Federal Register / Vol. 72, No. 46 / Friday, March 9, 2007 / Notices 10801 

20 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Securities Exchange Act Release No. 53105 

(January 11, 2006), 71 FR 3129 (January 19, 2006) 

(SR–Amex–2005–059) (PowerShares DB 

Commodity Index Tracking Fund); Securities 

Exchange Act Release No. 54351 (August 23, 2006), 

71 FR 51245 (August 29, 2006) (SR–Amex–2006–

44) (PowerShares DB G10 Currency Harvest Fund); 

Securities Exchange Act Release No. 55029 

(December 29, 2006), 72 FR 806 (January 8, 2007) 

(SR–Amex–2006–76) (seven PowerShares DB 

commodity funds); Securities Exchange Act Release 

No. 53876 (May 25, 2006), 71 FR 32158 (June 2, 

2006) (SR–NYSE–2006–16) (iPath Dow-Jones AIG 

Commodity Index Total Return Exchange-Traded 

Notes); Securities Exchange Act Release No. 53849 

(May 22, 2006), 71 FR 30706 (May 30, 2006) (SR–

NYSE–2006–20) (iPath GSCI Total Return Index 

Exchange-Traded Notes); Securities Exchange Act 

Release No. 54177 (July 19, 2006), 71 FR 42700 

(July 27, 2006) (SR–NYSE–2006–19) (iPath 

Goldman Sachs Crude Oil Total Return Index 

Exchange-Traded Notes); Securities Exchange Act 

Release No. 54013 (June 16, 2006), 71 FR 36372 

(June 26, 2006) (SR–NYSE–2006–17) (iShares GSCI 

Commodity-Indexed Trust); Securities Exchange 

Act Release No. 53582 (March 31, 2006), 71 FR 

17510 (April 6, 2006) (SR–Amex–2005–127) 

(United States Oil Fund, LP); Securities Exchange 

Act Release No. 54839 (November 29, 2006), 71 FR 

70804 (December 6, 2006) (SR–Amex–2006–82) 

(MACROShares Oil Up and Oil Down Tradeable 

Shares). 

4 17 CFR 242.602. 

5 ‘‘OTC market maker’’ means any dealer that 

holds itself out as being willing to buy from and sell 

to its customers, or others, in the United States, an 

NMS stock for its own account on a regular or 

continuous basis otherwise than on a national 

securities exchange in amounts of less than block 

size. See 17 CFR 242.600(b)(52). ‘‘NMS stock’’

means any security or class of securities for which 

transaction reports are collected, processed, and 

made available pursuant to an effective transaction 

reporting plan. See 17 CFR 242.600(b)(47). 

6OTC market makers that are not subject to the 

1% Rule may nevertheless elect to communicate 

quotations in exchange-listed securities to NASD, in 

which case NASD must disseminate such 

quotations. 

7NASD already uses the ADF to fulfill its 

obligations under the Quote Rule with respect to 

Nasdaq-listed securities. 

8See Letter from Robert L.D. Colby, Acting 

Director, Division of Market Regulation, 

Continued 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.20

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–4192 Filed 3–8–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55386; File No. SR–

NASDAQ–2007–016] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Order Granting Accelerated 

Approval of Proposed Rule Change 

Relating to the Trading of 16 

Commodity-Related Securities 

Pursuant to Unlisted Trading 

Privileges on a Pilot Basis 

March 2, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on March 1, 

2007, The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been 

substantially prepared by the Exchange. 

This order provides notice of the 

proposed rule change and approves the 

proposal on an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq proposes to amend Rule 4630 

to govern trading in any CommodityRelated Security (as defined below) and 

to make conforming amendments to 

Rule 4120. Pursuant to the amended 

rule and in accordance with the terms 

and conditions specified in this filing, 

Nasdaq also proposes to trade, pursuant 

to unlisted trading privileges, the 16 

Commodity-Related Securities 

described below. 

