Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Adopt Listing Standards for Certain Securities, 41462-41480 [2013-16528]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 132 (Wednesday, July 10, 2013)]
[Notices]
[Pages 41462-41480]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-16528]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69931; File No. SR-BATS-2013-038]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To 
Adopt Listing Standards for Certain Securities

July 3, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on June 21, 2013, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which filing was amended and replaced in its entirety by 
Amendment No. 1 thereto on July 2, 2013, and which Items have been 
prepared by the Exchange. The Commission is publishing this notice to 
solicit comments on the proposed rule change, as modified by Amendment 
No. 1, from interested persons.
---------------------------------------------------------------------------

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

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

    The Exchange filed a proposal to adopt rules for the qualification, 
listing and delisting of companies on the Exchange. Specifically, the 
Exchange proposes to adopt rules applicable to the following securities 
(all of which are defined below): 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 Trust Securities; and Currency Warrants. Specifically, 
the proposal would adopt the relevant listing standards of the NASDAQ 
Stock Market LLC (``Nasdaq''), as set forth below. The Exchange also 
proposes changes to delete certain rule text from Rule 14.11(h), 
``Listing Requirements for Securities Not Specified Above (Other 
Securities),'' to conform to the current listing standards of Nasdaq 
and to delete rule text that would become duplicative at the time the 
proposed rule becomes operative.
---------------------------------------------------------------------------

    \3\ Exchange Rules 14.11(d)(2)(G) and (H) currently include 
initial listing standards applicable to Equity Index-Linked 
Securities and Commodity-Linked Securities. The Exchange proposes to 
re-number the existing rule text in Rules 14.11(d)(2)(G) and (H), 
and to adopt continuing listing standards applicable to Equity 
Index-Linked Securities and Commodity-Linked Securities, in proposed 
Rules 14.11(d)(2)(K)(i) and (ii).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
Web site at https://www.batstrading.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 parts of such 
statements.

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

1. Purpose
    This Amendment No. 1 to SR-BATS-2013-038 amends and replaces in its 
entirety the proposal as originally submitted on September 25, 2012. 
Amendment No. 1 corrects certain inconsistencies between the proposed 
rules and the descriptions of such proposed rules as well as various 
typographical and grammatical errors contained in the original filing.
    The Exchange is proposing rules to adopt listing standards for each 
of the products enumerated above on the Exchange. Chapter XIV of the 
Exchange's Rules sets forth the rules applicable to securities listed 
on the Exchange (the ``Listing Rules''). The Exchange is also proposing 
to make several non-substantive grammatical and technical changes to 
the Listing Rules. The Exchange's Listing Rules govern the 
qualification, listing and delisting of Securities on the Exchange.

[[Page 41463]]

The Listing Rules also set forth, among other things, definitions,\4\ 
the Exchange's regulatory authority to list and maintain securities,\5\ 
general procedures and prerequisites for initial and continued listing 
on the Exchange,\6\ and, most significantly to the instant proposed 
rule change, ``Other Securities,'' \7\ which govern, without 
limitation, listing and qualification rules applicable to Portfolio 
Depository Receipts, Index Fund Shares and other types of exchange 
traded products. The proposed amendment to Rule 14.11(d), 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 and Commodity-Linked Securities, Fixed Income 
Index-Linked Securities and Futures-Linked Securities, ``Linked 
Securities'') to the rule.
---------------------------------------------------------------------------

    \4\ See Section 14.1 of the Exchange's Rules.
    \5\ See Section 14.2 of the Exchange's Rules.
    \6\ See Section 14.3 of the Exchange's Rules.
    \7\ See Section 14.11 of the Exchange's Rules.
---------------------------------------------------------------------------

    Proposed new Rule 14.11(e), 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. Existing Rule 
14.11(e), Selected Equity-linked Debt Securities (``SEEDS''), would be 
re-numbered as Rule 14.11(e)(12), and as a result, the Exchange 
proposes to re-number the sub-paragraphs and cross-references contained 
in such Rule.
    The proposed rule change is intended to define the specific 
products (see above) that the Exchange intends to list and trade, and 
the listing and qualification requirements for each such product.
    The Exchange also proposes changes to delete certain rule text from 
Rule 14.11(h), ``Listing Requirements for Securities Not Specified 
Above (Other Securities),'' to conform to the current listing standards 
of Nasdaq and to delete rule text that would become duplicative at the 
time the proposed rule becomes operative. Specifically, the Exchange 
proposes to delete text to conform Rule 14.11(h) to conform such rule 
to Nasdaq Rule 5730.
Proposed Changes to Rule 14.11(d)--Linked Securities
Introductory Paragraphs to Rule 14.11(d)
    The proposed amendments to Rule 14.11(d) would state that the 
Exchange 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 (an ``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 (a ``Commodity Reference 
Asset''). The terms ``Commodity'' and ``Commodity-Related Security'' 
are defined in Rule 14.11.
    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 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 (a ``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 (a ``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 (a ``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. The Exchange 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 14.11(d).
Additional Changes to Rule 14.11(d)
    The Exchange is not proposing any amendments to Rules 
14.11(d)(2)(A)-(C) or (E)-(F) and such provisions would apply to all 
Linked Securities.\8\
---------------------------------------------------------------------------

    \8\ Current Rule 14.11(d)(2)(A)-(C) states:
    (A) Both the issue and the issuer of such security meet the 
criteria for other securities set forth in Rule 14.11(h), 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.
    Current Rule 14.11(d)(2)(E) and (F) state:
    (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 paragraph (a)(1) of this Rule. 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 paragraph (a)(1) of this Rule, 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.
---------------------------------------------------------------------------

    The Exchange proposes to amend Rule 14.11(d)(2)(D) so that the 
Exchange may list Linked Securities that provide for three times 
accelerated payment at maturity.\9\ In changing Rule 14.11(d)(2)(D), 
the Exchange is conforming its rule to the established listing rules of 
other exchanges. This proposed change to Rule 14.11(d)(2)(D) is based, 
word-for-word, on Nasdaq

[[Page 41464]]

