Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Permit Trading of Shares of 93 Funds of the ProShares Trust Pursuant to Unlisted Trading Privileges, 68926-68930 [E7-23611]
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68926
Federal Register / Vol. 72, No. 234 / Thursday, December 6, 2007 / Notices
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site at https://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, 100 F Street, NE., Washington,
DC 20549, on official business days
between the hours of 10 a.m. and 3 p.m.
Copies of such filing also will be
available for inspection and copying at
the principal office 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 No.
SR–ISE–2007–87 and should be
submitted on or before December 27,
2007.
mstockstill on PROD1PC66 with NOTICES
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, 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,10 and in
particular, the requirements of Section
6(b) of the Act.11 Specifically, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,12 which requires,
among other things, that the rules of a
national securities exchange be
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 a national market
system, and, in general, to protect
investors and the public interest.
Surveillance
The Commission notes that the
Exchange has represented that its
10 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
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18:57 Dec 05, 2007
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existing surveillance procedures
applicable to trading options are
adequate to properly monitor trading in
options on Index Multiple ETFs and
Index Inverse ETFs. In addition, the
Exchange has represented that the
expansion of the types of investments
that may be held by Index Multiple
ETFs or Index Inverse ETFs under ISE
Rule 502(h) will not have any effect on
the rules pertaining to position and
exercise limits 13 or margin.14
substantive issues that differ
substantially from those raised in the
prior filings that would preclude the
trading of the options on Index Multiple
ETFs or Index Inverse ETFs on the
Exchange. Therefore, accelerating
approval of this proposal should benefit
investors by creating, without delay,
additional competition in the market for
these types of options.
Listing and Trading Options on Fund
Shares
The Commission notes that, pursuant
to the proposed rule change, the
Exchange represented that the current
continuing listing standards for options
on Exchange-Traded Fund Shares will
continue to apply. These provisions
include requirements regarding initial
and continued listing standards,
suspension of opening transactions, and
trading halts. Proposed amended ISE
Rule 502(h), would require that Index
Multiple ETFs and Index Inverse ETFs
be traded on a national securities
exchange and must be an ‘‘NMS stock’’
as defined under Rule 600 of Regulation
NMS. 15
The Commission believes that this
proposal is necessary to enable the
Exchange to list and trade options on
the shares of the Ultra Fund, Short Fund
and UltraShort Fund of the ProShares
Trust. The Commission believes that the
ability to trade options on the Index
Multiple ETFs and Index Inverse ETFs
will provide investors with additional
risk management tools. The Commission
further believes that the proposed
amendment to the Exchange’s listing
criteria for options on Fund Shares will
ensure that the Exchange will be able to
list options on the Funds of the
ProShares Trust as well as other Index
Multiple ETFs and Index Inverse ETFs
that may be introduced in the future,
thereby affording investors greater
investment choices.
The Commission finds good cause for
approving this proposal before the
thirtieth day after the publication of
notice thereof in the Federal Register.
The Commission notes that it has
recently approved substantially similar
proposals by other national securities
exchanges.16 This proposed rule change
does not raise any new, unique, or
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,17 that the
proposed rule change, (SR–ISE–2007–
87), is hereby approved on an
accelerated basis.
13 See
ISE Rules 412 and 414.
ISE Rule 1202.
15 17 CFR 242.600(b)(47).
16 See Securities Exchange Act Release Nos.
56650 (October 12, 2007), 72 FR 59123 (October 18,
2007) (approving SR–Amex–2007–35) and 56715
(October 29, 2007), 72 FR 62287 (November 2, 2007)
(approving SR–CBOE–2007–119 on an accelerated
basis).
14 See
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V. Conclusion
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–23586 Filed 12–5–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56866; File No. SR–ISE–
2007–102]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Order
Granting Accelerated Approval of
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To Permit
Trading of Shares of 93 Funds of the
ProShares Trust Pursuant to Unlisted
Trading Privileges
November 29, 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 October
25, 2007, the International Securities
Exchange, LLC (‘‘Exchange’’ or ‘‘ISE’’)
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. On November 29, 2007, ISE
filed Amendment No. 1 to the proposed
rule change.3 This order provides notice
of the proposed rule change and
approves the proposal, as modified by
Amendment No. 1, on an accelerated
basis.
17 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 Amendment No. 1 supersedes and replaces the
original filing in its entirety.
18 17
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Federal Register / Vol. 72, No. 234 / Thursday, December 6, 2007 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to trade
shares (‘‘Shares’’) of the 93 funds
identified below (collectively, ‘‘Funds’’)
of the ProShares Trust pursuant to
unlisted trading privileges (‘‘UTP’’).
The text of the proposed rule change
is available on the Exchange’s Web site
(https://www.ise.com), at the Exchange’s
principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, ISE
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
ISE proposes to trade pursuant to UTP
the Shares of the 93 Funds, which are
exchange-traded funds (‘‘ETFs’’). The
Commission has previously approved
the listing and trading of those ETFs on
the American Stock Exchange LLC
(‘‘Amex’’). The Exchange is submitting
this filing because its current generic
listing standards for ETFs do not extend
to ETFs where the investment objective
corresponds to a specified multiple of
the performance, or the inverse
performance, of an index that underlies
a Fund (each such index is referred to
below as an ‘‘Underlying Index’’), rather
than merely mirroring the performance
of the index. These Shares are currently
trading on Amex, NYSE Arca, and
Nasdaq. The Funds are referred to as
Ultra Funds, Short Funds, and
UltraShort Funds, as described more
fully below.
