[Federal Register Volume 77, Number 62 (Friday, March 30, 2012)]
[Notices]
[Pages 19428-19454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-7516]



[[Page 19427]]

Vol. 77

Friday,

No. 62

March 30, 2012

Part II





Securities and Exchange Commission





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





Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment No. 
1 Thereto, Relating to the Adoption of Listing Standards for Certain 
Securities; Notice

Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / 
Notices

[[Page 19428]]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66648; File No. SR-NASDAQ-2012-013]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment No. 
1 Thereto, Relating to the Adoption of Listing Standards for Certain 
Securities

March 23, 2012.

I. Introduction

    On January 20, 2012, The NASDAQ Stock Market LLC (``NASDAQ'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to adopt rules applicable to the qualification, 
listing, trading, and delisting of certain securities on NASDAQ. The 
proposed rule change was published for comment in the Federal Register 
on February 9, 2012.\3\ The Commission received no comments on the 
proposal. On March 21, 2012, the Exchange filed Amendment No. 1 to the 
proposed rule change.\4\ This order grants approval of the proposed 
rule change, as modified by Amendment No. 1 thereto.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 66320 (February 3, 
2012), 77 FR 6833 (``Notice'').
    \4\ In Amendment No. 1, consistent with its proposal to conform 
the continued listing requirements applicable to Equity Index-Linked 
Securities and Commodity-Linked Securities to those of another 
national securities exchange and to incorporate such requirements 
under proposed Rules 5710(k)(i)(B) and (k)(ii)(B), NASDAQ proposes 
to delete existing references to continued listing standards 
applicable to Linked Securities (as defined herein) in Rule 5730(b). 
In addition, in Amendment No. 1, NASDAQ proposes to incorporate 
additional rule requirements relating to information dissemination 
applicable to Index-Linked Exchangeable Notes in order to conform 
its proposal with the listing requirements for Index-Linked 
Exchangeable Notes of another national securities exchange. This 
technical amendment does not require notice and comment as it did 
not materially affect the substance of the rule filing or raise any 
unique or novel regulatory issues.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to adopt rules applicable to the 
qualification, listing, trading, and delisting on NASDAQ (``Listing 
Rules'') of certain securities. Specifically, NASDAQ proposes to amend 
Rule 5710 (``Securities Linked to the Performance of Indexes and 
Commodities (Including Currencies)'') to: (i) Incorporate generic 
continued listing standards for Equity Index-Linked Securities and 
Commodity-Linked Securities (collectively, ``Existing Linked 
Securities'') under Rule 5710; \5\ (ii) adopt initial and continued 
generic listing standards for Fixed Income Index-Linked Securities, 
Futures-Linked Securities, and Multifactor Index-Linked Securities 
(collectively, ``Additional Linked Securities,'' and together with the 
Existing Linked Securities, ``Linked Securities''); \6\ (iii) revise 
the introductory paragraph to incorporate references to, and provide 
descriptions of, the Additional Linked Securities; \7\ (iv) revise the 
paragraph of Rule 5710 relating to trading halts to clarify that it 
applies to all Linked Securities; \8\ (v) adopt Commentary .01 relating 
to obligations of Market Makers in Linked Securities; \9\ and (vi) 
correct cross references and conform defined terms. In addition, NASDAQ 
proposes new Rule 5711 (``Trading of Certain Derivative Securities'') 
to adopt initial and continued listing criteria for the following 
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 (together with the Linked Securities, collectively, the 
``Subject Securities'').\10\ The proposed Listing Rules are based on, 
and are substantially similar to, the listing standards of NYSE Arca, 
Inc. (``NYSE Arca'') for the listing and trading of the Subject 
Securities.
---------------------------------------------------------------------------

    \5\ NASDAQ Rules 5710(g) and (h) currently include initial 
listing standards applicable to the Existing Linked Securities. 
NASDAQ proposes to move the existing rule text in Rules 5710(g) and 
(h) to proposed Rule 5710(k)(i)(A) and (k)(ii)(A), respectively. In 
addition, NASDAQ Rule 5730(b) currently includes continued listing 
standards applicable to Existing Linked Securities. NASDAQ proposes 
to conform the continued listing requirements applicable to the 
Existing Linked Securities to those of another national securities 
exchange, to incorporate such requirements under proposed Rules 
5710(k)(i)(B) and (k)(ii)(B), and to delete references in Rule 
5730(b) to Existing Linked Securities. See supra note 4.
    \6\ See proposed Rules 5710(k)(iii)-(v).
    \7\ See introductory paragraphs to Rule 5710, as proposed to be 
amended.
    \8\ See proposed Rule 5710(h) (formerly Rule 5710(j)).
    \9\ See proposed Commentary .01 to Rule 5710.
    \10\ The Exchange has proposed to adopt generic listing 
standards for Linked Securities and Index-Linked Exchangeable Notes, 
both generic and non-generic listing standards for Currency Trust 
Shares, and non-generic listing standards for all other Subject 
Securities.
---------------------------------------------------------------------------

A. Proposed Amendments to Rule 5710 (``Securities Linked to the 
Performance of Indexes and Commodities (Including Currencies)'')

    NASDAQ has proposed to amend the introductory paragraphs of Rule 
5710 to state that NASDAQ will consider for listing and trading Fixed 
Income Index-Linked Securities, Futures-Linked Securities, and 
Multifactor Index-Linked Securities that in each case meet the 
applicable criteria of Rule 5710. In addition, the Exchange has 
proposed to amend the introductory paragraph to provide definitions for 
``Equity Reference Asset'' and ``Commodity Reference Asset,'' which 
refer to the basis for payment at maturity for Equity Index-Linked 
Securities and Commodity-Linked Securities, respectively. NASDAQ has 
further proposed to amend the introductory paragraph to describe the 
basis for payment at maturity for each of the Additional Linked 
Securities as follows:
    <bullet> 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 
(``Fixed Income Reference Asset'').
    <bullet> The payment at maturity with respect to Futures-Linked 
Securities is based on the performance of an index of (a) futures on 
Treasury Securities, GSE Securities, supranational debt and debt of a 
foreign country or a subdivision thereof, or options or other 
derivatives on any of the foregoing; or (b) interest rate futures or 
options or derivatives on the foregoing in this subparagraph (b); or 
(c) CBOE Volatility Index (VIX) Futures (``Futures Reference Asset'').
    <bullet> The payment at maturity with respect to Multifactor Index-
Linked Securities is based on the performance of any combination of two 
or more Equity Reference Assets, Commodity Reference Assets, Fixed 
Income Reference Assets or Futures Reference Assets (``Multifactor 
Reference Asset,'' and together with Equity Reference Assets, Commodity 
Reference Assets, Fixed Income Reference Assets and Futures Reference 
Assets, ``Reference Assets''). A Multifactor Reference Asset may 
include as a component a notional investment in cash or a cash 
equivalent based on a widely accepted overnight

