAV, and a hyperlink on its Web site to the Index Sponsor’s Web site. In addition, the Web site for the Funds contains the following information: (1) The current 6 The Exchange represents that if Amex halts trading in the Shares of any Fund because the NAV per Share for such Fund is no longer disseminated to all market participants at the same time, it would also halt trading such Shares. E-mail from Jonathan Cayne, Associate General Counsel, Nasdaq, to Edward Cho, Special Counsel, Division of Market Regulation, Commission, dated March 14, 2007 (clarifying that the Exchange would also halt trading the Shares in such an event). 7 The Cash Deposit Amount is the amount of cash equal to the NAV per Share times 200,000 Shares to be transferred to the Administrator for the purchase of one or more Baskets (as defined below). 8 A Basket is a single block of 200,000 Shares; issuances of the Shares can be made only in one or more Baskets. PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 NAV per Share daily, the prior business day’s NAV, and the reported closing price; (2) the mid-point of the bid-ask price in relation to the NAV as of the time the NAV is calculated (the ‘‘BidAsk Price’’); (3) the calculation of the premium or discount of such price against such NAV; (4) data in chart form displaying the frequency distribution of discounts and premiums of the Bid-Ask Price against the NAV, within appropriate ranges for each of the four previous calendar quarters; (5) the prospectus; and (6) other applicable quantitative information. Nasdaq states that it will halt trading in the Shares of a Fund under the conditions specified in Nasdaq Rules 4120 and 4121. The conditions for a trading halt include a regulatory halt by the original listing market. Nasdaq will also halt trading in the Shares if the original listing market delists them. UTP trading in the Shares will be governed by provisions of Nasdaq Rule 4120(b) relating to temporary interruptions in the calculation or wide dissemination of the Indicative Fund Value or the value of the Indexes.9 Additionally, the Exchange may cease trading the Shares if other unusual conditions or circumstances exist which, in the opinion of the Exchange, make further dealings on the Exchange detrimental to the maintenance of a fair and orderly market. The Exchange represents that it would follow any procedures with respect to initiating any trading halts as set forth in Nasdaq Rule 4120(c). Nasdaq deems the Shares of the Funds to be equity securities, and therefore, trading in the Shares would be subject to Nasdaq’s existing rules governing the trading of equity securities. Trading in the Shares will also be subject to Nasdaq Rule 4630 (Trading in Commodity-Related Securities). The trading hours for the Shares on Nasdaq will be 9:30 a.m. to 4 p.m. ET. In connection with the trading of the Shares, Nasdaq will inform its members in an Information Circular, prior to the commencement of trading, of the special characteristics and risks associated with trading the Shares. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of Shares in Baskets (and that Shares are not individually redeemable); (2) Nasdaq Rule 2310, which imposes suitability obligations on Nasdaq members with respect to recommending transactions in 9 See Securities Exchange Act Release No. 55269 (February 9, 2007), 72 FR 7490 (February 15, 2007) (SR–NASDAQ–2006–050) (setting forth trading halt requirements when the Exchange is trading a product pursuant to UTP). See also supra note 6. E:\FR\FM\23MRN1.SGM 23MRN1 Federal Register / Vol. 72, No. 56 / Friday, March 23, 2007 / Notices the Shares to customers; (3) how information regarding the Indicative Fund Value is disseminated; (4) the requirement that members deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction;10 (5) other relevant trading information; (6) any exemptive, noaction, and/or interpretive relief granted by the Commission from any rules under the Act; (7) the various fees and expenses to which the Funds are subject; and (8) the fact that the Commodity Futures Trading Commission has regulatory jurisdiction over the trading of futures contracts. The Information Circular will also disclose the trading hours of the Shares of the Funds, when the NAV for the Shares will be calculated each trading day, information about the Shares of each Fund, and the public availability of the corresponding Index values on the Funds’ Web site. Nasdaq believes that its surveillance procedures are adequate to address any concerns about the trading of the Shares on Nasdaq. Trading of the Shares through Nasdaq will be subject to NASD’s surveillance procedures for equity securities, in general, and exchange-traded funds, in particular.11 The Exchange may obtain information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members or affiliates of the ISG, including NYBOT. sroberts on PROD1PC70 with NOTICES 2. Statutory Basis The proposal is consistent with Section 6(b) of the Act 12 in general and Section 6(b)(5) of the Act 13 in particular in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market, and, in general, to protect investors and the public interest. In addition, the proposal is consistent with Rule 12f-5 under the Act 14 because Nasdaq deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules 10 Specifically, the Information Circular will also note that (1) investors purchasing Shares directly from a Fund (by delivery of the corresponding Cash Deposit Amount) will receive a prospectus and (2) members purchasing Shares from a Fund for resale to investors will deliver a prospectus to such investors. 