Rule 5710(d).\10\ Both the Exchanges Rule 14.11(d)(2)(D) and Nasdaq 
Rule 5710(d) state that pursuant to Rule 19b-4(e) under the Act \11\ a 
loss or negative payment at maturity of a Linked Security may be 
accelerated by a multiple of the performance of an underlying asset 
(known as the ``acceleration provision''). However, in Rule 
14.11(d)(2)(D) the Exchange sets the multiple for the acceleration 
provision at ``twice''; whereas Nasdaq sets the acceleration provision 
multiple at ``three times''.\12\ Other than changing one word--from 
``twice'' to ``three times''--in the Exchange's acceleration provision 
in Rule 14.11(d)(2)(D), no other change is proposed or made to such 
sub-paragraph and such provision, as amended, would apply to all Linked 
Securities.
---------------------------------------------------------------------------

    \9\ The proposal is applicable only to non-option products.
    \10\ The Exchange notes that the proposal is also consistent 
with NYSE Arca (``Arca'') Equities Rule 5.2(j)(6)(A)(d) and Section 
703.22(B)(6) of the New York Stock Exchange Listed Company Manual.
    \11\ 17 CFR 240.19b-4(e).
    \12\ See Nasdaq Rule 5710(d). See also Securities Exchange Act 
Release No. 68721 (January 24, 2013), 78 FR 6379 (January 30, 2013) 
(SR-NASDAQ-2013-008) (notice of filing and immediate effectiveness 
of rule change to amend Rule 5710 to allow three times (3x) the 
performance of the underlying Reference Asset).
---------------------------------------------------------------------------

    Additionally, the Exchange proposes to re-number the current text 
of Rule 14.11(d) by deleting current Rules 14.11(d)(2)(G) and (H) and 
moving the text of these two sections into proposed Rules 
14.11(d)(2)(K)(i) and (ii).\13\ Further, the Exchange is proposing to 
re-number the remaining existing sections of Rule 14.11(d), and to 
amend references and defined terms in such sections such that they 
would apply to all Linked Securities.
---------------------------------------------------------------------------

    \13\ See supra note 3.
---------------------------------------------------------------------------

Listing Standards for Linked Securities
    Proposed Rule 14.11(d)(2)(K) would adopt listing standards for the 
various Linked Securities, as described below.
Equity Index-Linked Securities
Initial Listing Criteria
    Proposed Rule 14.11(d)(2)(K)(i)(a) would set forth the initial 
listing criteria for Equity Index-Linked Securities found in current 
Rule 14.11(d)(2)(G), which would be deleted and replaced in proposed 
Rule 14.11(d)(2)(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 (i) no underlying 
component security represents more than 10% of the dollar weight of the 
index and (ii) the index has a minimum of 20 components; and
     all component securities shall be either (i) securities 
(other than securities of a foreign issuer and American Depository 
Receipts (``ADRs'')) that are (a) 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 (b) an ``NMS stock'' (as defined in 
Rule 600 of Regulation NMS under the Act), or (ii) 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 the Exchange will not in the aggregate represent 
more than 20% of the dollar weight of the index.
Continued Listing Criteria
    Rule 14.11(d)(2)(K)(i)(b) would adopt continued listing criteria 
for Equity Index-Linked Securities. Specifically, the Exchange 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, the Exchange 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, 
the Exchange will commence delisting or removal proceedings (unless the 
Commission has approved the

[[Page 41465]]

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 is occurring on the 
Exchange (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 Regular Trading Hours \14\ 
and both the Pre-Opening \15\ and After Hours Trading Sessions; \16\ or
---------------------------------------------------------------------------

    \14\ Regular Trading Hours are defined in Exchange Rule 1.5(w) 
as the time between 9:30 a.m. to 4:00 p.m. E.T.
    \15\ The Pre-Opening Session is defined in Exchange Rule 1.5(r) 
and currently means the time between 8:00 a.m. to 9:30 a.m. E.T.
    \16\ The After Hours Trading Session is defined in Exchange Rule 
1.5(c) and currently means the time between 4:00 p.m. to 5:00 p.m. 
E.T.
---------------------------------------------------------------------------

     if such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable. Equity-Linked Indexes will be rebalanced at least 
annually.
    The proposed rule change relating to Equity-Linked Securities is 
based on Nasdaq Rule 5710(k)(i).
Commodity-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(ii) would adopt the initial listing 
criteria (found in current Rule 14.11(d)(2)(H), which would be deleted 
and replaced in proposed Rule 14.11(d)(2)(K)(ii)(a)) and continued 
listing criteria for Commodity-Linked Securities, as set forth below.
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 the Exchange 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: (A) The 
generally accepted spot price for the currency exchange rate in 
question; or (B) derived from a market of which (i) is an ISG member or 
affiliate or with which the Exchange has a comprehensive surveillance 
sharing agreement and (ii) 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 14.11(d)(2)(K)(ii)(b) would establish continued 
listing criteria for Commodity-Linked Securities. Specifically, the 
Exchange will commence delisting or removal proceedings if any of the 
initial listing criteria described above are not continuously 
maintained. Additionally, the Exchange 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 the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule change relating to Commodity-Linked Securities is 
based on Nasdaq Rule 5710(k)(ii).
Fixed Income Index-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(iii) would set forth the listing 
criteria for Fixed Income Index-Linked Securities.
Initial Listing Standards
    Proposed Rule 14.11(d)(2)(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: (i) Issuers that are required to file 
reports pursuant to Sections 13 and 15(d) of the Act; or (ii) issuers 
that have a worldwide market value of outstanding common equity held by 
non-affiliates of $700 million or more; or (iii) issuers that have 
outstanding securities that are notes, bonds,