[[Page 19429]]

loan interest rate, LIBOR, Prime Rate, or an implied interest rate 
based on observed market spot and foreign currency forward rates.
    Based on NASDAQ's proposed amendments to the introductory 
paragraphs of Rule 5710, the definition of ``Linked Securities'' in 
Rule 5710 would now encompass the Additional Linked Securities. 
Therefore, under NASDAQ's proposal, all provisions of Rule 5710 that 
apply to Linked Securities would now apply to the Additional Linked 
Securities as well.
    As stated in the introductory paragraphs to Rule 5710, NASDAQ may 
consider for listing and trading pursuant to Rule 19b-4(e) under the 
Act Linked Securities (including the Additional Linked Securities) that 
meet the standards set forth in Rule 5710, and NASDAQ may submit a rule 
filing pursuant to Section 19(b)(2) of the Act to permit the listing 
and trading of Linked Securities (including the Additional Linked 
Securities) that do not otherwise meet the standards set forth in Rule 
5710.
    NASDAQ is not proposing any amendments to Rules 5710(a)-(f), and 
such provisions would apply to all Linked Securities (including the 
Additional Linked Securities).\11\ NASDAQ has proposed to delete 
current Rules 5710(g) and (h) (which contain the initial listing 
standards for Equity Index-Linked Securities and Commodity-Linked 
Securities) and move the text of these two paragraphs to proposed Rules 
5710(k)(i)(A) and (k)(ii)(A).\12\ NASDAQ has proposed to re-number the 
remaining existing paragraphs of Rule 5710 to reflect the deletion of 
paragraphs (g) and (h). NASDAQ has proposed to update cross references 
throughout the existing rule text of 5710 to reflect this 
reorganization and renumbering, and to reflect the addition of 
paragraph (k) to Rule 5710 (described below).
---------------------------------------------------------------------------

    \11\ Rules 5710(a)-(f) set forth the following requirements:
    (a) Both the issue and the issuer of such security meet the 
criteria for other securities set forth in Rule 5730(a), except that 
if the security is traded in $1,000 denominations or is redeemable 
at the option of holders thereof on at least a weekly basis, then no 
minimum number of holders and no minimum public distribution of 
trading units shall be required.
    (b) The issue has a term of not less than one (1) year and not 
greater than thirty (30) years.
    (c) The issue must be the non-convertible debt of the Company.
    (d) The payment at maturity may or may not provide for a 
multiple of the direct or inverse performance of an underlying 
index, indexes or Reference Asset; however, in no event will a loss 
(negative payment) at maturity be accelerated by a multiple that 
exceeds twice the performance of an underlying index, indexes or 
Reference Asset.
    (e) The Company will be expected to have a minimum tangible net 
worth in excess of $250,000,000 and to exceed by at least 20% the 
earnings requirements set forth in Rule 5405(b)(1)(A). In the 
alternative, the Company will be expected: (i) To have a minimum 
tangible net worth of $150,000,000 and to exceed by at least 20% the 
earnings requirement set forth in Rule 5405(b)(1)(A), and (ii) not 
to have issued securities where the original issue price of all the 
Company's other index-linked note offerings (combined with index-
linked note offerings of the Company's affiliates) listed on a 
national securities exchange exceeds 25% of the Company's net worth.
    (f) The Company is in compliance with Rule 10A-3 under the Act.
    \12\ See supra note 5.
---------------------------------------------------------------------------

    NASDAQ is not proposing any substantive amendments to Rules 
5710(i), (k), or (l), and under the proposal, such paragraphs would be 
renumbered as paragraphs (g), (i), and (j), respectively. Such 
paragraphs would apply to all Linked Securities (including the 
Additional Linked Securities), unless otherwise noted therein.\13\
---------------------------------------------------------------------------

    \13\ Proposed Rules 5710(g), (i) and (j) provide as follows:
    (g) Maintenance and Dissemination--(i) If the index is 
maintained by a broker-dealer, the broker-dealer shall erect a 
``firewall'' around the personnel 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. (ii) 
Unless the Commission order applicable under paragraph (k) hereof 
provides otherwise, the current value of the index or the Reference 
Asset (as applicable) will be widely disseminated at least every 15 
seconds during NASDAQ's regular market session, except as provided 
in the next clause (iii). (iii) The values of the following indexes 
need not be calculated and widely disseminated at least every 15 
seconds if, after the close of trading, the indicative value of the 
Equity Index-Linked Security based on one or more of such indexes is 
calculated and disseminated to provide an updated value: CBOE S&P 
500 BuyWrite Index(sm), CBOE DJIA Buy Write Index(sm), CBOE Nasdaq-
100 BuyWrite Index(sm). (iv) If the value of a Linked Security is 
based on more than one index, then the dissemination requirement of 
this paragraph (g) applies to the composite value of such indexes. 
(v) In the case of a Commodity-Linked Security that is periodically 
redeemable, the indicative value of the subject Commodity-Linked 
Security must be calculated and widely disseminated by one or more 
major market data vendors on at least a 15-second basis during 
NASDAQ's regular market session.
    * * *
    (i) Surveillance Procedures. FINRA will implement on behalf of 
Nasdaq written surveillance procedures for Linked Securities. Nasdaq 
will enter into adequate comprehensive surveillance sharing 
agreements for non-U.S. securities, as applicable.
    (j) Linked Securities will be treated as equity instruments. 
Furthermore, for the purpose of fee determination, Linked Securities 
shall be deemed and treated as Other Securities.
---------------------------------------------------------------------------

