Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Adoption of Listing Standards for Certain Securities, 6833-6850 [2012-2994]

Download as PDF Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices believes that the proposed rule change reflects this competitive environment because it will reduce fees paid by active market participants, without removing any of the market’s existing pricing incentives. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. Because the market for order execution is extremely competitive, members may readily opt to disfavor NASDAQ’s execution services if they believe that alternatives offer them better value. The proposed changes will enhance competition by reducing certain of NASDAQ’s fees. Notably, the proposed pricing tiers for Tape B Securities will enhance NASDAQ’s ability to compete with NYSEArca, which currently offers reduced fees to access liquidity in Tape B Securities.13 Similarly, the change to the PMI Program will enhance competition with the EDGX Exchange, which encourages participation in its pre-market and post-market trading sessions by means of favorable pricing offered to members that are active during pre-market and/or post-market hours.14 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. mstockstill on DSK4VPTVN1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act 15 and subparagraph (f)(2) of Rule 19b–4 thereunder.16 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings 13 https://usequities.nyx.com/markets/nyse-arcaequities/trading-fees. 14 https://www.directedge.com/Membership/Fee Schedule/EDGXFeeSchedule.aspx. 15 15 U.S.C. 78s(b)(3)(A)(ii). 16 17 CFR 240.19b–4(f)(2). VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NASDAQ–2012–020 on the subject line. • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2012–020. This file number should be included on the subject line if email 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 Web site viewing and printing 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 the 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 Number SR– NASDAQ–2012–020 and should be submitted on or before March 1, 2012. PO 00000 CFR 200.30–3(a)(12). Frm 00062 Fmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–3000 Filed 2–8–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–66320; File No. SR– NASDAQ–2012–013] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change Relating to the Adoption of Listing Standards for Certain Securities February 3, 2012. Paper Comments 17 17 6833 Sfmt 4703 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 January 20, 2012, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt rules applicable to the qualification, listing, trading, and delisting of certain securities on NASDAQ (‘‘Listing Rules’’). Specifically, NASDAQ proposes to adopt Listing Rules applicable to the following securities: Equity Index-Linked Securities, Commodity-Linked Securities,3 Fixed Income Index-Linked Securities, Futures-Linked Securities, Multifactor Index-Linked Securities; Index-Linked Exchangeable Notes; Equity Gold Shares; Trust Certificates; CommodityBased Trust Shares; Currency Trust Shares; Commodity Index Trust Shares; Commodity Futures Trust Shares; Partnership Units; Trust Units; Managed 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 NASDAQ Rules 5710(g) and (h) currently include initial listing standards applicable to Equity Index-Linked Securities and Commodity-Linked Securities. NASDAQ proposes to re-number the existing rule text in Rules 5710(g) and (h), and to adopt continuing listing standards applicable to Equity Index-Linked Securities and CommodityLinked Securities, in proposed Rules 5710(k)(i) and (ii). 2 17 E:\FR\FM\09FEN1.SGM 09FEN1 6834 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices Trust Securities; and Currency Warrants. The proposal would adopt listing standards based on the relevant listing standards of the NYSE Arca, Inc. (‘‘NYSEArca’’) Equities Rules, as set forth below. The text of the proposed rule change is available on the Exchange’s Web site at https:// www.nasdaq.cchwallstreet.com, at the principal office of the Exchange, 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, the Exchange included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. mstockstill on DSK4VPTVN1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this proposed rule change is to adopt listing standards for each of the products specified above. The Section 5000 series of the NASDAQ rules govern the qualification, listing and delisting of securities on the NASDAQ Stock Market. Section 5000 also sets forth, among other things, definitions,4 NASDAQ’s regulatory authority to list and maintain securities,5 general procedures and prerequisites for initial and continued listing on the NASDAQ Stock Market,6 and, most significantly to the instant proposed rule change, ‘‘Other Securities,’’ 7 which govern, without limitation, listing and qualification rules applicable to Exchange Traded Funds, Portfolio Depository Receipts and Index Fund Shares. The proposed amendments to Rule 5710, Securities Linked to the Performance of Indexes and Commodities (Including Currencies), would add continuing listing standards for Equity IndexLinked Securities and CommodityLinked Securities, and initial and continuing listing standards for fixed 4 See Section 5005 of the NASDAQ Rules. Section 5100 of the NASDAQ Rules. 6 See Section 5200 of the NASDAQ Rules. 7 See Section 5700 of the NASDAQ Rules. 5 See VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 income index-linked securities (‘‘Fixed Income Index-Linked Securities’’), futures-linked securities (‘‘FuturesLinked Securities’’) and multifactor index-linked securities (‘‘Multifactor Index-Linked Securities’’ and, together with Equity Index-Linked Securities, Commodity-Linked Securities, Fixed Income Index-Linked Securities and Futures-Linked Securities, ‘‘Linked Securities’’) to the rule. Proposed new Rule 5711, Trading of Certain Derivative Securities, would include listing standards for IndexLinked Exchangeable Notes, Equity Gold Shares, Trust Certificates, Commodity-Based Trust Shares, Currency Trust Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, Partnership Units, Trust Units, Managed Trust Securities, and Currency Warrants. The instant proposed rule change is intended to define the specific products (see above) that NASDAQ intends to list and trade, and the listing and qualification requirements for each such product. Introductory Paragraphs to Rule 5710 The proposed amendments to Rule 5710 would state that NASDAQ will consider for listing and trading the Linked Securities set forth in the introductory paragraphs of the rule. These paragraphs describe the basis for the payment at maturity of the various securities, which is the performance of ‘‘Reference Assets,’’ as defined below. Specifically: • Equity Index-Linked Securities are securities that provide for the payment at maturity of a cash amount based on the performance of an underlying equity index or indexes (‘‘Equity Reference Asset’’). • The payment at maturity with respect to Commodity-Linked Securities is based on one or more physical Commodities or Commodity futures, options or other Commodity derivatives, Commodity-Related Securities, or a basket or index of any of the foregoing (‘‘Commodity Reference Asset’’). The terms ‘‘Commodity’’ and ‘‘CommodityRelated Security’’ are defined in Rule 4630. • The payment at maturity with respect to Fixed Income Index-Linked Securities is based on the performance of one or more indexes or portfolios of notes, bonds, debentures or evidence of indebtedness that include, but are not limited to, U.S. Department of the Treasury securities (‘‘Treasury Securities’’), government-sponsored entity securities (‘‘GSE Securities’’), municipal securities, trust preferred securities, supranational debt and debt PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 of a foreign country or a subdivision thereof or a basket or index of any of the foregoing (‘‘Fixed Income Reference Asset’’). • The payment at maturity with respect to Futures-Linked Securities is based on the performance of an index of (a) futures on Treasury Securities, GSE Securities, supranational debt and debt of a foreign country or a subdivision thereof, or options or other derivatives on any of the foregoing; or (b) interest rate futures or options or derivatives on the foregoing in this subparagraph (b); or (c) CBOE Volatility Index (VIX) Futures (‘‘Futures Reference Asset’’). • The payment at maturity with respect to Multifactor Index-Linked Securities is based on the performance of any combination of two or more Equity Reference Assets, Commodity Reference Assets, Fixed Income Reference Assets or Futures Reference Assets (‘‘Multifactor Reference Asset,’’ and together with Equity Reference Assets, Commodity Reference Assets, Fixed Income Reference Assets and Futures Reference Assets, ‘‘Reference Assets’’). A Multifactor Reference Asset may include as a component a notional investment in cash or a cash equivalent based on a widely accepted overnight loan interest rate, LIBOR, Prime Rate, or an implied interest rate based on observed market spot and foreign currency forward rates. Linked Securities may or may not provide for the repayment of the original principal investment amount. NASDAQ may submit a rule filing pursuant to Section 19(b)(2) of the Act to permit the listing and trading of Linked Securities that do not otherwise meet the standards set forth in Rule 5710. Technical Changes to Rule 5710 NASDAQ is not proposing any amendments to Rules 5710(a)–(f), and such provisions would apply to all Linked Securities.8 Additionally, 8 Current Rules 5710(a)–(f) state: (a) Both the issue and the issuer of such security meet the criteria for other securities set forth in Rule 5730(a), except that if the security is traded in $1,000 denominations or is redeemable at the option of holders thereof on at least a weekly basis, then no minimum number of holders and no minimum public distribution of trading units shall be required. (b) The issue has a term of not less than one (1) year and not greater than thirty (30) years. (c) The issue must be the non-convertible debt of the Company. (d) The payment at maturity may or may not provide for a multiple of the direct or inverse performance of an underlying index, indexes or Reference Asset; however, in no event will a loss (negative payment) at maturity be accelerated by a multiple that exceeds twice the performance of an underlying index, indexes or Reference Asset. E:\FR\FM\09FEN1.SGM 09FEN1 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices NASDAQ proposes to re-number the current text of Rule 5710 by deleting current Rules 5710(g) and (h) and moving the text of these two sections into proposed Rules 5710 (k)(i) and (ii).9 In addition, NASDAQ is proposing to re-number the remaining existing sections of Rule 5710, and to amend references and defined terms in such sections such that they would apply to all Linked Securities. Linked Securities Proposed Rule 5710(k) would adopt listing standards for the various Linked Securities. Equity Index-Linked Securities mstockstill on DSK4VPTVN1PROD with NOTICES Initial Listing Criteria Proposed Rule 5710(k)(i)(A) would set forth the initial listing criteria for Equity Index-Linked Securities found in current Rule 5710(g), which would be deleted and replaced in proposed Rule 5710(k)(i)(A). Specifically: In the case of an Equity Index-Linked Security, each underlying index is required to have at least ten (10) component securities. In addition, the index or indexes to which the security is linked shall either: (1) Have been reviewed and approved for the trading of options or other derivatives by the Commission under Section 19(b)(2) of the Act and rules thereunder, and the conditions set forth in the Commission’s approval order, including comprehensive surveillance sharing agreements for non-U.S. stocks, continue to be satisfied, or (2) the index or indexes meet the following criteria: • Each component security has a minimum market value of at least $75 million, except that for each of the lowest weighted component securities in the index that in the aggregate account for no more than 10% of the weight of the index, the market value can be at least $50 million; • Each component security shall have trading volume in each of the last six months of not less than 1,000,000 shares, except that for each of the lowest weighted component securities in the (e) The Company will be expected to have a minimum tangible net worth in excess of $250,000,000 and to exceed by at least 20% the earnings requirements set forth in Rule 5405(b)(1)(A). In the alternative, the Company will be expected: (i) To have a minimum tangible net worth of $150,000,000 and to exceed by at least 20% the earnings requirement set forth in Rule 5405(b)(1)(A), and (ii) not to have issued securities where the original issue price of all the Company’s other index-linked note offerings (combined with index-linked note offerings of the Company’s affiliates) listed on a national securities exchange exceeds 25% of the Company’s net worth. (f) The Company is in compliance with Rule 10A–3 under the Act. 9 See supra note 3. VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 index that in the aggregate account for no more than 10% of the weight of the index, the trading volume shall be at least 500,000 shares in each of the last six months; • Indexes based upon the equal-dollar or modified equal-dollar weighting method will be rebalanced at least semiannually; • In the case of a capitalizationweighted or modified capitalizationweighted index, the lesser of the five highest weighted component securities in the index or the highest weighted component securities in the index that in the aggregate represent at least 30% of the total number of component securities in the index, each have an average monthly trading volume of at least 2,000,000 shares over the previous six months; • No underlying component security will represent more than 25% of the weight of the index, and the five highest weighted component securities in the index do not in the aggregate account for more than 50% of the weight of the index (60% for an index consisting of fewer than 25 component securities); • 90% of the index’s numerical value and at least 80% of the total number of component securities will meet the then current criteria for standardized option trading on a national securities exchange or a national securities association, provided, however, that an index will not be subject to this requirement if (a) no underlying component security represents more than 10% of the dollar weight of the index and (b) the index has a minimum of 20 components; and • All component securities shall be either (A) securities (other than securities of a foreign issuer and American Depository Receipts (‘‘ADRs’’)) that are (i) issued by a 1934 Act reporting company or by an investment company registered under the Investment Company Act of 1940 that, in each case, has securities listed on a national securities exchange and (ii) an ‘‘NMS stock’’ (as defined in Rule 600 of Regulation NMS under the Act), or (B) securities of a foreign issuer or ADRs, provided that securities of a foreign issuer (including when they underlie ADRs) whose primary trading market outside the United States is not a member of the Intermarket Surveillance Group (‘‘ISG’’) or a party to a comprehensive surveillance sharing agreement with NASDAQ will not in the aggregate represent more than 20% of the dollar weight of the index. Continued Listing Criteria Rule 5710(k)(i)(B) would adopt continued listing criteria for Equity PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 6835 Index-Linked Securities. Specifically, NASDAQ will commence delisting or removal proceedings (unless the Commission has approved the continued trading of the subject Equity Index-Linked Security), if any of the standards set forth above are not continuously maintained, except that: • The criteria that no single component represent more than 25% of the dollar weight of the index and the five highest dollar weighted components in the index cannot represent more than 50% (or 60% for indexes with less than 25 components) of the dollar weight of the index, need only be satisfied at the time the index is rebalanced; and • Component stocks that in the aggregate account for at least 90% of the weight of the index each shall have a minimum global monthly trading volume of 500,000 shares, or minimum global notional volume traded per month of $12,500,000, averaged over the last six months. In connection with an Equity IndexLinked Security that is based on an index that has been reviewed and approved for the trading of options or other derivatives by the Commission under Section 19(b)(2) of the Act and rules thereunder and the conditions set forth in the Commission’s approval order, NASDAQ will commence delisting or removal proceedings (unless the Commission has approved the continued trading of the subject Equity Index-Linked Security) if an underlying index or indexes fails to satisfy the maintenance standards or conditions for such index or indexes as set forth by the Commission in its order under Section 19(b)(2) of the Act approving the index or indexes for the trading of options or other derivatives. Additionally, NASDAQ will commence delisting or removal proceedings (unless the Commission has approved the continued trading of the subject Equity Index-Linked Security), under any of the following circumstances: • If the aggregate market value or the principal amount of the Equity IndexLinked Securities publicly held is less than $400,000; • If the value of the index or composite value of the indexes is no longer calculated or widely disseminated on at least a 15-second basis with respect to indexes containing only securities listed on a national securities exchange, or on at least a 60second basis with respect to indexes containing foreign country securities, provided, however, that, if the official index value does not change during some or all of the period when trading E:\FR\FM\09FEN1.SGM 09FEN1 6836 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices is occurring on NASDAQ (for example, for indexes of foreign country securities, because of time zone differences or holidays in the countries where such indexes’ component stocks trade) then the last calculated official index value must remain available throughout NASDAQ trading hours; or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. Equity-Linked Indexes will be rebalanced at least annually. The proposed rule change relating to Equity-Linked Securities is based on NYSEArca Equities Rule 5.2(j)(6)(B)(I). mstockstill on DSK4VPTVN1PROD with NOTICES Commodity-Linked Securities Proposed Rule 5710(k)(ii) would adopt the initial listing criteria (found in current Rule 5710(h), which would be deleted and replaced in proposed Rule 5710(k)(ii)(A)) and continued listing criteria for Commodity-Linked Securities. Initial Listing Criteria The Reference Asset must meet one of the following criteria: • The Reference Asset to which the security is linked shall have been reviewed and approved for the trading of Commodity-Related Securities or options or other derivatives by the Commission under Section 19(b)(2) of the Act and rules thereunder and the conditions set forth in the Commission’s approval order, including with respect to comprehensive surveillance sharing agreements, continue to be satisfied; or • The pricing information for each component of a Reference Asset other than a Currency must be derived from a market which is an ISG member or affiliate or with which NASDAQ has a comprehensive surveillance sharing agreement. Notwithstanding the previous sentence, pricing information for gold and silver may be derived from the London Bullion Market Association. The pricing information for each component of a Reference Asset that is a Currency must be either: (1) The generally accepted spot price for the currency exchange rate in question; or (2) derived from a market of which (a) is an ISG member or affiliate or with which NASDAQ has a comprehensive surveillance sharing agreement and (b) is the pricing source for a currency component of a Reference Asset that has previously been approved by the Commission. A Reference Asset may include components representing not more than 10% of the dollar weight of such Reference Asset for which the pricing information is derived from markets that do not meet the VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 requirements of subparagraph (2) of the proposed rule; provided, however, that no single component subject to this exception exceeds 7% of the dollar weight of the Reference Asset. The term ‘‘Currency,’’ as used in the proposed rule, means one or more currencies, or currency options, futures, or other currency derivatives, CommodityRelated Securities if their underlying Commodities are currencies or currency derivatives, or a basket or index of any of the foregoing. Continued Listing Standards Proposed Rule 5710(k)(ii)(B) would establish continued listing criteria for Commodity-Linked Securities. Specifically, NASDAQ will commence delisting or removal proceedings if any of the initial listing criteria described above are not continuously maintained. Additionally, NASDAQ will also commence delisting or removal proceedings under any of the following circumstances: • If the aggregate market value or the principal amount of the CommodityLinked Securities publicly held is less than $400,000; • If the value of the Commodity Reference Asset is no longer calculated or available and a new Commodity Reference Asset is substituted, unless the new Commodity Reference Asset meets the requirements of the proposed rule; or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. The proposed rule change relating to Commodity-Linked Securities is based on NYSEArca Equities Rule 5.2(j)(6)(B)(II). Fixed Income Index-Linked Securities Proposed Rule 5710(k)(iii) would set forth the listing criteria for Fixed Income Index-Linked Securities. Initial Listing Standards Proposed Rule 5710(k)(iii)(A) states that either the Fixed Income Reference Asset to which the security is linked shall have been reviewed and approved for the trading of options, Index Fund Shares, or other derivatives by the Commission under Section 19(b)(2) of the Securities Exchange Act of 1934 and rules thereunder and the conditions set forth in the Commission’s approval order continue to be satisfied or the issue must meet the following initial listing criteria: • Components of the Fixed Income Reference Asset that in the aggregate account for at least 75% of the weight of the Fixed Income Reference Asset PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 must each have a minimum original principal amount outstanding of $100 million or more; • A component of the Fixed Income Reference Asset may be a convertible security, however, once the convertible security component converts to the underlying equity security, the component is removed from the Fixed Income Reference Asset; • No component of the Fixed Income Reference Asset (excluding Treasury Securities and GSE Securities) will represent more than 30% of the dollar weight of the Fixed Income Reference Asset, and the five highest dollar weighted components in the Fixed Income Reference Asset will not in the aggregate account for more than 65% of the dollar weight of the Fixed Income Reference Asset; • An underlying Fixed Income Reference Asset (excluding one consisting entirely of exempted securities) must include a minimum of 13 non-affiliated issuers; and • Component securities that in the aggregate account for at least 90% of the dollar weight of the Fixed Income Reference Asset must be from one of the following: (a) Issuers that are required to file reports pursuant to Sections 13 and 15(d) of the Act; or (b) issuers that have a worldwide market value of outstanding common equity held by non-affiliates of $700 million or more; or (c) issuers that have outstanding securities that are notes, bonds, debentures, or evidence of indebtedness having a total remaining principal amount of at least $1 billion; or (d) exempted securities as defined in Section 3(a)(12) of the Act, or (e) issuers that are a government of a foreign country or a political subdivision of a foreign country. In addition, the value of the Fixed Income Reference Asset must be widely disseminated to the public by one or more major market vendors at least once per business day. Continued Listing Standards Proposed Rule 5710(k)(iii)(C) would provide that NASDAQ will commence delisting or removal proceedings if any of the initial listing criteria described above are not continuously maintained, and that NASDAQ will also commence delisting or removal proceedings: • If the aggregate market value or the principal amount of the Fixed Income Index-Linked Securities publicly held is less than $400,000; • If the value of the Fixed Income Reference Asset is no longer calculated or available and a new Fixed Income Reference Asset is substituted, unless the new Fixed Income Reference Asset E:\FR\FM\09FEN1.SGM 09FEN1 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices meets the requirements of proposed Rule 5710(k); or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings inadvisable. The proposed rule change relating to Fixed-Income Linked Securities is based on NYSEArca Equities Rule 5.2(j)(6)(B)(IV). Futures-Linked Securities Proposed Rule 5710(k)(iv) would establish listing standards for FuturesLinked Securities. mstockstill on DSK4VPTVN1PROD with NOTICES Initial Listing Standards Proposed Rule 5710(k)(iv)(A) states that the issue must meet either of the following the initial listing standards: • The Futures Reference Asset to which the security is linked shall have been reviewed and approved for the trading of Futures-Linked Securities or options or other derivatives by the Commission under Section 19(b)(2) of the Act and rules thereunder and the conditions set forth in the Commission’s approval order, including with respect to comprehensive surveillance sharing agreements, continue to be satisfied, or • The pricing information for components of a Futures Reference Asset must be derived from a market which is an ISG member or affiliate or with which NASDAQ has a comprehensive surveillance sharing agreement. A Futures Reference Asset may include components representing not more than 10% of the dollar weight of such Futures Reference Asset for which the pricing information is derived from markets that do not meet the requirements of proposed Rule 5710(k)(iv)(A)(2); provided, however, that no single component subject to this exception exceeds 7% of the dollar weight of the Futures Reference Asset. In addition, the issue must meet both of the following initial listing criteria: • The value of the Futures Reference Asset must be calculated and widely disseminated by one or more major market data vendors on at least a 15second basis during the Regular Market Session, as defined in Rule 4120; and • In the case of Futures-Linked Securities that are periodically redeemable, the value of a share of each series (‘‘Intraday Indicative Value’’) of the subject Futures-Linked Securities must be calculated and widely disseminated by NASDAQ or one or more major market data vendors on at least a 15-second basis during the Regular Market Session (as defined in Rule 4120). VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 Continued Listing Standards Proposed Rule 5710(k)(iv)(C) states that NASDAQ will commence delisting or removal proceedings if any of the initial listing criteria described above are not continuously maintained, and that NASDAQ will also commence delisting or removal proceedings under any of the following circumstances: • If the aggregate market value or the principal amount of the Futures-Linked Securities publicly held is less than $400,000; • If the value of the Futures Reference Asset is no longer calculated or available and a new Futures Reference Asset is substituted, unless the new Futures Reference Asset meets the requirements of proposed Rule 5710(k); or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. The proposed rule change relating to Futures-Linked Securities is based on NYSEArca Equities Rule 5.2(j)(6)(B)(V). Multifactor Index-Linked Securities Proposed Rule 5710(k)(v) would govern the listing standards for Multifactor Index-Linked Securities. Initial Listing Standards Proposed Rule 5710(k)(v)(A) states that the issue must meet one of the following initial listing standards: • Each component of the Multifactor Reference Asset to which the security is linked shall have been reviewed and approved for the trading of either options, Index Fund Shares, or other derivatives under Section 19(b)(2) of the Act and rules thereunder and the conditions set forth in the Commission’s approval order continue to be satisfied; or • Each Reference Asset included in the Multifactor Reference Asset must meet the applicable initial and continued listing criteria set forth in the relevant subsection of proposed Rule 5710(k). In addition to one of the initial listing standards set forth above, proposed Rule 5710(k)(v)(B) would state that the issue must meet both of the following initial listing criteria: • The value of the Multifactor Reference Asset must be calculated and widely disseminated to the public on at least a 15-second basis during the time the Multifactor Index-Linked Security trades on NASDAQ; and • In the case of Multifactor IndexLinked Securities that are periodically redeemable, the indicative value of the Multifactor Index-Linked Securities PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 6837 must be calculated and widely disseminated by one or more major market data vendors on at least a 15second basis during the time the Multifactor Index-Linked Securities trade on NASDAQ. Continued Listing Criteria Proposed Rule 5710(k)(v)(C) states that NASDAQ will commence delisting or removal proceedings: • If any of the initial listing criteria described above are not continuously maintained; • If the aggregate market value or the principal amount of the Multifactor Index-Linked Securities publicly held is less than $400,000; • If the value of the Multifactor Reference Asset is no longer calculated or available and a new Multifactor Reference Asset is substituted, unless the new Multifactor Reference Asset meets the requirements