The text of the proposed rule change 

is available from Nasdaq’s Web site at 

http://nasdaq.complinet.com, at 

Nasdaq’s principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item III below. The 

Exchange has prepared summaries, set 

forth in Sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Nasdaq is proposing to trade the 

following securities pursuant to UTP for 

a pilot period of three months beginning 

on March 5, 2007: (1) Shares of the 

PowerShares DB Commodity Index 

Tracking Fund, (2) shares of the 

PowerShares DB G10 Currency Harvest 

Fund, (3) shares of the PowerShares DB 

Agricultural Fund, (4) shares of the 

PowerShares DB Oil Fund, (5) shares of 

the PowerShares DB Base Metals Fund, 

(6) shares of the PowerShares DB Energy 

Fund, (7) shares of the PowerShares DB 

Silver Fund, (8) shares of the 

PowerShares DB Gold Fund, (9) shares 

of the PowerShares DB Precious Metals 

Fund, (10) iPath Dow Jones-AIG 

Commodity Index Total Return 

Exchange-Traded Notes, (11) iPath GSCI 

Total Return Index Exchange-Traded 

Notes, (12) iPath Goldman Sachs Crude 

Oil Total Return Index Exchange-Traded 

Notes, (13) shares of the iShares GSCI 

Commodity-Indexed Trust, (14) units of 

the United States Oil Fund, LP, (15) 

Claymore MACROShares Oil Up 

Tradeable Shares, and (16) Claymore 

MACROShares Oil Down Tradeable 

Shares (collectively, the ‘‘Covered 

Securities’’). The Commission 

previously approved the original listing 

and trading of each of the Covered 

Securities by the New York Stock 

Exchange (‘‘NYSE’’) or the American 

Stock Exchange (‘‘Amex’’).3 Since the 

time of their listing on NYSE or Amex, 

the Covered Securities have traded on 

an over-the-counter (‘‘OTC’’) basis on 

systems operated as facilities of NASD 

by Nasdaq and its affiliates. Specifically, 

the products are currently traded on the 

ITS/CAES System, which Nasdaq 

operates for NASD pursuant to a 

Transitional System and Regulatory 

Services Agreement (the ‘‘Transitional 

Agreement’’). 

Under Rule 602 of Regulation NMS 

(the ‘‘Quote Rule’’),4 NASD is required 

to collect the best bid, best offer, and 

quotation sizes communicated 

otherwise than on an exchange by each 

NASD member acting in the capacity of 

an ‘‘OTC market maker’’ for any ‘‘NMS 

stock,’’ 5 unless the executed volume of 

such member, during the most recent 

calendar quarter, comprised one percent 

or less of the aggregate trading volume 

for such security (the ‘‘1% Rule’’).6

Nasdaq has operated ITS/CAES under 

the Transitional Agreement in order to 

allow NASD to fulfill its Quote Rule 

obligation to provide a quotation facility 

for non-Nasdaq exchange-listed 

securities (‘‘CQS Securities’’). On March 

5, 2007, NASD expects to begin to fulfill 

its obligation to provide a quotation 

facility for CQS Securities without 

Nasdaq’s assistance through its 

Alternative Display Facility (the 

‘‘ADF’’).7 Also at that time, Nasdaq 

expects to stop operating the ITS/CAES 

System. 

On July 28, 2006, the Commission 

granted NASD a limited exemption 8


jlentini on PROD1PC65 with NOTICES
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Commission, to T. Grant Callery, Executive Vice 

President and General Counsel, NASD (July 28, 

2006). 9 17 CFR 240.12f–5. 

10 ‘‘New Derivative Security Product’’ is defined 

as any type of option, warrant, hybrid securities 

product, or any other security, other than a single 

equity option or a security futures product, whose 

value is based, in whole or in part, upon the 

performance of, or interest in, an underlying 

instrument. See 17 CFR 240.19b–4(e). 

11 15 U.S.C. 78s. 