mstockstill on PROD1PC66 with NOTICES
Ultra Funds
Certain Funds seek daily investment
results, before fees and expenses, that
correspond to twice (200%) the daily
performance of the Underlying Indexes
(‘‘Ultra Funds’’). If such a Fund meets
its objective, the net asset value
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(‘‘NAV’’) 4 of the Shares of the Fund
should increase (on a percentage basis)
approximately twice as much as the
Fund’s Underlying Index when the
prices of the securities in such Index
increase on a given day, and should lose
approximately twice as much when
such prices decline on a given day. This
filing applies to the following Ultra
Funds:
• Four Ultra Funds, the listing and
trading of which on Amex were
approved by the Commission on May
10, 2006: 5 (1) Ultra S&P 500, (2) Ultra
Nasdaq–100, (3) Ultra Dow 30, and (4)
Ultra S&P Mid-Cap 400; and
• 27 Ultra Funds, the listing and
trading of which on Amex were
approved by the Commission on January
17, 2007: 6 (1) Ultra Russell 2000, (2)
Ultra S&P SmallCap 600, (3) Ultra
S&P500/Citigroup Value, (4) Ultra
S&P500/Citigroup Growth, (5) Ultra S&P
MidCap 400/Citigroup Value, (6) Ultra
S&P MidCap 400/Citigroup Growth, (7)
Ultra S&P SmallCap 600/Citigroup
Value, (8) Ultra S&P SmallCap 600/
Citigroup Growth, (9) Ultra Basic
Materials, (10) Ultra Consumer Goods,
(11) Ultra Consumer Services, (12) Ultra
Financials, (13) Ultra Health Care, (14)
Ultra Industrials, (15) Ultra Oil & Gas,
(16) Ultra Real Estate, (17) Ultra
Semiconductors, (18) Ultra Technology,
(19) Ultra Utilities, (20) Ultra Russell
Midcap Index, (21) Ultra Russell
Midcap Growth Index, (22) Ultra Russell
Midcap Value Index, (23) Ultra Russell
1000 Index, (24) Ultra Russell 1000
Growth Index, (25) Ultra Russell 1000
Value Index, (26) Ultra Russell 2000
Growth Index, and (27) Ultra Russell
2000 Value Index.
Short Funds
ISE also proposes to trade Shares of
certain Funds that seek daily investment
results, before fees and expenses, that
correspond to the inverse or opposite of
4 NAV per Share of each Fund is computed by
dividing the value of the net assets of such Fund
(i.e., the value of its total assets less total liabilities)
by its total number of Shares outstanding. Expenses
and fees are accrued daily and taken into account
for purposes of determining NAV.
5 See Securities Exchange Act Release No. 54040
(June 23, 2006), 71 FR 37629 (June 30, 2006) (SR–
Amex–2006–41). The Commission approved the
UTP trading of these Funds on NYSE Arca and
Nasdaq. See Securities Exchange Act Release No.
54045 (June 26, 2006), 71 FR 37971 (July 3, 2006)
(SR–PCX–2005–115); Securities Exchange Act
Release No. 55353 (February 26, 2007), 72 FR 9802
(March 5, 2007) (SR–Nasdaq–2007–011).
6 See Securities Exchange Act Release No. 55117
(January 17, 2007), 72 FR 3442 (January 25, 2007)
(SR–Amex–2006–101). Subsequently, the
Commission approved the UTP trading of these
Funds on NYSE Arca. See Securities Exchange Act
Release No. 55125 (January 18, 2007), 72 FR 3462
(January 25, 2007) (SR–NYSEArca–2007–87) (SR–
NYSEArca–2006–87).
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68927
the daily performance (¥100%) of the
Underlying Indexes (‘‘Short Funds’’). If
such a Fund is successful in meeting its
objective, the NAV of the corresponding
Shares should increase approximately
as much (on a percentage basis) as the
respective Underlying Index loses when
the prices of the securities in the Index
decline on a given day, or should
decrease approximately as much as the
respective Index gains when prices in
the Index rise on a given day. This filing
applies to the following Short Funds:
• Four Short Funds, the listing and
trading of which on Amex were
approved by the Commission on May
10, 2006: 7 (1) Short S&P 500, (2) Short
Nasdaq–100, (3) Short Dow 30, and (4)
Short S&P Mid-Cap 400; and
• 27 Short Funds, the listing and
trading of which on Amex were
approved by the Commission on January
17, 2007: 8 (1) Short Russell 2000, (2)
Short S&P SmallCap 600, (3) Short
S&P500/Citigroup Value, (4) Short
S&P500/Citigroup Growth, (5) Short
S&P MidCap 400/Citigroup Value, (6)
Short S&P MidCap 400/Citigroup
Growth, (7) Short S&P SmallCap 600/
Citigroup Value, (8) Short S&P
SmallCap 600/Citigroup Growth, (9)
Short Basic Materials, (10) Short
Consumer Goods, (11) Short Consumer
Services, (12) Short Financials, (13)
Short Health Care, (14) Short
Industrials, (15) Short Oil & Gas, (16)
Short Real Estate, (17) Short
Semiconductors, (18) Short Technology,
(19) Short Utilities, (20) Short Russell
Midcap Index, (21) Short Russell
Midcap Growth Index, (22) Short
Russell Midcap Value Index, (23) Short
Russell 1000 Index, (24) Short Russell
1000 Growth Index, (25) Short Russell
1000 Value Index, (26) Short Russell
2000 Growth Index, and (27) Short
Russell 2000 Value Index.
UltraShort Funds
ISE also proposes to trade Shares of
certain Funds that seek daily investment
results, before fees and expenses, that
correspond to twice the inverse
(¥200%) of the daily performance of
the Underlying Indexes (‘‘UltraShort
Funds’’). If such a Fund is successful in
meeting its objective, the NAV of the
corresponding Shares should increase
approximately twice as much (on a
percentage basis) as the respective
Underlying Index loses when the prices
of the securities in the Index decline on
a given day, or should decrease
approximately twice as much as the
respective Underlying Index gains when
such prices rise on a given day. This
7 See
8 See
E:\FR\FM\06DEN1.SGM
supra note 4.
supra note 5.