    NASDAQ has proposed to amend the current rule text relating to 
trading halts in Linked Securities \14\ to remove references to 
``Commodity-Linked Securities'' and ``Equity Index-Linked Securities'' 
in order to make the paragraph applicable to all Linked Securities 
(including the Additional Linked Securities).\15\
---------------------------------------------------------------------------

    \14\ See proposed Rule 5710(h) (formerly Rule 5710(j).
    \15\ Proposed Rule 5701(h) provides as follows:
    (h) Trading Halts. In the case of Linked Securities, if the 
indicative value (if required to be disseminated) or the Reference 
Asset value is not being disseminated as required, or if the value 
of the index is not being disseminated as required, Nasdaq may halt 
trading during the day on which such interruption occurs. Nasdaq 
will halt trading no later than the beginning of trading following 
the trading day when the interruption commenced if such interruption 
persists at this time.
---------------------------------------------------------------------------

    As discussed above, NASDAQ has proposed to move the initial listing 
standards for Equity Index-Linked Securities and Commodity-Linked 
Securities (previously in Rules 5710(g) and (h)) to new paragraph (k). 
New paragraph (k) of Rule 5710 would also set forth the continued 
listing standards for Equity Index-Linked Securities and Commodity-
Linked Securities and both initial and continued listing standards for 
the Additional Linked Securities (as further described below).\16\
---------------------------------------------------------------------------

    \16\ See supra notes 4 and 5.
---------------------------------------------------------------------------

    Finally, NASDAQ has proposed to add Commentary .01 to Rule 5710, 
which would establish certain regulatory requirements for registered 
Market Makers in Linked Securities. Specifically, registered Market 
Makers in Linked Securities would be required to file with NASDAQ, in a 
manner prescribed by NASDAQ, and keep current a list identifying all 
accounts for trading in the Reference Asset components, the 
commodities, currencies or futures underlying the Reference Asset 
components, or any derivative instruments based on the Reference Asset 
or based on any Reference Asset component or any physical commodity, 
currency or futures underlying a Reference Asset component, which the 
registered Market Maker may have or over which it may exercise 
investment discretion. No registered Market Maker in Linked Securities 
would be permitted to trade in the Reference Asset components, the 
commodities, currencies, or futures underlying the Reference Asset 
components, or any derivative instruments based on the Reference Asset 
or based on any Reference Asset component or any physical commodity or 
futures currency underlying a Reference Asset component, in an account 
in which a registered Market Maker, directly or indirectly, controls 
trading activities, or has a direct interest in the profits or losses 
thereof, which has not been reported to NASDAQ as required by the 
proposed Rule.\17\
---------------------------------------------------------------------------

    \17\ See proposed Commentary .01(a) to Rule 5710.
---------------------------------------------------------------------------

    In addition to the existing obligations under NASDAQ rules 
regarding the

[[Page 19430]]

production of books and records,\18\ proposed Commentary .01(b) would 
further require registered Market Makers in Linked Securities to make 
available to NASDAQ such books, records, or other information 
pertaining to transactions by such entity or any limited partner, 
officer, or approved person thereof, registered or nonregistered 
employee affiliated with such entity for its or their own accounts in 
the Reference Asset components, the commodities, currencies or futures 
underlying the Reference Asset components, or any derivative 
instruments based on the Reference Asset or based on any Reference 
Asset component or any physical commodity, currency or futures 
underlying a Reference Asset component, as may be requested by NASDAQ.
---------------------------------------------------------------------------

    \18\ See, e.g., NASDAQ Rule 4625.
---------------------------------------------------------------------------

    Proposed Commentary .01 to Rule 5710 is based on, and is 
substantively identical to, Commentary .01 to NYSE Arca Equities Rule 
5.2(j)(6) (``Equity Index-Linked Securities, Commodity-Linked 
Securities, Currency-Linked Securities, Fixed Income Index-Linked 
Securities, Futures-Linked Securities and Multifactor Index-Linked 
Securities'').
1. Equity Index-Linked Securities
    Proposed Rule 5710(k)(i)(A) would set forth the initial listing 
criteria for Equity Index-Linked Securities, which are currently found 
in Rule 5710(g).\19\ NASDAQ has not proposed any substantive changes to 
its initial listing criteria for Equity Index-Linked Securities.\20\
---------------------------------------------------------------------------

    \19\ As discussed above, Rule 5710(g) would be deleted and 
replaced in its entirety by proposed Rule 5710(k)(i)(A).
    \20\ Proposed Rule 5710(k)(i)(A) (formerly Rule 5710(g)) 
provides as follows:
    (A) 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:
    (a) 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;
    (b) 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;
    (c) Indexes based upon the equal-dollar or modified equal-dollar 
weighting method will be rebalanced at least semiannually;
    (d) 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;
    (e) 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);
    (f) 90% of the index's numerical value and at least 80% of the 
total number of component securities will meet the then current 
criteria for standardized option trading on a national securities 
exchange or a national securities association, provided, however, 
that an index will not be subject to this requirement if (a) no 
underlying component security represents more than 10% of the dollar 
weight of the index and (b) the index has a minimum of 20 
components; and
    (g) All component securities shall be either (A) securities 
(other than securities of a foreign issuer and American Depository 
Receipts (``ADRs'')) that are (i) issued by a 1934 Act reporting 
company or by an investment company registered under the Investment 
Company Act of 1940 that, in each case, has securities listed on a 
national securities exchange and (ii) an ``NMS stock'' (as defined 
in Rule 600 of Regulation NMS under the Act), or (B) securities of a 
foreign issuer or ADRs, provided that securities of a foreign issuer 
(including when they underlie ADRs) whose primary trading market 
outside the United States is not a member of the Intermarket 
Surveillance Group (``ISG'') or a party to a comprehensive 
surveillance sharing agreement with Nasdaq will not in the aggregate 
represent more than 20% of the dollar weight of the index.
---------------------------------------------------------------------------