12Nasdaq is amending Rule 4120 to make it 

applicable to any Commodity-Related Security (as 

defined below) and to include the term 

‘‘commodity-related value’’ in the definition of a 

Required Value that must be disseminated under 

the conditions described in the rule. Thus, for 

example, the term ‘‘commodity-related value’’

would include the price of crude oil futures 

contracts on which the United States Oil Fund is 

based. 

13Surveillance of all trading on NASD facilities 

operated by Nasdaq, including the trading of the 

Covered Securities, is currently being conducted by 

NASD. After Nasdaq begins to trade the Covered 

Securities as an exchange, NASD will continue to 

surveil trading pursuant to a regulatory services 

agreement. Nasdaq is responsible for NASD’s 

performance under this regulatory services 

agreement. 

from the Quote Rule and granted OTC 

market makers a limited exemption 

from the 1% Rule by providing that an 

OTC market maker is not required to 

provide quotations to NASD, and NASD 

is not required to collect and 

disseminate such quotations, if the OTC 

market maker provides its quotations to 

a national securities exchange that in 

turn disseminates the quotations of each 

such OTC market maker, even if such 

quotations do not reflect the exchange’s 

best bid and offer. Thus, because 

Nasdaq disseminates depth-of-book 

information reflecting the quotations of 

each of its market makers, an OTC 

market maker may satisfy its 1% Rule 

obligations by quoting on Nasdaq. 

The Covered Securities have been 

eligible to trade on ITS/CAES because 

the Quote Rule requires NASD, as a 

national securities association, to 

provide a means for its members to post 

quotes for all NMS stocks. As an 

exchange, however, Nasdaq may not 

trade securities on a UTP basis unless 

Nasdaq ‘‘has in effect a rule or rules 

providing for transactions in the class or 

type of security to which the exchange 

extends unlisted trading privileges,’’ 9

and, in the case of ‘‘new derivatives 

securities products’’ within the meaning 

of SEC Rule 19b–4(e),10 it either has 

generic listing standards applicable to 

the product in question or receives 

Commission approval for a rule filing 

under Section 19 of the Act 11 to allow 

trading of the product. The Covered 

Securities are new derivative securities 

products for which Nasdaq does not 

have generic listing standards, and 

therefore Nasdaq must obtain 

Commission approval of a filing before 

trading them as an exchange. 

It had been Nasdaq’s expectation that 

it would not trade all of the Covered 

Securities as of March 5, 2007, in light 

of low trading volumes of some of the 

Covered Securities and the 

administrative requirements associated 

with product-specific filings. Based on 

input from its members and NASD, 

however, Nasdaq has concluded that 

there are OTC market makers in each of 

the Covered Securities that may be 

subject to the 1% Rule, based on recent 

trading volumes. Moreover, although 

the ADF is scheduled to become 

operational for CQS Securities on March 

5, 2007, an NASD member that is not 

already an ADF participant might not 

have sufficient time to move its 

quotations in the Covered Securities to 

the ADF by March 5. Accordingly, 

Nasdaq believes that it must begin 

trading the Covered Securities by March 

5 in order to prevent disruptions in the 

markets for the Covered Securities and 

forestall regulatory compliance issues 

for OTC market makers subject to the 

1% Rule in the Covered Securities. 

It does not appear that there would be 

sufficient time between now and March 

5 for Nasdaq and Commission staff to 

process a detailed filing regarding each 

of the Covered Securities. Moreover, in 

cases where Covered Securities are 

issued by pooled investment vehicles 

that invest in commodity futures that 

are traded on futures exchanges that are 

not members of the Intermarket 

Surveillance Group (‘‘ISG’’), securities 

exchanges trading the Covered 

Securities have entered into regulatory 

information-sharing agreements with 

such futures exchanges. At this time, 

Nasdaq is in the process of entering into 

such agreements with ICE Futures and 

the Kansas Board of Trade, and is in the 

process of amending its existing 

agreement with the New York 

Mercantile Exchange (‘‘NYMEX’’) to 

cover additional commodities. Nasdaq 

has just completed an agreement with 

the London Metals Exchange, and 

expects to complete the remaining 

agreements in the near future, but not by 

March 5, 2007. 