06DEN1
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Federal Register / Vol. 72, No. 234 / Thursday, December 6, 2007 / Notices
filing applies to the following
UltraShort Funds:
• Four UltraShort Funds, the listing
and trading of which on Amex were
approved by the Commission on June
23, 2006: 9 (1) UltraShort S&P 500, (2)
UltraShort Nasdaq–100, (3) UltraShort
Dow 30, and (4) UltraShort S&P MidCap 400; and
• 27 UltraShort Funds, the listing and
trading of which on Amex were
approved by the Commission on January
17, 2007: 10 (1) UltraShort Russell 2000,
(2) UltraShort S&P SmallCap 600, (3)
UltraShort S&P500/Citigroup Value, (4)
UltraShort S&P500/Citigroup Growth,
(5) UltraShort S&P MidCap 400/
Citigroup Value, (6) UltraShort S&P
MidCap 400/Citigroup Growth, (7)
UltraShort S&P SmallCap 600/Citigroup
Value, (8) UltraShort S&P SmallCap
600/Citigroup Growth, (9) UltraShort
Basic Materials, (10) UltraShort
Consumer Goods, (11) UltraShort
Consumer Services, (12) UltraShort
Financials, (13) UltraShort Health Care,
(14) UltraShort Industrials, (15)
UltraShort Oil & Gas, (16) UltraShort
Real Estate, (17) UltraShort
Semiconductors, (18) UltraShort
Technology, (19) UltraShort Utilities,
(20) UltraShort Russell Midcap Index,
(21) UltraShort Russell Midcap Growth
Index, (22) UltraShort Russell Midcap
Value Index, (23) UltraShort Russell
1000 Index, (24) UltraShort Russell 1000
Growth Index, (25) UltraShort Russell
1000 Value Index, (26) UltraShort
Russell 2000 Growth Index, and (27)
UltraShort Russell 2000 Value Index.
Access to the current portfolio
composition of each Fund is currently
available through the Trust’s Web site
(https://www.proshares.com).11 The
Underlying Indexes are identified in the
filings in which Amex proposed to list
and trade the Funds (the ‘‘Original
Filings’’).12 The Original Filings state
that Amex would disseminate for each
Fund on a daily basis by means of
9 See
supra note 5.
id.
11 The Trust’s Web site is publicly accessible at
no charge and contains the following information
for each Fund’s Shares: (1) The prior business day’s
closing NAV, the reported closing price, and a
calculation of the premium or discount of such
price in relation to the closing NAV; (2) data for a
period covering at least the current and three
immediately preceding calendar quarters (or the life
of a Fund, if shorter) indicating how frequently
each Fund’s Shares traded at a premium or discount
to NAV based on the daily closing price and the
closing NAV, and the magnitude of such premiums
and discounts; (3) its prospectus and product
description; and (4) other quantitative information
such as daily trading volume. The prospectus and/
or product description for each Fund would inform
investors that the Trust’s Web site has information
about the premiums and discounts at which the
Fund’s Shares have traded.
12 See supra notes 4 and 5.
mstockstill on PROD1PC66 with NOTICES
10 See
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18:57 Dec 05, 2007
Jkt 214001
Consolidated Tape Association (‘‘CTA’’)
and CQ High Speed Lines information
with respect to an Indicative Intra-Day
Value (‘‘IIV’’), quotations for and lastsale information concerning the Shares,
the recent NAV, the number of shares
outstanding, and the estimated cash
amount and total cash amount per
Creation Unit. Amex will make
available on its Web site the daily
trading volume, closing price, NAV, and
final dividend amounts, if any, to be
paid for each Fund. The NAV of each
Fund is calculated and determined each
business day at the close of regular
trading, typically 4 p.m. Eastern Time
(‘‘ET’’). The NAV would be calculated
and disseminated at the same time to all
market participants.13
The Original Filings state that the
daily closing index value and the
percentage change in the daily closing
index value for each Underlying Index
would be publicly available on various
Web sites such as https://
www.bloomberg.com. The Original
Filings further state that data regarding
each Underlying Index is also available
from the respective index provider to
subscribers. According to the Original
Filings, several independent data
vendors package and disseminate index
data in various value-added formats
(including vendors displaying both
securities and index levels and vendors
displaying index levels only).
The Original Filings state that the
value of each Underlying Index is
updated intra-day on a real-time basis as
its individual component securities
change in price, and the intra-day
values of each Underlying Index are
disseminated at least every 15 seconds
throughout Amex’s trading day by
Amex or another organization
authorized by the relevant Underlying
Index provider.
To provide updated information
relating to each Fund for use by
investors, professionals, and persons
wishing to create or redeem Shares,
Amex disseminates through the
facilities of the CTA: (1) Continuously
throughout Amex’s trading day, the
market value of a Share; and (2) at least
every 15 seconds throughout Amex’s
trading day, the IIV as calculated by
Amex.
Shares would trade on ISE from 9:30
a.m. ET until 4:15 p.m. ET. ISE would
halt trading in the Shares of a Fund
under the conditions specified in ISE
Rules 702, 703, and 2123. The
13 The Original Filings explain that, if the IIV is
not disseminated as required, Amex would halt
trading in the shares of the Funds. If Amex halts
trading for this reason, then ISE would halt trading
in the Shares immediately, as set forth in ISE Rule
2123(e).
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Frm 00072
Fmt 4703
Sfmt 4703
conditions for a halt include a
regulatory halt by the listing market.
UTP trading in the Shares will also be
governed by provisions of ISE Rule 2123
relating to temporary interruptions in
the calculation or wide dissemination of
the IIV or the value of the Underlying
Index. Additionally, ISE may cease
trading the Shares if other unusual
conditions or circumstances exist
which, in the opinion of ISE, makes
further dealings on ISE detrimental to
the maintenance of a fair and orderly
market. ISE will also follow any
procedures with respect to trading halts
as set forth in ISE rules.