11 NASD surveils trading on Nasdaq pursuant to a regulatory services agreement. Nasdaq is responsible for NASD’s performance under this regulatory services agreement. 12 15 U.S.C. 78f(b). 13 15 U.S.C. 78f(b)(5). 14 17 CFR 240.12f–5. VerDate Aug<31>2005 16:41 Mar 22, 2007 Jkt 211001 governing the trading of equity securities. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange 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 purpose of the Act. 13845 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 available publicly. All submissions should refer to File Number SR-NASDAQ–2007–023 and should be submitted on or before April 13, 2007. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. IV. Commission’s Findings and Order Granting Accelerated Approval of the Proposed Rule Change After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national III. Solicitation of Comments securities exchange.15 In particular, the Interested persons are invited to Commission finds that the proposed submit written data, views, and rule change is consistent with Section arguments concerning the foregoing, 6(b)(5) of the Act,16 which requires that including whether the proposed rule an exchange have rules designed, among change is consistent with the Act. other things, to promote just and Comments may be submitted by any of equitable principles of trade, to remove the following methods: impediments to and perfect the mechanism of a free and open market Electronic Comments and a national market system, and in • Use the Commission’s Internet general to protect investors and the comment form (http://www.sec.gov/ public interest. The Commission rules/sro.shtml); or believes that this proposal should • Send an e-mail to rulebenefit investors by increasing comments@sec.gov. Please include File competition among markets that trade Number SR-NASDAQ–2007–023 on the the Shares. subject line. In addition, the Commission finds that the proposal is consistent with Paper Comments Section 12(f) of the Act,17 which permits • Send paper comments in triplicate an exchange to trade, pursuant to UTP, to Nancy M. Morris, Secretary, a security that is listed and registered on Securities and Exchange Commission, another exchange.18 The Commission 100 F Street, NE., Washington, DC notes that it previously approved the 20549–1090. listing and trading of the Shares on All submissions should refer to File Amex.19 The Commission also finds that Number SR-NASDAQ–2007–023. This the proposal is consistent with Rule file number should be included on the 12f–5 under the Act,20 which provides subject line if e-mail is used. To help the that an exchange shall not extend UTP Commission process and review your to a security unless the exchange has in comments more efficiently, please use effect a rule or rules providing for only one method. The Commission will transactions in the class or type of post all comments on the Commission’s security to which the exchange extends Internet Web site (http://www.sec.gov/ UTP. The Exchange has represented that rules/sro.shtml). Copies of the 15 In approving this rule change, the Commission submission, all subsequent notes that it has considered the proposed rule’s amendments, all written statements impact on efficiency, competition, and capital with respect to the proposed rule formation. See 15 U.S.C. 78c(f). change that are filed with the 16 15 U.S.C. 78f(b)(5). Commission, and all written 17 15 U.S.C. 78l(f). communications relating to the 18 Section 12(a) of the Act, 15 U.S.C. 78l(a), generally prohibits a broker-dealer from trading a proposed rule change between the Commission and any person, other than security on a national securities exchange unless the security is registered on that exchange pursuant those that may be withheld from the to Section 12 of the Act. Section 12(f) of the Act public in accordance with the excludes from this restriction trading in any security to which an exchange ‘‘extends UTP.’’ provisions of 5 U.S.C. 552, will be When an exchange extends UTP to a security, it available for inspection and copying in allows its members to trade the security as if it were the Commission’s Public Reference listed and registered on the exchange even though Room. Copies of such filing also will be it is not so listed and registered. 