In light of all of these considerations, 

Nasdaq is seeking Commission approval 

for a proposal to trade the Covered 

Securities for a three-month pilot 

period. During the pilot period, Nasdaq 

will complete all required regulatory 

information sharing agreements and will 

submit detailed product-specific filings 

covering each of the Covered Securities. 

Nasdaq deems the Covered Securities 

to be equity securities, thus rendering 

trading in the Covered Securities subject 

to its existing rules governing the 

trading of equity securities. During the 

period while a Covered Security is 

trading under this pilot filing, its trading 

hours will be 9:30 a.m. to 4 p.m., 

Eastern Time (‘‘ET’’). Nasdaq may, 

however, propose longer trading hours 

for some of the Covered Securities in a 

subsequent product-specific filing, 

depending on the extent of 

dissemination of intraday values and 

index values related to the Covered 

Security. 

Nasdaq will halt trading in a Covered 

Security under the conditions specified 

in Nasdaq Rules 4120 and 4121. The 

conditions for a halt include a 

regulatory halt by the listing market. 

UTP trading in the Covered Securities 

will also be governed by provisions of 

Nasdaq Rule 4120(b) relating to 

temporary interruptions in the 

calculation or wide dissemination of (i) 

the Intraday Indicative Value, Intraday 

Optimized Portfolio Value, or other 

comparable intraday valuation for a 

Covered Security; or (ii) the value of any 

index or any commodity-related value 

underlying a Covered Security.12

Additionally, Nasdaq may cease trading 

a Covered Security if other unusual 

conditions or circumstances exist 

which, in the opinion of Nasdaq, make 

further dealings on Nasdaq detrimental 

to the maintenance of a fair and orderly 

market. Nasdaq will also follow any 

procedures with respect to trading halts 

as set forth in Nasdaq Rule 4120(c). 

Finally, Nasdaq will stop trading a 

Covered Security if the listing market 

delists it. 

Nasdaq believes that its surveillance 

procedures are adequate to address any 

concerns about the trading of the 

Covered Securities on Nasdaq. Trading 

of the Covered Securities through ITS/ 

CAES is currently subject to NASD’s 

surveillance procedures for equity 

securities in general and ETFs in 

particular. After Nasdaq begins to trade 

the Covered Securities as an exchange, 

NASD, on behalf of Nasdaq, will 

continue to surveil Nasdaq trading, 

including Nasdaq trading of the Covered 

Securities. Nasdaq’s transition to 

exchange status will not result in any 

change in the surveillance process with 

respect to the Covered Securities.13

Nasdaq is able to obtain information 

regarding trading in the Covered 

Securities and the underlying futures 

through its members in connection with 

the proprietary or customer trades that 

such members effect on any relevant 

market. In addition, Nasdaq may obtain 

trading information via the Intermarket 

Surveillance Group (‘‘ISG’’) from other 

exchanges who are members or affiliates 

of the ISG, including the Chicago Board 


jlentini on PROD1PC65 with NOTICES
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14Securities Exchange Act Release No. 54765 

(November 16, 2006), 71 FR 67668 (November 22, 

2006) (SR–NASDAQ–2006–009). 

15The amended rule is thus intended to apply to 

instruments that have been defined as ‘‘investment 

shares,’’ ‘‘commodity-based trust shares,’’ ‘‘currency 

trust shares,’’ ‘‘commodity index trust shares,’’ or 

‘‘partnership units’’ under the rules of Amex and 

NYSE Arca. The amended rule is also intended to 

apply to securities that have been defined as 

‘‘paired trust shares’’ under such rules, with a 

reference price that is related to commodities, 

futures contracts, options on futures contracts, 

forward contracts, commodity swaps, or other 

related derivatives. 

16 15 U.S.C. 78f(b). 