[[Page 41466]]

debentures, or evidence of indebtedness having a total remaining 
principal amount of at least $1 billion; or (iv) exempted securities as 
defined in Section 3(a)(12) of the Act, or (v) issuers that are a 
government of a foreign country or a political subdivision of a foreign 
country.
    In addition, proposed Rule 14.11(d)(2)(k)(iii)(b) states 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 14.11(d)(2)(K)(iii)(c) would provide that the 
Exchange will commence delisting or removal proceedings if any of the 
initial listing criteria described above are not continuously 
maintained, and that the Exchange 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 meets the 
requirements of proposed Rule 14.11(d)(2)(K); or
     if such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule change relating to Fixed-Income Linked Securities 
is based on Nasdaq Rule 5710(k)(iii).
Futures-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(iv) would establish listing standards 
for Futures-Linked Securities.
Initial Listing Standards
    Proposed Rule 14.11(d)(2)(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 the Exchange 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 
14.11(d)(2)(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, proposed Rule 14.11(d)(2)(k)(iv)(b) states that 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, and
     in the case of Futures-Linked Securities that are 
periodically redeemable, the value of a share of each series (the 
``Intraday Indicative Value'') of the subject Futures-Linked Securities 
must be calculated and widely disseminated by the Exchange or one or 
more major market data vendors on at least a 15-second basis during the 
Exchange's regular market session.
Continued Listing Standards
    Proposed Rule 14.11(d)(2)(K)(iv)(c) states that the Exchange will 
commence delisting or removal proceedings if any of the initial listing 
criteria described above are not continuously maintained, and that the 
Exchange 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 14.11(d)(2)(K); or
     if such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule change relating to Futures-Linked Securities is 
based on Nasdaq Rule 5710(k)(iv).
Multifactor Index-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(v) would govern the listing standards 
for Multifactor Index-Linked Securities.
Initial Listing Standards
    Proposed Rule 14.11(D)(2)(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 14.11(d)(2)(K).
    In addition to one of the initial listing standards set forth 
above, proposed Rule 14.11(d)(2)(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 the Exchange; 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 the 
Exchange.
Continued Listing Criteria
    Proposed Rule 14.11(d)(2)(K)(v)(c) states that the Exchange 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 14.11(d)(2)(K); or
     if such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule change relating to Multifactor Index-Linked 
Securities is based on Nasdaq Rule 5710(k)(v).

[[Page 41467]]

Regulatory Requirements for Registered Market Makers in Linked 
Securities
    Interpretation and Policy .01 to proposed Rule 14.11(d)(2)(K) would 
establish certain regulatory requirements for registered Market Makers 
in Linked Securities. Specifically, the registered Market Maker in 
Linked Securities must file with the Exchange, in a manner prescribed 
by the Exchange, 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 indirectly, controls trading 
activities, or has a direct interest in the profits or losses thereof, 
which has not been reported to the Exchange as required by the proposed 
Rule.
    In addition to the existing obligations under Exchange rules 
regarding the production of books and records \17\ the registered 
Market Maker in Linked Securities would be required to make available 
to the Exchange 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 the Exchange.
---------------------------------------------------------------------------

    \17\ See, e.g., Exchange Rule 4.2.
---------------------------------------------------------------------------

    The proposed rule change relating to regulatory requirements for 
registered Market Makers in Linked Securities is based on Nasdaq Rule 
5710, Commentary .01.
Proposed Rule 14.11(e)--Trading of Certain Derivative Securities
    The Exchange proposes to adopt new Rule 14.11(e), Trading of 
Certain Derivative Securities, which would set forth listing standards 
for the securities described below.
Index-Linked Exchangeable Notes
    Proposed Rule 14.11(e)(1) 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 (the ``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 the Exchange pursuant to Rule 19b-4(e) under the Act,\18\ 
provided:
---------------------------------------------------------------------------

    \18\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

     Both the issue and the issuer of such security meet the 
requirements of Rule 14.11(h), 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 14.8(b)(2). In the 
alternative, the issuer will be expected: (i) To have a minimum 
tangible net worth of $150,000,000 and to otherwise substantially 
exceed the earnings requirements set forth in Rule 14.8(b)(2); and (ii) 
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 
(i) 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 (each, a ``Third-Party Index'') either by the Commission 
under Section 19(b)(2) of the Act and rules thereunder or by the 
Exchange under rules adopted pursuant to Rule 19b-4(e); or (ii) indices 
which the issuer has created and for which the Exchange will have 
obtained approval from either the Commission pursuant to Section 
19(b)(2) and rules thereunder or from the Exchange under rules adopted 
pursuant to Rule 19b-4(e) (each an ``Issuer Index''). The Issuer 
Indices and their underlying securities must meet one of the following: 
(A) The procedures and criteria set forth in BATS Options Rules 29.6(b) 
and (c), or (B) the criteria set forth in Rules 14.11(e)(12)(B)(iii) 
and (iv), the index concentration limits set forth in BATS Options Rule 
29.6, and BATS Options Rule 29.6(b)(12) insofar as it relates to BATS 
Options Rule 29.6(b)(6).
    Index-Linked Exchangeable Notes will be treated as equity 
instruments.
    Under proposed Rule 14.11(e)(1)(F) the Intraday Indicative Value of 
the subject Index-Linked Exchangeable Notes must be calculated and 
widely disseminated by the Exchange or one or more major market data 
vendors on at least a 15-second basis during the Exchange's regular 
market session. Additionally, under proposed Rule 14.11(e)(1)(G), the 
value of the underlying index must be publicly available to investors, 
on a real time basis, every 15 seconds. For the avoidance of doubt, 
proposed Rule 14.11(e)(1)(F) also includes a definition of ``Intraday 
Indicative Value'' that is specific to the proposed rule, i.e., for 
purposes of the proposed rule, the term ``Intraday Indicative Value'' 
means an estimate of the value of a note or a share of the series of 
Index-Linked Exchangeable Notes. Proposed Rules 14.11(e)(1)(F) and (G) 
would ensure that the value of an Index-Linked Exchangeable Note and 
its underlying index are publicly available on a real time basis. This 
will provide investors with up-to-date information on the value of the 
note and the Third Party Index or Issuer Index. Accordingly, Index-
Linked Exchangeable Notes

[[Page 41468]]

should allow investors to: (i) Respond quickly to market changes 
through intra-day trading opportunities; (ii) engage in hedging 
strategies; and (iii) reduce transaction costs for trading a group or 
index of securities.
Continued Listing Standards
    Beginning twelve months after the initial issuance of a series of 
Index-Linked Exchangeable Notes, the Exchange 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 the Exchange makes further dealings on 
the Exchange inadvisable.
    The proposed rule change relating to Index-Linked Exchangeable 
Notes is based on Nasdaq Rule 5711(a).
Equity Gold Shares
Description
    Proposed Rule 14.11(e)(2) 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 Exchange 
Rule 14.11(c), all other of the Exchange's rules that reference ``Index 
Fund Shares'' shall also apply to Equity Gold Shares.
Applicability
    Except to the extent that specific provisions in proposed Rule 
14.11(e)(2) govern, or unless the context otherwise requires, the 
provisions of all other Exchange Rules and policies would be applicable 
to the trading of Equity Gold Shares on the Exchange. The provisions 
set forth in proposed Rule 14.11(e)(4) 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 
Nasdaq Rule 5711(b).
Trust Certificates
    Proposed Rule 14.11(e)(3) would govern the listing standards 
applicable to Trust Certificates. The Exchange 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 
(the ``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 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 (an 
``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 
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.