The Exchange proposes to amend ISE
Rule 2123 to add a subparagraph
addressing the suitability
responsibilities of Equity Electronic
Access Members (‘‘EAMs’’) in
recommending these Funds to
customers. Specifically, proposed Rule
2123(l) would require an Equity EAM to
have reasonable grounds for believing
that the recommendation of any
transaction for the purchase, sale, or
exchange of any of these Funds is
suitable for its customer. An Equity
EAM shall base its determination of
suitability upon the basis of the
information furnished by such customer
after reasonable inquiry concerning the
customer’s investment objectives, tax
status, financial situation, and needs,
and any other information known by
such Equity EAM.
Prior to the commencement of
trading, the Exchange will inform
Equity EAMs in a Regulatory
Information Circular (‘‘RIC’’) of the
special characteristics and risks
associated with trading the Shares.
Specifically, the RIC will discuss the
following: (1) The procedures for
purchases and redemptions of Shares in
Creation Unit Aggregations (and that
Shares are not individually redeemable);
(2) proposed ISE Rule 2132(l), which
imposes a duty of due diligence on
Equity EAMs to learn the essential facts
relating to every customer prior to
trading the Shares; (3) how information
regarding the IIV is disseminated; (4) the
requirement that Equity EAMs deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with a transaction; and (5)
trading information.
In addition, the RIC will reference
that the Fund is subject to various fees
and expenses described in the
Registration Statement. The RIC will
also discuss any exemptive, no-action,
and/or interpretive relief granted by the
Commission from the Act and rules
under the Act.
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06DEN1
Federal Register / Vol. 72, No. 234 / Thursday, December 6, 2007 / Notices
The RIC will also disclose that the
NAV for the Shares will be calculated
after 4 p.m. ET each trading day.
The Exchange intends to utilize its
existing surveillance procedures
applicable to equities to monitor trading
in the Shares. The Exchange represents
that these procedures are adequate to
properly monitor Exchange trading of
the Shares and to deter and detect
violations of Exchange rules. The
Exchange’s current trading surveillance
focuses on detecting securities trading
outside their normal patterns. When
such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations. Additionally, the
Exchange may obtain information via
the Intermarket Surveillance Group
(‘‘ISG’’) from other exchanges who are
members or affiliates of the ISG.14 The
Exchange also has a general policy
prohibiting the distribution of material,
non-public information by employees.
2. Statutory Basis
The statutory basis under the Act for
this proposed rule change is found in
Section 6(b)(5),15 in that the proposed
rule change is designed to promote just
and equitable principles of trade,
remove impediments to and perfect the
mechanisms of 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
The proposed rule change does not
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
mstockstill on PROD1PC66 with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–ISE–2007–102 on the
subject line.
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act, 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
Paper Comments
general to protect investors and the
public interest. The Commission
• Send paper comments in triplicate
believes that this proposal should
to Nancy M. Morris, Secretary,
benefit investors by increasing
Securities and Exchange Commission,
competition among markets that trade
100 F Street, NE., Washington, DC
the Shares.
20549–1090.
In addition, the Commission finds
All submissions should refer to File
that the proposal is consistent with
Number SR–ISE–2007–102. This file
Section 12(f) of the Act,17 which permits
number should be included on the
subject line if e-mail is used. To help the an exchange to trade, pursuant to UTP,
a security that is listed and registered on
Commission process and review your
another exchange.18 The Commission
comments more efficiently, please use
only one method. The Commission will notes that it previously approved the
and
post all comments on the Commission’s listing 19 trading of the Shares on
Amex. The Commission also finds that
Internet Web site (https://www.sec.gov/
the proposal is consistent with Rule
rules/sro.shtml). Copies of the
12f–5 under the Act,20 which provides
submission, all subsequent
that an exchange shall not extend UTP
amendments, all written statements
to a security unless the exchange has in
with respect to the proposed rule
effect a rule or rules providing for
change that are filed with the
transactions in the class or type of
Commission, and all written
security to which the exchange extends
communications relating to the
UTP. The Exchange has represented that
proposed rule change between the
Commission and any person, other than it meets this requirement because it
deems the Shares to be equity securities,
those that may be withheld from the
thus rendering trading in the Shares
public in accordance with the
subject to the Exchange’s existing rules
provisions of 5 U.S.C. 552, will be
governing the trading of equity
available for inspection and copying in
securities.
the Commission’s Public Reference
The Commission further believes that
Room, 100 F Street, NE., Washington,
the proposal is consistent with Section
DC 20549, on official business days
21
between the hours of 10 a.m. and 3 p.m. 11A(a)(1)(C)(iii) of the Act, which sets
forth Congress’s finding that it is in the
Copies of such filing also will be
public interest and appropriate for the
available for inspection and copying at
protection of investors and the
the principal office of ISE. All
maintenance of fair and orderly markets
comments received will be posted
to assure the availability to brokers,
without change; the Commission does
dealers, and investors of information
not edit personal identifying
with respect to quotations for and
information from submissions. You
transactions in securities. Quotations for
should submit only information that
you wish to make available publicly. All and last-sale information regarding the
Shares are disseminated through the
submissions should refer to File
facilities of the CTA and the
Number SR–ISE–2007–102 and should
be submitted on or before December 27, Consolidated Quotation System.
Furthermore, the IIV, updated to reflect
2007.
changes in currency exchange rates, is
IV. Commission’s Findings and Order
17 15 U.S.C. 78l(f).
Granting Accelerated Approval of the
18 Section 12(a) of the Act, 15 U.S.C. 78l(a),
Proposed Rule Change
generally prohibits a broker-dealer from trading a
After careful review, the Commission
security on a national securities exchange unless
finds that the proposed rule change is
the security is registered on that exchange pursuant
to Section 12 of the Act. Section 12(f) of the Act
consistent with the requirements of the
excludes from this restriction trading in any
Act and the rules and regulations
security to which an exchange ‘‘extends UTP.’’
thereunder applicable to a national
When an exchange extends UTP to a security, it
securities exchange.16 In particular, the
allows its members to trade the security as if it were
16 In
14 For a list of the current members and affiliate
members of ISG, see https://www.isgportal.com.