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

18 17 CFR 240.12f–5. 

of Trade. In addition, Nasdaq has a 

regulatory information sharing 

agreement with NYMEX covering gold 

and silver futures, and is in the process 

of amending the agreement to cover 

crude oil, heating oil, natural gas, 

copper, and unleaded gasoline. Nasdaq 

has also just entered into a regulatory 

sharing agreement with the London 

Metals Exchange related to aluminum, 

copper, lead, nickel, tin, and zinc. 

Nasdaq is also in the process of entering 

into information-sharing agreements 

with ICE Futures related to crude oil 

and gas oil, and with the Kansas Board 

of Trade related to wheat. 

Nasdaq will inform its members in 

Information Circulars of the special 

characteristics and risks associated with 

trading the Covered Securities. 

Specifically, the Information Circulars 

will discuss the following: (a) 

Applicable procedures for purchases 

and redemptions of Covered Securities; 

(b) Nasdaq Rule 2310, which imposes 

suitability obligations on Nasdaq 

members with respect to recommending 

transactions in Covered Securities to 

customers; (c) how information 

regarding applicable intraday values is 

disseminated; (d) prospectus delivery 

requirements; and (e) trading 

information. 

In addition, the Information Circulars 

will reference that the Covered 

Securities are subject to various fees and 

expenses described in their applicable 

Registration Statements. The 

Information Circulars will also reference 

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 such as 

aluminum, gold, crude oil, heating oil, 

corn, and wheat, or the futures contracts 

on which the value of the certain 

Covered Securities are based. The 

Information Circulars will describe the 

public availability of information about 

the Covered Securities and underlying 

indexes or prices. The Information 

Circular will also discuss any relief 

granted by the Commission or the staff 

from any rules under the Act. 

In November 2006, the Commission 

approved Nasdaq Rule 4630 to govern 

the trading of Commodity-Based Trust 

Shares.14 Commodity-Based Trust 

Shares were defined as trust-issued 

receipts based on the value of an 

underlying commodity or index of 

commodities held by a trust. Nasdaq is 

now proposing to amend the rule to 

make it apply broadly to trading in any 

security issued by any trust, 

partnership, commodity pool or similar 

entity that invests, directly or through 

another entity, in any combination of 

commodities, futures contracts, options 

on futures contracts, forward contracts, 

commodity swaps, or other related 

derivatives, or the value of which is 

determined by the value of 

commodities, futures contracts, options 

on futures contracts, forward contracts, 

commodity swaps, or other related 

derivatives (a ‘‘Commodity-Related 

Security’’).15 All of the Covered 

Securities under this filing are 

Commodity-Related Securities and 

therefore governed by the amended rule. 

Under the amended rule: 

• A member acting as a registered 

market maker in a Commodity-Related 

Security will be obligated to establish 

adequate information barriers when 

such market maker engages in interdepartmental communications. For 

purposes of a Commodity-Related 

Security, ‘‘inter-departmental 

communications’’ are defined to include 

communications to other departments 

within the same firm or the firm’s 

affiliates that involve trading in 

commodities, futures contracts, options 

on futures contracts, forward contracts, 

commodity swaps, or other related 

derivatives underlying such 

Commodity-Related Security. 

• A member acting as a registered 

market maker in a Commodity-Related 

Security must file with Nasdaq 

Regulation in a manner prescribed by 

Nasdaq Regulation and keep current a 

list identifying all accounts for trading 

in commodities, futures contracts, 

options on futures contracts, forward 

contracts, commodity swaps, or other 

related derivatives underlying such 

Commodity-Related Security, that the 

market maker may have or over which 

it may exercise investment discretion. 

• A member acting as a registered 

market maker in a Commodity-Related 

Security shall make available to Nasdaq 

Regulation such books, records, or other 

information pertaining to transactions 

by such entity or registered or nonregistered employee affiliated with such 

entity for its or their own accounts for 

trading commodities, futures contracts, 

options on futures contracts, forward 

contracts, commodity swaps, or other 

related derivatives underlying such 

Commodity-Related Security, as may be 

requested by Nasdaq Regulation. 