The Exchange 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
    Proposed Interpretation and Policy .01 to proposed Rule 14.11(e)(3) 
would state that the Exchange 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 
Exchange (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 Regular Trading Hours and 
both the Pre-Opening and After Hours Trading Sessions; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
Other Provisions
    Proposed Interpretation and Policy .02 to Rule 14.11(e)(3) 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 Interpretation and Policy .03 to Rule 14.11(e)(3) 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 the Exchange.
    Proposed Interpretation and Policy .04 to Rule 14.11(e)(3) would 
provide that voting rights will be as set forth in the applicable Trust 
prospectus.
    Proposed Interpretation and Policy .05 to Rule 14.11(e)(3) would 
provide that the Exchange will implement written surveillance 
procedures for Trust Certificates.
    Proposed Interpretation and Policy .06 to Rule 14.11(e)(3) would 
provide that the Trust Certificates will be subject to the Exchange's 
equity trading rules.
    Proposed Interpretation and Policy .07 to Rule 14.11(e)(3) would 
provide that prior to the commencement of trading of a particular Trust 
Certificates listing pursuant to this Rule, the Exchange 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 Interpretation and Policy .08 to Rule 14.11(e)(3) 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

[[Page 41469]]

Exchange's options market (``BATS Options'') in order to exercise such 
rights.
    Proposed Interpretation and Policy .09 to Rule 14.11(e)(3) would 
provide that Trust Certificates may pass-through periodic payments of 
interest and principle of the underlying securities.
    Proposed Interpretation and Policy .10 to Rule 14.11(e)(3) would 
provide that the Trust payments may be guaranteed pursuant to a 
financial guaranty insurance policy which may include swap agreements.
    Proposed Interpretation and Policy .11 to Rule 14.11(e)(3) 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 
Nasdaq Rule 5711(c).
Commodity-Based Trust Shares
    Proposed Rule 14.11(e)(4) would permit the listing and trading, or 
trading pursuant to unlisted trading privileges, of Commodity-Based 
Trust Shares on the Exchange. Proposed Rule 14.11(e)(4) would be 
applicable only to Commodity-Based 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 the Exchange of such securities. 
Commodity-Based Trust Shares are included within the definition of 
``security'' or ``securities'' as such terms are used in the Rules of 
the Exchange.
Description
    ``Commodity-Based Trust Shares,'' as defined in proposed Rule 
14.11(e)(4)(C)(i), means a security (a) that is issued by a Trust that 
holds a specified commodity deposited with the Trust; (b) that is 
issued by such Trust in a specified aggregate minimum number in return 
for a deposit of a quantity of the underlying commodity; and (c) that, 
when aggregated in the same specified minimum number, may be redeemed 
at a holder's request by such Trust which will deliver to the redeeming 
holder the quantity of the underlying commodity. Proposed Rule 
14.11(e)(4)(C)(ii) states that the term ``commodity'' is defined in 
Section 1(a)(4) of the Commodity Exchange Act.
    Proposed Rule 14.11(e)(4)(D) states that the Exchange 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 14.11(e)(4)(E)(i) states that the Exchange will 
establish a minimum number of Commodity-Based Trust Shares required to 
be outstanding at the time of commencement of trading on the Exchange.
Continued Listing Standards
    Proposed Rule 14.11(e)(4)(E)(ii) provides that following the 
initial 12-month period following commencement of trading on the 
Exchange of Commodity-Based Trust Shares, the Exchange 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 the Exchange 
or the Exchange stops providing a hyperlink on its Web site to any such 
unaffiliated commodity value;
     The Intraday Indicative Value \19\ is no longer made 
available on at least a 15-second delayed basis; or
---------------------------------------------------------------------------

    \19\ The Intraday Indicative Value is an estimate, updated at 
least every 15 seconds, of the value of a share of each series 
during the Exchange's regular market session. See, e.g., Exchange 
Rules 14.11(b)(3)(C) and (c)(3)(C).
---------------------------------------------------------------------------

     Such other event shall occur or condition exists which in 
the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
Other Provisions
    Upon termination of a Trust, the Exchange requires that Commodity-
Based Trust Shares issued in connection with such entity Trust be 
removed from Exchange 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 14.11(e)(4)(E)(iii) 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 14.11(e)(4)(E)(iv) 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 the Exchange.
    Proposed Rule 14.11(e)(4)(E)(v) states that voting rights shall be 
as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(4)(F) and (G) describe the limitation of 
the Exchange liability and requirements for Market Makers in Commodity-
Based Trust Shares (see below for a general discussion of these 
requirements).
    Interpretation and Policy .01 to proposed Exchange Rule 14.11(e)(4) 
provides that a Commodity-Based Trust Share is a Trust Issued Receipt 
that holds a specified commodity deposited with the Trust.
    Interpretation and Policy .02 to proposed Exchange Rule 14.11(e)(4) 
provides that the Exchange requires that Members provide all purchasers 
of newly issued Commodity-Based Trust Shares a prospectus for the 
series of Commodity-Based Trust Shares.
    Interpretation and Policy .03 to proposed Exchange Rule 14.11(e)(4) 
provides that transactions in Commodity-Based Trust Shares will occur 
during Regular Trading Hours and both the Pre-Opening and After Hours 
Trading Sessions.
    Interpretation and Policy .04 to proposed Exchange Rule 14.11(e)(4) 
provides that the Exchange 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 Nasdaq Rule 5711(d).
Currency Trust Shares
    The Exchange proposes to adopt new Exchange Rule 14.11(e)(5) for 
the purpose of permitting the listing and trading, or trading pursuant 
to unlisted trading privileges, of Currency Trust Shares. Proposed Rule 
14.11(e)(5) would be applicable only to Currency Trust Shares. Except 
to the extent inconsistent with the proposed Rule, or unless the 
context otherwise requires, the