19 See supra note 3. available for inspection and copying at 20 17 CFR 240.12f–5. the principal offices of the Exchange. PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 E:\FR\FM\23MRN1.SGM 23MRN1 sroberts on PROD1PC70 with NOTICES 13846 Federal Register / Vol. 72, No. 56 / Friday, March 23, 2007 / Notices it meets this requirement because it deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. The Commission further believes that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the Act,21 which sets forth Congress’ 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 publicly available on the Web site of the Funds and Amex. Such Web sites also disseminate information about the current and most recent NAV per Share, the Bid-Ask Price of the Shares, and discount and premium information of the Bid-Ask Price against the NAV. The Index Sponsor calculates and publishes through the facilities of the CT and major market data vendors the intra-day values of each Index at least every 15 seconds during regular trading hours and the closing levels of each Index. In addition, Amex disseminates through the CT for each of the Funds on a per-Share basis an updated Indicative Fund Value, which generally reflects the cash required for creations and redemptions of Shares, at least every 15 seconds during the trading day. The Administrator calculates and simultaneously disseminates once each business day to all market participants the NAV per Share and publishes the most recent Cash Deposit Amount on a per-Share basis. Also, the daily settlement prices of and other applicable information regarding the DX Contracts, including futures quotes and last sale information, are publicly available on NYBOT’s Web site and on the Web sites of various market data vendors, automated quotation systems, and other financial information services. The Commission notes that, if the Shares should be delisted by the listing exchange, the Exchange would no longer have authority to trade the Shares pursuant to this order. In support of this proposal, the Exchange has made the following representations: (1) The Exchange’s surveillance procedures are adequate to address any concerns associated with the trading of the Shares on a UTP basis. (2) The Exchange would inform its members in an Information Circular of the special characteristics and risks associated with trading the Shares, including suitability recommendation requirements. (3) The Exchange would require its members to deliver a prospectus to investors purchasing Shares prior to or concurrently with a transaction in such Shares and will note this prospectus delivery requirement in the Information Circular. This approval order is conditioned on the Exchange’s adherence to the foregoing representations. The Commission finds good cause for approving this proposal before the thirtieth day after the publication of notice thereof in the Federal Register. As noted above, the Commission previously found that the listing and trading of the Shares on Amex is consistent with the Act. The Commission presently is not aware of any regulatory issue that should cause it to revisit that finding or would preclude the trading of the Shares on the Exchange pursuant to UTP. Therefore, accelerating approval of this proposal should benefit investors by creating, without undue delay, additional competition in the market for such Shares. V. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,22 that the proposed rule change (SR–NASDAQ– 2007–023) be, and it hereby is, approved on an accelerated basis. For the Commission, by the Division of Market Regulation, pursuant to delegated authority.23 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–5348 Filed 3–22–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55490; File No. SR–NSCC– 2007–02] Self-Regulatory Organizations; National Securities Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees Charged to the CDS Clearing and Depository Services, Inc. March 19, 2007. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on 22 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 23 17 21 15 U.S.C. 78k–1(a)(1)(C)(iii). VerDate Aug<31>2005 16:41 Mar 22, 2007 Jkt 211001 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 January 26, 2007, the National Securities Clearing Corporation (‘‘NSCC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which items have been prepared primarily by NSCC. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The proposed rule change would permit NSCC, effective February 1, 2007, to cease to charge fees for ‘‘Covered Services’’ in ‘‘Omnibus Accounts’’ (as each term is defined below) to the CDS Clearing and Depository Services, Inc. (‘‘CDS’’), formerly the Canadian Depository for Securities Ltd., in exchange for CDS agreeing not to charge NSCC for such services.2 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, NSCC 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 IV below. NSCC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of such statements.3 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The purpose of the proposed rule change is to facilitate the efficient processing of cross-border securities transactions between the U.S. and Canada. CDS is a participant in both NSCC and DTC. CDS holds securities in the name of Cede & Co., DTC’s nominee name, in one or more omnibus accounts at DTC, and also has a clearance account at NSCC (collectively the ‘‘CDS Omnibus Accounts’’).4 2 The Depository Trust Company (‘‘DTC’’) has submitted a similar proposed rule change (File No. SR–DTC–2007–02). 3 The Commission has modified parts of these statements. 4 For purposes of this rule filing, the term ‘‘CDS Omnibus Accounts’’ shall not include CDS’s additional accounts established pursuant to the Multiple Account Number Agreement, dated October 27, 2006 between CDS and NSCC and the Additional Account Agreement, dated October 27, 2006 between DTC and CDS. E:\FR\FM\23MRN1.SGM 23MRN1