• In connection with trading a 

Commodity-Related Security or 

commodities, futures contracts, options 

on futures contracts, forward contracts, 

commodity swaps, or other related 

derivatives underlying a CommodityRelated Security, the member acting as 

a market maker in a Commodity-Related 

Security shall not use any material 

nonpublic information received from 

any person associated with the member 

or employee of such person regarding 

trading by such person or employee in 

the commodities, futures contracts, 

options on futures contracts, forward 

contracts, commodity swaps, or other 

related derivatives underlying such 

Commodity-Related Security. 

The amended rule also requires 

members to provide a prospectus to all 

purchasers of a newly issued 

Commodity-Related Security. Finally, 

the amended rule stipulates that Nasdaq 

will file proposals under Section 19(b) 

of the Act before trading separate and 

distinct Commodity-Based Securities 

designated on different underlying 

commodity-related investments, and 

that the proposal filed with respect to 

particular Commodity-Related Security 

will specify the applicable trading hours 

for such Commodity-Related Security. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with Section 6(b) 

of the Act 16 in general and Section 

6(b)(5) of the Act 17 in particular, in that 

in that it is designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, remove 

impediments to a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. In addition, Nasdaq 

believes that the proposal is consistent 

with Rule 12f–5 under the Act 18

because it deems the Covered Securities 

to be an equity securities, thus 

rendering trading in the Covered 

Securities subject to Nasdaq’s existing 

rules governing the trading of equity 

securities. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 


jlentini on PROD1PC65 with NOTICES
10804 Federal Register / Vol. 72, No. 46 / Friday, March 9, 2007 / Notices 

19 In approving this rule change, the Commission 

notes that it has considered the proposal’s impact 

on efficiency, competition, and capital formation. 

See 15 U.S.C. 78c(f). 

20 15 U.S.C. 78f(b)(5). 

21 15 U.S.C. 78l(f). 

22Section 12(a) of the Act, 15 U.S.C. 78l(a), 

generally prohibits a broker-dealer from trading a 

security on a national securities exchange unless 

the security is registered on that exchange pursuant 

to Section 12 of the Act. Section 12(f) of the Act 

excludes from this restriction trading in any 

security to which an exchange ‘‘extends UTP.’’

When an exchange extends UTP to a security, it 

allows its members to trade the security as if it were 

listed and registered on the exchange even though 

it is not so listed and registered. 

23See supra note 3. 

24 17 CFR 240.12f–5. 25 15 U.S.C. 78k–1(a)(1)(C)(iii). 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments on the proposed 

rule change were neither solicited nor 

received. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2007–016 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Nancy M. Morris, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2007–016. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for inspection and copying in 

the Commission’s Public Reference 

Room. Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Exchange. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2007–016 and 

should be submitted on or before March 

30, 2007. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

After careful review, the Commission 

finds that the proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.19 In particular, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,20 which requires that 

an exchange have rules designed, among 

other things, to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and in 

general to protect investors and the 

public interest. The Commission 

believes that this proposal should 

benefit investors by increasing 

competition among markets that trade 

the Covered Securities. 

In addition, the Commission finds 

that the proposal is consistent with 

Section 12(f) of the Act,21 which permits 

an exchange to trade, pursuant to UTP, 

a security that is listed and registered on 

another exchange.22 The Commission 

notes that it previously approved the 

listing and trading of each of the 

Covered Securities on either NYSE or 

Amex.23 The Commission also finds that 

the proposal is consistent with Rule 

12f–5 under the Act,24 which provides 

that an exchange shall not extend UTP 

to a security unless the exchange has in 

effect a rule or rules providing for 

transactions in the class or type of 

security to which the exchange extends 

UTP. The Exchange has represented that 

it meets this requirement because it 

deems the Covered Securities to be 

equity securities, thus rendering trading 

in the Covered Securities subject to the 

Exchange’s existing rules governing the 

trading of equity securities. 