    Proposed Rule 5710(k)(i)(B) would contain continued listing 
standards for Equity Index-Linked Securities. Under the proposal, 
NASDAQ would commence delisting or removal proceedings (unless the 
Commission has approved the continued trading of the subject Equity 
Index-Linked Security), if any of the initial listing standards are not 
continuously maintained, except that: (i) 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 (ii) 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.\21\
---------------------------------------------------------------------------

    \21\ See proposed Rule 5710(k)(i)(B)(1).
---------------------------------------------------------------------------

    In connection with an Equity Index-Linked Security that is listed 
pursuant to proposed Rule 5710(k)(i)(A)(1), NASDAQ would 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.\22\
---------------------------------------------------------------------------

    \22\ See proposed Rule 5710(k)(i)(B)(2).
---------------------------------------------------------------------------

    Additionally, NASDAQ would commence delisting or removal 
proceedings (unless the Commission has approved the continued trading 
of the subject Equity Index-Linked Security), under any of the 
following circumstances:
    <bullet> If the aggregate market value or the principal amount of 
the Equity Index-Linked Securities publicly held is less than $400,000;
    <bullet> 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 NASDAQ 
(for example, for indexes of foreign country securities, because of 
time zone differences or holidays in the countries where such indexes' 
component stocks trade) then the last calculated official index value 
must remain available throughout NASDAQ trading hours; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ 
inadvisable.\23\
---------------------------------------------------------------------------

    \23\ See proposed Rule 5710(k)(i)(B)(3).
---------------------------------------------------------------------------

    Finally, the proposed rule provides that indexes underlying Equity 
Index-Linked Securities would be rebalanced at least annually.\24\
---------------------------------------------------------------------------

    \24\ See proposed Rule 5710(k)(i)(B)(4).
---------------------------------------------------------------------------

    The proposed continued listing criteria for Equity Index-Linked 
Securities are based on, and substantively identical to, NYSE Arca 
Equities Rule 5.2(j)(6)(B)(I)(2) (``Equity Index-Linked Securities 
Listing Standards--Continued Listing Criteria'').\25\
---------------------------------------------------------------------------

    \25\ Consistent with its proposal to conform the continued 
listing requirements applicable to Equity Index-Linked Securities to 
those of NYSE Arca and to incorporate such requirements under 
proposed Rule 5710(k)(i)(B), NASDAQ has proposed to delete existing 
references to continued listing standards applicable to Equity 
Index-Linked Securities in Rule 5730(b). See supra notes 4 and 5.

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

[[Page 19431]]

2. Commodity-Linked Securities
    Proposed Rule 5710(k)(ii)(A) would set forth the initial listing 
criteria for Commodity-Linked Securities, which are currently found in 
Rule 5710(h).\26\ NASDAQ has not proposed any substantive changes to 
its initial listing criteria for Commodity-Linked Securities.\27\
---------------------------------------------------------------------------

    \26\ As discussed above, Rule 5710(h) would be deleted and 
replaced in its entirety by proposed Rule 5710(k)(ii)(A).
    \27\ Proposed Rule 5710(k)(ii)(A) (formerly Rule 5710(h)) 
provides as follows:
    (A) In the case of a Commodity-Linked Security, the Reference 
Asset shall meet the criteria in either subparagraph (1) or 
subparagraph (2) below:
    (1) 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.
    (2) The pricing information for each component of a Reference 
Asset other than a Currency must be derived from a market which is 
an ISG member or affiliate or with which Nasdaq has a comprehensive 
surveillance sharing agreement. Notwithstanding the previous 
sentence, pricing information for gold and silver may be derived 
from the London Bullion Market Association. The pricing information 
for each component of a Reference Asset that is a Currency must be 
either: (1) The generally accepted spot price for the currency 
exchange rate in question; or (2) derived from a market of which (a) 
is an ISG member or affiliate or with which Nasdaq has a 
comprehensive surveillance sharing agreement and (b) is the pricing 
source for a currency component of a Reference Asset that has 
previously been approved by the Commission. A Reference Asset may 
include components representing not more than 10% of the dollar 
weight of such Reference Asset for which the pricing information is 
derived from markets that do not meet the requirements of this 
subparagraph (2), 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 this 
subparagraph, shall mean 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.
---------------------------------------------------------------------------

    Proposed Rule 5710(k)(ii)(B) would establish new continued listing 
standards for Commodity-Linked Securities. NASDAQ would commence 
delisting or removal proceedings if any of the initial listing criteria 
are not continuously maintained.\28\ Additionally, NASDAQ would 
commence delisting or removal proceedings under any of the following 
circumstances:
---------------------------------------------------------------------------

    \28\ See proposed Rule 5710(k)(ii)(B)(1).
---------------------------------------------------------------------------

    <bullet> If the aggregate market value or the principal amount of 
the Commodity-Linked Securities publicly held is less than $400,000;
    <bullet> 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
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ 
inadvisable.\29\
---------------------------------------------------------------------------

    \29\ See proposed Rule 5710(k)(ii)(B)(2).
---------------------------------------------------------------------------

    The proposed continued listing standards for Commodity-Linked 
Securities are based on, and substantively identical to, NYSE Arca 
Equities Rule 5.2(j)(6)(B)(II)(2) (``Commodity-Linked Securities 
Listing Standards'').\30\
---------------------------------------------------------------------------

    \30\ Consistent with its proposal to conform the continued 
listing requirements applicable to Commodity-Linked Securities to 
those of NYSE Arca and to incorporate such requirements under 
proposed Rule 5710(k)(ii)(B), NASDAQ has proposed to delete existing 
references to continued listing standards applicable to Commodity-
Linked Securities in Rule 5730(b). See supra notes 4 and 5.
---------------------------------------------------------------------------