Agencies

[Federal Register Volume 72, Number 56 (Friday, March 23, 2007)]
[Notices]
[Pages 13843-13846]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-5348]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55489; File No. SR-NASDAQ-2007-023]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Trade the Shares of the PowerShares DB U.S. Dollar Index 
Bullish Fund and the PowerShares DB U.S. Dollar Index Bearish Fund 
Pursuant to Unlisted Trading Privileges

March 19, 2007.
    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 March 9, 2007, 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 substantially prepared by the Exchange. 
This Order provides notice of the proposed rule change and approves the 
proposed rule change on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to trade shares of the PowerShares DB U.S. Dollar 
Index Bullish Fund (the ``Bullish Fund'') and the PowerShares DB U.S. 
Dollar Index Bearish Fund (the ``Bearish Fund,'' and together with the 
Bullish Fund, the ``Funds'') pursuant to unlisted trading privileges 
(``UTP''). The text of the proposed rule change is available at Nasdaq, 
the Commission's Public Reference Room, and nasdaq.complinet.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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. The Exchange 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
    Pursuant to Nasdaq Rule 4630, which permits the Exchange to approve 
for UTP trading a ``commodity-related security'' that is issued by a 
trust, partnership, commodity pool, or similar entity that invests in 
any combination of commodities, futures contracts, options on futures 
contracts, forward contracts, commodity swaps, or other related 
derivatives, the Exchange proposes to trade pursuant to UTP the shares 
of the Funds (the ``Shares''). The Shares represent beneficial 
ownership interests in the corresponding common units of beneficial 
interests of the DB U.S. Dollar Index Master Bullish Fund and the DB 
U.S. Dollar Index Master Bearish Fund, respectively (collectively, the 
``Master Funds''). A proposal to list and trade the Shares by the 
American Stock Exchange

[[Page 13844]]

LLC (``Amex'') has been approved by the Commission.\3\
---------------------------------------------------------------------------

    \3\ See Securities Exchange Act Release No. 55292 (February 14, 
2007), 72 FR 8406 (February 26, 2007) (SR-Amex-2006-86) (``Amex 
Order''); Securities Exchange Act Release No. 55110 (January 16, 
2007), 72 FR 3171 (January 24, 2007) (SR-Amex-2006-86) (``Amex 
Notice'').
---------------------------------------------------------------------------