of proposed Rule 5710(k); or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. The proposed rule change relating to Multifactor Index-Linked Securities is based on NYSEArca Equities Rule 5.2(j)(6)(B)(VI). Regulatory Requirements for Registered Market Makers in Linked Securities Commentary .01 to proposed Rule 5710(k) would establish certain regulatory requirements for registered Market Makers in Linked Securities. Specifically, the registered Market Maker in Linked Securities must file with NASDAQ, in a manner prescribed by NASDAQ, and keep current a list identifying all accounts for trading in the Reference Asset components, the commodities, currencies or futures underlying the Reference Asset components, or any derivative instruments based on the Reference Asset or based on any Reference Asset component or any physical commodity, currency or futures underlying a Reference Asset component, which the registered Market Maker may have or over which it may exercise investment discretion. No registered Market Maker in Linked Securities would be permitted to trade in the Reference Asset components, the commodities, currencies or futures underlying the Reference Asset components, or any derivative instruments based on the Reference Asset or based on any Reference Asset component or any physical commodity, or futures currency underlying a Reference Asset component, in an account in which a registered Market Maker, directly or E:\FR\FM\09FEN1.SGM 09FEN1 6838 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices indirectly, controls trading activities, or has a direct interest in the profits or losses thereof, which has not been reported to NASDAQ as required by the proposed Rule. In addition to the existing obligations under NASDAQ rules regarding the production of books and records,10 the registered Market Maker in Linked Securities would be required to make available to NASDAQ such books, records or other information pertaining to transactions by such entity or any limited partner, officer or approved person thereof, registered or nonregistered employee affiliated with such entity for its or their own accounts in the Reference Asset components, the commodities, currencies or futures underlying the Reference Asset components, or any derivative instruments based on the Reference Asset or based on any Reference Asset component or any physical commodity, currency or futures underlying a Reference Asset component, as may be requested by NASDAQ. The proposed rule change relating to regulatory requirements for registered Market Makers in Linked Securities is based on NYSEArca Equities Rule 5.2(j)(6), Commentary .01. Proposed Rule 5711—Trading of Certain Derivative Securities NASDAQ proposes to adopt new Rule 5711, Trading of Certain Derivative Securities, which would set forth listing standards for the securities described below. mstockstill on DSK4VPTVN1PROD with NOTICES Index-Linked Exchangeable Notes Proposed Rule 5711(a) would adopt listing standards for Index-Linked Exchangeable Notes. Description Index-Linked Exchangeable Notes are exchangeable debt securities that are exchangeable at the option of the holder (subject to the requirement that the holder in most circumstances exchange a specified minimum amount of notes), on call by the issuer, or at maturity for a cash amount (‘‘Cash Value Amount’’) based on the reported market prices of the underlying stocks of an underlying index. Each Index-Linked Exchangeable Note is intended to provide investors with an instrument that closely tracks the underlying index. Notwithstanding that the notes are linked to an index, they will trade as a single security. Initial Listing Standards Index-Linked Exchangeable Notes will be considered for listing and 10 See, e.g., NASDAQ Rule 4625. VerDate Mar<15>2010 18:04 Feb 08, 2012 trading by NASDAQ pursuant to Rule 19b–4(e) under the Act,11 provided: • Both the issue and the issuer of such security meet the requirements of Rule 5730, Listing Requirements for Securities Not Specified Above (Other Securities), except that the minimum public distribution shall be 150,000 notes with a minimum of 400 public note-holders, except, if traded in thousand dollar denominations or redeemable at the option of the holders thereof on at least a weekly basis, then no minimum public distribution and no minimum number of holders. • The issue has a minimum term of one year. • The issuer will be expected to have a minimum tangible net worth in excess of $250,000,000, and to otherwise substantially exceed the earnings requirements set forth in Rule 5405(b). In the alternative, the issuer will be expected: (A) to have a minimum tangible net worth of $150,000,000 and to otherwise substantially exceed the earnings requirements set forth in Rule 5405(b); and (B) not to have issued Index-Linked Exchangeable Notes where the original issue price of all the issuer’s other Index-Linked Exchangeable Note offerings (combined with other index-linked exchangeable note offerings of the issuer’s affiliates) listed on a national securities exchange exceeds 25% of the issuer’s net worth. • The index to which an exchangeable-note is linked shall either be (A) indices that have been created by a third party and been reviewed and have been approved for the trading of options or other derivatives securities (‘‘Third-Party Index’’) either by the Commission under Section 19(b)(2) of the Act and rules thereunder or by NASDAQ under rules adopted pursuant to Rule 19b–4(e); or (B) indices which the issuer has created and for which NASDAQ will have obtained approval from either the Commission pursuant to Section 19(b)(2) and rules thereunder or from NASDAQ under rules adopted pursuant to Rule 19b–4(e) (‘‘Issuer Index’’). The Issuer Indices and their underlying securities must meet one of the following: (A) The procedures and criteria set forth in NOM Rules, Chapter XIV, Section 6(b) and (c), or (B) the criteria set forth in Rules 5715(b)(3) and (4), the index concentration limits set forth in NOM Rule Chapter XIV, Section 6, and NOM Rule Chapter XIV, Section 6(b)(12) insofar as it relates to NOM Rule Chapter XIV, Section 6(b)(6). Index-Linked Exchangeable Notes will be treated as equity instruments. 11 17 Jkt 226001 PO 00000 CFR 240.19b–4(e). Frm 00067 Fmt 4703 Sfmt 4703 Continued Listing Standards Beginning twelve months after the initial issuance of a series of IndexLinked Exchangeable Notes, NASDAQ will consider the suspension of trading in or removal from listing of that series of Index-Linked Exchangeable Notes under any of the following circumstances: • If the series has fewer than 50,000 notes issued and outstanding; • If the market value of all IndexLinked Exchangeable Notes of that series issued and outstanding is less than $1,000,000; or • If such other event shall occur or such other condition exists which in the opinion of NASDAQ makes further dealings of NASDAQ inadvisable. The proposed rule change relating to Index-Linked Exchangeable Notes is based on NYSEArca Equities Rule 5.2(j)(4). Equity Gold Shares Description Proposed Rule 5711(b) would apply to Equity Gold Shares that represent units of fractional undivided beneficial interest in, and ownership of, the Equity Gold Trust. While Equity Gold Shares are not technically ‘‘Index Fund Shares,’’ and thus are not covered by NASDAQ Rule 5705, all other NASDAQ rules that reference ‘‘Index Fund Shares’’ shall also apply to Equity Gold Shares. Applicability Except to the extent that specific provisions in proposed Rule 5711(b) govern, or unless the context otherwise requires, the provisions of all other NASDAQ Rules and policies would be applicable to the trading of Equity Gold Shares on NASDAQ. The provisions set forth in proposed Rule 5711(d) relating to Commodity-Based Trust Shares would also apply to Equity Gold Shares. The proposed rule change relating to Equity Gold Shares is based on NYSEArca Equities Rule 5.2(j)(5). Trust Certificates Proposed Rule 5711(c) would govern the listing standards applicable to Trust Certificates. NASDAQ will consider for trading, whether by listing or pursuant to unlisted trading privileges, Trust Certificates. Description Trust Certificates represent an interest in a special purpose trust (‘‘Trust’’) created pursuant to a trust agreement. The Trust will only issue Trust Certificates. Trust Certificates may or may not provide for the repayment of E:\FR\FM\09FEN1.SGM 09FEN1 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices the original principal investment amount. Trust Certificates pay an amount at maturity which is based upon the performance of specified assets as set forth below: • An underlying index or indexes of equity securities (‘‘Equity Reference Asset’’); • Instruments that are direct obligations of the issuing company, either exercisable throughout their life (i.e., American style) or exercisable only on their expiration date (i.e., European style), entitling the holder to a cash settlement in U.S. dollars to the extent that the foreign or domestic index has declined below (for a put warrant) or increased above (for a call warrant) the pre-stated cash settlement value of the index (‘‘Index Warrants’’); or • A combination of two or more Equity Reference Assets or Index Warrants. NASDAQ will file separate proposals under Section 19(b) of the Act before trading, either by listing or pursuant to unlisted trading privileges, Trust Certificates. mstockstill on DSK4VPTVN1PROD with NOTICES Continued Listing Standards Commentary .01 to proposed Rule 5711(c) would state that NASDAQ will commence delisting or removal proceedings with respect to an issue of Trust Certificates (unless the Commission has approved the continued trading of such issue), under any of the following circumstances: • If the aggregate market value or the principal amount of the securities publicly held is less than $400,000; • If the value of the index or composite value of the indexes is no longer calculated or widely disseminated on at least a 15-second basis with respect to indexes containing only securities listed on a national securities exchange, or on at least a 60second basis with respect to indexes containing foreign country securities; provided, however, that, if the official index value does not change during some or all of the period when trading is occurring on the NASDAQ Stock Market (for example, for indexes of foreign country securities, because of time zone differences or holidays in the countries where such indexes’ component stocks trade) then the last calculated official index value must remain available throughout NASDAQ trading hours; or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 Other Provisions Proposed Commentary .02 to Rule 5711(c) would provide that the stated term of the Trust shall be as stated in the Trust prospectus. However, a Trust may be terminated under such earlier circumstances as may be specified in the Trust prospectus. Proposed Commentary .03 to Rule 5711(c) would provide that the trustee of a Trust must be a trust company or banking institution having substantial capital and surplus and the experience and facilities for handling corporate trust business. In cases where, for any reason, an individual has been appointed as trustee, a qualified trust company or banking institution must be appointed co-trustee. No change is to be made in the trustee of a listed issue without prior notice to and approval of NASDAQ. Proposed Commentary .04 to Rule 5711(c) would provide that voting rights will be as set forth in the applicable Trust prospectus. Proposed Commentary .05 to Rule 5711(c) would provide that NASDAQ will implement written surveillance procedures for Trust Certificates. Proposed Commentary .06 to Rule 5711(c) would provide that the Trust Certificates will be subject to NASDAQ’s equity trading rules. Proposed Commentary .07 to Rule 5711(c) would provide that prior to the commencement of trading of a particular Trust Certificates listing pursuant to this Rule, NASDAQ will evaluate the nature and complexity of the issue and, if appropriate, distribute a circular to Members providing guidance regarding compliance responsibilities (including suitability recommendations and account approval) when handling transactions in Trust Certificates. Proposed Commentary .08 to Rule 5711(c) would provide that Trust Certificates may be exchangeable at the option of the holder into securities that participate in the return of the applicable underlying asset. In the event that the Trust Certificates are exchangeable at the option of the holder and contain an Index Warrant, then a Member must ensure that the Member’s account is approved for options trading in accordance with the rules of the NASDAQ Options Market (‘‘NOM’’) in order to exercise such rights. Proposed Commentary .09 to Rule 5711(c) would provide that Trust Certificates may pass-through periodic payments of interest and principle of the underlying securities. Proposed Commentary .10 to Rule 5711(c) would provide that the Trust PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 6839 payments may be guaranteed pursuant to a financial guaranty insurance policy which may include swap agreements. Proposed Commentary .11 to Rule 5711(c) would provide that the Trust Certificates may be subject to early termination or call features. The proposed rule change relating to Trust Certificates is based on NYSEArca Equities Rule 5.2(j)(7). Commodity-Based Trust Shares Proposed Rule 5711(d) would permit the listing and trading, or trading pursuant to unlisted trading privileges, of Commodity-Based Trust Shares on NASDAQ. Proposed Rule 5711(d) would be applicable only to Commodity-Based Trust Shares. Except to the extent inconsistent with this Rule, or unless the context otherwise requires, the provisions of the trust issued receipts rules, Bylaws, and all other rules and procedures of the Board of Directors shall be applicable to the trading on NASDAQ of such securities. Commodity-Based Trust Shares are included within the definition of ‘‘security’’ or ‘‘securities’’ as such terms are used in the Bylaws and Rules of NASDAQ. Description ‘‘Commodity-Based Trust Shares,’’ as defined in proposed Rule 5711(d)(iii)(A), means a security (1) that is issued by a Trust that holds a specified commodity deposited with the Trust; (2) that is issued by such Trust in a specified aggregate minimum number in return for a deposit of a quantity of the underlying commodity; and (3) that, when aggregated in the same specified minimum number, may be redeemed at a holder’s request by such Trust which will deliver to the redeeming holder the quantity of the underlying commodity. Proposed Rule 5711(d)(iii)(B) states that the term ‘‘commodity’’ is defined in Section 1(a)(4) of the Commodity Exchange Act. Proposed Rule 5711(d)(iv) states that NASDAQ may trade, either by listing or pursuant to unlisted trading privileges, Commodity-Based Trust Shares based on an underlying commodity. Each issue of a Commodity-Based Trust Share will be designated as a separate series and will be identified by a unique symbol. Initial Listing Standards Proposed Rule 5711(d)(v)(A) states that NASDAQ will establish a minimum number of Commodity-Based Trust Shares required to be outstanding at the time of commencement of trading on NASDAQ. E:\FR\FM\09FEN1.SGM 09FEN1 6840 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices Continued Listing Standards Proposed Rule 5711(d)(v)(B) provides that following the initial 12 month period following commencement of trading on NASDAQ of CommodityBased Trust Shares, NASDAQ will consider the suspension of trading in or removal from listing of such series under any of the following circumstances if: • The Trust has more than 60 days remaining until termination and there are fewer than 50 record and/or beneficial holders of Commodity-Based Trust Shares for 30 or more consecutive trading days; • The Trust has fewer than 50,000 receipts issued and outstanding; • The market value of all receipts issued and outstanding is less than $1,000,000; • The value of the underlying commodity is no longer calculated or available on at least a 15-second delayed basis from a source unaffiliated with the sponsor, Trust, custodian or NASDAQ or NASDAQ stops providing a hyperlink on its Web site to any such unaffiliated commodity value; • The Intraday Indicative Value 12 is no longer made available on at least a 15-second delayed basis; or • Such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. mstockstill on DSK4VPTVN1PROD with NOTICES Other Provisions Upon termination of a Trust, NASDAQ requires that CommodityBased Trust Shares issued in connection with such entity Trust be removed from NASDAQ listing. A Trust may terminate in accordance with the provisions of the Trust prospectus, which may provide for termination if the value of the Trust falls below a specified amount. Proposed Rule 5711(d)(v)(C) provides that the stated term of the Trust shall be as stated in the Trust prospectus. However, a Trust may be terminated under such earlier circumstances as may be specified in the Trust prospectus. Proposed Rule 5711(d)(v)(D) would apply the following requirements to the trustee of a Trust: • The trustee of a Trust must be a trust company or banking institution having substantial capital and surplus and the experience and facilities for handling corporate trust business. In cases where, for any reason, an 12 The Intraday Indicative Value is an estimate, updated at least every 15 seconds, of the value of a share of each series during NASDAQ’s Regular Market Session (as defined in Rule 4120(b)(4)(D)). See, e.g., NASDAQ Rules 5705(b)(3)(C) and 5705(b)(6)(A). VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 individual has been appointed as trustee, a qualified trust company or banking institution must be appointed co-trustee. • No change is to be made in the trustee of a listed issue without prior notice to and approval of NASDAQ. Proposed Rule 5711(d)(v)(E) states that voting rights shall be as set forth in the applicable Trust prospectus. Proposed Rules 5711(d)(vi) and (vii) describe the limitation of NASDAQ liability and requirements for Market Makers in Commodity-Based Trust Shares (see below for a general discussion of these requirements). Commentary .01 to proposed NASDAQ Rule 5711(d) provides that a Commodity-Based Trust Share is a Trust Issued Receipt that holds a specified commodity deposited with the Trust. Commentary .02 to proposed NASDAQ Rule 5711(d) provides that NASDAQ requires that Members provide all purchasers of newly issued Commodity-Based Trust Shares a prospectus for the series of CommodityBased Trust Shares. Commentary .03 to proposed NASDAQ Rule 5711(d) provides that transactions in Commodity-Based Trust Shares will occur during the trading hours specified in Rule 4120. Commentary .04 to proposed NASDAQ Rule 5711(d) provides that NASDAQ will file separate proposals under Section 19(b) of the Exchange Act before the listing and/or trading of Commodity-Based Trust Shares. The proposed rule change relating to Commodity-Based Trust Shares is based on NYSEArca Equities Rule 8.201. Currency Trust Shares NASDAQ proposes to adopt new NASDAQ Rule 5711(e) for the purpose of permitting the listing and trading, or trading pursuant to unlisted trading privileges, of Currency Trust Shares. Proposed Rule 5711(e) would be applicable only to Currency Trust Shares. Except to the extent inconsistent with the proposed Rule, or unless the context otherwise requires, the provisions of the trust issued receipts rules, Bylaws, and all other rules and procedures of the Board of Directors shall be applicable to the trading on NASDAQ of such securities. Currency Trust Shares are included within the definition of ‘‘security’’ or ‘‘securities’’ as such terms are used in the Bylaws and Rules of NASDAQ. Description Proposed Rule 5711(e)(iii) provides that the term ‘‘Currency Trust Shares’’ as used in these proposed rules means, PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 unless the context otherwise requires, a security that: • Is issued by a Trust that holds a specified non-U.S. currency or currencies deposited with the Trust; • When aggregated in some specified minimum number may be surrendered to the Trust by an Authorized Participant (as defined in the Trust’s prospectus) to receive the specified nonU.S. currency or currencies; and • Pays beneficial owners interest and other distributions on the deposited non-U.S. currency or currencies, if any, declared and paid by the Trust. Proposed Rule 5711(e)(iv) states that NASDAQ may trade, either by listing or pursuant to unlisted trading privileges, Currency Trust Shares that hold a specified non-U.S. currency or currencies. Each issue of Currency Trust Shares would be designated as a separate series and shall be identified by a unique symbol. Initial Listing Standards NASDAQ will establish a minimum number of Currency Trust Shares required to be outstanding at the time of commencement of trading on NASDAQ. Continued Listing Standards Proposed Rule 5711(e)(v)(B) provides that, following the initial 12 month period following commencement of trading on NASDAQ of Currency Trust Shares, NASDAQ will consider the suspension of trading in or removal from listing of such series under any of the following circumstances: • If the Trust has more than 60 days remaining until termination and there are fewer than 50 record and/or beneficial holders of Currency Trust Shares for 30 or more consecutive trading days; • If the Trust has fewer than 50,000 Currency Trust Shares issued and outstanding; • If the market value of all Currency Trust Shares issued and outstanding is less than $1,000,000; • If the value of the applicable nonU.S. currency is no longer calculated or available on at least a 15-second delayed basis from a source unaffiliated with the sponsor, Trust, custodian or NASDAQ or NASDAQ stops providing a hyperlink on its Web site to any such unaffiliated applicable non-U.S. currency value; • If the Intraday Indicative Value is no longer made available on at least a 15-second delayed basis; or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. Upon termination of a Trust, NASDAQ would require that Currency E:\FR\FM\09FEN1.SGM 09FEN1 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES Trust Shares issued in connection with such entity Trust be removed from NASDAQ listing. A Trust may terminate in accordance with the provisions of the Trust prospectus, which may provide for termination if the value of the Trust falls below a specified amount. Other Proposed Rule 5711(e)(v)(C) states that the stated term of the Trust shall be as stated in the Trust prospectus. However, a Trust may be terminated under such earlier circumstances as may be specified in the Trust prospectus. Proposed Rule 5711(e)(v)(D) states that the following requirements apply to the trustee of a Trust: • The trustee of a Trust must be a trust company or banking institution having substantial capital and surplus and the experience and facilities for handling corporate trust business. In cases where, for any reason, an individual has been appointed as trustee, a qualified trust company or banking institution must be appointed co-trustee. • No change is to be made in the trustee of a listed issue without prior notice to and approval of NASDAQ. Proposed Rule 5711(e)(v)(E) states that voting rights shall be as set forth in the applicable Trust prospectus. Proposed Rules 5711(e)(vi) and (vii) set forth the requirements respecting limitation of NASDAQ liability and Market Maker Accounts (see below for a general discussion of these requirements). Proposed Rule 5711(e)(viii) states that NASDAQ may submit a rule filing pursuant to Section 19(b)(2) of the Act to permit the listing and trading of Currency Trust Shares that do not otherwise meet the standards set forth in Commentary .04 to proposed Rule 5711(e). Commentary .01 to proposed Rule 5711(e) states that a Currency Trust Share is a Trust Issued Receipt that holds a specified non-U.S. currency or currencies deposited with the Trust. Commentary .02 to proposed Rule 5711(e) states that NASDAQ requires that Members provide all purchasers of newly issued Currency Trust Shares a prospectus for the series of Currency Trust Shares. Commentary .03 to proposed Rule 5711(e) provides that transactions in Currency Trust Shares will occur during the trading hours specified in NASDAQ Rule 4120. Commentary .04 to proposed Rule 5711(e) provides that NASDAQ may approve an issue of Currency Trust Shares for listing and/or trading (including pursuant to unlisted trading VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 privileges) pursuant to Rule 19b–4(e) under the Act. Such issue shall satisfy the criteria set forth in the proposed rule, together with the following criteria: • A minimum of 100,000 shares of a series of Currency Trust Shares is required to be outstanding at commencement of trading (this would not apply to issues trading pursuant to unlisted trading privileges); • The value of the applicable nonU.S. currency, currencies or currency index must be disseminated by one or more major market data vendors on at least a 15-second delayed basis; • The Intraday Indicative Value must be calculated and widely disseminated by NASDAQ or one or more major market data vendors on at least a 15second basis during the Regular Market Session (as defined in NASDAQ Rule 4120; and • NASDAQ will implement written surveillance procedures applicable to Currency Trust Shares. Commentary .05 to proposed Rule 5711(e) states that if the value of a Currency Trust Share is based in whole or in part on an index that is maintained by a broker-dealer, the broker-dealer would be required to erect a ‘‘firewall’’ around the personnel responsible for the maintenance of such index or who have access to information concerning changes and adjustments to the index, and the index shall be calculated by a third party who is not a broker-dealer. Additionally, any advisory committee, supervisory board or similar entity that advises an index licensor or administrator or that makes decisions regarding the index or portfolio composition, methodology and related matters must implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material, non-public information regarding the applicable index or portfolio. Commentary .06 to proposed Rule 5711(e) provides that Currency Trust Shares will be subject to NASDAQ’s equity trading rules. Trading Halts Proposed Commentary .07 to Rule 5711(e) states that if the Intraday Indicative Value or the value of the nonU.S. currency or currencies or the currency index applicable to a series of Currency Trust Shares is not being disseminated as required, NASDAQ may halt trading during the day on which such interruption first occurs. If such interruption persists past the trading day in which it occurred, NASDAQ will halt trading no later than the beginning of the trading day PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 6841 following the interruption. If NASDAQ becomes aware that the net asset value applicable to a series of Currency Trust Shares is not being disseminated to all market participants at the same time, it will halt trading in such series until such time as the net asset value is available to all market participants. The proposed rule change relating to Currency Trust Shares is based on NYSEArca Equities Rule 8.202. Commodity Index Trust Shares NASDAQ will consider for trading, whether by listing or pursuant to unlisted trading privileges, Commodity Index Trust Shares that meet the criteria of proposed Rule 5711(f). Proposed Rule 5711(f)(ii) states that proposed Rule 5711(f) would be applicable only to Commodity Index Trust Shares. Except to the extent inconsistent with the proposed Rule, or unless the context otherwise requires, the provisions of the trust issued receipts rules, Bylaws, and all other rules and procedures of the Board of Directors shall be applicable to the trading on NASDAQ of such securities. Commodity Index Trust Shares are included within the definition of ‘‘security’’ or ‘‘securities’’ as such terms are used in the Bylaws and Rules of NASDAQ. Description Proposed Rule 5711(f)(iii) defines the term ‘‘Commodity Index Trust Shares’’ to mean, as used in these proposed Rules (unless the context otherwise requires), a security that (A) is issued by a Trust that (1) is a commodity pool as defined in the Commodity Exchange Act and regulations thereunder, and that is managed by a commodity pool operator registered with the Commodity Futures Trading Commission; and (2) that holds long positions in futures contracts on a specified commodity index, or interests in a commodity pool which, in turn, holds such long positions; and (B) when aggregated in some specified minimum number may be surrendered to the Trust by the beneficial owner to receive positions in futures contracts on a specified index and cash or short term securities. The term ‘‘futures contract’’ is commonly known as a ‘‘contract of sale of a commodity for future delivery’’ set forth in Section 2(a) of the Commodity Exchange Act. Proposed Rule 5711(f)(iv) states that NASDAQ may trade, either by listing or pursuant to unlisted trading privileges, Commodity Index Trust Shares based on one or more securities. The Commodity Index Trust Shares based on particular securities would be designated as a E:\FR\FM\09FEN1.SGM 09FEN1 6842 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices separate series and would be identified by a unique symbol. mstockstill on DSK4VPTVN1PROD with NOTICES Initial Listing Standards Proposed Rule 5711(f)(v)(A) states that NASDAQ will establish a minimum number of Commodity Index Trust Shares required to be outstanding at the time of commencement of trading on NASDAQ. Continued Listing Standards Under proposed Rule 5711(f)(v)(B), NASDAQ will consider the suspension of trading in or removal from listing of a series of Commodity Index Trust Shares under any of the following circumstances: • Following the initial twelve-month period beginning upon the commencement of trading of the Commodity Index Trust Shares, there are fewer than 50 record and/or beneficial holders of Commodity Index Trust Shares for 30 or more consecutive trading days; • If the value of the applicable underlying index is no longer calculated or available on at least a 15-second delayed basis from a source unaffiliated with the sponsor, the Trust or the trustee of the Trust; • If the net asset value for the trust is no longer disseminated to all market participants at the same time; • If