3. Fixed Income Index-Linked Securities
    Proposed Rule 5710(k)(iii) would establish initial and continued 
listing standards for Fixed Income Index-Linked Securities.
    Proposed Rule 5710(k)(iii)(A) provides that either: (i) 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 Act 
and rules thereunder and the conditions set forth in the Commission's 
approval order continue to be satisfied; or (ii) the issue must meet 
the following initial listing criteria:
    <bullet> 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;
    <bullet> 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;
    <bullet> 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;
    <bullet> An underlying Fixed Income Reference Asset (excluding one 
consisting entirely of exempted securities) must include a minimum of 
13 non-affiliated issuers; and
    <bullet> Component securities that in the aggregate account for at 
least 90% of the dollar weight of the Fixed Income Reference Asset must 
be from one of the following: (a) Issuers that are required to file 
reports pursuant to Sections 13 and 15(d) of the Act; or (b) issuers 
that have a worldwide market value of outstanding common equity held by 
non-affiliates of $700 million or more; or (c) issuers that have 
outstanding securities that are notes, bonds, debentures, or evidence 
of indebtedness having a total remaining principal amount of at least 
$1 billion; or (d) exempted securities as defined in Section 3(a)(12) 
of the Act; or (e) issuers that are a government of a foreign country 
or a political subdivision of a foreign country.
    In addition, the value of the Fixed Income Reference Asset must be 
widely disseminated to the public by one or more major market vendors 
at least once per business day.\31\
---------------------------------------------------------------------------

    \31\ See proposed Rule 5710(k)(iii)(B).
---------------------------------------------------------------------------

    Proposed Rule 5710(k)(iii)(C) provides that NASDAQ would commence 
delisting or removal proceedings if any of the initial listing criteria 
are not continuously maintained, and that NASDAQ would also commence 
delisting or removal proceedings if:
    <bullet> The aggregate market value or the principal amount of the 
Fixed Income Index-Linked Securities publicly held is less than 
$400,000;
    <bullet> 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 5710(k); or
    <bullet> Such other event shall occur or condition exists which in 
the opinion of NASDAQ makes further dealings inadvisable.
    The proposed initial and continued listing standards for Fixed-
Income Linked Securities are based on, and substantively identical to, 
NYSE Arca Equities Rule 5.2(j)(6)(B)(IV) (``Fixed Income Index-Linked 
Securities Listing Standards'').
4. Futures-Linked Securities
    Proposed Rule 5710(k)(iv) would establish initial and continued 
listing standards for Futures-Linked Securities. Proposed Rule 
5710(k)(iv)(A) states that

[[Page 19432]]

the issue must meet one of the following initial listing standards:
    <bullet> 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
    <bullet> The pricing information for components of a Futures 
Reference Asset must be derived from a market which is a member, or an 
affiliate of a member, of the Intermarket Surveillance Group (``ISG''), 
or with which NASDAQ has a comprehensive surveillance sharing 
agreement. A Futures Reference Asset may include components 
representing not more than 10% of the dollar weight of such Futures 
Reference Asset for which the pricing information is derived from 
markets that do not meet the foregoing requirement; provided, however, 
that no single component subject to this exception exceeds 7% of the 
dollar weight of the Futures Reference Asset.
    In addition, the issue must meet both of the following initial 
listing criteria:
    <bullet> The value of the Futures Reference Asset must be 
calculated and widely disseminated by one or more major market data 
vendors on at least a 15-second basis during the Regular Market Session 
(as defined in NASDAQ Rule 4120); and
    <bullet> In the case of Futures-Linked Securities that are 
periodically redeemable, the Intraday Indicative Value \32\ of the 
subject Futures-Linked Securities must be calculated and widely 
disseminated by NASDAQ or one or more major market data vendors on at 
least a 15-second basis during the Regular Market Session.\33\
---------------------------------------------------------------------------

    \32\ The ``Intraday Indicative Value'' is an estimate of the 
value of a share of each series of a particular security.
    \33\ See proposed Rule 5710(k)(iv)(B).
---------------------------------------------------------------------------

    Proposed Rule 5710(k)(iv)(C) states that NASDAQ would commence 
delisting or removal proceedings if any of the initial listing criteria 
are not continuously maintained, and that NASDAQ would also commence 
delisting or removal proceedings under any of the following 
circumstances:
    <bullet> If the aggregate market value or the principal amount of 
the Futures-Linked Securities publicly held is less than $400,000;
    <bullet> If the value of the Futures Reference Asset is no longer 
calculated or available and a new Futures Reference Asset is 
substituted, unless the new Futures Reference Asset meets the 
requirements of proposed Rule 5710(k); or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    The proposed initial and continued listing standards for Futures-
Linked Securities are based on, and substantively identical to, NYSE 
Arca Equities Rule 5.2(j)(6)(B)(V) (``Futures-Linked Securities Listing 
Standards'').
5. Multifactor Index-Linked Securities
    Proposed Rule 5710(k)(v) would establish initial and continued 
listing standards for Multifactor Index-Linked Securities. Proposed 
Rule 5710(k)(v)(A) states that the issue must meet one of the following 
initial listing standards:
    <bullet> 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
    <bullet> Each Reference Asset included in the Multifactor Reference 
Asset must meet the applicable initial and continued listing criteria 
set forth in the relevant subsection of proposed Rule 5710(k).
    In addition, proposed Rule 5710(k)(v)(B) provides that the issue 
must meet both of the following additional initial listing criteria:
    <bullet> The value of the Multifactor Reference Asset must be 
calculated and widely disseminated to the public on at least a 15-
second basis during the time the Multifactor Index-Linked Security 
trades on NASDAQ; and
    <bullet> In the case of Multifactor Index-Linked Securities that 
are periodically redeemable, the Intraday Indicative Value of the 
Multifactor Index-Linked Securities must be calculated and widely 
disseminated by one or more major market data vendors on at least a 15-
second basis during the time the Multifactor Index-Linked Securities 
trade on NASDAQ.
    Proposed Rule 5710(k)(v)(C) states that NASDAQ would commence 
delisting or removal proceedings if:
    <bullet> Any of the initial listing criteria described above are 
not continuously maintained;
    <bullet> The aggregate market value or the principal amount of the 
Multifactor Index-Linked Securities publicly held is less than 
$400,000;
    <bullet> The value of the Multifactor Reference Asset is no longer 
calculated or available and a new Multifactor Reference Asset is 
substituted, unless the new Multifactor Reference Asset meets the 
requirements of proposed Rule 5710(k); or
    <bullet> Such other event shall occur or condition exists which in 
the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    The proposed initial and continued listing standards for 
Multifactor Index-Linked Securities are based on, and substantively 
identical to, NYSE Arca Equities Rule 5.2(j)(6)(B)(VI) (``Multifactor 
Index-Linked Securities Listing Standards'').