    The overall investment objective of each of the Funds and the 
Master Funds is to reflect the performance of their respective 
benchmark index, less expenses, plus the excess, if any, of the 
corresponding Master Fund's interest income from its holdings of U.S. 
Treasury and other high-credit-quality, short-term fixed income 
securities over its expenses. The Bullish Fund seeks to track the 
``Long Index'' by investing in long positions in futures contracts 
(``DX Contracts'') on the U.S. Dollar Index[supreg] (``USDX''), and the 
Bearish Fund seeks to track the ``Short Index'' by investing in short 
positions in DX Contracts on the USDX.\4\ Both the Long Index and Short 
Index (collectively, the ``Indexes'') are designed to reflect the 
return from investing in the first-to-expire DX Contract. DX Contracts 
are traded through the FINEX currency markets of the New York Board of 
Trade (``NYBOT'').
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    \4\ The USDX, which is composed of six underlying foreign 
currencies (Euro, Japanese Yen, British Pound, Canadian Dollar, 
Swedish Krona, and Swiss Franc, collectively, the ``Index 
Currencies''), is composed of notional amounts of each Index 
Currency reflecting a geometric average of the change in the Index 
Currencies' exchange rates against the U.S. Dollar (``USD'') 
relative to those as of March 1973. The value of the USDX reflects a 
general indication of the international value of the USD by 
averaging the exchange rates between the USD and the Index 
Currencies.
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    The use of a long position in a DX Contract in the construction of 
the Long Index causes the Long Index level to rise as a result of any 
upward price movement in the DX Contract. Conversely, the use of a 
short position in a DX Contract in the construction of the Short Index 
causes the Short Index level to rise as a result of any downward price 
movement in the DX Contract. As a result, the performance of the Long 
Index and Short Index would reflect any rise or fall of the USD versus 
the underlying basket of Index Currencies.\5\
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    \5\ The calculation methodologies of each Index, as well as the 
structure and operation of the Funds and the creation and redemption 
procedures for the Shares, are described in greater detail in the 
Amex Notice.
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    Deutsche Bank AG London (the ``Index Sponsor'') calculates the 
values of the Indexes during the trading day and such values are 
disseminated at least every 15 seconds through the facilities of the 
Consolidated Tape (``CT''), major market data vendors, the Web site of 
DB Commodity Services LLC, as operator of the Funds and Master Funds 
(the ``Managing Owner''), and the Index Sponsor's Web site. Amex also 
disseminates for each of the Funds on a per-Share basis an updated 
``Indicative Fund Value,'' which reflects the cash required for 
creations and redemptions for each Fund, adjusted to reflect the price 
changes of the DX Contracts and the holdings of U.S. Treasury 
securities and other high-credit-quality, short-term fixed income 
securities, at least every 15 seconds between 9:30 a.m. to 4:15 p.m. 
Eastern Time (``ET''). Shortly after 4 p.m. ET each business day, the 
Bank of New York (the ``Administrator''), determines the net asset 
value (``NAV'') for each of the Funds and disseminates such NAV per 
Share to all market participants at the same time.\6\
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    \6\ The Exchange represents that if Amex halts trading in the 
Shares of any Fund because the NAV per Share for such Fund is no 
longer disseminated to all market participants at the same time, it 
would also halt trading such Shares. E-mail from Jonathan Cayne, 
Associate General Counsel, Nasdaq, to Edward Cho, Special Counsel, 
Division of Market Regulation, Commission, dated March 14, 2007 
(clarifying that the Exchange would also halt trading the Shares in 
such an event).
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    On each business day, the Administrator makes available immediately 
prior to 9:30 a.m. ET the most recent Cash Deposit Amount \7\for the 
creation of a Basket,\8\ and Amex disseminates the current value of the 
Cash Deposit Amount on a per-Share basis at least every 15 seconds 
throughout the trading day. The daily settlement prices of the DX 
Contracts, specific contract specifications, and delayed futures 
contract information on current and past trading sessions, including 
futures quotes and last sale information, are publicly available on 
NYBOT's Web site and on the Web sites of various market data vendors, 
news publications, automated quotation systems, or other financial 
information services.
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    \7\ The Cash Deposit Amount is the amount of cash equal to the 
NAV per Share times 200,000 Shares to be transferred to the 
Administrator for the purchase of one or more Baskets (as defined 
below).
    \8\ A Basket is a single block of 200,000 Shares; issuances of 
the Shares can be made only in one or more Baskets.
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    Information regarding the Shares is available through Amex, the 
Index Sponsor, and various independent sources. Specifically, Amex 
disseminates on a daily basis for each of the Funds information with 
respect to the daily trading volume of each of the Shares, the number 
of Shares outstanding, the closing prices of each Fund's Shares, the 
corresponding NAV, and a hyperlink on its Web site to the Index 
Sponsor's Web site. In addition, the Web site for the Funds contains 
the following information: (1) The current NAV per Share daily, the 
prior business day's NAV, and the reported closing price; (2) the mid-
point of the bid-ask price in relation to the NAV as of the time the 
NAV is calculated (the ``Bid-Ask Price''); (3) the calculation of the 
premium or discount of such price against such NAV; (4) data in chart 
form displaying the frequency distribution of discounts and premiums of 
the Bid-Ask Price against the NAV, within appropriate ranges for each 
of the four previous calendar quarters; (5) the prospectus; and (6) 
other applicable quantitative information.
    Nasdaq states that it will halt trading in the Shares of a Fund 
under the conditions specified in Nasdaq Rules 4120 and 4121. The 
conditions for a trading halt include a regulatory halt by the original 
listing market. Nasdaq will also halt trading in the Shares if the 
original listing market delists them. UTP trading in the Shares will be 
governed by provisions of Nasdaq Rule 4120(b) relating to temporary 
interruptions in the calculation or wide dissemination of the 
Indicative Fund Value or the value of the Indexes.\9\ Additionally, the 
Exchange may cease trading the Shares if other unusual conditions or 
circumstances exist which, in the opinion of the Exchange, make further 
dealings on the Exchange detrimental to the maintenance of a fair and 
orderly market. The Exchange represents that it would follow any 
procedures with respect to initiating any trading halts as set forth in 
Nasdaq Rule 4120(c).
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    \9\ See Securities Exchange Act Release No. 55269 (February 9, 
2007), 72 FR 7490 (February 15, 2007) (SR-NASDAQ-2006-050) (setting 
forth trading halt requirements when the Exchange is trading a 
product pursuant to UTP). See also supra note 6.
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    Nasdaq deems the Shares of the Funds to be equity securities, and 
therefore, trading in the Shares would be subject to Nasdaq's existing 
rules governing the trading of equity securities. Trading in the Shares 
will also be subject to Nasdaq Rule 4630 (Trading in Commodity-Related 
Securities). The trading hours for the Shares on Nasdaq will be 9:30 
a.m. to 4 p.m. ET.
    In connection with the trading of the Shares, Nasdaq will inform 
its members in an Information Circular, prior to the commencement of 
trading, of the special characteristics and risks associated with 
trading the Shares. Specifically, the Information Circular will discuss 
the following: (1) The procedures for purchases and redemptions of 
Shares in Baskets (and that Shares are not individually redeemable); 
(2) Nasdaq Rule 2310, which imposes suitability obligations on Nasdaq 
members with respect to recommending transactions in