the Intraday Indicative Value is no longer made available on at least a 15-second delayed basis; or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. Upon termination of a Trust, NASDAQ would require that Commodity Index Trust Shares issued in connection with such entity Trust be removed from NASDAQ listing. A Trust may terminate in accordance with the provisions of the Trust prospectus, which may provide for termination if the value of the Trust falls below a specified amount. Proposed Rule 5711(f)(v)(C) provides that the stated term of the Trust shall be as stated in the Trust prospectus. However, a Trust may be terminated under such earlier circumstances as may be specified in the Trust prospectus. Proposed Rule 5711(f)(v)(D) states that the following requirements apply to the trustee of a Trust: • The trustee of a Trust must be a trust company or banking institution having substantial capital and surplus and the experience and facilities for handling corporate trust business. In cases where, for any reason, an individual has been appointed as trustee, a qualified trust company or VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 banking institution must be appointed co-trustee. • No change is to be made in the trustee of a listed issue without prior notice to and approval of NASDAQ. Proposed Rule 5711(f)(v)(E) provides that voting rights shall be as set forth in the applicable Trust prospectus. Proposed Rules 5711(f)(vi) and (vii) set forth the requirements respecting limitation of NASDAQ liability and Market Maker Accounts (see below for a general discussion of these requirements). Commentary .01 to proposed Rule 5711(f) states that a Commodity Index Trust Share is a Trust Issued Receipt that holds long positions in futures contracts on a specified commodity index, or interests in a commodity pool which, in turn, holds such long positions, deposited with the Trust. Commentary .02 to proposed Rule 5711(f) states that NASDAQ requires that Members provide all purchasers of newly issued Commodity Index Trust Shares a prospectus for the series of Commodity Index Trust Shares. Commentary .03 to proposed Rule 5711(f) states that transactions in Commodity Index Trust Shares will occur during the trading hours specified in Rule 4120. Commentary .04 to proposed Rule 5711(f) states that NASDAQ will file separate proposals under Section 19(b) of the Act before trading, either by listing or pursuant to unlisted trading privileges, Commodity Index Trust Shares. The proposed rule change relating to Commodity Index Trust Shares is based on NYSEArca Equities Rule 8.202. Description Proposed Rule 5711(g)(iii) states that the term ‘‘Commodity Futures Trust Shares’’ as used in the proposed Rules means, unless the context otherwise requires, a security that: (i) is issued by a Trust that is a commodity pool as defined in the Commodity Exchange Act and regulations thereunder, and that is managed by a commodity pool operator registered with the Commodity Futures Trading Commission, and holds positions in futures contracts that track the performance of a specified commodity, or interests in a commodity pool which, in turn, holds such positions; and (ii) is issued and redeemed daily in specified aggregate amounts at net asset value. The term ‘‘futures contract’’ is a ‘‘contract of sale of a commodity for future delivery’’ set forth in Section 2(a) of the Commodity Exchange Act. The term ‘‘commodity’’ is defined in Section 1(a)(4) of the Commodity Exchange Act. Designation of an Underlying Commodity Futures Contract Proposed Rule 5711(g)(iv) states that NASDAQ may trade, either by listing or pursuant to unlisted trading privileges, Commodity Futures Trust Shares based on an underlying commodity futures contract. Each issue of Commodity Futures Trust Shares shall be designated as a separate series and shall be identified by a unique symbol. Commodity Futures Trust Shares Initial Listing Standards Proposed Rule 5711(g)(v)(A) states that NASDAQ will establish a minimum number of Commodity Futures Trust Shares required to be outstanding at the time of commencement of trading on NASDAQ. Proposed Rule 5711(g) governs the listing of Commodity Futures Trust Shares. NASDAQ will consider for trading, whether by listing or pursuant to unlisted trading privileges, Commodity Futures Trust Shares that meet the criteria of proposed Rule 5711(g). Proposed Rule 5711(g)(ii) states that proposed Rule 5711(g) would apply only to Commodity Futures Trust Shares. Except to the extent inconsistent with the proposed Rule, or unless the context otherwise requires, the provisions of the trust issued receipts rules, Bylaws, and all other rules and procedures of the Board of Directors shall be applicable to the trading on NASDAQ of such securities. Commodity Futures Trust Shares are included within the definition of ‘‘security’’ or ‘‘securities’’ as such terms are used in the Bylaws and Rules of NASDAQ. Continued Listing Standards Proposed Rule 5711(g)(v)(B) states that NASDAQ will consider the suspension of trading in or removal from listing of a series of Commodity Futures Trust Shares under any of the following circumstances: • If, following the initial twelvemonth period beginning upon the commencement of trading of the Commodity Futures Trust Shares: (1) the Trust has fewer than 50,000 Commodity Futures Trust Shares issued and outstanding; or (2) the market value of all Commodity Futures Trust Shares issued and outstanding is less than $1,000,000; or (3) there are fewer than 50 record and/or beneficial holders of Commodity Futures Trust Shares for 30 consecutive trading days; • If the value of the underlying futures contracts is no longer calculated or available on at least a 15-second PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 E:\FR\FM\09FEN1.SGM 09FEN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices delayed basis during NASDAQ’s Regular Market Session (as defined in NASDAQ Rule 4120) from a source unaffiliated with the sponsor, the Trust or the trustee of the Trust; • If the net asset value for the Trust is no longer disseminated to all market participants at the same time; • If the Intraday Indicative Value is no longer disseminated on at least a 15second delayed basis during NASDAQ’s Regular Market Session (as defined in NASDAQ Rule 4120); or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. Upon termination of a Trust, NASDAQ requires that Commodity Futures Trust Shares issued in connection with such trust be removed from NASDAQ listing. A Trust will terminate in accordance with the provisions of the Trust prospectus. Proposed Rule 5711(g)(v)(C) states that the stated term of the Trust shall be as stated in the prospectus. However, a Trust may be terminated under such earlier circumstances as may be specified in the Trust prospectus. Proposed Rule 5711(g)(v)(D) states that the following requirements apply to the trustee of a Trust: • The trustee of a Trust must be a trust company or banking institution having substantial capital and surplus and the experience and facilities for handling corporate trust business. In cases where, for any reason, an individual has been appointed as trustee, a qualified trust company or banking institution must be appointed co-trustee. • No change is to be made in the trustee of a listed issue without prior notice to and approval of NASDAQ. Proposed Rule 5711(g)(v)(E) states that voting rights shall be as set forth in the applicable Trust prospectus. Proposed Rules 5711(g)(vi) and (vii) describe the requirements for Market Makers and the limitation of NASDAQ liability in Commodity Futures Trust Shares (see below for a general discussion of these requirements). Proposed Rule 5711(g)(viii) states that NASDAQ will file separate proposals under Section 19(b) of the Act before listing and trading separate and distinct Commodity Futures Trust Shares designated on different underlying futures contracts. Commentary .01 to proposed Rule 5711(g) would require Members trading in Commodity Futures Trust Shares to provide all purchasers of newly issued Commodity Futures Trust Shares a prospectus for the series of Commodity Futures Trust Shares. VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 Commentary .02 to proposed Rule 5711(g) states that transactions in Commodity Futures Trust Shares will occur during the trading hours specified in Rule 4120. Commentary .03 to proposed Rule 5711(g) states that if the Intraday Indicative Value or the value of the underlying futures contract is not being disseminated as required, NASDAQ may halt trading during the day in which the interruption to the dissemination of the Intraday Indicative Value or the value of the underlying futures contract occurs. If the interruption to the dissemination of the Intraday Indicative Value or the value of the underlying futures contract persists past the trading day in which it occurred, NASDAQ will halt trading no later than the beginning of the trading day following the interruption. In addition, if NASDAQ becomes aware that the net asset value with respect to a series of Commodity Futures Trust Shares is not disseminated to all market participants at the same time, it will halt trading in such series until such time as the net asset value is available to all market participants. Commentary .04 to proposed Rule 5711(g) states that NASDAQ’s rules governing the trading of equity securities apply. Commentary .05 to proposed Rule 5711(g) states that NASDAQ will implement written surveillance procedures for Commodity Futures Trust Shares. The proposed rule change relating to Commodity Futures Trust Shares is based on NYSEArca Equities Rule 8.204. Partnership Units Proposed Rule 5711(h) would govern the listing of Partnership Units. Under proposed Rule 5711(h)(i), NASDAQ will consider for trading, whether by listing or pursuant to unlisted trading privileges, Partnership Units that meet the criteria of proposed Rule 5711(h). Description Under proposed Rule 5711(h)(ii), the following terms as used in the proposed Rule would, unless the context otherwise requires, have the meanings herein specified. Proposed Rule 5711(h)(ii)(A) states that the term ‘‘commodity’’ is defined in Section 1(a)(4) of the Commodity Exchange Act. Proposed Rule 5711(h)(ii)(B) defines a Partnership Unit for purposes of the proposed Rule as a security (a) that is issued by a partnership that invests in any combination of futures contracts, options on futures contracts, forward PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 6843 contracts, commodities and/or securities; and (b) that is issued and redeemed daily in specified aggregate amounts at net asset value. Proposed Rule 5711(h)(iii) states that NASDAQ may list and trade Partnership Units based on an underlying asset, commodity or security. Each issue of a Partnership Unit would be designated as a separate series and would be identified by a unique symbol. Initial Listing Standards Proposed Rule 5711(h)(iv)(A) states that NASDAQ will establish a minimum number of Partnership Units required to be outstanding at the time of commencement of trading on NASDAQ. Continued Listing Standards Proposed Rule 5711(h)(iv)(B) provides that NASDAQ will consider removal of Partnership Units from listing under any of the following circumstances: • If, following the initial twelve month period from the date of commencement of trading of the Partnership Units, (a) the partnership has more than 60 days remaining until termination and there are fewer than 50 record and/or beneficial holders of the Partnership Units for 30 or more consecutive trading days; (b) the partnership has fewer than 50,000 Partnership Units issued and outstanding; or (c) the market value of all Partnership Units issued and outstanding is less than $1,000,000; • If the value of the underlying benchmark investment, commodity or asset is no longer calculated or available on at least a 15-second delayed basis or NASDAQ stops providing a hyperlink on its Web site to any such investment, commodity or asset value; • If the Intraday Indicative Value is no longer made available on at least a 15- second delayed basis; or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. Upon termination of a partnership, NASDAQ requires that Partnership Units issued in connection with such partnership be removed from NASDAQ listing. A partnership will terminate in accordance with the provisions of the partnership prospectus. Proposed Rule 5711(h)(iv)(C) provides that the stated term of the partnership shall be as stated in the prospectus. However, such entity may be terminated under such earlier circumstances as may be specified in the Partnership prospectus. Proposed Rule 5711(h)(iv)(D) would adopt the following requirements that E:\FR\FM\09FEN1.SGM 09FEN1 6844 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices apply to the general partner of a partnership: • The general partner of a partnership must be an entity having substantial capital and surplus and the experience and facilities for handling partnership business. In cases where, for any reason, an individual has been appointed as general partner, a qualified entity must also be appointed as general partner. • No change is to be made in the general partner of a listed issue without prior notice to and approval of NASDAQ. Proposed Rule 5711(h)(iv)(E) states that voting rights shall be as set forth in the applicable partnership prospectus. Proposed Rule 5711(h)(v) and (vi) describe the limitation of NASDAQ liability and requirements for Market Makers in Partnership Units (see below for a general discussion of these requirements). Proposed Rule 5711(h)(vii) states that NASDAQ will file separate proposals under Section 19(b) of the Act before listing and trading separate and distinct Partnership Units designated on different underlying investments, commodities and/or assets. Commentary .01 to proposed Rule 5711(h) states that NASDAQ requires that Members provide to all purchasers of newly issued Partnership Units a prospectus for the series of Partnership Units. The proposed rule change relating to Partnership Units is based on NYSEArca Equities Rule 8.300. Trust Units NASDAQ proposes to add new Rule 5711(i) in order to permit trading, either by listing or pursuant to unlisted trading privileges, of Trust Units. Proposed Rule 5711(i)(i) states that the provisions in proposed Rule 5711(i) are applicable only to Trust Units. In addition, except to the extent inconsistent with this Rule, or unless the context otherwise requires, the rules and procedures of the Board of Directors shall be applicable to the trading on NASDAQ of such securities. Trust Units are included within the definition of ‘‘security,’’ ‘‘securities’’ and ‘‘derivative securities products’’ as such terms are used in the Rules of NASDAQ. mstockstill on DSK4VPTVN1PROD with NOTICES Description Proposed Rule 5711(i)(ii) states that the following terms as used in the proposed Rule shall, unless the context otherwise requires, have the meanings herein specified: • The term ‘‘commodity’’ is defined in Section 1(a)(4) of the Commodity Exchange Act. VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 • A Trust Unit is a security that is issued by a trust or other similar entity that is constituted as a commodity pool that holds investments comprising or otherwise based on any combination of futures contracts, options on futures contracts, forward contracts, swap contracts, commodities and/or securities. Proposed Rule 5711(i)(iii) states that NASDAQ may list and trade Trust Units based on an underlying asset, commodity, security or portfolio. Each issue of a Trust Unit shall be designated as a separate series and shall be identified by a unique symbol. Initial Listing Standards Proposed Rule 5711(i)(iv)(A) states that NASDAQ will establish a minimum number of Trust Units required to be outstanding at the time of commencement of trading on NASDAQ. NASDAQ will obtain a representation from the issuer of each series of Trust Units that the net asset value per share for the series will be calculated daily and will be made available to all market participants at the same time. Continued Listing Standards Proposed Rule 5711(i)(iv)(B)(1) states that NASDAQ will remove Trust Units from listing under any of the following circumstances: • If following the initial twelve month period following the commencement of trading of Trust Units, (i) the trust has more than 60 days remaining until termination and there are fewer than 50 record and/or beneficial holders of Trust Units for 30 or more consecutive trading days; (ii) the trust has fewer than 50,000 Trust Units issued and outstanding; or (iii) the market value of all Trust Units issued and outstanding is less than $1,000,000; or • If such other event shall occur or condition exists which in the opinion of the NASDAQ makes further dealings on NASDAQ inadvisable. Trading Halts Proposed Rule 5711(i)(iv)(B)(2) states that NASDAQ will halt trading in a series of Trust Units if the circuit breaker parameters in Rule 4120(a)(11) have been reached. In exercising its discretion to halt or suspend trading in a series of Trust Units, NASDAQ may consider any relevant factors. In particular, if the portfolio and net asset value per share are not being disseminated as required, NASDAQ may halt trading during the day in which the interruption to the dissemination of the portfolio holdings or net asset value per share occurs. If the PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 interruption to the dissemination of the portfolio holdings or net asset value per share persists past the trading day in which it occurred, NASDAQ will halt trading no later than the beginning of the trading day following the interruption. Upon termination of a trust, NASDAQ would require that Trust Units issued in connection with such trust be removed from NASDAQ listing. A trust will terminate in accordance with the provisions of the prospectus. Proposed Rule 5711(i)(iv)(C) provides that the stated term of the trust shall be as stated in the prospectus. However, such entity may be terminated under such earlier circumstances as may be specified in the prospectus. Proposed Rule 5711(i)(iv)(D) would adopt the following requirements applicable to the trustee of a Trust: • The trustee of a trust must be a trust company or banking institution having substantial capital and surplus and the experience and facilities for handling corporate trust business. In cases where, for any reason, an individual has been appointed as trustee, a qualified trust company or banking institution must be appointed co-trustee. • No change is to be made in the trustee of a listed issue without prior notice to and approval of NASDAQ. Proposed Rule 5711(i)(iv)(E) states that voting rights shall be as set forth in the prospectus. Proposed Rules 5711(i)(v) and (vi) describe the requirements for Market Makers and the limitation of NASDAQ liability respecting Trust Units (see below for a general discussion of these requirements). Commentary .01 to proposed Rule 5711(i) states that NASDAQ requires that Members provide to all purchasers of newly issued Trust Units a prospectus for the series of Trust Units. Commentary .02 to proposed Rule 5711(i) states that transactions in Trust Units will occur during the trading hours specified in NASDAQ Rule 4120. Commentary .03 to proposed Rule 5711(i) states that NASDAQ will file separate proposals under Section 19(b) of the Act before listing and trading separate and distinct Trust Units designated on different underlying investments, commodities, assets and/or portfolios. The proposed rule change relating to Trust Units is based on NYSEArca Equities Rule 8.500. Managed Trust Securities Proposed Rule 5711(j) would adopt listing standards for Managed Trust Securities. Under proposed Rule 5711(j)(i), NASDAQ will consider for E:\FR\FM\09FEN1.SGM 09FEN1 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES trading, whether by listing or pursuant to unlisted trading privileges, Managed Trust Securities that meet the criteria of the proposed Rule. Proposed Rule 5711(j)(ii) states that the proposed Rule would apply only to Managed Trust Securities. Managed Trust Securities are included within the definition of ‘‘security’’ or ‘‘securities’’ as such terms are used in the Bylaws and Rules of NASDAQ. Description Proposed Rule 5711(j)(iii)(A) defines the term ‘‘Managed Trust Securities’’ to mean, unless the context otherwise requires, a security that is registered under the Securities Act of 1933, as amended, and which (1) is issued by a Trust that is a commodity pool as defined in the Commodity Exchange Act and regulations thereunder, and that is managed by a commodity pool operator registered with the Commodity Futures Trading Commission, and which holds long and/or short positions in exchangetraded futures contracts and/or certain currency forward contracts selected by the Trust’s advisor consistent with the Trust’s investment objectives, which will only include, exchange-traded futures contracts involving commodities, currencies, stock indices, fixed income indices, interest rates and sovereign, private and mortgage or asset backed debt instruments, and/or forward contracts on specified currencies, each as disclosed in the Trust’s prospectus as such may be amended from time to time; and (2) is issued and redeemed continuously in specified aggregate amounts at the next applicable net asset value. Proposed Rule 5711(j)(iii) also includes the following definitions concerning Managed Trust Securities: • Disclosed Portfolio. Under proposed Rule 5711(j)(iii)(B), the term ‘‘Disclosed Portfolio’’ means the identities and quantities of the securities and other assets held by the Trust that will form the basis for the Trust’s calculation of net asset value at the end of the business day. • Intraday Indicative Value. Under proposed Rule 5711(j)(iii)(C), the term ‘‘Intraday Indicative Value’’ is the estimated indicative value of a Managed Trust Security based on current information regarding the value of the securities and other assets in the Disclosed Portfolio. • Reporting Authority. Under proposed Rule 5711(j)(iii)(D), the term ‘‘Reporting Authority’’ in respect of a particular series of Managed Trust Securities means NASDAQ, an institution, or a reporting or information service designated by NASDAQ or by VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 the Trust or the exchange that lists a particular series of Managed Trust Securities (if NASDAQ is trading such series pursuant to unlisted trading privileges) as the official source for calculating and reporting information relating to such series, including, but not limited to, the Intraday Indicative Value; the Disclosed Portfolio; the amount of any cash distribution to holders of Managed Trust Securities, net asset value, or other information relating to the issuance, redemption or trading of Managed Trust Securities. A series of Managed Trust Securities may have more than one Reporting Authority, each having different functions. Proposed Rule 5711(j)(iv) states that NASDAQ may trade, either by listing or pursuant to unlisted trading privileges, Managed Trust Securities based on the underlying portfolio of exchange-traded futures and/or certain currency forward contracts described in the related prospectus. Each issue of Managed Trust Securities shall be designated as a separate trust or series and shall be identified by a unique symbol. Initial Listing Standards Under proposed Rule 5711(j)(v)(A), Managed Trust Securities will be listed and traded on NASDAQ subject to application of the following initial listing criteria: • NASDAQ will establish a minimum number of Managed Trust Securities required to be outstanding at the time of commencement of trading on NASDAQ. • NASDAQ will obtain a representation from the issuer of each series of Managed Trust Securities that the net asset value per share for the series will be calculated daily and that the net asset value and the Disclosed Portfolio will be made available to all market participants at the same time. Continued Listing Standards Under proposed Rule 5711(j)(v)(B), each series of Managed Trust Securities will be listed and traded on NASDAQ subject to application of the following continued listing criteria: • The Intraday Indicative Value for Managed Trust Securities will be widely disseminated by one or more major market data vendors at least every 15 seconds during the time when the Managed Trust Securities trade on NASDAQ. • The Disclosed Portfolio will be disseminated at least once daily and will be made available to all market participants at the same time. • The Reporting Authority that provides the Disclosed Portfolio must implement and maintain, or be subject to, procedures designed to prevent the PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 6845 use and dissemination of material nonpublic information regarding the actual components of the portfolio. Under proposed Rule 5711(j)(v)(B)(3), NASDAQ will consider the suspension of trading in or removal from listing of a series of Managed Trust Securities under any of the following circumstances: • If, following the initial twelvemonth period beginning upon the commencement of trading of the Managed Trust Securities: (A) The Trust has fewer than 50,000 Managed Trust Securities issued and outstanding; (B) the market value of all Managed Trust Securities issued and outstanding is less than $1,000,000; or (C) there are fewer than 50 record and/or beneficial holders of Managed Trust Securities for 30 consecutive trading days; • If the Intraday Indicative Value for the Trust is no longer calculated or available or the Disclosed Portfolio is not made available to all market participants at the same time; • If the Trust issuing the Managed Trust Securities has failed to file any filings required by the Securities and Exchange Commission or if NASDAQ is aware that the Trust is not in compliance with the conditions of any exemptive order or no-action relief granted by the Securities and Exchange Commission to the Trust with respect to the series of Managed Trust Securities; or • If such other event shall occur or condition exists which in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable. Trading Halts Proposed Rule 5711(j)(v)(B)(4) states that, if the Intraday Indicative Value of a series of Managed Trust Securities is not being disseminated as required, NASDAQ may halt trading during the day in which the interruption to the dissemination of the Intraday Indicative Value occurs. If the interruption to the dissemination of the Intraday Indicative Value persists past the trading day in which it occurred, NASDAQ will halt trading no later than the beginning of the trading day following the interruption. If a series of Managed Trust Securities is trading on NASDAQ pursuant to unlisted trading privileges, NASDAQ will halt trading in that series as specified in Rule 4120(a) or (b) as applicable. In addition, if NASDAQ becomes aware that the net asset value or the Disclosed Portfolio with respect to a series of Managed Trust Securities is not disseminated to all market participants at the same time, it will halt trading in such series until such time as the net asset value or the Disclosed E:\FR\FM\09FEN1.SGM 09FEN1 mstockstill on DSK4VPTVN1PROD with NOTICES 6846 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices Portfolio is available to all market participants. Proposed Rule 5711(j)(v)(B)(5) states that upon termination of a Trust, NASDAQ requires that Managed Trust Securities issued in connection with such Trust be removed from NASDAQ listing. A Trust will terminate in accordance with the provisions of the Trust prospectus. Proposed Rule 5711(j)(v)(C) states that the term of the Trust shall be as stated in the prospectus. However, a Trust may be terminated under such earlier circumstances as may be specified in the Trust prospectus. Proposed Rule 5711(j)(v)(D) would state that the following requirements apply to the trustee of a Trust: • The trustee of a Trust must be a trust company or banking institution having substantial capital and surplus and the experience and facilities for handling corporate trust business. In cases where, for any reason, an individual has been appointed as trustee, a qualified trust company or banking institution must be appointed co-trustee. • No change is to be made in the trustee of a listed issue without prior notice to and approval of NASDAQ. Proposed Rule 5711(j)(v)(E) states that voting rights shall be as set forth in the applicable Trust prospectus. Proposed Rules 5711(j)(vi) and (vii) describe the regulatory requirements for registered Market Makers in Managed Trust Securities, and the limitation of NASDAQ liability respecting Managed Trust Securities (see below for a general discussion of these requirements). Proposed Rule 5711(j)(viii) states that NASDAQ will file separate proposals under Section 19(b) of the Act before listing and trading separate and distinct Managed Trust Securities. In addition to the above, the Commentary to proposed Rule 5711(j) includes the following provisions: Commentary .01 to proposed Rule 5711(j) states that NASDAQ requires that Members provide all purchasers of newly issued Managed Trust Securities a prospectus for the series of Managed Trust Securities. Commentary .02 to proposed Rule 5711(j) states that transactions in Managed Trust Securities will occur during the trading hours specified in Rule 4120. Commentary .03 to proposed Rule 5711(j) states that NASDAQ’s rules governing the trading of equity securities apply. Commentary .04 to proposed Rule 5711(j) states that NASDAQ will implement written surveillance VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 procedures for Managed Trust Securities. Commentary .05 to proposed Rule 5711(j) states that if the Trust’s advisor is affiliated with a broker-dealer, the broker-dealer shall erect a ‘‘fire wall’’ around the personnel who have access to information concerning changes and adjustments to the Disclosed Portfolio. Personnel who make decisions on the Trust’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the applicable Trust portfolio. The proposed rule change relating to Managed Trust Securities is based on NYSEArca Equities Rule 8.700. Currency Warrants Proposed Rule 5711(k) would govern the listing of Currency Warrants. Under proposed Rule 5711(k)(i), the listing of Currency Warrant issues is considered on a case-by-case basis. Currency Warrant issues will be evaluated for listing against the following criteria: Initial Listing Standards Proposed Rule 5711(k)(i)(A) requires the warrant issuer to have a minimum tangible net worth in excess of $250,000,000 and otherwise to exceed substantially the earnings requirements set forth in Rule 5405(b).13 In the alternative, the warrant issuer will be expected to have a minimum tangible net worth of $150,000,000 and otherwise to exceed substantially the earnings requirements set forth in Rule 5405(b), and not to have issued warrants where the original issue price of all the issuer’s currency warrant offerings (combined with currency warrant offerings of the issuer’s affiliates) listed on a national securities exchange or traded through the facilities of NASDAQ exceeds 25% of the warrant issuer’s net worth. Proposed Rule 5711(k)(i)(B) states that the term must be one to five years from date of issuance. Proposed Rule 5711(k)(i)(C) requires that there must be a minimum public distribution of 1,000,000 warrants together with a minimum of 400 public holders, and an aggregate market value of $4,000,000. In the alternative, there must be a minimum public distribution of 2,000,000 warrants together with a minimum number of public warrant holders determined on a case by case basis, an aggregate market value of $12,000,000 and an initial warrant price of $6. 