B. Proposed Rule 5711--Trading of Certain Derivative Securities

    NASDAQ has proposed to adopt new Rule 5711 (``Trading of Certain 
Derivative Securities''), which would set forth listing standards for 
the following 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.
1. Index-Linked Exchangeable Notes
    Proposed Rule 5711(a) would adopt generic listing standards for 
Index-Linked Exchangeable Notes. Index-Linked Exchangeable Notes are 
exchangeable debt securities that are exchangeable at the option of the 
holder (subject to the requirement that the holder in most 
circumstances exchange a specified minimum amount of notes), on call by 
the issuer, or at maturity for a cash amount (``Cash Value Amount'') 
based on the reported market prices of the underlying stocks of an 
underlying index.\34\
---------------------------------------------------------------------------

    \34\ See proposed Rule 5711(a).
---------------------------------------------------------------------------

    Index-Linked Exchangeable Notes would be considered for listing and 
trading by NASDAQ pursuant to Rule 19b-4(e) under the Act,\35\ 
provided:
---------------------------------------------------------------------------

    \35\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

    <bullet> Both the issue and the issuer of such security meet the 
requirements of NASDAQ Rule 5730 (``Listing Requirements for Securities 
Not Specified Above (Other Securities)''), except that the minimum 
public distribution shall be 150,000 notes with a minimum of 400 public 
note-holders, except, if traded in thousand dollar denominations or 
redeemable at the option of the holders thereof on at least a weekly 
basis, then no minimum

[[Page 19433]]

public distribution and no minimum number of holders.\36\
---------------------------------------------------------------------------

    \36\ See proposed Rule 5711(a)(i).
---------------------------------------------------------------------------

    <bullet> The issue has a minimum term of one year.\37\
---------------------------------------------------------------------------

    \37\ See proposed Rule 5711(a)(ii).
---------------------------------------------------------------------------

    <bullet> 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 NASDAQ Rule 5405(b).\38\ 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 5405(b); 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.\39\
---------------------------------------------------------------------------

    \38\ Rule 5405(b) sets forth initial listing standards for 
primary equity securities.
    \39\ See proposed Rule 5711(a)(iii).
---------------------------------------------------------------------------

    <bullet> The index to which an Index-Linked 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 NASDAQ under rules adopted pursuant to Rule 19b-4(e); 
or (ii) indices which the issuer has created and for which NASDAQ will 
have obtained approval from either the Commission pursuant to Section 
19(b)(2) and rules thereunder or from NASDAQ under rules adopted 
pursuant to Rule 19b-4(e) (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 Nasdaq Options Market 
(``NOM'') Rules, Chapter XIV, Section 6(b) and (c); or (B) the criteria 
set forth in NASDAQ Rules 5715(b)(3) and (4), the index concentration 
limits set forth in NOM Rules, Chapter XIV, Section 6, and NOM Rules, 
Chapter XIV, Section 6(b)(12) insofar as it relates to NOM Rules, 
Chapter XIV, Section 6(b)(6).\40\
---------------------------------------------------------------------------

    \40\ See proposed Rule 5711(a)(iv).
---------------------------------------------------------------------------

    Index-Linked Exchangeable Notes would be treated as equity 
instruments.\41\ The Intraday Indicative Value of each series of Index-
Linked Exchangeable Notes would be required to be calculated and widely 
disseminated by NASDAQ or one or more major market data vendors on at 
least a 15-second basis during the Regular Market Session.\42\ In 
addition, the value of the underlying index must also be publicly 
disseminated to investors, on a real time basis, every 15 seconds.\43\
---------------------------------------------------------------------------

    \41\ See proposed Rule 5711(a)(v).
    \42\ See proposed Rule 5711(a)(vi). 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. Id.
    \43\ See proposed Rule 5711(a)(vii). 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. Id.
---------------------------------------------------------------------------

    Beginning twelve months after the initial issuance of a series of 
Index-Linked Exchangeable Notes, NASDAQ would consider the suspension 
of trading in or removal from listing of that series of Index-Linked 
Exchangeable Notes under any of the following circumstances:
    <bullet> If the series has fewer than 50,000 notes issued and 
outstanding;
    <bullet> If the market value of all Index-Linked Exchangeable Notes 
of that series issued and outstanding is less than $1,000,000; or
    <bullet> If such other event shall occur or such other condition 
exists which in the opinion of NASDAQ makes further dealings of NASDAQ 
inadvisable.\44\
---------------------------------------------------------------------------

    \44\ See proposed Rule 5711(a)(viii).
---------------------------------------------------------------------------

    The proposed listing requirements relating to Index-Linked 
Exchangeable Notes are based on, and substantively identical to, NYSE 
Arca Equities Rule 5.2(j)(4) (``Index-Linked Exchangeable Notes'').
2. Equity Gold Shares
    Proposed Rule 5711(b) would establish listing standards for Equity 
Gold Shares that represent units of fractional undivided beneficial 
interest in, and ownership of, the Equity Gold Trust. While Equity Gold 
Shares are not technically ``Index Fund Shares,'' and thus are not 
covered by NASDAQ Rule 5705, all other NASDAQ rules that reference 
``Index Fund Shares'' shall also apply to Equity Gold Shares.\45\
---------------------------------------------------------------------------

    \45\ See proposed Rule 5711(b)(i).
---------------------------------------------------------------------------

    Except to the extent that specific provisions in proposed Rule 
5711(b) govern, or unless the context otherwise requires, the 
provisions of all other NASDAQ Rules and policies would be applicable 
to the trading of Equity Gold Shares on NASDAQ.\46\ In addition, the 
requirements set forth in proposed Rule 5711(d) relating to Commodity-
Based Trust Shares would also apply to Equity Gold Shares.\47\
---------------------------------------------------------------------------

    \46\ See proposed Rule 5711(b)(ii).
    \47\ See proposed Rule 5711(b)(iii).
---------------------------------------------------------------------------