15 15 U.S.C. 78f(b)(5).
VerDate Aug<31>2005
18:57 Dec 05, 2007
Jkt 214001
68929
approving this rule change, the Commission
notes that it has considered the proposal’s impact
on efficiency, competition, and capital formation.
See 15 U.S.C. 78c(f).
PO 00000
Frm 00073
Fmt 4703
Sfmt 4703
listed and registered on the exchange even though
it is not so listed and registered.
19 See supra notes 5 and 6.
20 17 CFR 240.12f–5.
21 15 U.S.C. 78k–1(a)(1)(C)(iii).
E:\FR\FM\06DEN1.SGM
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mstockstill on PROD1PC66 with NOTICES
68930
Federal Register / Vol. 72, No. 234 / Thursday, December 6, 2007 / Notices
calculated by Amex and published via
the facilities of the CTA on a 15-second
delayed basis throughout ISE’s trading
hours. As mentioned above, the Trust’s
Web site provides information relating
to the value of the Shares such as the
prior business day’s closing NAV, the
reported closing price, and daily trading
volume.
The Commission also believes that the
Exchange’s trading halt rules are
reasonably designed to prevent trading
in the Shares when transparency is
impaired. If the listing market halts
trading when the IIV is not being
calculated or disseminated, the
Exchange would halt trading in the
Shares pursuant to ISE Rule 2123(e).
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 believes that its
surveillance procedures are adequate to
properly monitor Exchange trading of
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules.
2. Prior to the commencement of
trading, the Exchange would inform
EAMs in a Regulatory Information
Circular of the special characteristics
and risks associated with trading the
Shares.
3. ISE would require its members to
deliver a prospectus or product
description to investors purchasing the
Shares prior to or concurrently with a
transaction in the Shares.
This approval order is based on the
Exchange’s 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 previously, the Commission
previously found that the listing and
trading of the Shares on Amex is
consistent with the Act and that the
trading of the Shares pursuant to UTP
by NYSE Arca and Nasdaq is consistent
with the Act.22 The Commission
presently is not aware of any regulatory
issue that should cause it to revisit these
findings 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
the Shares.
22 See
supra at notes 5 and 6.
VerDate Aug<31>2005
18:57 Dec 05, 2007
Jkt 214001
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,23 that the
proposed rule change (SR–ISE–2007–
102) as modified by Amendment No. 1,
be, and hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7–23611 Filed 12–5–07; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–56865; File No. SR–NSCC–
2007–06]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing of
Proposed Rule Change To Modify the
Hearing Procedures Afforded to
Members and Applicants for
Membership and Harmonize Them
With Similar Rules of Its Affiliates
November 29, 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 April 30,
2007, the National Securities Clearing
Corporation (‘‘NSCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change 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 parties.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The proposed rule change seeks (1) to
modify NSCC’s rules regarding hearing
procedures afforded to members and
applicants for membership and (2)
where practicable or beneficial, to
harmonize them with similar rules of
NSCC’s affiliates, The Depository Trust
Company (‘‘DTC’’) and the Fixed
Income Clearing Corporation (‘‘FICC’’).
23 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
24 17
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
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 these statements.3
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
(1) Minor Rule Violation Plan
In 1984, the Commission adopted
amendments to Rule 19d–1(c) under the
Act 4 that allow self-regulatory
organizations to adopt with Commission
approval plans for the disposition of
minor violations of rules.5
Currently under NSCC’s rules, a
member or applicant subject to
disciplinary action has a right to a
hearing before a panel comprised of
members of NSCC’s Credit and Market
Risk Management Committee regardless
of the severity of the action for which
the member or applicant is being
disciplined.6 Because some rule
violations are not sufficiently serious to
merit Board review, NSCC is proposing
to adopt a Minor Rule Violation Plan
within the meaning of Rule 19d–1(c)(2)
of the Act for those rule violations
NSCC deems minor. Consistent with
Rule 19d–1(c)(2) of the Act, NSCC
would designate those rule violations
for which a fine may be assessed in an
amount not to exceed $5,000 as minor
rule violations. If a member were to
dispute a fine imposed by NSCC by
filing a written request for hearing and
a written statement, NSCC management
would have the authority to waive the
fine. NSCC management would notify
the Board of Directors (or a Committee
authorized by the Board of Directors) of
its determination to waive the fine and
would provide the reasons for the
3 The Commission has modified the text of the
summaries prepared by NSCC.
4 17 CFR 240.19d–1(c).
5 Securities Exchange Act Release No. 21013
(June 1, 1984), 49 FR 23828 (June 8, 1984) [File No.
S7–983A].
6 If the action or proposed action of NSCC as to
which the hearing relates has been taken or has
been proposed to be taken by the Credit and Market
Risk Management Committee, the members of the
panel shall be drawn from members of the
Executive Committee of NSCC’s Board of Directors.
See Rule 37 (Hearing Procedures), Section 2.
E:\FR\FM\06DEN1.SGM
06DEN1
]]>Agencies
[Federal Register Volume 72, Number 234 (Thursday, December 6, 2007)]
[Notices]
[Pages 68926-68930]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-23611]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-56866; File No. SR-ISE-2007-102]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Order Granting Accelerated Approval of
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Permit
Trading of Shares of 93 Funds of the ProShares Trust Pursuant to
Unlisted Trading Privileges
November 29, 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 October 25, 2007, the International Securities Exchange, LLC
(``Exchange'' or ``ISE'') 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. On November 29, 2007, ISE filed Amendment No. 1 to the
proposed rule change.\3\ This order provides notice of the proposed
rule change and approves the proposal, as modified by Amendment No. 1,
on an accelerated basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 supersedes and replaces the original filing
in its entirety.
---------------------------------------------------------------------------
[[Page 68927]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to trade shares (``Shares'') of the 93 funds
identified below (collectively, ``Funds'') of the ProShares Trust
pursuant to unlisted trading privileges (``UTP'').