[[Page 41470]]

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 the Exchange of such securities. Currency Trust Shares 
are included within the definition of ``security'' or ``securities'' as 
such terms are used in the Rules of the Exchange.
Description
    Proposed Rule 14.11(e)(5)(C) 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 14.11(e)(5)(D) states that the Exchange 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
    The Exchange will establish a minimum number of Currency Trust 
Shares required to be outstanding at the time of commencement of 
trading on the Exchange.
Continued Listing Standards
    Proposed Rule 14.11(e)(5)(E)(ii) provides that, following the 
initial 12 month period following commencement of trading on the 
Exchange of Currency Trust Shares, the Exchange 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 the 
Exchange or the Exchange 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 the Exchange makes further dealings on the Exchange 
inadvisable.
    Upon termination of a Trust, the Exchange would require that 
Currency Trust Shares issued in connection with such entity Trust be 
removed from Exchange 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 14.11(e)(5)(E)(iii) 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 14.11(e)(5)(E)(iv) 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 the Exchange.
    Proposed Rule 14.11(e)(5)(E)(v) states that voting rights shall be 
as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(5)(F) and (G) set forth the requirements 
respecting limitation of the Exchange liability and Market Maker 
Accounts (see below for a general discussion of these requirements).
    Proposed Rule 14.11(e)(5)(H) states that the Exchange 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 Interpretation and Policy .04 to proposed 
Rule 14.11(e)(5).
    Interpretation and Policy .01 to proposed Rule 14.11(e)(5) 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.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(5) states 
that the Exchange requires that Members provide all purchasers of newly 
issued Currency Trust Shares a prospectus for the series of Currency 
Trust Shares.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(5) provides 
that transactions in Currency Trust Shares will occur during Regular 
Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(5) provides 
that the Exchange 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 the Exchange or one or more major market data 
vendors on at least a 15- second basis during the regular market 
session; and
     The Exchange will implement written surveillance 
procedures applicable to Currency Trust Shares.
    Interpretation and Policy .05 to proposed Rule 14.11(e)(5) 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.

[[Page 41471]]

    Interpretation and Policy .06 to proposed Rule 14.11(e)(5) provides 
that Currency Trust Shares will be subject to the Exchange's equity 
trading rules.
Trading Halts
    Proposed Interpretation and Policy .07 to Rule 14.11(e)(5) 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, the 
Exchange may halt trading during the day on which such interruption 
first occurs. If such interruption persists past the trading day in 
which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption. If the 
Exchange 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 Nasdaq Rule 5711(e).
Commodity Index Trust Shares
    The Exchange will consider for trading, whether by listing or 
pursuant to unlisted trading privileges, Commodity Index Trust Shares 
that meet the criteria of proposed Rule 14.11(e)(6). Proposed Rule 
14.11(e)(6)(B) states that proposed Rule 14.11(e)(6) 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 the Exchange of such securities. Commodity 
Index Trust Shares are included within the definition of ``security'' 
or ``securities'' as such terms are used in the Rules of the Exchange.
Description
    Proposed Rule 14.11(e)(6)(C) defines the term ``Commodity Index 
Trust Shares'' to mean, as used in these proposed Rules (unless the 
context otherwise requires), a security that (i) is issued by a Trust 
that (a) 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 
(b) 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 (ii) 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 14.11(e)(6)(D) states that the Exchange 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 
separate series and would be identified by a unique symbol.
Initial Listing Standards
    Proposed Rule 14.11(e)(6)(E)(i) states that the Exchange will 
establish a minimum number of Commodity Index Trust Shares required to 
be outstanding at the time of commencement of trading on the Exchange.
Continued Listing Standards
    Under proposed Rule 14.11(e)(6)(E)(ii), the Exchange 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 the Exchange makes further dealings on the Exchange 
inadvisable.
    Upon termination of a Trust, the Exchange would require that 
Commodity Index Trust Shares issued in connection with such entity 
Trust be removed from Exchange 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 14.11(e)(6)(E)(iii) 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 14.11(e)(6)(E)(iv) 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 the Exchange.
    Proposed Rule 14.11(e)(6)(E)(v) provides that voting rights shall 
be as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(6)(F) and (G) set forth the requirements 
respecting limitation of the Exchange liability and Market Maker 
Accounts (see below for a general discussion of these requirements).
    Interpretation and Policy .01 to proposed Rule 14.11(e)(6) 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.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(6) states 
that the Exchange requires that Members provide all purchasers of newly 
issued Commodity Index Trust Shares a prospectus for the series of 
Commodity Index Trust Shares.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(6) states 
that transactions in Commodity Index Trust Shares will occur during 
Regular Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(6) states 
that the Exchange 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 Nasdaq Rule 5711(f).