The Commission further believes that 

the proposal is consistent with Section 

11A(a)(1)(C)(iii) of the Act,25 which sets 

forth Congress’ finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities. Quotations for 

and last sale information regarding the 

Covered Securities are disseminated 

through the facilities of the CTA and the 

Consolidated Quotation System. 

Furthermore, (i) the Intraday Indicative 

Value, Intraday Optimized Portfolio 

Value, or other comparable intraday 

valuation for a Covered Security; or (ii) 

the value of any index or any 

commodity-related value underlying a 

Covered Security, is calculated by the 

original listing market and published 

via the facilities of the Consolidated 

Tape Association on a 15-second 

delayed basis throughout the trading 

hours for the Covered Securities. In 

addition, if the listing market halts 

trading when either (i) the Intraday 

Indicative Value, Intraday Optimized 

Portfolio Value, or other comparable 

intraday valuation for a Covered 

Security; or (ii) the value of any index 

or any commodity-related value 

underlying a Covered Security, is not 

being calculated or disseminated, the 

Exchange would halt trading in such 

Covered Security. 

The Commission notes that, if a 

Covered Security should be delisted by 

the listing exchange, the Exchange 

would no longer have authority to trade 

the Covered Security pursuant to this 

order. 

In support of this proposal, the 

Exchange has made the following 

representations: 

1. The Exchange’s surveillance 

procedures are adequate to properly 

monitor Exchange trading of the 

Covered Securities. 

2. Prior to the commencement of 

trading, the Exchange would inform its 

members in an Information Bulletin of 

the special characteristics and risks 

associated with trading the Covered 

Securities. 

3. Prior to the commencement of 

trading, the Exchange would inform its 

members in an Information Bulletin the 

requirement that members deliver a 

prospectus to investors purchasing 

newly issued Covered Securities prior to 

or concurrently with the confirmation of 

a transaction. 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 72, No. 46 / Friday, March 9, 2007 / Notices 10805 

26 15 U.S.C. 78s(b)(2). 

27 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(iii). 

4 17 CFR 240.19b–4(f)(6). 

5The NASD has asked the Commission to waive 

the 30-day operative delay provided in Rule 19b–

4(f)(6)(iii). 17 CFR 240.19b–4(f)(6)(iii). 

6See Securities Exchange Act Release No. 54084 

(June 30, 2006), 71 FR 38935 (July 10, 2006) (order 

approving File No. SR–NASD–2005–087). 

7See Securities Exchange Act Release No. 54715 

(November 6, 2006), 71 FR 66354 (November 14, 

2006) (order approving File No. SR–NASD–2006–

108). The NASD/NSX TRF commenced operation 

for the reporting of over-the-counter (‘‘OTC’’) trades 

in Nasdaq-listed securities on November 27, 2006, 

and began accepting reports of OTC trades in nonNasdaq exchange-listed securities on February 20, 

2007. 

8See Securities Exchange Act Release No. 54931 

(December 13, 2006), 71 FR 76409 (December 20, 

2006) (order approving File No. SR–NASD–2006–

115). The NASD/BSE TRF will commence operation 

upon successful completion of system testing and 

certification (currently anticipated to be in the first 

quarter of 2007). 

This approval order is conditioned on 

the Exchange’s adherence to these 

representations. 

Exchanges that trade commodityrelated securities generally have in 

place surveillance arrangements with 

markets that trade the underlying 

commodities. The Commission notes 

that the Exchange has indicated that it 

currently is in the process of entering 

into information-sharing agreements 

with the ICE Futures and the Kansas 

Board of Trade, as well as amending its 

current information sharing agreement 

with NYMEX. Although the Exchange 

has not finalized these agreements, the 

Commission believes nevertheless that 

the Exchange’s proposal to trade the 

Covered Securities on a pilot basis is 

consistent with the Act in view of (1) 

the limited duration of the pilot period 

(three months), (2) the Exchange’s 

representation that these informationsharing agreements would be complete 

‘‘in the near future,’’ and (3) the fact that 

the Exchange must submit a proposed 

rule change addressing each Covered 

Security, to continue trading the 

securities after the expiration of the 

pilot period. 