The text of the proposed rule change is available on the Exchange's
Web site (https://www.ise.com), at the Exchange's principal office, and
at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, ISE 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
ISE proposes to trade pursuant to UTP the Shares of the 93 Funds,
which are exchange-traded funds (``ETFs''). The Commission has
previously approved the listing and trading of those ETFs on the
American Stock Exchange LLC (``Amex''). The Exchange is submitting this
filing because its current generic listing standards for ETFs do not
extend to ETFs where the investment objective corresponds to a
specified multiple of the performance, or the inverse performance, of
an index that underlies a Fund (each such index is referred to below as
an ``Underlying Index''), rather than merely mirroring the performance
of the index. These Shares are currently trading on Amex, NYSE Arca,
and Nasdaq. The Funds are referred to as Ultra Funds, Short Funds, and
UltraShort Funds, as described more fully below.
Ultra Funds
Certain Funds seek daily investment results, before fees and
expenses, that correspond to twice (200%) the daily performance of the
Underlying Indexes (``Ultra Funds''). If such a Fund meets its
objective, the net asset value (``NAV'') \4\ of the Shares of the Fund
should increase (on a percentage basis) approximately twice as much as
the Fund's Underlying Index when the prices of the securities in such
Index increase on a given day, and should lose approximately twice as
much when such prices decline on a given day. This filing applies to
the following Ultra Funds:
---------------------------------------------------------------------------
\4\ NAV per Share of each Fund is computed by dividing the value
of the net assets of such Fund (i.e., the value of its total assets
less total liabilities) by its total number of Shares outstanding.
Expenses and fees are accrued daily and taken into account for
purposes of determining NAV.
---------------------------------------------------------------------------
Four Ultra Funds, the listing and trading of which on Amex
were approved by the Commission on May 10, 2006: \5\ (1) Ultra S&P 500,
(2) Ultra Nasdaq-100, (3) Ultra Dow 30, and (4) Ultra S&P Mid-Cap 400;
and
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 54040 (June 23,
2006), 71 FR 37629 (June 30, 2006) (SR-Amex-2006-41). The Commission
approved the UTP trading of these Funds on NYSE Arca and Nasdaq. See
Securities Exchange Act Release No. 54045 (June 26, 2006), 71 FR
37971 (July 3, 2006) (SR-PCX-2005-115); Securities Exchange Act
Release No. 55353 (February 26, 2007), 72 FR 9802 (March 5, 2007)
(SR-Nasdaq-2007-011).
---------------------------------------------------------------------------
27 Ultra Funds, the listing and trading of which on Amex
were approved by the Commission on January 17, 2007: \6\ (1) Ultra
Russell 2000, (2) Ultra S&P SmallCap 600, (3) Ultra S&P500/Citigroup
Value, (4) Ultra S&P500/Citigroup Growth, (5) Ultra S&P MidCap 400/
Citigroup Value, (6) Ultra S&P MidCap 400/Citigroup Growth, (7) Ultra
S&P SmallCap 600/Citigroup Value, (8) Ultra S&P SmallCap 600/Citigroup
Growth, (9) Ultra Basic Materials, (10) Ultra Consumer Goods, (11)
Ultra Consumer Services, (12) Ultra Financials, (13) Ultra Health Care,
(14) Ultra Industrials, (15) Ultra Oil & Gas, (16) Ultra Real Estate,
(17) Ultra Semiconductors, (18) Ultra Technology, (19) Ultra Utilities,
(20) Ultra Russell Midcap Index, (21) Ultra Russell Midcap Growth
Index, (22) Ultra Russell Midcap Value Index, (23) Ultra Russell 1000
Index, (24) Ultra Russell 1000 Growth Index, (25) Ultra Russell 1000
Value Index, (26) Ultra Russell 2000 Growth Index, and (27) Ultra
Russell 2000 Value Index.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 55117 (January 17,
2007), 72 FR 3442 (January 25, 2007) (SR-Amex-2006-101).
Subsequently, the Commission approved the UTP trading of these Funds
on NYSE Arca. See Securities Exchange Act Release No. 55125 (January
18, 2007), 72 FR 3462 (January 25, 2007) (SR-NYSEArca-2007-87) (SR-
NYSEArca-2006-87).
---------------------------------------------------------------------------
Short Funds
ISE also proposes to trade Shares of certain Funds that seek daily
investment results, before fees and expenses, that correspond to the
inverse or opposite of the daily performance (-100%) of the Underlying
Indexes (``Short Funds''). If such a Fund is successful in meeting its
objective, the NAV of the corresponding Shares should increase
approximately as much (on a percentage basis) as the respective
Underlying Index loses when the prices of the securities in the Index
decline on a given day, or should decrease approximately as much as the
respective Index gains when prices in the Index rise on a given day.
This filing applies to the following Short Funds:
Four Short Funds, the listing and trading of which on Amex
were approved by the Commission on May 10, 2006: \7\ (1) Short S&P 500,
(2) Short Nasdaq-100, (3) Short Dow 30, and (4) Short S&P Mid-Cap 400;
and
---------------------------------------------------------------------------
\7\ See supra note 4.
---------------------------------------------------------------------------
27 Short Funds, the listing and trading of which on Amex
were approved by the Commission on January 17, 2007: \8\ (1) Short
Russell 2000, (2) Short S&P SmallCap 600, (3) Short S&P500/Citigroup
Value, (4) Short S&P500/Citigroup Growth, (5) Short S&P MidCap 400/
Citigroup Value, (6) Short S&P MidCap 400/Citigroup Growth, (7) Short
S&P SmallCap 600/Citigroup Value, (8) Short S&P SmallCap 600/Citigroup
Growth, (9) Short Basic Materials, (10) Short Consumer Goods, (11)
Short Consumer Services, (12) Short Financials, (13) Short Health Care,
(14) Short Industrials, (15) Short Oil & Gas, (16) Short Real Estate,
(17) Short Semiconductors, (18) Short Technology, (19) Short Utilities,
(20) Short Russell Midcap Index, (21) Short Russell Midcap Growth
Index, (22) Short Russell Midcap Value Index, (23) Short Russell 1000
Index, (24) Short Russell 1000 Growth Index, (25) Short Russell 1000
Value Index, (26) Short Russell 2000 Growth Index, and (27) Short
Russell 2000 Value Index.