13 Rule 5405(b) sets forth initial listing standards for primary equity securities. PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 Under proposed Rule 5711(k)(i)(D), the warrants will be cash settled in U.S. dollars. Under proposed Rule 5711(k)(i)(E), all currency warrants must include in their terms provisions specifying the time by which all exercise notices must be submitted, and that all unexercised warrants that are in the money will be automatically exercised on their expiration date or on or promptly following the date on which such warrants are delisted by NASDAQ (if such warrant issue has not been listed on another organized securities market in the United States). Under proposed Rule 5711(k)(ii), NASDAQ will file separate proposals under Section 19(b) of the Act before listing and trading separate and distinct Currency Warrants. Regulatory Matters Proposed Rule 5711(k)(iii) describes regulatory matters applicable to Currency Warrants. Specifically: • No Member shall accept an order from a customer to purchase or sell a Currency Warrant unless the customer’s account has been approved for options trading pursuant to NOM Rules Chapter XI, Section 7. • Suitability. The provisions of NOM Rules Chapter XI, Section 9 shall apply to recommendations in Currency Warrants and the term ‘‘option’’ as used therein shall be deemed for purposes of this Rule to include such warrants. • Discretionary Accounts. Any account in which a Member exercises discretion to trade in Currency Warrants shall be subject to the provisions of NOM Rules, Chapter XI, Section 10 with respect to such trading. For purposes of this Rule, the terms ‘‘option’’ and ‘‘options contract’’ as used in Chapter XI, Section 10 shall be deemed to include Currency Warrants. • Supervision of Accounts. NOM Rules, Chapter XI, Section 8 shall apply to all customer accounts of a Member in which transactions in Currency Warrants are effected. The term ‘‘option’’ as used in Chapter XI, Section 8 shall be deemed to include Currency Warrants. • Public Customer Complaints. NOM Rules, Chapter XI, Section 24 shall apply to all public customer complaints received by a Member regarding Currency Warrants. The term ‘‘option’’ as used in Chapter XI, Section 24 shall be deemed to include such warrants. • Communications with Public Customers. Members participating in Currency Warrants shall be bound to comply with the Communications and Disclosures rule of FINRA, as E:\FR\FM\09FEN1.SGM 09FEN1 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices subject securities affected by the proposed rules (‘‘securities’’): Trading Halts or Suspensions Under proposed Rule 5711(k)(iv), trading on NASDAQ in any Currency Warrant will be halted whenever NASDAQ deems such action appropriate in the interests of a fair and orderly market or to protect investors. Trading in Currency Warrants that have been the subject of a halt or suspension by NASDAQ may resume if NASDAQ determines that the conditions which led to the halt or suspension are no longer present, or that the interests of a fair and orderly market are best served by a resumption of trading. mstockstill on DSK4VPTVN1PROD with NOTICES applicable, as though such rule were part of these Rules. Information Circular Prior to the commencement of trading, NASDAQ will inform its Members in an Information Circular of the special characteristics and risks associated with trading the securities. Specifically, the Information Circular will discuss the following: (1) The procedures for purchases and redemptions of the securities (and/or that the securities are not individually redeemable); (2) NASDAQ Rule 2310, which imposes suitability obligations on NASDAQ Members with respect to recommending transactions in the securities to customers; (3) how information regarding the Intraday Indicative Value is disseminated; (4) the requirement that Members deliver a prospectus to investors purchasing newly issued securities prior to or concurrently with the confirmation of a transaction; and (5) trading information. In addition, the Information Circular will advise Members, prior to the commencement of trading, of the prospectus delivery requirements applicable to the securities. Members purchasing securities for resale to investors will deliver a prospectus to such investors. The Information Circular will also discuss any exemptive, noaction and interpretive relief granted by the Commission from any rules under the Act. In addition, the Information Circular will reference that the securities are subject to various fees and expenses described in the registration statement. If applicable, the Information Circular will also reference that the CFTC has regulatory jurisdiction over the trading of futures contracts. The Information Circular will also disclose the trading hours of the securities and, if applicable, the Net Asset Value (‘‘NAV’’) calculation time for the securities. The Information Circular will disclose that information about the securities and the corresponding indexes, if applicable, will be publicly available on the Web site for the securities. The Information Circular will also reference, if applicable, the fact that there is no regulated source of last sale information regarding physical commodities, and that the Commission has no jurisdiction over the trading of physical commodities or futures contracts on which the value of the securities may be based. The Information Circular will also reference the risks involved in trading the securities during the Opening Process and the Post-Market Session Reporting of Warrant Positions Proposed Rule 5711(k)(v) would govern reporting of warrant positions. Proposed Rule 5711(k)(v)(A) would require each Member to file with NASDAQ a report with respect to each account in which the Member has an interest, each account of a partner, officer, director, or employee of such Member, and each customer account that has established an aggregate position (whether long or short) of 100,000 warrants covering the same underlying currency, combining for purposes of the proposed Rule: (1) Long positions in put warrants and short positions in call warrants, and (2) short positions in put warrants with long positions in call warrants. The report shall be in such form as may be prescribed by NASDAQ and shall be filed no later than the close of business on the next day following the day on which the transaction or transactions requiring the filing of such report occurred. Proposed Rule 5711(k)(v)(B) states that whenever a report shall be required to be filed with respect to an account pursuant to the proposed Rule, the Member filing the same must file with NASDAQ such additional periodic reports with respect to such account as NASDAQ may from time to time require. Proposed Rule 5711(k)(v)(C) states that all reports required by the proposed Rule shall be filed with NASDAQ in such manner and form as prescribed by NASDAQ. The proposed rule change relating to Currency Warrants is based on NYSEArca Equities Rules 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.12, and 8.13. General Provisions To the extent not specifically addressed in the respective proposed rules, the following general provisions apply to all of the proposed rules and VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 6847 when an updated Intraday Indicative Value will not be calculated or publicly disseminated and, if applicable, the risks involved in trading the securities during the Regular Market Session when the Intraday Indicative Value may be static or based in part on the fluctuation of currency exchange rates when the underlying markets have closed prior to the close of NASDAQ’s Regular Market Session. Limitation of NASDAQ Liability Neither NASDAQ, any agent of NASDAQ, nor the Reporting Authority (if applicable), shall have any liability for damages, claims, losses or expenses caused by any errors, omissions, or delays in calculating or disseminating any applicable underlying index or asset value; the current value of the applicable positions or interests required to be deposited to a Trust, if applicable, in connection with issuance of the securities; net asset value; or any other information relating to the purchase, redemption, or trading of the securities, resulting from any negligent act or omission by NASDAQ, any agent of NASDAQ, or the Reporting Authority (if applicable), or any act, condition or cause beyond the reasonable control of NASDAQ, any agent of NASDAQ, or the Reporting Authority (if applicable), including, but not limited to, an act of God; fire; flood; extraordinary weather conditions; war; insurrection; riot; strike; accident; action of government; communications or power failure; equipment or software malfunction; or any error, omission or delay in the reports of transactions in the applicable positions or interests. Market Maker Accounts A registered Market Maker in the securities described below must file with NASDAQ, in a manner prescribed by NASDAQ, and keep current a list identifying all accounts for trading in: • In the case of Commodity-Based Trust Shares, the applicable underlying commodity, related commodity futures or options on commodity futures, or any other related commodity derivatives, which the registered Market Maker may have or over which it may exercise investment discretion (‘‘Underlying Commodities’’); • In the case of Currency Trust Shares, the applicable underlying nonU.S. currency, options, futures or options on futures on such currency, or any other derivatives based on such currency, which the registered Market Maker may have or over which it may exercise investment discretion (‘‘Underlying Currencies’’); E:\FR\FM\09FEN1.SGM 09FEN1 mstockstill on DSK4VPTVN1PROD with NOTICES 6848 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices • In the case of Commodity Index Trust Shares, the applicable physical commodities included in, or options, futures or options on futures on, an index underlying an issue of Commodity Index Trust Shares or any other derivatives based on such index or based on any commodity included in such index, which the registered Market Maker may have or over which it may exercise investment discretion (‘‘Underlying Commodity Index Assets’’); • In the case of Commodity Futures Trust Shares, the applicable underlying commodity, related futures or options on futures, or any other related derivatives, which the registered Market Maker may have or over which it may exercise investment discretion (‘‘Underlying Commodity Futures’’); • In the case of Partnership Units, the applicable underlying asset or commodity, related futures or options on futures, or any other related derivatives, which the registered Market Maker may have or over which it may exercise investment discretion (‘‘Underlying Partnership Unit Assets’’); • In the case of Trust Units, the applicable underlying commodity, related commodity futures or options on commodity futures, or any other related commodity derivatives, which the registered Market Maker may have or over which it may exercise investment discretion (‘‘Underlying Trust Unit Assets’’); and • In the case of Managed Trust Securities, the underlying commodity or applicable currency, related futures or options on futures, or any other related derivatives, which a registered Market Maker may have or over which it may exercise investment discretion (‘‘Underlying Managed Trust Assets’’). No registered Market Maker in the above mentioned securities shall trade in the respective Underlying Commodities, Underlying Currencies, Underlying Commodity Index Assets, Underlying Commodity Futures, Underlying Partnership Unit Assets, Underlying Trust Unit Assets, and/or the Underlying Managed Trust Assets (collectively, ‘‘Underlying Assets’’) in an account in which a market maker, directly or indirectly, controls trading activities, or has a direct interest in the profits or losses thereof, which has not been reported to NASDAQ. In addition to the existing obligations under NASDAQ rules regarding the production of books and records (see, e.g., Rule 4625), a registered Market Maker in the above mentioned securities is required to make available to NASDAQ such books, records or other information pertaining to transactions VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 by such entity or registered or nonregistered employee affiliated with such entity for its or their own accounts for trading the applicable Underlying Assets as may be requested by NASDAQ. Trading Rules NASDAQ deems the securities to be equity securities, thus rendering trading in the securities subject to NASDAQ’s existing rules governing the trading of equity securities. The securities will trade on NASDAQ from 8 a.m. to 8 p.m. E.T. NASDAQ has appropriate rules to facilitate transactions in the securities during all trading sessions. The minimum price increment for quoting and entry of orders in equity securities traded on NASDAQ is $0.01, with the exception of securities that are priced less than $1.00 for which the minimum price increment for order entry is $0.0001.14 Surveillance NASDAQ believes that its surveillance procedures are adequate to address any concerns about the trading of the securities on NASDAQ. Trading of the securities on NASDAQ will be subject to FINRA’s surveillance procedures for derivative products.15 NASDAQ may obtain information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members or affiliates of the ISG.16 In addition, to the extent that a fund invests in futures contracts, not more 14 See, e.g., Rule 4751. Regulation NMS Rule 612, Minimum Pricing Increment, provides: a. No national securities exchange, national securities association, alternative trading system, vendor, or broker or dealer shall display, rank, or accept from any person a bid or offer, an order, or an indication of interest in any NMS stock priced in an increment smaller than $0.01 if that bid or offer, order, or indication of interest is priced equal to or greater than $1.00 per share. b. No national securities exchange, national securities association, alternative trading system, vendor, or broker or dealer shall display, rank, or accept from any person a bid or offer, an order, or an indication of interest in any NMS stock priced in an increment smaller than $0.0001 if that bid or offer, order, or indication of interest is priced less than $1.00 per share. c. The Commission, by order, may exempt from the provisions of this section, either unconditionally or on specified terms and conditions, any person, security, quotation, or order, or any class or classes of persons, securities, quotations, or orders, if the Commission determines that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors. 17 CFR 242.612. 15 FINRA surveils trading on NASDAQ pursuant to a regulatory services agreement. NASDAQ is responsible for FINRA’s performance under this regulatory services agreement. 16 For a list of the current members and affiliate members of ISG, see www.isgportal.com. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 than 10% of the weight of such futures contracts in the aggregate shall consist of components whose principal trading market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement. NASDAQ has a general policy prohibiting the distribution of material, non-public information by its employees. As a general matter, NASDAQ has regulatory jurisdiction over its Members and their associated persons, which includes any person or entity controlling a Member, as well as a subsidiary or affiliate of a Member that is in the securities business. A subsidiary or affiliate of a Member that does business only in commodities or futures contracts would not be subject to NASDAQ jurisdiction, but NASDAQ could obtain information regarding the activities of such subsidiary or affiliate through surveillance sharing agreements with regulatory organizations of which such subsidiary or affiliate is a Member. Trading Halts With respect to trading halts, in addition to the halt requirements in the proposed rules, NASDAQ may consider all relevant factors in exercising its discretion to halt or suspend trading in the securities. Trading in the securities may be halted because of market conditions or for reasons that, in the view of NASDAQ, make trading in the securities inadvisable. These may include: (1) The extent to which trading in the underlying asset or assets is not occurring; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. In addition, trading in the securities will be subject to trading halts caused by extraordinary market volatility pursuant to NASDAQ’s ‘‘circuit breaker’’ Rule 4120(a)(11) or by the halt or suspension of the trading of the current underlying asset or assets. If the applicable Intraday Indicative Value, value of the underlying index, or the value of the underlying asset or assets (e.g., securities, commodities, currencies, futures contracts, or other assets) is not being disseminated as required, NASDAQ may halt trading during the day in which such interruption to the dissemination occurs. If the interruption to the dissemination of the applicable Intraday Indicative Value, value of the underlying index, or the value of the underlying asset or assets persists past the trading day in which it occurred, NASDAQ will halt trading no later than the beginning of the trading day following the interruption. In addition, if NASDAQ becomes aware that the net E:\FR\FM\09FEN1.SGM 09FEN1 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES asset value with respect to a series of the securities is not disseminated to all market participants at the same time, it will halt trading in such series until such time as the net asset value is available to all market participants. Suitability Currently, NASDAQ Rule 2310 governs Recommendations to Customers (Suitability), Fair Dealing with Customers, Suitability Obligations to Institutional Customers, and Direct Participation Programs. Prior to the commencement of trading of any inverse, leveraged, or inverse leveraged securities, NASDAQ will inform its Members of the suitability requirements of NASDAQ Rule 2310 in an Information Circular. Specifically, Members will be reminded in the Information Circular that, in recommending transactions in these securities, they must have a reasonable basis to believe that (1) the recommendation is suitable for a customer given reasonable inquiry concerning the customer’s investment objectives, financial situation, needs, and any other information known by such Member, and (2) the customer can evaluate the special characteristics, and is able to bear the financial risks, of an investment in the securities. In connection with the suitability obligation, the Information Circular will also provide that members must make reasonable efforts to obtain the following information: (1) The customer’s financial status; (2) the customer’s tax status; (3) the customer’s investment objectives; and (4) such other information used or considered to be reasonable by such Member or registered representative in making recommendations to the customer. In addition, FINRA has implemented increased sales practice and customer margin requirements for FINRA members applicable to inverse, leveraged, and inverse leveraged securities and options on such securities, as described in FINRA Regulatory Notices 09–31 (June 2009), 09–53 (August 2009) and 09–65 (November 2009) (‘‘FINRA Regulatory Notices’’). Members that carry customer accounts will be required to follow the FINRA guidance set forth in the FINRA Regulatory Notices. The Information Circular will reference the FINRA Regulatory Notices regarding sales practice and customer margin requirements for FINRA members applicable to inverse, leveraged, and inverse leveraged securities and options on such securities. NASDAQ notes that, for such inverse, leveraged, and inverse leveraged VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 securities, the corresponding funds seek leveraged, inverse, or leveraged inverse returns on a daily basis, and do not seek to achieve their stated investment objective over a period of time greater than one day because compounding prevents the funds from perfectly achieving such results. Accordingly, results over periods of time greater than one day typically will not be a leveraged multiple (+200%), the inverse (¥100%) or a leveraged inverse multiple (¥200%) of the period return of the applicable benchmark and may differ significantly from these multiples. NASDAQ’s Information Circular, as well as the applicable registration statement, will provide information regarding the suitability of an investment in such securities. 2. Statutory Basis The proposed rule change, as amended, is consistent with section 6(b) of the Act,17 in general, and furthers the objectives of section 6(b)(5),18 particularly, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and 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. Specifically, NASDAQ believes that the proposed rule change should enhance depth and liquidity, and should promote narrower markets in the subject securities. Furthermore, NASDAQ’s listing requirements as proposed herein are at least as stringent as those of any other national securities exchange and, consequently, the proposed rule change is consistent with the protection of investors and the public interest. Additionally, the proposal is designed to prevent fraudulent and manipulative acts and practices, as all of the proposed new products are subject to existing NASDAQ trading rules, together with specific requirements for registered market makers, books and record production, surveillance procedures, suitability and prospectus requirements, and requisite NASDAQ approvals, all set forth above. The proposal is also designed to promote just and equitable principles of trade by way of initial and continued listing standards which, if not maintained, will result in the discontinuation of trading in the affected products. These requirements, together with the applicable NASDAQ 17 15 18 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(5). Frm 00078 Fmt 4703 Sfmt 4703 6849 equity trading rules (which apply to the proposed products), ensure that no investor would have an unfair advantage over another respecting the trading of the subject products. On the contrary, all investors will have the same access to, and use of, information concerning the specific products and trading in the specific products, all to the benefit of public customers and the marketplace as a whole. Furthermore, the proposal is designed to remove impediments to and perfect the mechanism of a free and open market and a national market system by adopting listing standards that will lead ultimately to the trading of the proposed new products on NASDAQ, just as they are currently traded on other exchanges. NASDAQ believes that individuals and entities permitted to make markets on NASDAQ in the proposed new products should enhance competition within the mechanism of a free and open market and a national market system, and customers and other investors in the national market system should benefit from more depth and liquidity in the market for the proposed new products. B. Self-Regulatory Organization’s Statement on Burden on Competition NASDAQ does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. E:\FR\FM\09FEN1.SGM 09FEN1 6850 Federal Register / Vol. 77, No. 27 / Thursday, February 9, 2012 / Notices Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–66321; File No. SR– NYSEArca–2011–95] • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–NASDAQ–2012–013 on the subject line. Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change Relating to Listing and Trading of the PIMCO Total Return Exchange Traded Fund Under NYSE Arca Equities Rule 8.600 Paper Comments February 3, 2012. • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. I. Introduction mstockstill on DSK4VPTVN1PROD with NOTICES All submissions should refer to File Number SR–NASDAQ–2012–013. This file number should be included on the subject line if email 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 Web site viewing and printing in the Commission’s Public Reference Section, 100 F Street NE., Washington, DC 20549–1090, on official business days between 10 a.m. and 3 p.m. Copies of the 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 Number SR–NASDAQ–2012–013 and should be submitted on or before March 1, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–2994 Filed 2–8–12; 8:45 am] BILLING CODE 8011–01–P 19 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 18:04 Feb 08, 2012 Jkt 226001 On December 13, 2011, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the PIMCO Total Return Exchange Traded Fund (‘‘Fund’’) under NYSE Arca Equities Rule 8.600. The proposed rule change was published for comment in the Federal Register on December 22, 2011.3 The Commission received no comments on the proposal. This order grants approval of the proposed rule change. II. Description of the Proposed Rule Change The Exchange proposes to list and trade the Shares of the Fund pursuant to NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by PIMCO ETF Trust (‘‘Trust’’), a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company.4 The investment manager to the Fund is Pacific Investment Management Company LLC (‘‘PIMCO’’ or ‘‘Adviser’’). PIMCO Investments LLC serves as the distributor for the Fund, and State Street Bank & Trust Co. serves as the custodian and transfer agent for the Fund. The Adviser is affiliated with a broker-dealer and has implemented a 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 65988 (December 16, 2011), 76 FR 79741 (‘‘Notice’’). 4 The Trust is registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’). On July 7, 2011, the Trust filed with the Commission Post-Effective Amendment No. 30 to Form N–1A relating to the Fund (File Nos. 333– 155395 and 811–22250) (‘‘Registration Statement’’). In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 28993 (November 10, 2009) (File No. 812– 13571) (‘‘Exemptive Order’’). 2 17 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 ‘‘fire wall’’ with respect to such brokerdealer regarding access to information concerning the composition and/or changes to the Fund’s portfolio. If PIMCO elects to hire a sub-adviser for the Fund that is also affiliated with a broker-dealer, such sub-adviser will implement a fire wall with respect to such broker-dealer regarding access to information concerning the composition and/or changes to the portfolio.5 Description of the Fund The Fund will seek maximum total return, consistent with preservation of capital and prudent investment management. The Fund will invest under normal market circumstances 6 at least 65% of its total assets in a diversified portfolio of Fixed Income Instruments 7 of varying maturities. The Fund will invest primarily (under normal market circumstances, at least 65% of its total assets) in investmentgrade Fixed Income Instruments, but may invest up to 10% of its total assets in high-yield Fixed Income Instruments 5 See Commentary .06 to NYSE Arca Equities Rule 8.600. In the event (a) the Adviser or any subadviser becomes newly affiliated with a brokerdealer, or (b) any new manager, adviser, or subadviser becomes affiliated with a broker-dealer, it will implement a fire wall with respect to such broker-dealer regarding access to information concerning the composition and/or changes to the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. 6 The term ‘‘under normal market circumstances’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the fixed income markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. 7 ‘‘Fixed Income Instruments’’ on which the Fund will focus will be: Debt securities issued or guaranteed by the U.S. Government, its agencies or government-sponsored enterprises (‘‘U.S. Government Securities’’); corporate debt securities of U.S. and non-U.S. issuers, including convertible securities and corporate commercial paper; mortgage-backed and other asset-backed securities; inflation-indexed bonds issued both by governments and corporations; structured notes, including hybrid or ‘‘indexed’’ securities and eventlinked bonds; bank capital and trust preferred securities; loan participations and assignments; delayed funding loans and revolving credit facilities; bank certificates of deposit, fixed time deposits and bankers’ acceptances; repurchase agreements on Fixed Income Instruments and reverse repurchase agreements on Fixed Income Instruments; debt securities issued by states or local governments and their agencies, authorities and other government-sponsored enterprises; obligations of non-U.S. governments or their subdivisions, agencies and government-sponsored enterprises; and obligations of international agencies or supranational entities. Securities issued by U.S. Government agencies or government-sponsored enterprises may not be guaranteed by the U.S. Treasury. E:\FR\FM\09FEN1.SGM 09FEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 27 (Thursday, February 9, 2012)]
[Notices]
[Pages 6833-6850]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-2994]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66320; File No. SR-NASDAQ-2012-013]


 Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change Relating to the Adoption of 
Listing Standards for Certain Securities

February 3, 2012.
    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 January 20, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
The Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt rules applicable to the 
qualification, listing, trading, and delisting of certain securities on 
NASDAQ (``Listing Rules''). Specifically, NASDAQ proposes to adopt 
Listing Rules applicable to the following securities: Equity Index-
Linked Securities, Commodity-Linked Securities,\3\ Fixed Income Index-
Linked Securities, Futures-Linked Securities, Multifactor Index-Linked 
Securities; Index-Linked Exchangeable Notes; Equity Gold Shares; Trust 
Certificates; Commodity-Based Trust Shares; Currency Trust Shares; 
Commodity Index Trust Shares; Commodity Futures Trust Shares; 
Partnership Units; Trust Units; Managed

[[Page 6834]]

Trust Securities; and Currency Warrants.
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    \3\ NASDAQ Rules 5710(g) and (h) currently include initial 
listing standards applicable to Equity Index-Linked Securities and 
Commodity-Linked Securities. NASDAQ proposes to re-number the 
existing rule text in Rules 5710(g) and (h), and to adopt continuing 
listing standards applicable to Equity Index-Linked Securities and 
Commodity-Linked Securities, in proposed Rules 5710(k)(i) and (ii).
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    The proposal would adopt listing standards based on the relevant 
listing standards of the NYSE Arca, Inc. (``NYSEArca'') Equities Rules, 
as set forth below. The text of the proposed rule change is available 
on the Exchange's Web site at https://www.nasdaq.cchwallstreet.com, at 
the principal office of the Exchange, 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, the Exchange included statements 
concerning the purpose of, and basis for, the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV 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
    The purpose of this proposed rule change is to adopt listing 
standards for each of the products specified above. The Section 5000 
series of the NASDAQ rules govern the qualification, listing and 
delisting of securities on the NASDAQ Stock Market. Section 5000 also 
sets forth, among other things, definitions,\4\ NASDAQ's regulatory 
authority to list and maintain securities,\5\ general procedures and 
prerequisites for initial and continued listing on the NASDAQ Stock 
Market,\6\ and, most significantly to the instant proposed rule change, 
``Other Securities,'' \7\ which govern, without limitation, listing and 
qualification rules applicable to Exchange Traded Funds, Portfolio 
Depository Receipts and Index Fund Shares. The proposed amendments to 
Rule 5710, Securities Linked to the Performance of Indexes and 
Commodities (Including Currencies), would add continuing listing 
standards for Equity Index-Linked Securities and Commodity-Linked 
Securities, and initial and continuing listing standards for fixed 
income index-linked securities (``Fixed Income Index-Linked 
Securities''), futures-linked securities (``Futures-Linked 
Securities'') and multifactor index-linked securities (``Multifactor 
Index-Linked Securities'' and, together with Equity Index-Linked 
Securities, Commodity-Linked Securities, Fixed Income Index-Linked 
Securities and Futures-Linked Securities, ``Linked Securities'') to the 
rule.
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    \4\ See Section 5005 of the NASDAQ Rules.
    \5\ See Section 5100 of the NASDAQ Rules.
    \6\ See Section 5200 of the NASDAQ Rules.
    \7\ See Section 5700 of the NASDAQ Rules.
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    Proposed new Rule 5711, Trading of Certain Derivative Securities, 
would include listing standards for Index-Linked Exchangeable Notes, 
Equity Gold Shares, Trust Certificates, Commodity-Based Trust Shares, 
Currency Trust Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, Trust Units, Managed Trust Securities, 
and Currency Warrants.
    The instant proposed rule change is intended to define the specific 
products (see above) that NASDAQ intends to list and trade, and the 
listing and qualification requirements for each such product.
Introductory Paragraphs to Rule 5710
    The proposed amendments to Rule 5710 would state that NASDAQ will 
consider for listing and trading the Linked Securities set forth in the 
introductory paragraphs of the rule. These paragraphs describe the 
basis for the payment at maturity of the various securities, which is 
the performance of ``Reference Assets,'' as defined below.
    Specifically:
     Equity Index-Linked Securities are securities that provide 
for the payment at maturity of a cash amount based on the performance 
of an underlying equity index or indexes (``Equity Reference Asset'').
     The payment at maturity with respect to Commodity-Linked 
Securities is based on one or more physical Commodities or Commodity 
futures, options or other Commodity derivatives, Commodity-Related 
Securities, or a basket or index of any of the foregoing (``Commodity 
Reference Asset''). The terms ``Commodity'' and ``Commodity-Related 
Security'' are defined in Rule 4630.
     The payment at maturity with respect to Fixed Income 
Index-Linked Securities is based on the performance of one or more 
indexes or portfolios of notes, bonds, debentures or evidence of 
indebtedness that include, but are not limited to, U.S. Department of 
the Treasury securities (``Treasury Securities''), government-sponsored 
entity securities (``GSE Securities''), municipal securities, trust 
preferred securities, supranational debt and debt of a foreign country 
or a subdivision thereof or a basket or index of any of the foregoing 
(``Fixed Income Reference Asset'').
     The payment at maturity with respect to Futures-Linked 
Securities is based on the performance of an index of (a) futures on 
Treasury Securities, GSE Securities, supranational debt and debt of a 
foreign country or a subdivision thereof, or options or other 
derivatives on any of the foregoing; or (b) interest rate futures or 
options or derivatives on the foregoing in this subparagraph (b); or 
(c) CBOE Volatility Index (VIX) Futures (``Futures Reference Asset'').
     The payment at maturity with respect to Multifactor Index-
Linked Securities is based on the performance of any combination of two 
or more Equity Reference Assets, Commodity Reference Assets, Fixed 
Income Reference Assets or Futures Reference Assets (``Multifactor 
Reference Asset,'' and together with Equity Reference Assets, Commodity 
Reference Assets, Fixed Income Reference Assets and Futures Reference 
Assets, ``Reference Assets''). A Multifactor Reference Asset may 
include as a component a notional investment in cash or a cash 
equivalent based on a widely accepted overnight loan interest rate, 
LIBOR, Prime Rate, or an implied interest rate based on observed market 
spot and foreign currency forward rates.
    Linked Securities may or may not provide for the repayment of the 
original principal investment amount. NASDAQ may submit a rule filing 
pursuant to Section 19(b)(2) of the Act to permit the listing and 
trading of Linked Securities that do not otherwise meet the standards 
set forth in Rule 5710.
Technical Changes to Rule 5710
    NASDAQ is not proposing any amendments to Rules 5710(a)-(f), and 
such provisions would apply to all Linked Securities.\8\ Additionally,

[[Page 6835]]

NASDAQ proposes to re-number the current text of Rule 5710 by deleting 
current Rules 5710(g) and (h) and moving the text of these two sections 
into proposed Rules 5710 (k)(i) and (ii).\9\ In addition, NASDAQ is 
proposing to re-number the remaining existing sections of Rule 5710, 
and to amend references and defined terms in such sections such that 
they would apply to all Linked Securities.
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    \8\ Current Rules 5710(a)-(f) state:
    (a) Both the issue and the issuer of such security meet the 
criteria for other securities set forth in Rule 5730(a), except that 
if the security is traded in $1,000 denominations or is redeemable 
at the option of holders thereof on at least a weekly basis, then no 
minimum number of holders and no minimum public distribution of 
trading units shall be required.
    (b) The issue has a term of not less than one (1) year and not 
greater than thirty (30) years.
    (c) The issue must be the non-convertible debt of the Company.
    (d) The payment at maturity may or may not provide for a 
multiple of the direct or inverse performance of an underlying 
index, indexes or Reference Asset; however, in no event will a loss 
(negative payment) at maturity be accelerated by a multiple that 
exceeds twice the performance of an underlying index, indexes or 
Reference Asset.
    (e) The Company will be expected to have a minimum tangible net 
worth in excess of $250,000,000 and to exceed by at least 20% the 
earnings requirements set forth in Rule 5405(b)(1)(A). In the 
alternative, the Company will be expected: (i) To have a minimum 
tangible net worth of $150,000,000 and to exceed by at least 20% the 
earnings requirement set forth in Rule 5405(b)(1)(A), and (ii) not 
to have issued securities where the original issue price of all the 
Company's other index-linked note offerings (combined with index-
linked note offerings of the Company's affiliates) listed on a 
national securities exchange exceeds 25% of the Company's net worth.
    (f) The Company is in compliance with Rule 10A-3 under the Act.
    \9\ See supra note 3.
---------------------------------------------------------------------------

Linked Securities
    Proposed Rule 5710(k) would adopt listing standards for the various 
Linked Securities.
Equity Index-Linked Securities
Initial Listing Criteria
    Proposed Rule 5710(k)(i)(A) would set forth the initial listing 
criteria for Equity Index-Linked Securities found in current Rule 
5710(g), which would be deleted and replaced in proposed Rule 
5710(k)(i)(A). Specifically:
    In the case of an Equity Index-Linked Security, each underlying 
index is required to have at least ten (10) component securities. In 
addition, the index or indexes to which the security is linked shall 
either: (1) Have been reviewed and approved for the trading of options 
or other derivatives by the Commission under Section 19(b)(2) of the 
Act and rules thereunder, and the conditions set forth in the 
Commission's approval order, including comprehensive surveillance 
sharing agreements for non-U.S. stocks, continue to be satisfied, or 
(2) the index or indexes meet the following criteria:
     Each component security has a minimum market value of at 
least $75 million, except that for each of the lowest weighted 
component securities in the index that in the aggregate account for no 
more than 10% of the weight of the index, the market value can be at 
least $50 million;
     Each component security shall have trading volume in each 
of the last six months of not less than 1,000,000 shares, except that 
for each of the lowest weighted component securities in the index that 
in the aggregate account for no more than 10% of the weight of the 
index, the trading volume shall be at least 500,000 shares in each of 
the last six months;
     Indexes based upon the equal-dollar or modified equal-
dollar weighting method will be rebalanced at least semiannually;
     In the case of a capitalization-weighted or modified 
capitalization-weighted index, the lesser of the five highest weighted 
component securities in the index or the highest weighted component 
securities in the index that in the aggregate represent at least 30% of 
the total number of component securities in the index, each have an 
average monthly trading volume of at least 2,000,000 shares over the 
previous six months;
     No underlying component security will represent more than 
25% of the weight of the index, and the five highest weighted component 
securities in the index do not in the aggregate account for more than 
50% of the weight of the index (60% for an index consisting of fewer 
than 25 component securities);
     90% of the index's numerical value and at least 80% of the 
total number of component securities will meet the then current 
criteria for standardized option trading on a national securities 
exchange or a national securities association, provided, however, that 
an index will not be subject to this requirement if (a) no underlying 
component security represents more than 10% of the dollar weight of the 
index and (b) the index has a minimum of 20 components; and
     All component securities shall be either (A) securities 
(other than securities of a foreign issuer and American Depository 
Receipts (``ADRs'')) that are (i) issued by a 1934 Act reporting 
company or by an investment company registered under the Investment 
Company Act of 1940 that, in each case, has securities listed on a 
national securities exchange and (ii) an ``NMS stock'' (as defined in 
Rule 600 of Regulation NMS under the Act), or (B) securities of a 
foreign issuer or ADRs, provided that securities of a foreign issuer 
(including when they underlie ADRs) whose primary trading market 
outside the United States is not a member of the Intermarket 
Surveillance Group (``ISG'') or a party to a comprehensive surveillance 
sharing agreement with NASDAQ will not in the aggregate represent more 
than 20% of the dollar weight of the index.
Continued Listing Criteria
    Rule 5710(k)(i)(B) would adopt continued listing criteria for 
Equity Index-Linked Securities. Specifically, NASDAQ will commence 
delisting or removal proceedings (unless the Commission has approved 
the continued trading of the subject Equity Index-Linked Security), if 
any of the standards set forth above are not continuously maintained, 
except that:
     The criteria that no single component represent more than 
25% of the dollar weight of the index and the five highest dollar 
weighted components in the index cannot represent more than 50% (or 60% 
for indexes with less than 25 components) of the dollar weight of the 
index, need only be satisfied at the time the index is rebalanced; and
     Component stocks that in the aggregate account for at 
least 90% of the weight of the index each shall have a minimum global 
monthly trading volume of 500,000 shares, or minimum global notional 
volume traded per month of $12,500,000, averaged over the last six 
months.
    In connection with an Equity Index-Linked Security that is based on 
an index that has been reviewed and approved for the trading of options 
or other derivatives by the Commission under Section 19(b)(2) of the 
Act and rules thereunder and the conditions set forth in the 
Commission's approval order, NASDAQ will commence delisting or removal 
proceedings (unless the Commission has approved the continued trading 
of the subject Equity Index-Linked Security) if an underlying index or 
indexes fails to satisfy the maintenance standards or conditions for 
such index or indexes as set forth by the Commission in its order under 
Section 19(b)(2) of the Act approving the index or indexes for the 
trading of options or other derivatives.
    Additionally, NASDAQ will commence delisting or removal proceedings 
(unless the Commission has approved the continued trading of the 
subject Equity Index-Linked Security), under any of the following 
circumstances:
     If the aggregate market value or the principal amount of 
the Equity Index-Linked Securities publicly held is less than $400,000;
     If the value of the index or composite value of the 
indexes is no longer calculated or widely disseminated on at least a 
15-second basis with respect to indexes containing only securities 
listed on a national securities exchange, or on at least a 60-second 
basis with respect to indexes containing foreign country securities, 
provided, however, that, if the official index value does not change 
during some or all of the period when trading

[[Page 6836]]

is occurring on NASDAQ (for example, for indexes of foreign country 
securities, because of time zone differences or holidays in the 
countries where such indexes' component stocks trade) then the last 
calculated official index value must remain available throughout NASDAQ 
trading hours; or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    Equity-Linked Indexes will be rebalanced at least annually.
    The proposed rule change relating to Equity-Linked Securities is 
based on NYSEArca Equities Rule 5.2(j)(6)(B)(I).
Commodity-Linked Securities
    Proposed Rule 5710(k)(ii) would adopt the initial listing criteria 
(found in current Rule 5710(h), which would be deleted and replaced in 
proposed Rule 5710(k)(ii)(A)) and continued listing criteria for 
Commodity-Linked Securities.
Initial Listing Criteria
    The Reference Asset must meet one of the following criteria:
     The Reference Asset to which the security is linked shall 
have been reviewed and approved for the trading of Commodity-Related 
Securities or options or other derivatives by the Commission under 
Section 19(b)(2) of the Act and rules thereunder and the conditions set 
forth in the Commission's approval order, including with respect to 
comprehensive surveillance sharing agreements, continue to be 
satisfied; or
     The pricing information for each component of a Reference 
Asset other than a Currency must be derived from a market which is an 
ISG member or affiliate or with which NASDAQ has a comprehensive 
surveillance sharing agreement. Notwithstanding the previous sentence, 
pricing information for gold and silver may be derived from the London 
Bullion Market Association. The pricing information for each component 
of a Reference Asset that is a Currency must be either: (1) The 
generally accepted spot price for the currency exchange rate in 
question; or (2) derived from a market of which (a) is an ISG member or 
affiliate or with which NASDAQ has a comprehensive surveillance sharing 
agreement and (b) is the pricing source for a currency component of a 
Reference Asset that has previously been approved by the Commission. A 
Reference Asset may include components representing not more than 10% 
of the dollar weight of such Reference Asset for which the pricing 
information is derived from markets that do not meet the requirements 
of subparagraph (2) of the proposed rule; provided, however, that no 
single component subject to this exception exceeds 7% of the dollar 
weight of the Reference Asset. The term ``Currency,'' as used in the 
proposed rule, means one or more currencies, or currency options, 
futures, or other currency derivatives, Commodity-Related Securities if 
their underlying Commodities are currencies or currency derivatives, or 
a basket or index of any of the foregoing.
Continued Listing Standards
    Proposed Rule 5710(k)(ii)(B) would establish continued listing 
criteria for Commodity-Linked Securities. Specifically, NASDAQ will 
commence delisting or removal proceedings if any of the initial listing 
criteria described above are not continuously maintained. Additionally, 
NASDAQ will also commence delisting or removal proceedings under any of 
the following circumstances:
     If the aggregate market value or the principal amount of 
the Commodity-Linked Securities publicly held is less than $400,000;
     If the value of the Commodity Reference Asset is no longer 
calculated or available and a new Commodity Reference Asset is 
substituted, unless the new Commodity Reference Asset meets the 
requirements of the proposed rule; or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    The proposed rule change relating to Commodity-Linked Securities is 
based on NYSEArca Equities Rule 5.2(j)(6)(B)(II).
Fixed Income Index-Linked Securities
    Proposed Rule 5710(k)(iii) would set forth the listing criteria for 
Fixed Income Index-Linked Securities.
Initial Listing Standards
    Proposed Rule 5710(k)(iii)(A) states that either the Fixed Income 
Reference Asset to which the security is linked shall have been 
reviewed and approved for the trading of options, Index Fund Shares, or 
other derivatives by the Commission under Section 19(b)(2) of the 
Securities Exchange Act of 1934 and rules thereunder and the conditions 
set forth in the Commission's approval order continue to be satisfied 
or the issue must meet the following initial listing criteria:
     Components of the Fixed Income Reference Asset that in the 
aggregate account for at least 75% of the weight of the Fixed Income 
Reference Asset must each have a minimum original principal amount 
outstanding of $100 million or more;
     A component of the Fixed Income Reference Asset may be a 
convertible security, however, once the convertible security component 
converts to the underlying equity security, the component is removed 
from the Fixed Income Reference Asset;
     No component of the Fixed Income Reference Asset 
(excluding Treasury Securities and GSE Securities) will represent more 
than 30% of the dollar weight of the Fixed Income Reference Asset, and 
the five highest dollar weighted components in the Fixed Income 
Reference Asset will not in the aggregate account for more than 65% of 
the dollar weight of the Fixed Income Reference Asset;
     An underlying Fixed Income Reference Asset (excluding one 
consisting entirely of exempted securities) must include a minimum of 
13 non-affiliated issuers; and
     Component securities that in the aggregate account for at 
least 90% of the dollar weight of the Fixed Income Reference Asset must 
be from one of the following: (a) Issuers that are required to file 
reports pursuant to Sections 13 and 15(d) of the Act; or (b) issuers 
that have a worldwide market value of outstanding common equity held by 
non-affiliates of $700 million or more; or (c) issuers that have 
outstanding securities that are notes, bonds, debentures, or evidence 
of indebtedness having a total remaining principal amount of at least 
$1 billion; or (d) exempted securities as defined in Section 3(a)(12) 
of the Act, or (e) issuers that are a government of a foreign country 
or a political subdivision of a foreign country.
    In addition, the value of the Fixed Income Reference Asset must be 
widely disseminated to the public by one or more major market vendors 
at least once per business day.
Continued Listing Standards
    Proposed Rule 5710(k)(iii)(C) would provide that NASDAQ will 
commence delisting or removal proceedings if any of the initial listing 
criteria described above are not continuously maintained, and that 
NASDAQ will also commence delisting or removal proceedings:
     If the aggregate market value or the principal amount of 
the Fixed Income Index-Linked Securities publicly held is less than 
$400,000;
     If the value of the Fixed Income Reference Asset is no 
longer calculated or available and a new Fixed Income Reference Asset 
is substituted, unless the new Fixed Income Reference Asset

[[Page 6837]]

meets the requirements of proposed Rule 5710(k); or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings inadvisable.
    The proposed rule change relating to Fixed-Income Linked Securities 
is based on NYSEArca Equities Rule 5.2(j)(6)(B)(IV).
Futures-Linked Securities
    Proposed Rule 5710(k)(iv) would establish listing standards for 
Futures-Linked Securities.
Initial Listing Standards
    Proposed Rule 5710(k)(iv)(A) states that the issue must meet either 
of the following the initial listing standards:
     The Futures Reference Asset to which the security is 
linked shall have been reviewed and approved for the trading of 
Futures-Linked Securities or options or other derivatives by the 
Commission under Section 19(b)(2) of the Act and rules thereunder and 
the conditions set forth in the Commission's approval order, including 
with respect to comprehensive surveillance sharing agreements, continue 
to be satisfied, or
     The pricing information for components of a Futures 
Reference Asset must be derived from a market which is an ISG member or 
affiliate or with which NASDAQ has a comprehensive surveillance sharing 
agreement. A Futures Reference Asset may include components 
representing not more than 10% of the dollar weight of such Futures 
Reference Asset for which the pricing information is derived from 
markets that do not meet the requirements of proposed Rule 
5710(k)(iv)(A)(2); provided, however, that no single component subject 
to this exception exceeds 7% of the dollar weight of the Futures 
Reference Asset.
    In addition, the issue must meet both of the following initial 
listing criteria:
     The value of the Futures Reference Asset must be 
calculated and widely disseminated by one or more major market data 
vendors on at least a 15-second basis during the Regular Market 
Session, as defined in Rule 4120; and
     In the case of Futures-Linked Securities that are 
periodically redeemable, the value of a share of each series 
(``Intraday Indicative Value'') of the subject Futures-Linked 
Securities must be calculated and widely disseminated by NASDAQ or one 
or more major market data vendors on at least a 15-second basis during 
the Regular Market Session (as defined in Rule 4120).
Continued Listing Standards
    Proposed Rule 5710(k)(iv)(C) states that NASDAQ will commence 
delisting or removal proceedings if any of the initial listing criteria 
described above are not continuously maintained, and that NASDAQ will 
also commence delisting or removal proceedings under any of the 
following circumstances:
     If the aggregate market value or the principal amount of 
the Futures-Linked Securities publicly held is less than $400,000;
     If the value of the Futures Reference Asset is no longer 
calculated or available and a new Futures Reference Asset is 
substituted, unless the new Futures Reference Asset meets the 
requirements of proposed Rule 5710(k); or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    The proposed rule change relating to Futures-Linked Securities is 
based on NYSEArca Equities Rule 5.2(j)(6)(B)(V).
Multifactor Index-Linked Securities
    Proposed Rule 5710(k)(v) would govern the listing standards for 
Multifactor Index-Linked Securities.
Initial Listing Standards
    Proposed Rule 5710(k)(v)(A) states that the issue must meet one of 
the following initial listing standards:
     Each component of the Multifactor Reference Asset to which 
the security is linked shall have been reviewed and approved for the 
trading of either options, Index Fund Shares, or other derivatives 
under Section 19(b)(2) of the Act and rules thereunder and the 
conditions set forth in the Commission's approval order continue to be 
satisfied; or
     Each Reference Asset included in the Multifactor Reference 
Asset must meet the applicable initial and continued listing criteria 
set forth in the relevant subsection of proposed Rule 5710(k).
    In addition to one of the initial listing standards set forth 
above, proposed Rule 5710(k)(v)(B) would state that the issue must meet 
both of the following initial listing criteria:
     The value of the Multifactor Reference Asset must be 
calculated and widely disseminated to the public on at least a 15-
second basis during the time the Multifactor Index-Linked Security 
trades on NASDAQ; and
     In the case of Multifactor Index-Linked Securities that 
are periodically redeemable, the indicative value of the Multifactor 
Index-Linked Securities must be calculated and widely disseminated by 
one or more major market data vendors on at least a 15-second basis 
during the time the Multifactor Index-Linked Securities trade on 
NASDAQ.
Continued Listing Criteria
    Proposed Rule 5710(k)(v)(C) states that NASDAQ will commence 
delisting or removal proceedings:
     If any of the initial listing criteria described above are 
not continuously maintained;
     If the aggregate market value or the principal amount of 
the Multifactor Index-Linked Securities publicly held is less than 
$400,000;
     If the value of the Multifactor Reference Asset is no 
longer calculated or available and a new Multifactor Reference Asset is 
substituted, unless the new Multifactor Reference Asset meets the 
requirements of proposed Rule 5710(k); or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    The proposed rule change relating to Multifactor Index-Linked 
Securities is based on NYSEArca Equities Rule 5.2(j)(6)(B)(VI).
Regulatory Requirements for Registered Market Makers in Linked 
Securities
    Commentary .01 to proposed Rule 5710(k) would establish certain 
regulatory requirements for registered Market Makers in Linked 
Securities. Specifically, the registered Market Maker in Linked 
Securities must file with NASDAQ, in a manner prescribed by NASDAQ, and 
keep current a list identifying all accounts for trading in the 
Reference Asset components, the commodities, currencies or futures 
underlying the Reference Asset components, or any derivative 
instruments based on the Reference Asset or based on any Reference 
Asset component or any physical commodity, currency or futures 
underlying a Reference Asset component, which the registered Market 
Maker may have or over which it may exercise investment discretion. No 
registered Market Maker in Linked Securities would be permitted to 
trade in the Reference Asset components, the commodities, currencies or 
futures underlying the Reference Asset components, or any derivative 
instruments based on the Reference Asset or based on any Reference 
Asset component or any physical commodity, or futures currency 
underlying a Reference Asset component, in an account in which a 
registered Market Maker, directly or