[[Page 41472]]

Commodity Futures Trust Shares
    Proposed Rule 14.11(e)(7) governs the listing of Commodity Futures 
Trust Shares. The Exchange will consider for trading, whether by 
listing or pursuant to unlisted trading privileges, Commodity Futures 
Trust Shares that meet the criteria of proposed Rule 14.11(e)(7). 
Proposed Rule 14.11(e)(7)(B) states that proposed Rule 14.11(e)(7) 
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 the Exchange of such securities. 
Commodity Futures Trust Shares are included within the definition of 
``security'' or ``securities'' as such terms are used in the Rules of 
the Exchange.
Description
    Proposed Rule 14.11(e)(7)(C) 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 (a) 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 
(b) 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 14.11(e)(7)(D) states that the Exchange 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 14.11(e)(7)(E)(i) states that the Exchange will 
establish a minimum number of Commodity Futures Trust Shares required 
to be outstanding at the time of commencement of trading on the 
Exchange.
Continued Listing Standards
    Proposed Rule 14.11(e)(7)(E)(ii) states that the Exchange 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 delayed basis 
during the Exchange's regular market session 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 the Exchange's regular 
market session; or
     if such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Upon termination of a Trust, the Exchange requires that Commodity 
Futures Trust Shares issued in connection with such trust be removed 
from Exchange listing. A Trust will terminate in accordance with the 
provisions of the Trust prospectus.
    Proposed Rule 14.11(e)(7)(E)(iii) 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 14.11(e)(7)(E)(iv) 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 the Exchange.
    Proposed Rule 14.11(e)(7)(E)(v) states that voting rights shall be 
as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(7)(F) and (G) describe the requirements for 
Market Makers and the limitation of the Exchange liability in Commodity 
Futures Trust Shares (see below for a general discussion of these 
requirements).
    Proposed Rule 14.11(e)(7)(H) states that the Exchange 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.
    Interpretation and Policy .01 to proposed Rule 14.11(e)(7) 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.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(7) states 
that transactions in Commodity Futures Trust Shares will occur during 
Regular Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(7) states 
that if the Intraday Indicative Value or the value of the underlying 
futures contract is not being disseminated as required, the Exchange 
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, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption.
    In addition, if the Exchange 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.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(7) states 
that the Exchange's rules governing the trading of equity securities 
apply.
    Interpretation and Policy .05 to proposed Rule 14.11(e)(7) states 
that the Exchange will implement written surveillance procedures for 
Commodity Futures Trust Shares.

[[Page 41473]]

    The proposed rule change relating to Commodity Futures Trust Shares 
is based on Nasdaq Rule 5711(g).
Partnership Units
    Proposed Rule 14.11(e)(8) would govern the listing of Partnership 
Units. Under proposed Rule 14.11(e)(8)(A), the Exchange will consider 
for trading, whether by listing or pursuant to unlisted trading 
privileges, Partnership Units that meet the criteria of proposed Rule 
14.11(e)(8).
Description
    Under proposed Rule 14.11(e)(8)(B), the following terms as used in 
the proposed Rule would, unless the context otherwise requires, have 
the following meanings:
    Proposed Rule 14.11(e)(8)(B)(i) states that the term ``commodity'' 
is defined in Section 1(a)(4) of the Commodity Exchange Act.
    Proposed Rule 14.11(e)(8)(B)(ii) 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 14.11(e)(8)(C) states that the Exchange 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 14.11(e)(8)(D)(i) states that the Exchange will 
establish a minimum number of Partnership Units required to be 
outstanding at the time of commencement of trading on the Exchange.
Continued Listing Standards
    Proposed Rule 14.11(e)(8)(D)(ii) provides that the Exchange 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, (1) 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; (2) the partnership has 
fewer than 50,000 Partnership Units issued and outstanding; or (3) 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 the Exchange 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 the Exchange makes further dealings on the Exchange 
inadvisable.
    Upon termination of a partnership, the Exchange requires that 
Partnership Units issued in connection with such partnership be removed 
from Exchange listing. A partnership will terminate in accordance with 
the provisions of the partnership prospectus.
    Proposed Rule 14.11(e)(8)(D)(iii) 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 14.11(e)(8)(D)(iv) would adopt the following 
requirements that 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 the Exchange.
    Proposed Rule 14.11(e)(8)(D)(v) states that voting rights shall be 
as set forth in the applicable partnership prospectus.
    Proposed Rules 14.11(e)(8)(E) and (F) describe the limitation of 
the Exchange liability and requirements for Market Makers in 
Partnership Units (see below for a general discussion of these 
requirements).
    Proposed Rule 14.11(e)(8)(G) states that the Exchange 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.
    Interpretation and Policy .01 to proposed Rule 14.11(e)(8) states 
that the Exchange 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 
Nasdaq Rule 5711(h).
Trust Units
    The Exchange proposes to add new Rule 14.11(e)(9) in order to 
permit trading, either by listing or pursuant to unlisted trading 
privileges, of Trust Units.
    Proposed Rule 14.11(e)(9)(A) states that the provisions in proposed 
Rule 14.11(e)(9) 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 the Exchange 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 the Exchange.
Description
    Proposed Rule 14.11(e)(9)(B) states that the following terms as 
used in the proposed Rule shall, unless the context otherwise requires, 
have the following meanings:
     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 14.11(e)(9)(C) states that the Exchange 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 14.11(e)(9)(D)(i) states that the Exchange will 
establish a minimum number of Trust Units required to be outstanding at 
the time of commencement of trading on the Exchange. The Exchange 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 14.11(e)(9)(D)(ii)(a) states that the Exchange will 
remove Trust Units from listing under any of the following 
circumstances:

[[Page 41474]]