---------------------------------------------------------------------------
\8\ See supra note 5.
---------------------------------------------------------------------------
UltraShort Funds
ISE also proposes to trade Shares of certain Funds that seek daily
investment results, before fees and expenses, that correspond to twice
the inverse (-200%) of the daily performance of the Underlying Indexes
(``UltraShort Funds''). If such a Fund is successful in meeting its
objective, the NAV of the corresponding Shares should increase
approximately twice as much (on a percentage basis) as the respective
Underlying Index loses when the prices of the securities in the Index
decline on a given day, or should decrease approximately twice as much
as the respective Underlying Index gains when such prices rise on a
given day. This
[[Page 68928]]
filing applies to the following UltraShort Funds:
Four UltraShort Funds, the listing and trading of which on
Amex were approved by the Commission on June 23, 2006: \9\ (1)
UltraShort S&P 500, (2) UltraShort Nasdaq-100, (3) UltraShort Dow 30,
and (4) UltraShort S&P Mid-Cap 400; and
---------------------------------------------------------------------------
\9\ See supra note 5.
---------------------------------------------------------------------------
27 UltraShort Funds, the listing and trading of which on
Amex were approved by the Commission on January 17, 2007: \10\ (1)
UltraShort Russell 2000, (2) UltraShort S&P SmallCap 600, (3)
UltraShort S&P500/Citigroup Value, (4) UltraShort S&P500/Citigroup
Growth, (5) UltraShort S&P MidCap 400/Citigroup Value, (6) UltraShort
S&P MidCap 400/Citigroup Growth, (7) UltraShort S&P SmallCap 600/
Citigroup Value, (8) UltraShort S&P SmallCap 600/Citigroup Growth, (9)
UltraShort Basic Materials, (10) UltraShort Consumer Goods, (11)
UltraShort Consumer Services, (12) UltraShort Financials, (13)
UltraShort Health Care, (14) UltraShort Industrials, (15) UltraShort
Oil & Gas, (16) UltraShort Real Estate, (17) UltraShort Semiconductors,
(18) UltraShort Technology, (19) UltraShort Utilities, (20) UltraShort
Russell Midcap Index, (21) UltraShort Russell Midcap Growth Index, (22)
UltraShort Russell Midcap Value Index, (23) UltraShort Russell 1000
Index, (24) UltraShort Russell 1000 Growth Index, (25) UltraShort
Russell 1000 Value Index, (26) UltraShort Russell 2000 Growth Index,
and (27) UltraShort Russell 2000 Value Index.
---------------------------------------------------------------------------
\10\ See id.
---------------------------------------------------------------------------
Access to the current portfolio composition of each Fund is
currently available through the Trust's Web site (https://
www.proshares.com).\11\ The Underlying Indexes are identified in the
filings in which Amex proposed to list and trade the Funds (the
``Original Filings'').\12\ The Original Filings state that Amex would
disseminate for each Fund on a daily basis by means of Consolidated
Tape Association (``CTA'') and CQ High Speed Lines information with
respect to an Indicative Intra-Day Value (``IIV''), quotations for and
last-sale information concerning the Shares, the recent NAV, the number
of shares outstanding, and the estimated cash amount and total cash
amount per Creation Unit. Amex will make available on its Web site the
daily trading volume, closing price, NAV, and final dividend amounts,
if any, to be paid for each Fund. The NAV of each Fund is calculated
and determined each business day at the close of regular trading,
typically 4 p.m. Eastern Time (``ET''). The NAV would be calculated and
disseminated at the same time to all market participants.\13\
---------------------------------------------------------------------------
\11\ The Trust's Web site is publicly accessible at no charge
and contains the following information for each Fund's Shares: (1)
The prior business day's closing NAV, the reported closing price,
and a calculation of the premium or discount of such price in
relation to the closing NAV; (2) data for a period covering at least
the current and three immediately preceding calendar quarters (or
the life of a Fund, if shorter) indicating how frequently each
Fund's Shares traded at a premium or discount to NAV based on the
daily closing price and the closing NAV, and the magnitude of such
premiums and discounts; (3) its prospectus and product description;
and (4) other quantitative information such as daily trading volume.
The prospectus and/or product description for each Fund would inform
investors that the Trust's Web site has information about the
premiums and discounts at which the Fund's Shares have traded.
\12\ See supra notes 4 and 5.
\13\ The Original Filings explain that, if the IIV is not
disseminated as required, Amex would halt trading in the shares of
the Funds. If Amex halts trading for this reason, then ISE would
halt trading in the Shares immediately, as set forth in ISE Rule
2123(e).
---------------------------------------------------------------------------
The Original Filings state that the daily closing index value and
the percentage change in the daily closing index value for each
Underlying Index would be publicly available on various Web sites such
as https://www.bloomberg.com. The Original Filings further state that
data regarding each Underlying Index is also available from the
respective index provider to subscribers. According to the Original
Filings, several independent data vendors package and disseminate index
data in various value-added formats (including vendors displaying both
securities and index levels and vendors displaying index levels only).
The Original Filings state that the value of each Underlying Index
is updated intra-day on a real-time basis as its individual component
securities change in price, and the intra-day values of each Underlying
Index are disseminated at least every 15 seconds throughout Amex's
trading day by Amex or another organization authorized by the relevant
Underlying Index provider.