[[Page 6838]]

indirectly, controls trading activities, or has a direct interest in 
the profits or losses thereof, which has not been reported to NASDAQ as 
required by the proposed Rule.
    In addition to the existing obligations under NASDAQ rules 
regarding the production of books and records,\10\ the registered 
Market Maker in Linked Securities would be required to make available 
to NASDAQ such books, records or other information pertaining to 
transactions by such entity or any limited partner, officer or approved 
person thereof, registered or nonregistered employee affiliated with 
such entity for its or their own accounts in the Reference Asset 
components, the commodities, currencies or futures underlying the 
Reference Asset components, or any derivative instruments based on the 
Reference Asset or based on any Reference Asset component or any 
physical commodity, currency or futures underlying a Reference Asset 
component, as may be requested by NASDAQ.
---------------------------------------------------------------------------

    \10\ See, e.g., NASDAQ Rule 4625.
---------------------------------------------------------------------------

    The proposed rule change relating to regulatory requirements for 
registered Market Makers in Linked Securities is based on NYSEArca 
Equities Rule 5.2(j)(6), Commentary .01.
Proposed Rule 5711--Trading of Certain Derivative Securities
    NASDAQ proposes to adopt new Rule 5711, Trading of Certain 
Derivative Securities, which would set forth listing standards for the 
securities described below.
Index-Linked Exchangeable Notes
    Proposed Rule 5711(a) would adopt listing standards for Index-
Linked Exchangeable Notes.
Description
    Index-Linked Exchangeable Notes are exchangeable debt securities 
that are exchangeable at the option of the holder (subject to the 
requirement that the holder in most circumstances exchange a specified 
minimum amount of notes), on call by the issuer, or at maturity for a 
cash amount (``Cash Value Amount'') based on the reported market prices 
of the underlying stocks of an underlying index. Each Index-Linked 
Exchangeable Note is intended to provide investors with an instrument 
that closely tracks the underlying index. Notwithstanding that the 
notes are linked to an index, they will trade as a single security.
Initial Listing Standards
    Index-Linked Exchangeable Notes will be considered for listing and 
trading by NASDAQ pursuant to Rule 19b-4(e) under the Act,\11\ 
provided:
---------------------------------------------------------------------------

    \11\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

     Both the issue and the issuer of such security meet the 
requirements of Rule 5730, Listing Requirements for Securities Not 
Specified Above (Other Securities), except that the minimum public 
distribution shall be 150,000 notes with a minimum of 400 public note-
holders, except, if traded in thousand dollar denominations or 
redeemable at the option of the holders thereof on at least a weekly 
basis, then no minimum public distribution and no minimum number of 
holders.
     The issue has a minimum term of one year.
     The issuer will be expected to have a minimum tangible net 
worth in excess of $250,000,000, and to otherwise substantially exceed 
the earnings requirements set forth in Rule 5405(b). In the 
alternative, the issuer will be expected: (A) to have a minimum 
tangible net worth of $150,000,000 and to otherwise substantially 
exceed the earnings requirements set forth in Rule 5405(b); and (B) not 
to have issued Index-Linked Exchangeable Notes where the original issue 
price of all the issuer's other Index-Linked Exchangeable Note 
offerings (combined with other index-linked exchangeable note offerings 
of the issuer's affiliates) listed on a national securities exchange 
exceeds 25% of the issuer's net worth.
     The index to which an exchangeable-note is linked shall 
either be (A) indices that have been created by a third party and been 
reviewed and have been approved for the trading of options or other 
derivatives securities (``Third-Party Index'') either by the Commission 
under Section 19(b)(2) of the Act and rules thereunder or by NASDAQ 
under rules adopted pursuant to Rule 19b-4(e); or (B) indices which the 
issuer has created and for which NASDAQ will have obtained approval 
from either the Commission pursuant to Section 19(b)(2) and rules 
thereunder or from NASDAQ under rules adopted pursuant to Rule 19b-4(e) 
(``Issuer Index''). The Issuer Indices and their underlying securities 
must meet one of the following: (A) The procedures and criteria set 
forth in NOM Rules, Chapter XIV, Section 6(b) and (c), or (B) the 
criteria set forth in Rules 5715(b)(3) and (4), the index concentration 
limits set forth in NOM Rule Chapter XIV, Section 6, and NOM Rule 
Chapter XIV, Section 6(b)(12) insofar as it relates to NOM Rule Chapter 
XIV, Section 6(b)(6). Index-Linked Exchangeable Notes will be treated 
as equity instruments.
Continued Listing Standards
    Beginning twelve months after the initial issuance of a series of 
Index-Linked Exchangeable Notes, NASDAQ will consider the suspension of 
trading in or removal from listing of that series of Index-Linked 
Exchangeable Notes under any of the following circumstances:
     If the series has fewer than 50,000 notes issued and 
outstanding;
     If the market value of all Index-Linked Exchangeable Notes 
of that series issued and outstanding is less than $1,000,000; or
     If such other event shall occur or such other condition 
exists which in the opinion of NASDAQ makes further dealings of NASDAQ 
inadvisable.
    The proposed rule change relating to Index-Linked Exchangeable 
Notes is based on NYSEArca Equities Rule 5.2(j)(4).
Equity Gold Shares
Description
    Proposed Rule 5711(b) would apply to Equity Gold Shares that 
represent units of fractional undivided beneficial interest in, and 
ownership of, the Equity Gold Trust. While Equity Gold Shares are not 
technically ``Index Fund Shares,'' and thus are not covered by NASDAQ 
Rule 5705, all other NASDAQ rules that reference ``Index Fund Shares'' 
shall also apply to Equity Gold Shares.
Applicability
    Except to the extent that specific provisions in proposed Rule 
5711(b) govern, or unless the context otherwise requires, the 
provisions of all other NASDAQ Rules and policies would be applicable 
to the trading of Equity Gold Shares on NASDAQ. The provisions set 
forth in proposed Rule 5711(d) relating to Commodity-Based Trust Shares 
would also apply to Equity Gold Shares.
    The proposed rule change relating to Equity Gold Shares is based on 
NYSEArca Equities Rule 5.2(j)(5).
Trust Certificates
    Proposed Rule 5711(c) would govern the listing standards applicable 
to Trust Certificates. NASDAQ will consider for trading, whether by 
listing or pursuant to unlisted trading privileges, Trust Certificates.
Description
    Trust Certificates represent an interest in a special purpose trust 
(``Trust'') created pursuant to a trust agreement. The Trust will only 
issue Trust Certificates. Trust Certificates may or may not provide for 
the repayment of

[[Page 6839]]

the original principal investment amount. Trust Certificates pay an 
amount at maturity which is based upon the performance of specified 
assets as set forth below:
     An underlying index or indexes of equity securities 
(``Equity Reference Asset'');
     Instruments that are direct obligations of the issuing 
company, either exercisable throughout their life (i.e., American 
style) or exercisable only on their expiration date (i.e., European 
style), entitling the holder to a cash settlement in U.S. dollars to 
the extent that the foreign or domestic index has declined below (for a 
put warrant) or increased above (for a call warrant) the pre-stated 
cash settlement value of the index (``Index Warrants''); or
     A combination of two or more Equity Reference Assets or 
Index Warrants.
    NASDAQ will file separate proposals under Section 19(b) of the Act 
before trading, either by listing or pursuant to unlisted trading 
privileges, Trust Certificates.
Continued Listing Standards
    Commentary .01 to proposed Rule 5711(c) would state that NASDAQ 
will commence delisting or removal proceedings with respect to an issue 
of Trust Certificates (unless the Commission has approved the continued 
trading of such issue), under any of the following circumstances:
     If the aggregate market value or the principal amount of 
the securities publicly held is less than $400,000;
     If the value of the index or composite value of the 
indexes is no longer calculated or widely disseminated on at least a 
15-second basis with respect to indexes containing only securities 
listed on a national securities exchange, or on at least a 60-second 
basis with respect to indexes containing foreign country securities; 
provided, however, that, if the official index value does not change 
during some or all of the period when trading is occurring on the 
NASDAQ Stock Market (for example, for indexes of foreign country 
securities, because of time zone differences or holidays in the 
countries where such indexes' component stocks trade) then the last 
calculated official index value must remain available throughout NASDAQ 
trading hours; or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
Other Provisions
    Proposed Commentary .02 to Rule 5711(c) would provide that the 
stated term of the Trust shall be as stated in the Trust prospectus. 
However, a Trust may be terminated under such earlier circumstances as 
may be specified in the Trust prospectus.
    Proposed Commentary .03 to Rule 5711(c) would provide that the 
trustee of a Trust must be a trust company or banking institution 
having substantial capital and surplus and the experience and 
facilities for handling corporate trust business. In cases where, for 
any reason, an individual has been appointed as trustee, a qualified 
trust company or banking institution must be appointed co-trustee. No 
change is to be made in the trustee of a listed issue without prior 
notice to and approval of NASDAQ.
    Proposed Commentary .04 to Rule 5711(c) would provide that voting 
rights will be as set forth in the applicable Trust prospectus.
    Proposed Commentary .05 to Rule 5711(c) would provide that NASDAQ 
will implement written surveillance procedures for Trust Certificates.
    Proposed Commentary .06 to Rule 5711(c) would provide that the 
Trust Certificates will be subject to NASDAQ's equity trading rules.
    Proposed Commentary .07 to Rule 5711(c) would provide that prior to 
the commencement of trading of a particular Trust Certificates listing 
pursuant to this Rule, NASDAQ will evaluate the nature and complexity 
of the issue and, if appropriate, distribute a circular to Members 
providing guidance regarding compliance responsibilities (including 
suitability recommendations and account approval) when handling 
transactions in Trust Certificates.
    Proposed Commentary .08 to Rule 5711(c) would provide that Trust 
Certificates may be exchangeable at the option of the holder into 
securities that participate in the return of the applicable underlying 
asset. In the event that the Trust Certificates are exchangeable at the 
option of the holder and contain an Index Warrant, then a Member must 
ensure that the Member's account is approved for options trading in 
accordance with the rules of the NASDAQ Options Market (``NOM'') in 
order to exercise such rights.
    Proposed Commentary .09 to Rule 5711(c) would provide that Trust 
Certificates may pass-through periodic payments of interest and 
principle of the underlying securities.
    Proposed Commentary .10 to Rule 5711(c) would provide that the 
Trust payments may be guaranteed pursuant to a financial guaranty 
insurance policy which may include swap agreements.
    Proposed Commentary .11 to Rule 5711(c) would provide that the 
Trust Certificates may be subject to early termination or call 
features.
    The proposed rule change relating to Trust Certificates is based on 
NYSEArca Equities Rule 5.2(j)(7).
Commodity-Based Trust Shares
    Proposed Rule 5711(d) would permit the listing and trading, or 
trading pursuant to unlisted trading privileges, of Commodity-Based 
Trust Shares on NASDAQ. Proposed Rule 5711(d) would be applicable only 
to Commodity-Based Trust Shares. Except to the extent inconsistent with 
this Rule, or unless the context otherwise requires, the provisions of 
the trust issued receipts rules, Bylaws, and all other rules and 
procedures of the Board of Directors shall be applicable to the trading 
on NASDAQ of such securities. Commodity-Based Trust Shares are included 
within the definition of ``security'' or ``securities'' as such terms 
are used in the Bylaws and Rules of NASDAQ.
Description
    ``Commodity-Based Trust Shares,'' as defined in proposed Rule 
5711(d)(iii)(A), means a security (1) that is issued by a Trust that 
holds a specified commodity deposited with the Trust; (2) that is 
issued by such Trust in a specified aggregate minimum number in return 
for a deposit of a quantity of the underlying commodity; and (3) that, 
when aggregated in the same specified minimum number, may be redeemed 
at a holder's request by such Trust which will deliver to the redeeming 
holder the quantity of the underlying commodity. Proposed Rule 
5711(d)(iii)(B) states that the term ``commodity'' is defined in 
Section 1(a)(4) of the Commodity Exchange Act.
    Proposed Rule 5711(d)(iv) states that NASDAQ may trade, either by 
listing or pursuant to unlisted trading privileges, Commodity-Based 
Trust Shares based on an underlying commodity. Each issue of a 
Commodity-Based Trust Share will be designated as a separate series and 
will be identified by a unique symbol.
Initial Listing Standards
    Proposed Rule 5711(d)(v)(A) states that NASDAQ will establish a 
minimum number of Commodity-Based Trust Shares required to be 
outstanding at the time of commencement of trading on NASDAQ.

[[Page 6840]]

Continued Listing Standards
    Proposed Rule 5711(d)(v)(B) provides that following the initial 12 
month period following commencement of trading on NASDAQ of Commodity-
Based Trust Shares, NASDAQ will consider the suspension of trading in 
or removal from listing of such series under any of the following 
circumstances if:
     The Trust has more than 60 days remaining until 
termination and there are fewer than 50 record and/or beneficial 
holders of Commodity-Based Trust Shares for 30 or more consecutive 
trading days;
     The Trust has fewer than 50,000 receipts issued and 
outstanding;
     The market value of all receipts issued and outstanding is 
less than $1,000,000;
     The value of the underlying commodity is no longer 
calculated or available on at least a 15-second delayed basis from a 
source unaffiliated with the sponsor, Trust, custodian or NASDAQ or 
NASDAQ stops providing a hyperlink on its Web site to any such 
unaffiliated commodity value;
     The Intraday Indicative Value \12\ is no longer made 
available on at least a 15-second delayed basis; or
---------------------------------------------------------------------------

    \12\ The Intraday Indicative Value is an estimate, updated at 
least every 15 seconds, of the value of a share of each series 
during NASDAQ's Regular Market Session (as defined in Rule 
4120(b)(4)(D)). See, e.g., NASDAQ Rules 5705(b)(3)(C) and 
5705(b)(6)(A).
---------------------------------------------------------------------------

     Such other event shall occur or condition exists which in 
the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
Other Provisions
    Upon termination of a Trust, NASDAQ requires that Commodity-Based 
Trust Shares issued in connection with such entity Trust be removed 
from NASDAQ listing. A Trust may terminate in accordance with the 
provisions of the Trust prospectus, which may provide for termination 
if the value of the Trust falls below a specified amount.
    Proposed Rule 5711(d)(v)(C) provides that the stated term of the 
Trust shall be as stated in the Trust prospectus. However, a Trust may 
be terminated under such earlier circumstances as may be specified in 
the Trust prospectus.
    Proposed Rule 5711(d)(v)(D) would apply the following requirements 
to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(d)(v)(E) states that voting rights shall be as 
set forth in the applicable Trust prospectus.
    Proposed Rules 5711(d)(vi) and (vii) describe the limitation of 
NASDAQ liability and requirements for Market Makers in Commodity-Based 
Trust Shares (see below for a general discussion of these 
requirements).
    Commentary .01 to proposed NASDAQ Rule 5711(d) provides that a 
Commodity-Based Trust Share is a Trust Issued Receipt that holds a 
specified commodity deposited with the Trust.
    Commentary .02 to proposed NASDAQ Rule 5711(d) provides that NASDAQ 
requires that Members provide all purchasers of newly issued Commodity-
Based Trust Shares a prospectus for the series of Commodity-Based Trust 
Shares.
    Commentary .03 to proposed NASDAQ Rule 5711(d) provides that 
transactions in Commodity-Based Trust Shares will occur during the 
trading hours specified in Rule 4120.
    Commentary .04 to proposed NASDAQ Rule 5711(d) provides that NASDAQ 
will file separate proposals under Section 19(b) of the Exchange Act 
before the listing and/or trading of Commodity-Based Trust Shares.
    The proposed rule change relating to Commodity-Based Trust Shares 
is based on NYSEArca Equities Rule 8.201.
Currency Trust Shares
    NASDAQ proposes to adopt new NASDAQ Rule 5711(e) for the purpose of 
permitting the listing and trading, or trading pursuant to unlisted 
trading privileges, of Currency Trust Shares. Proposed Rule 5711(e) 
would be applicable only to Currency Trust Shares. Except to the extent 
inconsistent with the proposed Rule, or unless the context otherwise 
requires, the provisions of the trust issued receipts rules, Bylaws, 
and all other rules and procedures of the Board of Directors shall be 
applicable to the trading on NASDAQ of such securities. Currency Trust 
Shares are included within the definition of ``security'' or 
``securities'' as such terms are used in the Bylaws and Rules of 
NASDAQ.
Description
    Proposed Rule 5711(e)(iii) provides that the term ``Currency Trust 
Shares'' as used in these proposed rules means, unless the context 
otherwise requires, a security that:
     Is issued by a Trust that holds a specified non-U.S. 
currency or currencies deposited with the Trust;
     When aggregated in some specified minimum number may be 
surrendered to the Trust by an Authorized Participant (as defined in 
the Trust's prospectus) to receive the specified non-U.S. currency or 
currencies; and
     Pays beneficial owners interest and other distributions on 
the deposited non-U.S. currency or currencies, if any, declared and 
paid by the Trust.
    Proposed Rule 5711(e)(iv) states that NASDAQ may trade, either by 
listing or pursuant to unlisted trading privileges, Currency Trust 
Shares that hold a specified non-U.S. currency or currencies. Each 
issue of Currency Trust Shares would be designated as a separate series 
and shall be identified by a unique symbol.
Initial Listing Standards
    NASDAQ will establish a minimum number of Currency Trust Shares 
required to be outstanding at the time of commencement of trading on 
NASDAQ.
Continued Listing Standards
    Proposed Rule 5711(e)(v)(B) provides that, following the initial 12 
month period following commencement of trading on NASDAQ of Currency 
Trust Shares, NASDAQ will consider the suspension of trading in or 
removal from listing of such series under any of the following 
circumstances:
     If the Trust has more than 60 days remaining until 
termination and there are fewer than 50 record and/or beneficial 
holders of Currency Trust Shares for 30 or more consecutive trading 
days;
     If the Trust has fewer than 50,000 Currency Trust Shares 
issued and outstanding;
     If the market value of all Currency Trust Shares issued 
and outstanding is less than $1,000,000;
     If the value of the applicable non-U.S. currency is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the sponsor, Trust, custodian or NASDAQ 
or NASDAQ stops providing a hyperlink on its Web site to any such 
unaffiliated applicable non-U.S. currency value;
     If the Intraday Indicative Value is no longer made 
available on at least a 15-second delayed basis; or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    Upon termination of a Trust, NASDAQ would require that Currency

[[Page 6841]]

Trust Shares issued in connection with such entity Trust be removed 
from NASDAQ listing. A Trust may terminate in accordance with the 
provisions of the Trust prospectus, which may provide for termination 
if the value of the Trust falls below a specified amount.
Other
    Proposed Rule 5711(e)(v)(C) states that the stated term of the 
Trust shall be as stated in the Trust prospectus. However, a Trust may 
be terminated under such earlier circumstances as may be specified in 
the Trust prospectus.
    Proposed Rule 5711(e)(v)(D) states that the following requirements 
apply to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(e)(v)(E) states that voting rights shall be as 
set forth in the applicable Trust prospectus.
    Proposed Rules 5711(e)(vi) and (vii) set forth the requirements 
respecting limitation of NASDAQ liability and Market Maker Accounts 
(see below for a general discussion of these requirements).
    Proposed Rule 5711(e)(viii) states that NASDAQ may submit a rule 
filing pursuant to Section 19(b)(2) of the Act to permit the listing 
and trading of Currency Trust Shares that do not otherwise meet the 
standards set forth in Commentary .04 to proposed Rule 5711(e).
    Commentary .01 to proposed Rule 5711(e) states that a Currency 
Trust Share is a Trust Issued Receipt that holds a specified non-U.S. 
currency or currencies deposited with the Trust.
    Commentary .02 to proposed Rule 5711(e) states that NASDAQ requires 
that Members provide all purchasers of newly issued Currency Trust 
Shares a prospectus for the series of Currency Trust Shares.
    Commentary .03 to proposed Rule 5711(e) provides that transactions 
in Currency Trust Shares will occur during the trading hours specified 
in NASDAQ Rule 4120.
    Commentary .04 to proposed Rule 5711(e) provides that NASDAQ may 
approve an issue of Currency Trust Shares for listing and/or trading 
(including pursuant to unlisted trading privileges) pursuant to Rule 
19b-4(e) under the Act. Such issue shall satisfy the criteria set forth 
in the proposed rule, together with the following criteria:
     A minimum of 100,000 shares of a series of Currency Trust 
Shares is required to be outstanding at commencement of trading (this 
would not apply to issues trading pursuant to unlisted trading 
privileges);
     The value of the applicable non-U.S. currency, currencies 
or currency index must be disseminated by one or more major market data 
vendors on at least a 15-second delayed basis;
     The Intraday Indicative Value must be calculated and 
widely disseminated by NASDAQ or one or more major market data vendors 
on at least a 15-second basis during the Regular Market Session (as 
defined in NASDAQ Rule 4120; and
     NASDAQ will implement written surveillance procedures 
applicable to Currency Trust Shares.
    Commentary .05 to proposed Rule 5711(e) states that if the value of 
a Currency Trust Share is based in whole or in part on an index that is 
maintained by a broker-dealer, the broker-dealer would be required to 
erect a ``firewall'' around the personnel responsible for the 
maintenance of such index or who have access to information concerning 
changes and adjustments to the index, and the index shall be calculated 
by a third party who is not a broker-dealer. Additionally, any advisory 
committee, supervisory board or similar entity that advises an index 
licensor or administrator or that makes decisions regarding the index 
or portfolio composition, methodology and related matters must 
implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the applicable index or portfolio.
    Commentary .06 to proposed Rule 5711(e) provides that Currency 
Trust Shares will be subject to NASDAQ's equity trading rules.
Trading Halts
    Proposed Commentary .07 to Rule 5711(e) states that if the Intraday 
Indicative Value or the value of the non-U.S. currency or currencies or 
the currency index applicable to a series of Currency Trust Shares is 
not being disseminated as required, NASDAQ may halt trading during the 
day on which such interruption first occurs. If such interruption 
persists past the trading day in which it occurred, NASDAQ will halt 
trading no later than the beginning of the trading day following the 
interruption. If NASDAQ becomes aware that the net asset value 
applicable to a series of Currency Trust Shares is not being 
disseminated to all market participants at the same time, it will halt 
trading in such series until such time as the net asset value is 
available to all market participants.
    The proposed rule change relating to Currency Trust Shares is based 
on NYSEArca Equities Rule 8.202.
Commodity Index Trust Shares
    NASDAQ will consider for trading, whether by listing or pursuant to 
unlisted trading privileges, Commodity Index Trust Shares that meet the 
criteria of proposed Rule 5711(f).
    Proposed Rule 5711(f)(ii) states that proposed Rule 5711(f) would 
be applicable only to Commodity Index Trust Shares. Except to the 
extent inconsistent with the proposed Rule, or unless the context 
otherwise requires, the provisions of the trust issued receipts rules, 
Bylaws, and all other rules and procedures of the Board of Directors 
shall be applicable to the trading on NASDAQ of such securities. 
Commodity Index Trust Shares are included within the definition of 
``security'' or ``securities'' as such terms are used in the Bylaws and 
Rules of NASDAQ.
Description
    Proposed Rule 5711(f)(iii) defines the term ``Commodity Index Trust 
Shares'' to mean, as used in these proposed Rules (unless the context 
otherwise requires), a security that (A) is issued by a Trust that (1) 
is a commodity pool as defined in the Commodity Exchange Act and 
regulations thereunder, and that is managed by a commodity pool 
operator registered with the Commodity Futures Trading Commission; and 
(2) that holds long positions in futures contracts on a specified 
commodity index, or interests in a commodity pool which, in turn, holds 
such long positions; and (B) when aggregated in some specified minimum 
number may be surrendered to the Trust by the beneficial owner to 
receive positions in futures contracts on a specified index and cash or 
short term securities. The term ``futures contract'' is commonly known 
as a ``contract of sale of a commodity for future delivery'' set forth 
in Section 2(a) of the Commodity Exchange Act.
    Proposed Rule 5711(f)(iv) states that NASDAQ may trade, either by 
listing or pursuant to unlisted trading privileges, Commodity Index 
Trust Shares based on one or more securities. The Commodity Index Trust 
Shares based on particular securities would be designated as a

