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]

Download as PDF 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 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, 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). VerDate Aug<31>2005 18:57 Dec 05, 2007 Jkt 214001 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 PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 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 E:\FR\FM\06DEN1.SGM 06DEN1 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 (http://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 VerDate Aug<31>2005 18:57 Dec 05, 2007 Jkt 214001 (‘‘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). PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 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 68928 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 (http://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 VerDate Aug<31>2005 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 http:// 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). PO 00000 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. E:\FR\FM\06DEN1.SGM 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 (http://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 (http://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 http://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 06DEN1 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.

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[[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 (http://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
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    \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.
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    \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 (http://
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 http://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 http://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 (http://
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 (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, 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

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

    \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.
---------------------------------------------------------------------------

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

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

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

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

    \23\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-23611 Filed 12-5-07; 8:45 am]
BILLING CODE 8011-01-P