    The proposed listing requirements relating to Equity Gold Shares 
are based on, and substantively identical to, NYSE Arca Equities Rule 
5.2(j)(5) (``Equity Gold Shares'').
3. Trust Certificates
    Under proposed Rule 5711(c), NASDAQ may consider for trading, 
whether by listing or pursuant to unlisted trading privileges, Trust 
Certificates. Trust Certificates represent an interest in a special 
purpose 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:
    <bullet> An underlying index or indexes of equity securities 
(``Trust Certificate Equity Reference Asset'');
    <bullet> Instruments that are direct obligations of the issuing 
company, either exercisable throughout their life (i.e., American 
style) or exercisable only on their expiration date (i.e., European 
style), entitling the holder to a cash settlement in U.S. dollars to 
the extent that the foreign or domestic index has declined below (for a 
put warrant) or increased above (for a call warrant) the pre-stated 
cash settlement value of the index (``Index Warrants''); or
    <bullet> A combination of two or more Trust Certificate Equity 
Reference Assets or Index Warrants.\48\
---------------------------------------------------------------------------

    \48\ See proposed Rule 5711(c)(i).
---------------------------------------------------------------------------

    NASDAQ would file separate proposals under Section 19(b) of the Act 
before trading, either by listing or pursuant to unlisted trading 
privileges, Trust Certificates.\49\
---------------------------------------------------------------------------

    \49\ See proposed Rule 5711(c)(ii).
---------------------------------------------------------------------------

    Pursuant to proposed Commentary .01 to Rule 5711(c), NASDAQ would 
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:
    <bullet> If the aggregate market value or the principal amount of 
the securities publicly held is less than $400,000;
    <bullet> If the value of the index or composite value of the 
indexes is no longer calculated or widely disseminated on at least a 
15-second basis with respect to indexes containing only securities 
listed on a national securities exchange, or on at least a 60-second 
basis with respect to indexes containing foreign country securities; 
provided, however, that, if the official index value does not change 
during some or all of the period when trading is occurring on the 
NASDAQ Stock

[[Page 19434]]

Market (for example, for indexes of foreign country securities, because 
of time zone differences or holidays in the countries where such 
indexes' component stocks trade) then the last calculated official 
index value must remain available throughout NASDAQ trading hours; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    Proposed Commentary .02 to Rule 5711(c) provides that the stated 
term of the trust shall be as stated in the trust prospectus; however, 
a trust may be terminated under such earlier circumstances as may be 
specified in the trust prospectus.
    Proposed Commentary .03 to Rule 5711(c) provides 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. In addition, no 
change is to be made in the trustee of a listed issue without prior 
notice to and approval of NASDAQ.
    Proposed Commentary .04 to Rule 5711(c) provides that voting rights 
would be as set forth in the applicable trust prospectus.
    Proposed Commentary .05 to Rule 5711(c) provides that NASDAQ would 
implement written surveillance procedures for Trust Certificates.
    Proposed Commentary .06 to Rule 5711(c) provides that the Trust 
Certificates would be subject to NASDAQ's equity trading rules.
    Proposed Commentary .07 to Rule 5711(c) provides that prior to the 
commencement of trading of a particular Trust Certificates listing 
pursuant to proposed Rule 5711(c), NASDAQ will evaluate the nature and 
complexity of the issue and, if appropriate, distribute a circular to 
Members providing guidance regarding compliance responsibilities 
(including suitability recommendations and account approval) when 
handling transactions in Trust Certificates.
    Proposed Commentary .08 to Rule 5711(c) provides 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 NOM in order to exercise such rights.
    Proposed Commentary .09 to Rule 5711(c) provides that Trust 
Certificates may pass-through periodic payments of interest and 
principle of the underlying securities.
    Proposed Commentary .10 to Rule 5711(c) provides that the trust 
payments may be guaranteed pursuant to a financial guaranty insurance 
policy which may include swap agreements.
    Proposed Commentary .11 to Rule 5711(c) provides that the Trust 
Certificates may be subject to early termination or call features.
    The proposed standards relating to Trust Certificates are based on, 
and substantively identical to, NYSE Arca Equities Rule 5.2(j)(7) 
(``Trust Certificates'').
4. Commodity-Based Trust Shares
    Pursuant to proposed Rule 5711(d), NASDAQ may consider for trading, 
whether by listing or pursuant to unlisted trading privileges, of 
Commodity-Based Trust Shares that meet the criteria of the rule.\50\ 
The term ``Commodity-Based Trust Shares'' is defined as a security (i) 
that is issued by a trust that holds a specified commodity deposited 
with the trust; (ii) 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 (iii) 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.\51\ NASDAQ may trade, either by listing or 
pursuant to unlisted trading privileges, Commodity-Based Trust Shares 
based on an underlying commodity, and each issue of a Commodity-Based 
Trust Share would be designated as a separate series and would be 
identified by a unique symbol.\52\
---------------------------------------------------------------------------

    \50\ Proposed Rule 5711(d) would be applicable only to 
Commodity-Based Trust Shares. Except to the extent inconsistent with 
this Rule, or unless the context otherwise requires, the provisions 
of the trust issued receipts rules, Bylaws, and all other rules and 
procedures of the Board of Directors shall be applicable to the 
trading on NASDAQ of such securities. Commodity-Based Trust Shares 
are included within the definition of ``security'' or ``securities'' 
as such terms are used in the Bylaws and Rules of NASDAQ. See 
proposed Rule 5711(d)(ii).
    \51\ See proposed Rule 5711(d)(iii)(A). The term ``commodity'' 
is defined in Section 1(a)(4) of the Commodity Exchange Act 
(``CEA''). See proposed Rule 5711(d)(iii)(B).
    \52\ See proposed Rule 5711(d)(iv).
---------------------------------------------------------------------------

    Under the proposal, NASDAQ would establish a minimum number of 
Commodity-Based Trust Shares required to be outstanding at the time of 
commencement of trading on NASDAQ.\53\ Following the initial 12-month 
period following commencement of trading on NASDAQ of Commodity-Based 
Trust Shares, NASDAQ would consider the suspension of trading in or 
removal from listing of such series under any of the following 
circumstances:
---------------------------------------------------------------------------