To provide updated information relating to each Fund for use by
investors, professionals, and persons wishing to create or redeem
Shares, Amex disseminates through the facilities of the CTA: (1)
Continuously throughout Amex's trading day, the market value of a
Share; and (2) at least every 15 seconds throughout Amex's trading day,
the IIV as calculated by Amex.
Shares would trade on ISE from 9:30 a.m. ET until 4:15 p.m. ET. ISE
would halt trading in the Shares of a Fund under the conditions
specified in ISE Rules 702, 703, and 2123. The conditions for a halt
include a regulatory halt by the listing market. UTP trading in the
Shares will also be governed by provisions of ISE Rule 2123 relating to
temporary interruptions in the calculation or wide dissemination of the
IIV or the value of the Underlying Index. Additionally, ISE may cease
trading the Shares if other unusual conditions or circumstances exist
which, in the opinion of ISE, makes further dealings on ISE detrimental
to the maintenance of a fair and orderly market. ISE will also follow
any procedures with respect to trading halts as set forth in ISE rules.
The Exchange proposes to amend ISE Rule 2123 to add a subparagraph
addressing the suitability responsibilities of Equity Electronic Access
Members (``EAMs'') in recommending these Funds to customers.
Specifically, proposed Rule 2123(l) would require an Equity EAM to have
reasonable grounds for believing that the recommendation of any
transaction for the purchase, sale, or exchange of any of these Funds
is suitable for its customer. An Equity EAM shall base its
determination of suitability upon the basis of the information
furnished by such customer after reasonable inquiry concerning the
customer's investment objectives, tax status, financial situation, and
needs, and any other information known by such Equity EAM.
Prior to the commencement of trading, the Exchange will inform
Equity EAMs in a Regulatory Information Circular (``RIC'') of the
special characteristics and risks associated with trading the Shares.
Specifically, the RIC will discuss the following: (1) The procedures
for purchases and redemptions of Shares in Creation Unit Aggregations
(and that Shares are not individually redeemable); (2) proposed ISE
Rule 2132(l), which imposes a duty of due diligence on Equity EAMs to
learn the essential facts relating to every customer prior to trading
the Shares; (3) how information regarding the IIV is disseminated; (4)
the requirement that Equity EAMs deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with a
transaction; and (5) trading information.
In addition, the RIC will reference that the Fund is subject to
various fees and expenses described in the Registration Statement. The
RIC will also discuss any exemptive, no-action, and/or interpretive
relief granted by the Commission from the Act and rules under the Act.
[[Page 68929]]
The RIC will also disclose that the NAV for the Shares will be
calculated after 4 p.m. ET each trading day.
The Exchange intends to utilize its existing surveillance
procedures applicable to equities to monitor trading in the Shares. The
Exchange represents that these procedures are adequate to properly
monitor Exchange trading of the Shares and to deter and detect
violations of Exchange rules. The Exchange's current trading
surveillance focuses on detecting securities trading outside their
normal patterns. When such situations are detected, surveillance
analysis follows and investigations are opened, where appropriate, to
review the behavior of all relevant parties for all relevant trading
violations. Additionally, the Exchange may obtain information via the
Intermarket Surveillance Group (``ISG'') from other exchanges who are
members or affiliates of the ISG.\14\ The Exchange also has a general
policy prohibiting the distribution of material, non-public information
by employees.
---------------------------------------------------------------------------
\14\ For a list of the current members and affiliate members of
ISG, see https://www.isgportal.com.
---------------------------------------------------------------------------
2. Statutory Basis
The statutory basis under the Act for this proposed rule change is
found in Section 6(b)(5),\15\ in that the proposed rule change is
designed to promote just and equitable principles of trade, remove
impediments to and perfect the mechanisms of a free and open market and
a national market system, and in general to protect investors and the
public interest.
---------------------------------------------------------------------------
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes 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 not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
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 (https://
www.sec.gov/rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-ISE-2007-102 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-ISE-2007-102. This file
number should be included on the subject line if e-mail is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the 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, 100 F Street, NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of ISE. 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-ISE-2007-102 and should be
submitted on or before December 27, 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.\16\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act, 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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\16\ In approving this rule change, the Commission notes that it
has considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
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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 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 notes 5 and 6.
\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'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 facilities of the CTA and the
Consolidated Quotation System. Furthermore, the IIV, updated to reflect
changes in currency exchange rates, is
[[Page 68930]]
calculated by Amex and published via the facilities of the CTA on a 15-
second delayed basis throughout ISE's trading hours. As mentioned
above, the Trust's Web site provides information relating to the value
of the Shares such as the prior business day's closing NAV, the
reported closing price, and daily trading volume.
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\21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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The Commission also believes that the Exchange's trading halt rules
are reasonably designed to prevent trading in the Shares when
transparency is impaired. If the listing market halts trading when the
IIV is not being calculated or disseminated, the Exchange would halt
trading in the Shares pursuant to ISE Rule 2123(e).
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 believes that its surveillance procedures are
adequate to properly monitor Exchange trading of the Shares in all
trading sessions and to deter and detect violations of Exchange rules.
2. Prior to the commencement of trading, the Exchange would inform
EAMs in a Regulatory Information Circular of the special
characteristics and risks associated with trading the Shares.
3. ISE would require its members to deliver a prospectus or product
description to investors purchasing the Shares prior to or concurrently
with a transaction in the Shares.
This approval order is based on the Exchange's 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 previously, the Commission previously found
that the listing and trading of the Shares on Amex is consistent with
the Act and that the trading of the Shares pursuant to UTP by NYSE Arca
and Nasdaq is consistent with the Act.\22\ The Commission presently is
not aware of any regulatory issue that should cause it to revisit these
findings 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 the Shares.
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\22\ See supra at notes 5 and 6.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\23\ that the proposed rule change (SR-ISE-2007-102) as modified by
Amendment No. 1, be, and hereby is, approved on an accelerated basis.
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\23\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23611 Filed 12-5-07; 8:45 am]
BILLING CODE 8011-01-P