The Commission finds good cause for 

approving this proposal before the 

thirtieth day after the publication of 

notice thereof in the Federal Register. 

As noted previously, the Commission 

previously found that the listing and 

trading of each of the Covered Securities 

by either NYSE or Amex is consistent 

with the Act. The Commission presently 

is not aware of any regulatory issue that 

should cause it to revisit those findings 

or would preclude the trading of the 

Covered Securities on the Exchange 

pursuant to UTP. Furthermore, 

accelerated approval of this proposal is 

necessary to facilitate compliance by 

certain OTC market makers with the 1% 

Rule. Market disruption could result if 

these OTC market makers have no 

venue where they can publish their 

quotations in the Covered Securities. 

For these reasons, the Commission finds 

good cause to approve the amended 

proposal on an accelerated basis. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,26 that the 

proposed rule change (SR–NASDAQ–

2007–016), be and it hereby is, approved 

on an accelerated basis for a threemonth pilot period which will 

commence on March 5, 2007. 

For the Commission, by the Division of 

Market Regulation, pursuant to delegated 

authority.27

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E7–4193 Filed 3–8–07; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–55393; File No. SR–NASD–

2007–016] 

Self-Regulatory Organizations; 

National Association of Securities 

Dealers, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend NASD Rules 

4632C and 4632D To Reflect ‘‘As/Of’’

Trade Reporting and the Automated 

Reporting of Trade Cancellations to 

the NASD/NSX and NASD/BSE Trade 

Reporting Facilities 

March 2, 2007. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on February 

27, 2007, the National Association of 

Securities Dealers, Inc. (‘‘NASD’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared substantially by the 

NASD. The NASD has filed this 

proposal pursuant to Section 

19(b)(3)(A)(iii) of the Act 3 and Rule 

19b–4(f)(6) thereunder,4 which renders 

the proposal effective upon filing with 

the Commission.5 The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The NASD proposes to amend NASD 

Rules 4632C, ‘‘Transaction Reporting,’’

and 4632D, ‘‘Transaction Reporting,’’ to 

reflect ‘‘as/of’’ (T+1) trade reporting and 

the automated reporting of trade 

cancellations to the NASD/NSX Trade 

Reporting Facility (the ‘‘NASD/NSX 

TRF’’) and the NASD/BSE Trade 

Reporting Facility (the ‘‘NASD/BSE 

TRF’’), respectively. The proposed 

amendments are substantially identical 

to the current language of NASD Rule 

4632, ‘‘Transaction Reporting,’’ relating 

to the NASD/Nasdaq Trade Reporting 

Facility (‘‘NASD/Nasdaq TRF’’), which 

the Commission approved on June 30, 

2006.6 The text of the proposed rule 

change is available at the NASD, in the 

Commission’s Public Reference Room, 

and at http://www.nasd.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

NASD 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 NASD has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Commission approved the 

establishment of the NASD/NSX TRF 7

and the NASD/BSE TRF 8 on November 

6, 2006, and December 13, 2006, 

respectively. The NASD/NSX TRF and 

NASD/BSE TRF provide members with 

additional mechanisms for reporting 

locked-in trades in exchange-listed 

securities executed otherwise than on 

an exchange. 

Currently, the NASD/NSX TRF does 

not accept reports of trades on an ‘‘as/ 

of’’ or next day (T+1) basis and the 

NASD/BSE TRF rules also do not 

contemplate the submission of ‘‘as/of’’

trade reports. The rules relating to the 

NASD/NSX TRF and the NASD/BSE 

TRF expressly provide that members 

must use an alternative electronic 


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