[[Page 6842]]

separate series and would be identified by a unique symbol.
Initial Listing Standards
    Proposed Rule 5711(f)(v)(A) states that NASDAQ will establish a 
minimum number of Commodity Index Trust Shares required to be 
outstanding at the time of commencement of trading on NASDAQ.
Continued Listing Standards
    Under proposed Rule 5711(f)(v)(B), NASDAQ will consider the 
suspension of trading in or removal from listing of a series of 
Commodity Index Trust Shares under any of the following circumstances:
     Following the initial twelve-month period beginning upon 
the commencement of trading of the Commodity Index Trust Shares, there 
are fewer than 50 record and/or beneficial holders of Commodity Index 
Trust Shares for 30 or more consecutive trading days;
     If the value of the applicable underlying index is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the sponsor, the Trust or the trustee 
of the Trust;
     If the net asset value for the trust is no longer 
disseminated to all market participants at the same time;
     If the Intraday Indicative Value is no longer made 
available on at least a 15-second delayed basis; or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    Upon termination of a Trust, NASDAQ would require that Commodity 
Index Trust Shares issued in connection with such entity Trust be 
removed from NASDAQ listing. A Trust may terminate in accordance with 
the provisions of the Trust prospectus, which may provide for 
termination if the value of the Trust falls below a specified amount.
    Proposed Rule 5711(f)(v)(C) provides that the stated term of the 
Trust shall be as stated in the Trust prospectus. However, a Trust may 
be terminated under such earlier circumstances as may be specified in 
the Trust prospectus.
    Proposed Rule 5711(f)(v)(D) states that the following requirements 
apply to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(f)(v)(E) provides that voting rights shall be as 
set forth in the applicable Trust prospectus.
    Proposed Rules 5711(f)(vi) and (vii) set forth the requirements 
respecting limitation of NASDAQ liability and Market Maker Accounts 
(see below for a general discussion of these requirements).
    Commentary .01 to proposed Rule 5711(f) states that a Commodity 
Index Trust Share is a Trust Issued Receipt that holds long positions 
in futures contracts on a specified commodity index, or interests in a 
commodity pool which, in turn, holds such long positions, deposited 
with the Trust.
    Commentary .02 to proposed Rule 5711(f) states that NASDAQ requires 
that Members provide all purchasers of newly issued Commodity Index 
Trust Shares a prospectus for the series of Commodity Index Trust 
Shares.
    Commentary .03 to proposed Rule 5711(f) states that transactions in 
Commodity Index Trust Shares will occur during the trading hours 
specified in Rule 4120.
    Commentary .04 to proposed Rule 5711(f) states that NASDAQ will 
file separate proposals under Section 19(b) of the Act before trading, 
either by listing or pursuant to unlisted trading privileges, Commodity 
Index Trust Shares.
    The proposed rule change relating to Commodity Index Trust Shares 
is based on NYSEArca Equities Rule 8.202.
Commodity Futures Trust Shares
    Proposed Rule 5711(g) governs the listing of Commodity Futures 
Trust Shares. NASDAQ will consider for trading, whether by listing or 
pursuant to unlisted trading privileges, Commodity Futures Trust Shares 
that meet the criteria of proposed Rule 5711(g).
    Proposed Rule 5711(g)(ii) states that proposed Rule 5711(g) would 
apply only to Commodity Futures Trust Shares. Except to the extent 
inconsistent with the proposed Rule, or unless the context otherwise 
requires, the provisions of the trust issued receipts rules, Bylaws, 
and all other rules and procedures of the Board of Directors shall be 
applicable to the trading on NASDAQ of such securities. Commodity 
Futures Trust Shares are included within the definition of ``security'' 
or ``securities'' as such terms are used in the Bylaws and Rules of 
NASDAQ.
Description
    Proposed Rule 5711(g)(iii) states that the term ``Commodity Futures 
Trust Shares'' as used in the proposed Rules means, unless the context 
otherwise requires, a security that: (i) is issued by a Trust that is a 
commodity pool as defined in the Commodity Exchange Act and regulations 
thereunder, and that is managed by a commodity pool operator registered 
with the Commodity Futures Trading Commission, and holds positions in 
futures contracts that track the performance of a specified commodity, 
or interests in a commodity pool which, in turn, holds such positions; 
and (ii) is issued and redeemed daily in specified aggregate amounts at 
net asset value. The term ``futures contract'' is a ``contract of sale 
of a commodity for future delivery'' set forth in Section 2(a) of the 
Commodity Exchange Act. The term ``commodity'' is defined in Section 
1(a)(4) of the Commodity Exchange Act.
Designation of an Underlying Commodity Futures Contract
    Proposed Rule 5711(g)(iv) states that NASDAQ may trade, either by 
listing or pursuant to unlisted trading privileges, Commodity Futures 
Trust Shares based on an underlying commodity futures contract. Each 
issue of Commodity Futures Trust Shares shall be designated as a 
separate series and shall be identified by a unique symbol.
Initial Listing Standards
    Proposed Rule 5711(g)(v)(A) states that NASDAQ will establish a 
minimum number of Commodity Futures Trust Shares required to be 
outstanding at the time of commencement of trading on NASDAQ.
Continued Listing Standards
    Proposed Rule 5711(g)(v)(B) states that NASDAQ will consider the 
suspension of trading in or removal from listing of a series of 
Commodity Futures Trust Shares under any of the following 
circumstances:
     If, following the initial twelve-month period beginning 
upon the commencement of trading of the Commodity Futures Trust Shares: 
(1) the Trust has fewer than 50,000 Commodity Futures Trust Shares 
issued and outstanding; or (2) the market value of all Commodity 
Futures Trust Shares issued and outstanding is less than $1,000,000; or 
(3) there are fewer than 50 record and/or beneficial holders of 
Commodity Futures Trust Shares for 30 consecutive trading days;
     If the value of the underlying futures contracts is no 
longer calculated or available on at least a 15-second

[[Page 6843]]

delayed basis during NASDAQ's Regular Market Session (as defined in 
NASDAQ Rule 4120) from a source unaffiliated with the sponsor, the 
Trust or the trustee of the Trust;
     If the net asset value for the Trust is no longer 
disseminated to all market participants at the same time;
     If the Intraday Indicative Value is no longer disseminated 
on at least a 15-second delayed basis during NASDAQ's Regular Market 
Session (as defined in NASDAQ Rule 4120); or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    Upon termination of a Trust, NASDAQ requires that Commodity Futures 
Trust Shares issued in connection with such trust be removed from 
NASDAQ listing. A Trust will terminate in accordance with the 
provisions of the Trust prospectus.
    Proposed Rule 5711(g)(v)(C) states that the stated term of the 
Trust shall be as stated in the prospectus. However, a Trust may be 
terminated under such earlier circumstances as may be specified in the 
Trust prospectus.
    Proposed Rule 5711(g)(v)(D) states that the following requirements 
apply to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(g)(v)(E) states that voting rights shall be as 
set forth in the applicable Trust prospectus.
    Proposed Rules 5711(g)(vi) and (vii) describe the requirements for 
Market Makers and the limitation of NASDAQ liability in Commodity 
Futures Trust Shares (see below for a general discussion of these 
requirements).
    Proposed Rule 5711(g)(viii) states that NASDAQ will file separate 
proposals under Section 19(b) of the Act before listing and trading 
separate and distinct Commodity Futures Trust Shares designated on 
different underlying futures contracts.
    Commentary .01 to proposed Rule 5711(g) would require Members 
trading in Commodity Futures Trust Shares to provide all purchasers of 
newly issued Commodity Futures Trust Shares a prospectus for the series 
of Commodity Futures Trust Shares.
    Commentary .02 to proposed Rule 5711(g) states that transactions in 
Commodity Futures Trust Shares will occur during the trading hours 
specified in Rule 4120.
    Commentary .03 to proposed Rule 5711(g) states that if the Intraday 
Indicative Value or the value of the underlying futures contract is not 
being disseminated as required, NASDAQ may halt trading during the day 
in which the interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying futures contract 
occurs. If the interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying futures contract 
persists past the trading day in which it occurred, NASDAQ will halt 
trading no later than the beginning of the trading day following the 
interruption.
    In addition, if NASDAQ becomes aware that the net asset value with 
respect to a series of Commodity Futures Trust Shares is not 
disseminated to all market participants at the same time, it will halt 
trading in such series until such time as the net asset value is 
available to all market participants.
    Commentary .04 to proposed Rule 5711(g) states that NASDAQ's rules 
governing the trading of equity securities apply.
    Commentary .05 to proposed Rule 5711(g) states that NASDAQ will 
implement written surveillance procedures for Commodity Futures Trust 
Shares.
    The proposed rule change relating to Commodity Futures Trust Shares 
is based on NYSEArca Equities Rule 8.204.
Partnership Units
    Proposed Rule 5711(h) would govern the listing of Partnership 
Units. Under proposed Rule 5711(h)(i), NASDAQ will consider for 
trading, whether by listing or pursuant to unlisted trading privileges, 
Partnership Units that meet the criteria of proposed Rule 5711(h).
Description
    Under proposed Rule 5711(h)(ii), the following terms as used in the 
proposed Rule would, unless the context otherwise requires, have the 
meanings herein specified.
    Proposed Rule 5711(h)(ii)(A) states that the term ``commodity'' is 
defined in Section 1(a)(4) of the Commodity Exchange Act.
    Proposed Rule 5711(h)(ii)(B) defines a Partnership Unit for 
purposes of the proposed Rule as a security (a) that is issued by a 
partnership that invests in any combination of futures contracts, 
options on futures contracts, forward contracts, commodities and/or 
securities; and (b) that is issued and redeemed daily in specified 
aggregate amounts at net asset value.
    Proposed Rule 5711(h)(iii) states that NASDAQ may list and trade 
Partnership Units based on an underlying asset, commodity or security. 
Each issue of a Partnership Unit would be designated as a separate 
series and would be identified by a unique symbol.
Initial Listing Standards
    Proposed Rule 5711(h)(iv)(A) states that NASDAQ will establish a 
minimum number of Partnership Units required to be outstanding at the 
time of commencement of trading on NASDAQ.
Continued Listing Standards
    Proposed Rule 5711(h)(iv)(B) provides that NASDAQ will consider 
removal of Partnership Units from listing under any of the following 
circumstances:
     If, following the initial twelve month period from the 
date of commencement of trading of the Partnership Units, (a) the 
partnership has more than 60 days remaining until termination and there 
are fewer than 50 record and/or beneficial holders of the Partnership 
Units for 30 or more consecutive trading days; (b) the partnership has 
fewer than 50,000 Partnership Units issued and outstanding; or (c) the 
market value of all Partnership Units issued and outstanding is less 
than $1,000,000;
     If the value of the underlying benchmark investment, 
commodity or asset is no longer calculated or available on at least a 
15-second delayed basis or NASDAQ stops providing a hyperlink on its 
Web site to any such investment, commodity or asset value;
     If the Intraday Indicative Value is no longer made 
available on at least a 15- second delayed basis; or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    Upon termination of a partnership, NASDAQ requires that Partnership 
Units issued in connection with such partnership be removed from NASDAQ 
listing. A partnership will terminate in accordance with the provisions 
of the partnership prospectus.
    Proposed Rule 5711(h)(iv)(C) provides that the stated term of the 
partnership shall be as stated in the prospectus. However, such entity 
may be terminated under such earlier circumstances as may be specified 
in the Partnership prospectus.
    Proposed Rule 5711(h)(iv)(D) would adopt the following requirements 
that

[[Page 6844]]

apply to the general partner of a partnership:
     The general partner of a partnership must be an entity 
having substantial capital and surplus and the experience and 
facilities for handling partnership business. In cases where, for any 
reason, an individual has been appointed as general partner, a 
qualified entity must also be appointed as general partner.
     No change is to be made in the general partner of a listed 
issue without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(h)(iv)(E) states that voting rights shall be as 
set forth in the applicable partnership prospectus.
    Proposed Rule 5711(h)(v) and (vi) describe the limitation of NASDAQ 
liability and requirements for Market Makers in Partnership Units (see 
below for a general discussion of these requirements).
    Proposed Rule 5711(h)(vii) states that NASDAQ will file separate 
proposals under Section 19(b) of the Act before listing and trading 
separate and distinct Partnership Units designated on different 
underlying investments, commodities and/or assets.
    Commentary .01 to proposed Rule 5711(h) states that NASDAQ requires 
that Members provide to all purchasers of newly issued Partnership 
Units a prospectus for the series of Partnership Units.
    The proposed rule change relating to Partnership Units is based on 
NYSEArca Equities Rule 8.300.
Trust Units
    NASDAQ proposes to add new Rule 5711(i) in order to permit trading, 
either by listing or pursuant to unlisted trading privileges, of Trust 
Units.
    Proposed Rule 5711(i)(i) states that the provisions in proposed 
Rule 5711(i) are applicable only to Trust Units. In addition, except to 
the extent inconsistent with this Rule, or unless the context otherwise 
requires, the rules and procedures of the Board of Directors shall be 
applicable to the trading on NASDAQ of such securities. Trust Units are 
included within the definition of ``security,'' ``securities'' and 
``derivative securities products'' as such terms are used in the Rules 
of NASDAQ.
Description
    Proposed Rule 5711(i)(ii) states that the following terms as used 
in the proposed Rule shall, unless the context otherwise requires, have 
the meanings herein specified:
     The term ``commodity'' is defined in Section 1(a)(4) of 
the Commodity Exchange Act.
     A Trust Unit is a security that is issued by a trust or 
other similar entity that is constituted as a commodity pool that holds 
investments comprising or otherwise based on any combination of futures 
contracts, options on futures contracts, forward contracts, swap 
contracts, commodities and/or securities.
    Proposed Rule 5711(i)(iii) states that NASDAQ may list and trade 
Trust Units based on an underlying asset, commodity, security or 
portfolio. Each issue of a Trust Unit shall be designated as a separate 
series and shall be identified by a unique symbol.
Initial Listing Standards
    Proposed Rule 5711(i)(iv)(A) states that NASDAQ will establish a 
minimum number of Trust Units required to be outstanding at the time of 
commencement of trading on NASDAQ. NASDAQ will obtain a representation 
from the issuer of each series of Trust Units that the net asset value 
per share for the series will be calculated daily and will be made 
available to all market participants at the same time.
Continued Listing Standards
    Proposed Rule 5711(i)(iv)(B)(1) states that NASDAQ will remove 
Trust Units from listing under any of the following circumstances:
     If following the initial twelve month period following the 
commencement of trading of Trust Units, (i) the trust has more than 60 
days remaining until termination and there are fewer than 50 record 
and/or beneficial holders of Trust Units for 30 or more consecutive 
trading days; (ii) the trust has fewer than 50,000 Trust Units issued 
and outstanding; or (iii) the market value of all Trust Units issued 
and outstanding is less than $1,000,000; or
     If such other event shall occur or condition exists which 
in the opinion of the NASDAQ makes further dealings on NASDAQ 
inadvisable.
Trading Halts
    Proposed Rule 5711(i)(iv)(B)(2) states that NASDAQ will halt 
trading in a series of Trust Units if the circuit breaker parameters in 
Rule 4120(a)(11) have been reached. In exercising its discretion to 
halt or suspend trading in a series of Trust Units, NASDAQ may consider 
any relevant factors. In particular, if the portfolio and net asset 
value per share are not being disseminated as required, NASDAQ may halt 
trading during the day in which the interruption to the dissemination 
of the portfolio holdings or net asset value per share occurs. If the 
interruption to the dissemination of the portfolio holdings or net 
asset value per share persists past the trading day in which it 
occurred, NASDAQ will halt trading no later than the beginning of the 
trading day following the interruption.
    Upon termination of a trust, NASDAQ would require that Trust Units 
issued in connection with such trust be removed from NASDAQ listing. A 
trust will terminate in accordance with the provisions of the 
prospectus.
    Proposed Rule 5711(i)(iv)(C) provides that the stated term of the 
trust shall be as stated in the prospectus. However, such entity may be 
terminated under such earlier circumstances as may be specified in the 
prospectus.
    Proposed Rule 5711(i)(iv)(D) would adopt the following requirements 
applicable to the trustee of a Trust:
     The trustee of a trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(i)(iv)(E) states that voting rights shall be as 
set forth in the prospectus.
    Proposed Rules 5711(i)(v) and (vi) describe the requirements for 
Market Makers and the limitation of NASDAQ liability respecting Trust 
Units (see below for a general discussion of these requirements).
    Commentary .01 to proposed Rule 5711(i) states that NASDAQ requires 
that Members provide to all purchasers of newly issued Trust Units a 
prospectus for the series of Trust Units.
    Commentary .02 to proposed Rule 5711(i) states that transactions in 
Trust Units will occur during the trading hours specified in NASDAQ 
Rule 4120.
    Commentary .03 to proposed Rule 5711(i) states that NASDAQ will 
file separate proposals under Section 19(b) of the Act before listing 
and trading separate and distinct Trust Units designated on different 
underlying investments, commodities, assets and/or portfolios.
    The proposed rule change relating to Trust Units is based on 
NYSEArca Equities Rule 8.500.
Managed Trust Securities
    Proposed Rule 5711(j) would adopt listing standards for Managed 
Trust Securities. Under proposed Rule 5711(j)(i), NASDAQ will consider 
for

[[Page 6845]]

trading, whether by listing or pursuant to unlisted trading privileges, 
Managed Trust Securities that meet the criteria of the proposed Rule. 
Proposed Rule 5711(j)(ii) states that the proposed Rule would apply 
only to Managed Trust Securities. Managed Trust Securities are included 
within the definition of ``security'' or ``securities'' as such terms 
are used in the Bylaws and Rules of NASDAQ.
Description
    Proposed Rule 5711(j)(iii)(A) defines the term ``Managed Trust 
Securities'' to mean, unless the context otherwise requires, a security 
that is registered under the Securities Act of 1933, as amended, and 
which (1) is issued by a Trust that is a commodity pool as defined in 
the Commodity Exchange Act and regulations thereunder, and that is 
managed by a commodity pool operator registered with the Commodity 
Futures Trading Commission, and which holds long and/or short positions 
in exchange-traded futures contracts and/or certain currency forward 
contracts selected by the Trust's advisor consistent with the Trust's 
investment objectives, which will only include, exchange-traded futures 
contracts involving commodities, currencies, stock indices, fixed 
income indices, interest rates and sovereign, private and mortgage or 
asset backed debt instruments, and/or forward contracts on specified 
currencies, each as disclosed in the Trust's prospectus as such may be 
amended from time to time; and (2) is issued and redeemed continuously 
in specified aggregate amounts at the next applicable net asset value.
    Proposed Rule 5711(j)(iii) also includes the following definitions 
concerning Managed Trust Securities:
     Disclosed Portfolio. Under proposed Rule 5711(j)(iii)(B), 
the term ``Disclosed Portfolio'' means the identities and quantities of 
the securities and other assets held by the Trust that will form the 
basis for the Trust's calculation of net asset value at the end of the 
business day.
     Intraday Indicative Value. Under proposed Rule 
5711(j)(iii)(C), the term ``Intraday Indicative Value'' is the 
estimated indicative value of a Managed Trust Security based on current 
information regarding the value of the securities and other assets in 
the Disclosed Portfolio.
     Reporting Authority. Under proposed Rule 5711(j)(iii)(D), 
the term ``Reporting Authority'' in respect of a particular series of 
Managed Trust Securities means NASDAQ, an institution, or a reporting 
or information service designated by NASDAQ or by the Trust or the 
exchange that lists a particular series of Managed Trust Securities (if 
NASDAQ is trading such series pursuant to unlisted trading privileges) 
as the official source for calculating and reporting information 
relating to such series, including, but not limited to, the Intraday 
Indicative Value; the Disclosed Portfolio; the amount of any cash 
distribution to holders of Managed Trust Securities, net asset value, 
or other information relating to the issuance, redemption or trading of 
Managed Trust Securities. A series of Managed Trust Securities may have 
more than one Reporting Authority, each having different functions.
    Proposed Rule 5711(j)(iv) states that NASDAQ may trade, either by 
listing or pursuant to unlisted trading privileges, Managed Trust 
Securities based on the underlying portfolio of exchange-traded futures 
and/or certain currency forward contracts described in the related 
prospectus. Each issue of Managed Trust Securities shall be designated 
as a separate trust or series and shall be identified by a unique 
symbol.
Initial Listing Standards
    Under proposed Rule 5711(j)(v)(A), Managed Trust Securities will be 
listed and traded on NASDAQ subject to application of the following 
initial listing criteria:
     NASDAQ will establish a minimum number of Managed Trust 
Securities required to be outstanding at the time of commencement of 
trading on NASDAQ.
     NASDAQ will obtain a representation from the issuer of 
each series of Managed Trust Securities that the net asset value per 
share for the series will be calculated daily and that the net asset 
value and the Disclosed Portfolio will be made available to all market 
participants at the same time.
Continued Listing Standards
    Under proposed Rule 5711(j)(v)(B), each series of Managed Trust 
Securities will be listed and traded on NASDAQ subject to application 
of the following continued listing criteria:
     The Intraday Indicative Value for Managed Trust Securities 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the time when the Managed Trust 
Securities trade on NASDAQ.
     The Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the same 
time.
     The Reporting Authority that provides the Disclosed 
Portfolio must implement and maintain, or be subject to, procedures 
designed to prevent the use and dissemination of material non-public 
information regarding the actual components of the portfolio.
    Under proposed Rule 5711(j)(v)(B)(3), NASDAQ will consider the 
suspension of trading in or removal from listing of a series of Managed 
Trust Securities under any of the following circumstances:
     If, following the initial twelve-month period beginning 
upon the commencement of trading of the Managed Trust Securities: (A) 
The Trust has fewer than 50,000 Managed Trust Securities issued and 
outstanding; (B) the market value of all Managed Trust Securities 
issued and outstanding is less than $1,000,000; or (C) there are fewer 
than 50 record and/or beneficial holders of Managed Trust Securities 
for 30 consecutive trading days;
     If the Intraday Indicative Value for the Trust is no 
longer calculated or available or the Disclosed Portfolio is not made 
available to all market participants at the same time;
     If the Trust issuing the Managed Trust Securities has 
failed to file any filings required by the Securities and Exchange 
Commission or if NASDAQ is aware that the Trust is not in compliance 
with the conditions of any exemptive order or no-action relief granted 
by the Securities and Exchange Commission to the Trust with respect to 
the series of Managed Trust Securities; or
     If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
Trading Halts
    Proposed Rule 5711(j)(v)(B)(4) states that, if the Intraday 
Indicative Value of a series of Managed Trust Securities is not being 
disseminated as required, NASDAQ may halt trading during the day in 
which the interruption to the dissemination of the Intraday Indicative 
Value occurs. If the interruption to the dissemination of the Intraday 
Indicative Value persists past the trading day in which it occurred, 
NASDAQ will halt trading no later than the beginning of the trading day 
following the interruption. If a series of Managed Trust Securities is 
trading on NASDAQ pursuant to unlisted trading privileges, NASDAQ will 
halt trading in that series as specified in Rule 4120(a) or (b) as 
applicable. In addition, if NASDAQ becomes aware that the net asset 
value or the Disclosed Portfolio with respect to a series of Managed 
Trust Securities is not disseminated to all market participants at the 
same time, it will halt trading in such series until such time as the 
net asset value or the Disclosed