[[Page 13845]]

the Shares to customers; (3) how information regarding the Indicative 
Fund Value is disseminated; (4) the requirement that members deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction;\10\ (5) other 
relevant trading information; (6) any exemptive, no-action, and/or 
interpretive relief granted by the Commission from any rules under the 
Act; (7) the various fees and expenses to which the Funds are subject; 
and (8) the fact that the Commodity Futures Trading Commission has 
regulatory jurisdiction over the trading of futures contracts. The 
Information Circular will also disclose the trading hours of the Shares 
of the Funds, when the NAV for the Shares will be calculated each 
trading day, information about the Shares of each Fund, and the public 
availability of the corresponding Index values on the Funds' Web site.
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    \10\ Specifically, the Information Circular will also note that 
(1) investors purchasing Shares directly from a Fund (by delivery of 
the corresponding Cash Deposit Amount) will receive a prospectus and 
(2) members purchasing Shares from a Fund for resale to investors 
will deliver a prospectus to such investors.
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    Nasdaq believes that its surveillance procedures are adequate to 
address any concerns about the trading of the Shares on Nasdaq. Trading 
of the Shares through Nasdaq will be subject to NASD's surveillance 
procedures for equity securities, in general, and exchange-traded 
funds, in particular.\11\ The Exchange may obtain information via the 
Intermarket Surveillance Group (``ISG'') from other exchanges who are 
members or affiliates of the ISG, including NYBOT.
---------------------------------------------------------------------------