     If following the initial twelve month period following the 
commencement of trading of Trust Units, (A) 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; (B) the trust has fewer than 50,000 Trust Units issued 
and outstanding; or (C) 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 Exchange makes further dealings on the Exchange 
inadvisable.
Trading Halts
    Proposed Rule 14.11(e)(9)(D)(ii)(b) states that the Exchange will 
halt trading in a series of Trust Units if the circuit breaker 
parameters in Rule 11.18 have been reached. In exercising its 
discretion to halt or suspend trading in a series of Trust Units, the 
Exchange may consider any relevant factors. In particular, if the 
portfolio and net asset value per share are not being disseminated as 
required, the Exchange 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, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption.
    Upon termination of a trust, the Exchange would require that Trust 
Units issued in connection with such trust be removed from Exchange 
listing. A trust will terminate in accordance with the provisions of 
the prospectus.
    Proposed Rule 14.11(e)(9)(D)(iii) 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 14.11(e)(9)(D)(iv) 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 the Exchange.
    Proposed Rule 14.11(e)(9)(D)(v) states that voting rights shall be 
as set forth in the prospectus.
    Proposed Rules 14.11(e)(9)(E) and (F) describe the requirements for 
Market Makers and the limitation of the Exchange liability respecting 
Trust Units (see below for a general discussion of these requirements).
    Interpretation and Policy .01 to proposed Rule 14.11(e)(9) states 
that the Exchange requires that Members provide to all purchasers of 
newly issued Trust Units a prospectus for the series of Trust Units.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(9) states 
that transactions in Trust Units will occur during Regular Trading 
Hours and both the Pre-Opening and After Hours Trading Sessions.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(9) states 
that the Exchange 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 Nasdaq 
Rule 5711(i).
Managed Trust Securities
    Proposed Rule 14.11(e)(10) would adopt listing standards for 
Managed Trust Securities. Under proposed Rule 14.11(e)(10)(A), the 
Exchange will consider for trading, whether by listing or pursuant to 
unlisted trading privileges, Managed Trust Securities that meet the 
criteria of the proposed Rule. Proposed Rule 14.11(e)(10)(B) 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 Rules of 
the Exchange.
Description
    Proposed Rule 14.11(e)(10)(C)(i) 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 (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) 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 (b) is issued and redeemed continuously 
in specified aggregate amounts at the next applicable net asset value. 
Proposed Rule 14.11(e)(10)(C) also includes the following definitions 
concerning Managed Trust Securities:
     Disclosed Portfolio. Under proposed Rule 
14.11(e)(10)(C)(ii), 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 
14.11(e)(10)(C)(iii), 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 
14.11(e)(10)(C)(iv)), the term ``Reporting Authority'' in respect of a 
particular series of Managed Trust Securities means the Exchange, an 
institution, or a reporting or information service designated by the 
Exchange or by the Trust or the exchange that lists a particular series 
of Managed Trust Securities (if the Exchange 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 14.11(e)(10)(D) states that the Exchange 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.

[[Page 41475]]

Initial Listing Standards
    Under proposed Rule 14.11(e)(10)(E)(i), Managed Trust Securities 
will be listed and traded on the Exchange subject to application of the 
following initial listing criteria:
     The Exchange will establish a minimum number of Managed 
Trust Securities required to be outstanding at the time of commencement 
of trading on the Exchange.
     The Exchange 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 14.11(e)(10)(E)(ii), each series of Managed 
Trust Securities will be listed and traded on the Exchange 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 Regular Trading Hours.
     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 14.11(e)(10)(E)(ii)(c), the Exchange 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 the Exchange 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 the Exchange makes further dealings on the Exchange 
inadvisable.
Trading Halts
    Proposed Rule 14.11(e)(10)(E)(ii)(d) states that, if the Intraday 
Indicative Value of a series of Managed Trust Securities is not being 
disseminated as required, the Exchange 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, the Exchange 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 the Exchange pursuant to unlisted 
trading privileges, the Exchange will halt trading in that series as 
specified in Rule 11.18. In addition, if the Exchange 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 Portfolio is 
available to all market participants.
    Proposed Rule 14.11(e)(10)(E)(ii)(e) states that upon termination 
of a Trust, the Exchange requires that Managed Trust Securities issued 
in connection with such Trust be removed from Exchange listing. A Trust 
will terminate in accordance with the provisions of the Trust 
prospectus.
    Proposed Rule 14.11(e)(10)(E)(iii) 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 14.11(e)(10)(E)(iv) 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 the Exchange.
    Proposed Rule 14.11(e)(10)(E)(v) states that voting rights shall be 
as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(10)(F) and (G) describe the regulatory 
requirements for registered Market Makers in Managed Trust Securities, 
and the limitation of the Exchange liability respecting Managed Trust 
Securities (see below for a general discussion of these requirements).
    Proposed Rule 14.11(e)(10)(H) states that the Exchange 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 Interpretations and Policies to 
proposed Rule 14.11(e)(10) include the following provisions:
    Interpretation and Policy .01 to proposed Rule 14.11(e)(10) states 
that the Exchange requires that Members provide all purchasers of newly 
issued Managed Trust Securities a prospectus for the series of Managed 
Trust Securities.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(10) states 
that transactions in Managed Trust Securities will occur during Regular 
Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(10) states 
that the Exchange's rules governing the trading of equity securities 
apply.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(10) states 
that the Exchange will implement written surveillance procedures for 
Managed Trust Securities.
    Interpretation and Policy .05 to proposed Rule 14.11(e)(10) 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 Nasdaq Rule 5711(j).
Currency Warrants
    Proposed Rule 14.11(e)(11) would govern the listing of Currency 
Warrants.

[[Page 41476]]

Under proposed Rule 14.11(e)(11)(A), 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 14.11(e)(11)(A)(i) 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 14.8(b)(2).\20\ 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 14.8(b)(2), 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 the 
Exchange exceeds 25% of the warrant issuer's net worth.
---------------------------------------------------------------------------

    \20\ Rule 14.8(b)(2) sets forth initial listing standards for 
primary equity securities.
---------------------------------------------------------------------------

    Proposed Rule 14.11(e)(11)(A)(ii) states that the term must be one 
to five years from date of issuance.
    Proposed Rule 14.11(e)(11)(A)(iii) 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 14.11(e)(11)(A)(iv), the warrants will be cash 
settled in U.S. dollars.
    Under proposed Rule 14.11(e)(11)(A)(v), 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 the Exchange (if such warrant issue has not 
been listed on another organized securities market in the United 
States).
    Under proposed Rule 14.11(e)(11)(B), the Exchange will file 
separate proposals under Section 19(b) of the Act before listing and 
trading separate and distinct Currency Warrants.
Regulatory Matters
    Proposed Rule 14.11(e)(11)(C) 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 Rule 26.2.
     Suitability. The provisions of Rule 26.4 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 Rule 26.5 with respect to such trading. For purposes 
of the proposed Rule, the terms, ``option'' and ``options contract'' as 
used in Rule 26.5 shall be deemed to include Currency Warrants.
     Supervision of Accounts. Rule 26.3 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. Rule 26.17 shall apply to all 
public customer complaints received by a Member regarding Currency 
Warrants. The term ``option'' as used in Rule 26.17 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 applicable, as though 
such rule were part of these Rules.
Trading Halts or Suspensions
    Under proposed Rule 14.11(e)(11)(D) trading on the Exchange in any 
Currency Warrant will be halted whenever the Exchange 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 the Exchange may resume if the Exchange 
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 14.11(e)(11)(E) would govern reporting of warrant 
positions. Proposed Rule 14.11(e)(11)(E)(i) would require each Member 
to file with the Exchange 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: (a) long positions in put warrants and 
short positions in call warrants, and (b) short positions in put 
warrants with long positions in call warrants. The report shall be in 
such form as may be prescribed by the Exchange 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 14.11(e)(11)(E)(ii) 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 the 
Exchange such additional periodic reports with respect to such account 
as the Exchange may from time to time require.
    Proposed Rule 14.11(e)(11)(E)(iii) states that all reports required 
by the proposed Rule shall be filed with the Exchange in such manner 
and form as prescribed by the Exchange.
    The proposed rule change relating to Currency Warrants is based on 
Nasdaq Rule 5711(k).
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 (the 
``securities''):
Trading Rules
    The Exchange deems the securities to be equity securities, thus 
rendering trading in the securities subject to the Exchange's existing 
rules governing the trading of equity securities. The securities will 
trade on the Exchange during Regular Trading Hours, as well as during 
the Pre-Opening Session and the After Hours Trading Session. The 
Exchange 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 the Exchange 
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.\21\
---------------------------------------------------------------------------