[[Page 6846]]

Portfolio is available to all market participants.
    Proposed Rule 5711(j)(v)(B)(5) states that upon termination of a 
Trust, NASDAQ requires that Managed Trust Securities issued in 
connection with such Trust be removed from NASDAQ listing. A Trust will 
terminate in accordance with the provisions of the Trust prospectus.
    Proposed Rule 5711(j)(v)(C) states that the term of the Trust shall 
be as stated in the prospectus. However, a Trust may be terminated 
under such earlier circumstances as may be specified in the Trust 
prospectus.
    Proposed Rule 5711(j)(v)(D) would state that the following 
requirements apply to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(j)(v)(E) states that voting rights shall be as 
set forth in the applicable Trust prospectus.
    Proposed Rules 5711(j)(vi) and (vii) describe the regulatory 
requirements for registered Market Makers in Managed Trust Securities, 
and the limitation of NASDAQ liability respecting Managed Trust 
Securities (see below for a general discussion of these requirements).
    Proposed Rule 5711(j)(viii) states that NASDAQ will file separate 
proposals under Section 19(b) of the Act before listing and trading 
separate and distinct Managed Trust Securities.
    In addition to the above, the Commentary to proposed Rule 5711(j) 
includes the following provisions:
    Commentary .01 to proposed Rule 5711(j) states that NASDAQ requires 
that Members provide all purchasers of newly issued Managed Trust 
Securities a prospectus for the series of Managed Trust Securities.
    Commentary .02 to proposed Rule 5711(j) states that transactions in 
Managed Trust Securities will occur during the trading hours specified 
in Rule 4120.
    Commentary .03 to proposed Rule 5711(j) states that NASDAQ's rules 
governing the trading of equity securities apply.
    Commentary .04 to proposed Rule 5711(j) states that NASDAQ will 
implement written surveillance procedures for Managed Trust Securities.
    Commentary .05 to proposed Rule 5711(j) states that if the Trust's 
advisor is affiliated with a broker-dealer, the broker-dealer shall 
erect a ``fire wall'' around the personnel who have access to 
information concerning changes and adjustments to the Disclosed 
Portfolio. Personnel who make decisions on the Trust's portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding the 
applicable Trust portfolio.
    The proposed rule change relating to Managed Trust Securities is 
based on NYSEArca Equities Rule 8.700.
Currency Warrants
    Proposed Rule 5711(k) would govern the listing of Currency 
Warrants. Under proposed Rule 5711(k)(i), the listing of Currency 
Warrant issues is considered on a case-by-case basis. Currency Warrant 
issues will be evaluated for listing against the following criteria:
Initial Listing Standards
    Proposed Rule 5711(k)(i)(A) requires the warrant issuer to have a 
minimum tangible net worth in excess of $250,000,000 and otherwise to 
exceed substantially the earnings requirements set forth in Rule 
5405(b).\13\ In the alternative, the warrant issuer will be expected to 
have a minimum tangible net worth of $150,000,000 and otherwise to 
exceed substantially the earnings requirements set forth in Rule 
5405(b), and not to have issued warrants where the original issue price 
of all the issuer's currency warrant offerings (combined with currency 
warrant offerings of the issuer's affiliates) listed on a national 
securities exchange or traded through the facilities of NASDAQ exceeds 
25% of the warrant issuer's net worth.
---------------------------------------------------------------------------

    \13\ Rule 5405(b) sets forth initial listing standards for 
primary equity securities.
---------------------------------------------------------------------------

    Proposed Rule 5711(k)(i)(B) states that the term must be one to 
five years from date of issuance.
    Proposed Rule 5711(k)(i)(C) requires that there must be a minimum 
public distribution of 1,000,000 warrants together with a minimum of 
400 public holders, and an aggregate market value of $4,000,000. In the 
alternative, there must be a minimum public distribution of 2,000,000 
warrants together with a minimum number of public warrant holders 
determined on a case by case basis, an aggregate market value of 
$12,000,000 and an initial warrant price of $6.
    Under proposed Rule 5711(k)(i)(D), the warrants will be cash 
settled in U.S. dollars.
    Under proposed Rule 5711(k)(i)(E), all currency warrants must 
include in their terms provisions specifying the time by which all 
exercise notices must be submitted, and that all unexercised warrants 
that are in the money will be automatically exercised on their 
expiration date or on or promptly following the date on which such 
warrants are delisted by NASDAQ (if such warrant issue has not been 
listed on another organized securities market in the United States).
    Under proposed Rule 5711(k)(ii), NASDAQ will file separate 
proposals under Section 19(b) of the Act before listing and trading 
separate and distinct Currency Warrants.
Regulatory Matters
    Proposed Rule 5711(k)(iii) describes regulatory matters applicable 
to Currency Warrants. Specifically:
     No Member shall accept an order from a customer to 
purchase or sell a Currency Warrant unless the customer's account has 
been approved for options trading pursuant to NOM Rules Chapter XI, 
Section 7.
     Suitability. The provisions of NOM Rules Chapter XI, 
Section 9 shall apply to recommendations in Currency Warrants and the 
term ``option'' as used therein shall be deemed for purposes of this 
Rule to include such warrants.
     Discretionary Accounts. Any account in which a Member 
exercises discretion to trade in Currency Warrants shall be subject to 
the provisions of NOM Rules, Chapter XI, Section 10 with respect to 
such trading. For purposes of this Rule, the terms ``option'' and 
``options contract'' as used in Chapter XI, Section 10 shall be deemed 
to include Currency Warrants.
     Supervision of Accounts. NOM Rules, Chapter XI, Section 8 
shall apply to all customer accounts of a Member in which transactions 
in Currency Warrants are effected. The term ``option'' as used in 
Chapter XI, Section 8 shall be deemed to include Currency Warrants.
     Public Customer Complaints. NOM Rules, Chapter XI, Section 
24 shall apply to all public customer complaints received by a Member 
regarding Currency Warrants. The term ``option'' as used in Chapter XI, 
Section 24 shall be deemed to include such warrants.
     Communications with Public Customers. Members 
participating in Currency Warrants shall be bound to comply with the 
Communications and Disclosures rule of FINRA, as

[[Page 6847]]

applicable, as though such rule were part of these Rules.
Trading Halts or Suspensions
    Under proposed Rule 5711(k)(iv), trading on NASDAQ in any Currency 
Warrant will be halted whenever NASDAQ deems such action appropriate in 
the interests of a fair and orderly market or to protect investors. 
Trading in Currency Warrants that have been the subject of a halt or 
suspension by NASDAQ may resume if NASDAQ determines that the 
conditions which led to the halt or suspension are no longer present, 
or that the interests of a fair and orderly market are best served by a 
resumption of trading.
Reporting of Warrant Positions
    Proposed Rule 5711(k)(v) would govern reporting of warrant 
positions. Proposed Rule 5711(k)(v)(A) would require each Member to 
file with NASDAQ a report with respect to each account in which the 
Member has an interest, each account of a partner, officer, director, 
or employee of such Member, and each customer account that has 
established an aggregate position (whether long or short) of 100,000 
warrants covering the same underlying currency, combining for purposes 
of the proposed Rule: (1) Long positions in put warrants and short 
positions in call warrants, and (2) short positions in put warrants 
with long positions in call warrants. The report shall be in such form 
as may be prescribed by NASDAQ and shall be filed no later than the 
close of business on the next day following the day on which the 
transaction or transactions requiring the filing of such report 
occurred.
    Proposed Rule 5711(k)(v)(B) states that whenever a report shall be 
required to be filed with respect to an account pursuant to the 
proposed Rule, the Member filing the same must file with NASDAQ such 
additional periodic reports with respect to such account as NASDAQ may 
from time to time require.
    Proposed Rule 5711(k)(v)(C) states that all reports required by the 
proposed Rule shall be filed with NASDAQ in such manner and form as 
prescribed by NASDAQ.
    The proposed rule change relating to Currency Warrants is based on 
NYSEArca Equities Rules 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9, 8.12, and 
8.13.
General Provisions
    To the extent not specifically addressed in the respective proposed 
rules, the following general provisions apply to all of the proposed 
rules and subject securities affected by the proposed rules 
(``securities''):
Information Circular
    Prior to the commencement of trading, NASDAQ will inform its 
Members in an Information Circular of the special characteristics and 
risks associated with trading the securities. Specifically, the 
Information Circular will discuss the following: (1) The procedures for 
purchases and redemptions of the securities (and/or that the securities 
are not individually redeemable); (2) NASDAQ Rule 2310, which imposes 
suitability obligations on NASDAQ Members with respect to recommending 
transactions in the securities to customers; (3) how information 
regarding the Intraday Indicative Value is disseminated; (4) the 
requirement that Members deliver a prospectus to investors purchasing 
newly issued securities prior to or concurrently with the confirmation 
of a transaction; and (5) trading information.
    In addition, the Information Circular will advise Members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the securities. Members purchasing securities for resale 
to investors will deliver a prospectus to such investors. The 
Information Circular will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    In addition, the Information Circular will reference that the 
securities are subject to various fees and expenses described in the 
registration statement. If applicable, the Information Circular will 
also reference that the CFTC has regulatory jurisdiction over the 
trading of futures contracts.
    The Information Circular will also disclose the trading hours of 
the securities and, if applicable, the Net Asset Value (``NAV'') 
calculation time for the securities. The Information Circular will 
disclose that information about the securities and the corresponding 
indexes, if applicable, will be publicly available on the Web site for 
the securities. The Information Circular will also reference, if 
applicable, the fact that there is no regulated source of last sale 
information regarding physical commodities, and that the Commission has 
no jurisdiction over the trading of physical commodities or futures 
contracts on which the value of the securities may be based.
    The Information Circular will also reference the risks involved in 
trading the securities during the Opening Process and the Post-Market 
Session when an updated Intraday Indicative Value will not be 
calculated or publicly disseminated and, if applicable, the risks 
involved in trading the securities during the Regular Market Session 
when the Intraday Indicative Value may be static or based in part on 
the fluctuation of currency exchange rates when the underlying markets 
have closed prior to the close of NASDAQ's Regular Market Session.
Limitation of NASDAQ Liability
    Neither NASDAQ, any agent of NASDAQ, nor the Reporting Authority 
(if applicable), shall have any liability for damages, claims, losses 
or expenses caused by any errors, omissions, or delays in calculating 
or disseminating any applicable underlying index or asset value; the 
current value of the applicable positions or interests required to be 
deposited to a Trust, if applicable, in connection with issuance of the 
securities; net asset value; or any other information relating to the 
purchase, redemption, or trading of the securities, resulting from any 
negligent act or omission by NASDAQ, any agent of NASDAQ, or the 
Reporting Authority (if applicable), or any act, condition or cause 
beyond the reasonable control of NASDAQ, any agent of NASDAQ, or the 
Reporting Authority (if applicable), including, but not limited to, an 
act of God; fire; flood; extraordinary weather conditions; war; 
insurrection; riot; strike; accident; action of government; 
communications or power failure; equipment or software malfunction; or 
any error, omission or delay in the reports of transactions in the 
applicable positions or interests.
Market Maker Accounts
    A registered Market Maker in the securities described below must 
file with NASDAQ, in a manner prescribed by NASDAQ, and keep current a 
list identifying all accounts for trading in:
     In the case of Commodity-Based Trust Shares, the 
applicable underlying commodity, related commodity futures or options 
on commodity futures, or any other related commodity derivatives, which 
the registered Market Maker may have or over which it may exercise 
investment discretion (``Underlying Commodities'');
     In the case of Currency Trust Shares, the applicable 
underlying non-U.S. currency, options, futures or options on futures on 
such currency, or any other derivatives based on such currency, which 
the registered Market Maker may have or over which it may exercise 
investment discretion (``Underlying Currencies'');

[[Page 6848]]

     In the case of Commodity Index Trust Shares, the 
applicable physical commodities included in, or options, futures or 
options on futures on, an index underlying an issue of Commodity Index 
Trust Shares or any other derivatives based on such index or based on 
any commodity included in such index, which the registered Market Maker 
may have or over which it may exercise investment discretion 
(``Underlying Commodity Index Assets'');
     In the case of Commodity Futures Trust Shares, the 
applicable underlying commodity, related futures or options on futures, 
or any other related derivatives, which the registered Market Maker may 
have or over which it may exercise investment discretion (``Underlying 
Commodity Futures'');
     In the case of Partnership Units, the applicable 
underlying asset or commodity, related futures or options on futures, 
or any other related derivatives, which the registered Market Maker may 
have or over which it may exercise investment discretion (``Underlying 
Partnership Unit Assets'');
     In the case of Trust Units, the applicable underlying 
commodity, related commodity futures or options on commodity futures, 
or any other related commodity derivatives, which the registered Market 
Maker may have or over which it may exercise investment discretion 
(``Underlying Trust Unit Assets''); and
     In the case of Managed Trust Securities, the underlying 
commodity or applicable currency, related futures or options on 
futures, or any other related derivatives, which a registered Market 
Maker may have or over which it may exercise investment discretion 
(``Underlying Managed Trust Assets'').
    No registered Market Maker in the above mentioned securities shall 
trade in the respective Underlying Commodities, Underlying Currencies, 
Underlying Commodity Index Assets, Underlying Commodity Futures, 
Underlying Partnership Unit Assets, Underlying Trust Unit Assets, and/
or the Underlying Managed Trust Assets (collectively, ``Underlying 
Assets'') in an account in which a market maker, directly or 
indirectly, controls trading activities, or has a direct interest in 
the profits or losses thereof, which has not been reported to NASDAQ.
    In addition to the existing obligations under NASDAQ rules 
regarding the production of books and records (see, e.g., Rule 4625), a 
registered Market Maker in the above mentioned securities is required 
to make available to NASDAQ such books, records or other information 
pertaining to transactions by such entity or registered or non-
registered employee affiliated with such entity for its or their own 
accounts for trading the applicable Underlying Assets as may be 
requested by NASDAQ.
Trading Rules
    NASDAQ deems the securities to be equity securities, thus rendering 
trading in the securities subject to NASDAQ's existing rules governing 
the trading of equity securities. The securities will trade on NASDAQ 
from 8 a.m. to 8 p.m. E.T. NASDAQ has appropriate rules to facilitate 
transactions in the securities during all trading sessions. The minimum 
price increment for quoting and entry of orders in equity securities 
traded on NASDAQ is $0.01, with the exception of securities that are 
priced less than $1.00 for which the minimum price increment for order 
entry is $0.0001.\14\
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    \14\ See, e.g., Rule 4751.
    Regulation NMS Rule 612, Minimum Pricing Increment, provides:
    a. No national securities exchange, national securities 
association, alternative trading system, vendor, or broker or dealer 
shall display, rank, or accept from any person a bid or offer, an 
order, or an indication of interest in any NMS stock priced in an 
increment smaller than $0.01 if that bid or offer, order, or 
indication of interest is priced equal to or greater than $1.00 per 
share.
    b. No national securities exchange, national securities 
association, alternative trading system, vendor, or broker or dealer 
shall display, rank, or accept from any person a bid or offer, an 
order, or an indication of interest in any NMS stock priced in an 
increment smaller than $0.0001 if that bid or offer, order, or 
indication of interest is priced less than $1.00 per share.
    c. The Commission, by order, may exempt from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, any person, security, quotation, or order, or any class 
or classes of persons, securities, quotations, or orders, if the 
Commission determines that such exemption is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors.
    17 CFR 242.612.
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Surveillance
    NASDAQ believes that its surveillance procedures are adequate to 
address any concerns about the trading of the securities on NASDAQ. 
Trading of the securities on NASDAQ will be subject to FINRA's 
surveillance procedures for derivative products.\15\ NASDAQ may obtain 
information via the Intermarket Surveillance Group (``ISG'') from other 
exchanges who are members or affiliates of the ISG.\16\
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    \15\ FINRA surveils trading on NASDAQ pursuant to a regulatory 
services agreement. NASDAQ is responsible for FINRA's performance 
under this regulatory services agreement.
    \16\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
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    In addition, to the extent that a fund invests in futures 
contracts, not more than 10% of the weight of such futures contracts in 
the aggregate shall consist of components whose principal trading 
market is not a member of ISG or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement. NASDAQ 
has a general policy prohibiting the distribution of material, non-
public information by its employees.
    As a general matter, NASDAQ has regulatory jurisdiction over its 
Members and their associated persons, which includes any person or 
entity controlling a Member, as well as a subsidiary or affiliate of a 
Member that is in the securities business. A subsidiary or affiliate of 
a Member that does business only in commodities or futures contracts 
would not be subject to NASDAQ jurisdiction, but NASDAQ could obtain 
information regarding the activities of such subsidiary or affiliate 
through surveillance sharing agreements with regulatory organizations 
of which such subsidiary or affiliate is a Member.
Trading Halts
    With respect to trading halts, in addition to the halt requirements 
in the proposed rules, NASDAQ may consider all relevant factors in 
exercising its discretion to halt or suspend trading in the securities. 
Trading in the securities may be halted because of market conditions or 
for reasons that, in the view of NASDAQ, make trading in the securities 
inadvisable. These may include: (1) The extent to which trading in the 
underlying asset or assets is not occurring; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. In addition, trading in the 
securities will be subject to trading halts caused by extraordinary 
market volatility pursuant to NASDAQ's ``circuit breaker'' Rule 
4120(a)(11) or by the halt or suspension of the trading of the current 
underlying asset or assets.
    If the applicable Intraday Indicative Value, value of the 
underlying index, or the value of the underlying asset or assets (e.g., 
securities, commodities, currencies, futures contracts, or other 
assets) is not being disseminated as required, NASDAQ may halt trading 
during the day in which such interruption to the dissemination occurs. 
If the interruption to the dissemination of the applicable Intraday 
Indicative Value, value of the underlying index, or the value of the 
underlying asset or assets persists past the trading day in which it 
occurred, NASDAQ will halt trading no later than the beginning of the 
trading day following the interruption. In addition, if NASDAQ becomes 
aware that the net

[[Page 6849]]

asset value with respect to a series of the securities is not 
disseminated to all market participants at the same time, it will halt 
trading in such series until such time as the net asset value is 
available to all market participants.
Suitability
    Currently, NASDAQ Rule 2310 governs Recommendations to Customers 
(Suitability), Fair Dealing with Customers, Suitability Obligations to 
Institutional Customers, and Direct Participation Programs.
    Prior to the commencement of trading of any inverse, leveraged, or 
inverse leveraged securities, NASDAQ will inform its Members of the 
suitability requirements of NASDAQ Rule 2310 in an Information 
Circular. Specifically, Members will be reminded in the Information 
Circular that, in recommending transactions in these securities, they 
must have a reasonable basis to believe that (1) the recommendation is 
suitable for a customer given reasonable inquiry concerning the 
customer's investment objectives, financial situation, needs, and any 
other information known by such Member, and (2) the customer can 
evaluate the special characteristics, and is able to bear the financial 
risks, of an investment in the securities. In connection with the 
suitability obligation, the Information Circular will also provide that 
members must make reasonable efforts to obtain the following 
information: (1) The customer's financial status; (2) the customer's 
tax status; (3) the customer's investment objectives; and (4) such 
other information used or considered to be reasonable by such Member or 
registered representative in making recommendations to the customer.
    In addition, FINRA has implemented increased sales practice and 
customer margin requirements for FINRA members applicable to inverse, 
leveraged, and inverse leveraged securities and options on such 
securities, as described in FINRA Regulatory Notices 09-31 (June 2009), 
09-53 (August 2009) and 09-65 (November 2009) (``FINRA Regulatory 
Notices''). Members that carry customer accounts will be required to 
follow the FINRA guidance set forth in the FINRA Regulatory Notices. 
The Information Circular will reference the FINRA Regulatory Notices 
regarding sales practice and customer margin requirements for FINRA 
members applicable to inverse, leveraged, and inverse leveraged 
securities and options on such securities.
    NASDAQ notes that, for such inverse, leveraged, and inverse 
leveraged securities, the corresponding funds seek leveraged, inverse, 
or leveraged inverse returns on a daily basis, and do not seek to 
achieve their stated investment objective over a period of time greater 
than one day because compounding prevents the funds from perfectly 
achieving such results. Accordingly, results over periods of time 
greater than one day typically will not be a leveraged multiple 
(+200%), the inverse (-100%) or a leveraged inverse multiple (-200%) of 
the period return of the applicable benchmark and may differ 
significantly from these multiples. NASDAQ's Information Circular, as 
well as the applicable registration statement, will provide information 
regarding the suitability of an investment in such securities.
2. Statutory Basis
    The proposed rule change, as amended, is consistent with section 
6(b) of the Act,\17\ in general, and furthers the objectives of section 
6(b)(5),\18\ particularly, in that it is designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, NASDAQ believes that the proposed rule change should 
enhance depth and liquidity, and should promote narrower markets in the 
subject securities. Furthermore, NASDAQ's listing requirements as 
proposed herein are at least as stringent as those of any other 
national securities exchange and, consequently, the proposed rule 
change is consistent with the protection of investors and the public 
interest.
    Additionally, the proposal is designed to prevent fraudulent and 
manipulative acts and practices, as all of the proposed new products 
are subject to existing NASDAQ trading rules, together with specific 
requirements for registered market makers, books and record production, 
surveillance procedures, suitability and prospectus requirements, and 
requisite NASDAQ approvals, all set forth above.
    The proposal is also designed to promote just and equitable 
principles of trade by way of initial and continued listing standards 
which, if not maintained, will result in the discontinuation of trading 
in the affected products. These requirements, together with the 
applicable NASDAQ equity trading rules (which apply to the proposed 
products), ensure that no investor would have an unfair advantage over 
another respecting the trading of the subject products. On the 
contrary, all investors will have the same access to, and use of, 
information concerning the specific products and trading in the 
specific products, all to the benefit of public customers and the 
marketplace as a whole.
    Furthermore, the proposal is designed to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system by adopting listing standards that will lead ultimately to the 
trading of the proposed new products on NASDAQ, just as they are 
currently traded on other exchanges. NASDAQ believes that individuals 
and entities permitted to make markets on NASDAQ in the proposed new 
products should enhance competition within the mechanism of a free and 
open market and a national market system, and customers and other 
investors in the national market system should benefit from more depth 
and liquidity in the market for the proposed new products.

B. Self-Regulatory Organization's Statement on Burden on Competition

    NASDAQ does not believe that the proposed rule change will result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act, as amended.

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

    No written comments were either solicited or received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission shall: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings 
to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act.

[[Page 6850]]

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 email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2012-013 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2012-013. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street 
NE., Washington, DC 20549-1090, on official business days between 10 
a.m. and 3 p.m. Copies of the 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 Number SR-NASDAQ-2012-013 and should 
be submitted on or before March 1, 2012.
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-2994 Filed 2-8-12; 8:45 am]
BILLING CODE 8011-01-P

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