    \11\ NASD surveils trading on Nasdaq pursuant to a regulatory 
services agreement. Nasdaq is responsible for NASD's performance 
under this regulatory services agreement.
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2. Statutory Basis
    The proposal is consistent with Section 6(b) of the Act \12\ in 
general and Section 6(b)(5) of the Act \13\ in particular in that it is 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to, and perfect the mechanism of a free and open market, and, in 
general, to protect investors and the public interest. In addition, the 
proposal is consistent with Rule 12f-5 under the Act \14\ because 
Nasdaq deems the Shares to be equity securities, thus rendering trading 
in the Shares subject to the Exchange's existing rules governing the 
trading of equity securities.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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 purpose of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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-2007-023 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NASDAQ-2007-023. 
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 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 offices of the Exchange. 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 available publicly. All submissions should refer to 
File Number SR-NASDAQ-2007-023 and should be submitted on or before 
April 13, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\15\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\16\ 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 this proposal should benefit 
investors by increasing competition among markets that trade the 
Shares.
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    \15\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\17\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\18\ The Commission notes that it previously approved the 
listing and trading of the Shares on Amex.\19\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\20\ 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 has represented that

[[Page 13846]]

it meets this requirement because it deems the Shares to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities.
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    \17\ 15 U.S.C. 78l(f).
    \18\ 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 ``extends UTP.'' 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.
    \19\ See supra note 3.
    \20\ 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,\21\ which sets forth 
Congress' 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 publicly available on the Web site of the Funds and Amex. 
Such Web sites also disseminate information about the current and most 
recent NAV per Share, the Bid-Ask Price of the Shares, and discount and 
premium information of the Bid-Ask Price against the NAV. The Index 
Sponsor calculates and publishes through the facilities of the CT and 
major market data vendors the intra-day values of each Index at least 
every 15 seconds during regular trading hours and the closing levels of 
each Index. In addition, Amex disseminates through the CT for each of 
the Funds on a per-Share basis an updated Indicative Fund Value, which 
generally reflects the cash required for creations and redemptions of 
Shares, at least every 15 seconds during the trading day. The 
Administrator calculates and simultaneously disseminates once each 
business day to all market participants the NAV per Share and publishes 
the most recent Cash Deposit Amount on a per-Share basis. Also, the 
daily settlement prices of and other applicable information regarding 
the DX Contracts, including futures quotes and last sale information, 
are publicly available on NYBOT's Web site and on the Web sites of 
various market data vendors, automated quotation systems, and other 
financial information services.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Commission notes that, if the Shares should be delisted by the 
listing exchange, the Exchange would no longer have authority to trade 
the Shares pursuant to this order.
    In support of this proposal, the Exchange has made the following 
representations:
    (1) The Exchange's surveillance procedures are adequate to address 
any concerns associated with the trading of the Shares on a UTP basis.
    (2) The Exchange would inform its members in an Information 
Circular of the special characteristics and risks associated with 
trading the Shares, including suitability recommendation requirements.
    (3) The Exchange would require its members to deliver a prospectus 
to investors purchasing Shares prior to or concurrently with a 
transaction in such Shares and will note this prospectus delivery 
requirement in the Information Circular.

This approval order is conditioned on the Exchange's adherence to the 
foregoing representations.
    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. As noted above, the Commission previously found that 
the listing and trading of the Shares on Amex is consistent with the 
Act. The Commission presently is not aware of any regulatory issue that 
should cause it to revisit that finding or would preclude the trading 
of the Shares on the Exchange pursuant to UTP. Therefore, accelerating 
approval of this proposal should benefit investors by creating, without 
undue delay, additional competition in the market for such Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NASDAQ-2007-023) be, and it 
hereby is, approved on an accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E7-5348 Filed 3-22-07; 8:45 am]
BILLING CODE 8010-01-P