    \21\ See, e.g., Rule 11.11. 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.

---------------------------------------------------------------------------

[[Page 41477]]

Information Circular
    Prior to the commencement of trading, the Exchange 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) Exchange Rule 3.7, which imposes 
suitability obligations on the Exchange 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 Pre-Opening and After Hours Trading 
Sessions when an updated Intraday Indicative Value will not be 
calculated or publicly disseminate and, if applicable, the risks 
involved in trading the securities during Regular Trading Hours 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 the Exchange's Regular Trading Hours.
Limitation of Exchange Liability
    Neither the Exchange, any agent of the Exchange, 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 the Exchange, any agent 
of the Exchange, or the Reporting Authority (if applicable), or any 
act, condition or cause beyond the reasonable control of the Exchange, 
any agent of the Exchange, 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 the Exchange, in a manner prescribed by the Exchange, 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 (the ``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 (the ``Underlying Currencies'');
     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 (the 
``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 (the 
``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 (the 
``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 (the 
``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 (the 
``Underlying Managed Trust Assets'').
    No registered Market Maker in the above mentioned securities shall 
trade in the respective Underlying

[[Page 41478]]

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, the ``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 the Exchange.
    In addition to the existing obligations under Exchange rules 
regarding the production of books and records (see e.g., Rule 4.2), a 
registered Market Maker in the above mentioned securities is required 
to make available to the Exchange 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 the Exchange.
Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to address any concerns about the trading of the securities on the 
Exchange. Trading of the securities on the Exchange will be subject to 
the Exchange's surveillance procedures during all trading sessions in 
order to deter and detect violations of Exchange rules and the 
applicable federal securities laws. Trading of the securities on the 
Exchange will be subject to the Exchange's surveillance procedures for 
derivative products. The Exchange may obtain information via the ISG 
from other exchanges who are members or affiliates of the ISG or any 
other exchanges with which the Exchange has comprehensive surveillance 
sharing agreements.\22\
---------------------------------------------------------------------------

    \22\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
---------------------------------------------------------------------------

    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. The 
Exchange has a general policy prohibiting the distribution of material, 
non-public information by its employees.
    As a general matter, the Exchange 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 the Exchange jurisdiction, but the Exchange 
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, the Exchange 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 the Exchange, 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 the 
Exchange's ``circuit breaker'' Rule 11.18(d) 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, the Exchange 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, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption. In addition, 
if the Exchange becomes aware that the net 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, Exchange Rule 3.7 governs Recommendations to Customers 
(Suitability). Prior to the commencement of trading of any inverse, 
leveraged, or inverse leveraged securities, the Exchange will inform 
its Members of the suitability requirements of Exchange Rule 3.7 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 other securities holdings, financial 
situation and needs, and (2) the customer can evaluate the risks of the 
recommended transaction and is financially able to bear the risks of an 
investment in the securities.
    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.
    The Exchange 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. The Exchange'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,\23\ in general, and furthers the

[[Page 41479]]

objectives of section 6(b)(5),\24\ particular, 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. The Exchange further believes that the proposal, as amended 
by this Amendment No. 1, remains consistent the Act because this 
Amendment No. 1 does not propose to make any substantive changes to the 
proposal as originally filed.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the Exchange believes that the proposed rule change 
should enhance depth and liquidity, and should promote narrower markets 
in the subject securities. Furthermore, the Exchange'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 Exchange trading rules, together with specific 
requirements for registered market makers, books and record production, 
surveillance procedures, suitability and prospectus requirements, and 
requisite the Exchange approvals, all set forth above. With respect to 
the proposed changes to Rule 14.11(h), the proposal is designed to 
avoid duplication within the Exchange's rules.
    The proposal is intended to ensure that investors receive up-to-
date information on the value of certain underlying securities and 
indices in the products in which they invest, and protect investors and 
the public interest, enabling investors to: (i) Respond quickly to 
market changes through intra-day trading opportunities; (ii) engage in 
hedging strategies; and (iii) reduce transaction costs for trading a 
group or index of securities.
    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 the Exchange 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 the Exchange, just as they are 
currently traded on other exchanges. The Exchange believes that 
individuals and entities permitted to make markets on the Exchange 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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the current 
variances between the Exchange's listing rules and the listing rules of 
other exchanges limit competition in that there are certain products 
that the Exchange cannot list while other exchanges can list such 
products. Thus, approval of the proposed rule change will promote 
competition because it will allow the Exchange to compete with other 
national securities exchanges for additional product listings.

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

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

III. 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 self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the 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, as modified, 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 rule-comments@sec.gov. Please include 
File Number SR-BATS-2013-038 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-BATS-2013-038. 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 
10:00 a.m. and 3:00 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-BATS-2013-038, and should be 
submitted on or before July 31, 2013.


[[Page 41480]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-16528 Filed 7-9-13; 8:45 am]
BILLING CODE 8011-01-P