    \53\ See proposed Rule 5711(d)(v)(A).
---------------------------------------------------------------------------

    <bullet> 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;
    <bullet> If the trust has fewer than 50,000 receipts issued and 
outstanding;
    <bullet> If the market value of all receipts issued and outstanding 
is less than $1,000,000;
    <bullet> If the value of the underlying commodity is no longer 
calculated or available on at least a 15-second delayed basis from a 
source unaffiliated with the sponsor, trust, custodian or NASDAQ or 
NASDAQ stops providing a hyperlink on its Web site to any such 
unaffiliated commodity value;
    <bullet> If the Intraday Indicative Value is no longer made 
available on at least a 15-second delayed basis; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ 
inadvisable.\54\
---------------------------------------------------------------------------

    \54\ See proposed Rule 5711(d)(v)(B).
---------------------------------------------------------------------------

    Upon termination of a trust, NASDAQ requires that Commodity-Based 
Trust Shares issued in connection with such entity trust be removed 
from NASDAQ listing. A trust may terminate in accordance with the 
provisions of the trust prospectus, which may provide for termination 
if the value of the trust falls below a specified amount.\55\
---------------------------------------------------------------------------

    \55\ Id.
---------------------------------------------------------------------------

    Proposed Rule 5711(d)(v)(C) provides that the stated term of the 
trust shall be as stated in the trust prospectus; however, a trust may 
be terminated under such earlier circumstances as may be specified in 
the trust prospectus.
    Proposed Rule 5711(d)(v)(D) provides 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. In addition, no change is to 
be made in the trustee of a listed issue without prior notice to and 
approval of NASDAQ.

[[Page 19435]]

    Proposed Rule 5711(d)(v)(E) provides that voting rights shall be as 
set forth in the applicable trust prospectus.
    Proposed Rules 5711(d)(vi) and (vii) set forth the limitation of 
NASDAQ liability and requirements for Market Makers in Commodity-Based 
Trust Shares (see ``General Provisions--Limitation of Nasdaq 
Liability'' and ``General Provisions--Market Maker Accounts'' below for 
a description of these requirements).
    Proposed Commentary .01 to Rule 5711(d) provides that a Commodity-
Based Trust Share is a Trust Issued Receipt that holds a specified 
commodity deposited with the trust.
    Proposed Commentary .02 to Rule 5711(d) requires that Members 
provide all purchasers of newly issued Commodity-Based Trust Shares a 
prospectus for the series of Commodity-Based Trust Shares.
    Proposed Commentary .03 to Rule 5711(d) provides that transactions 
in Commodity-Based Trust Shares would occur during the trading hours 
specified in NASDAQ Rule 4120.
    Proposed Commentary .04 to Rule 5711(d) provides that NASDAQ would 
file separate proposals under Section 19(b) of the Act before the 
listing and/or trading of Commodity-Based Trust Shares.
    The proposed requirements relating to Commodity-Based Trust Shares 
are based on, and substantively identical to, NYSE Arca Equities Rule 
8.201 (``Commodity-Based Trust Shares'').
5. Currency Trust Shares
    Proposed Rule 5711(e) would permit the listing and trading, or 
trading pursuant to unlisted trading privileges, on NASDAQ of Currency 
Trust Shares that meet the criteria of the rule.\56\ The term 
``Currency Trust Shares'' as used in the proposed rule means, unless 
the context otherwise requires, a security that: (i) Is issued by a 
trust that holds a specified non-U.S. currency or currencies deposited 
with the trust; (ii) 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 (iii) pays beneficial owners interest and 
other distributions on the deposited non-U.S. currency or currencies, 
if any, declared and paid by the trust.\57\ NASDAQ may trade, either by 
listing or pursuant to unlisted trading privileges, Currency Trust 
Shares that hold a specified non-U.S. currency or currencies, and each 
issue of Currency Trust Shares would be designated as a separate series 
and shall be identified by a unique symbol.\58\
---------------------------------------------------------------------------

    \56\ Proposed Rule 5711(e) would be applicable only to Currency 
Trust Shares. Except to the extent inconsistent with the proposed 
Rule, or unless the context otherwise requires, the provisions of 
the trust issued receipts rules, Bylaws, and all other rules and 
procedures of the Board of Directors shall be applicable to the 
trading on NASDAQ of such securities. Currency Trust Shares are 
included within the definition of ``security'' or ``securities'' as 
such terms are used in the Bylaws and Rules of NASDAQ. See proposed 
Rule 5711(e)(ii).
    \57\ See proposed Rule 5711(e)(iii).
    \58\ See proposed Rule 5711(e)(iv).
---------------------------------------------------------------------------

    Under the proposal, NASDAQ would establish a minimum number of 
Currency Trust Shares required to be outstanding at the time of 
commencement of trading on NASDAQ.\59\ Following the initial 12-month 
period following commencement of trading on NASDAQ of Currency Trust 
Shares, NASDAQ would consider the suspension of trading in or removal 
from listing of such series under any of the following circumstances:
---------------------------------------------------------------------------

    \59\ See proposed Rule 5711(e)(v)(A).
---------------------------------------------------------------------------

    <bullet> 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;
    <bullet> If the trust has fewer than 50,000 Currency Trust Shares 
issued and outstanding;
    <bullet> If the market value of all Currency Trust Shares issued 
and outstanding is less than $1,000,000;
    <bullet> If the value of the applicable non-U.S. currency is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the sponsor, trust, custodian or NASDAQ 
or NASDAQ stops providing a hyperlink on its Web site to any such 
unaffiliated applicable non-U.S. currency value;
    <bullet> If the Intraday Indicative Value is no longer made 
available on at least a 15-second delayed basis; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ 
inadvisable.\60\
---------------------------------------------------------------------------

    \60\ See proposed Rule 5711(e)(v)(B).
---------------------------------------------------------------------------

    Upon termination of a trust, NASDAQ would require that Currency 
Trust Shares issued in connection with such entity trust be removed 
from NASDAQ listing. A trust may terminate in accordance with the 
provisions of the trust prospectus, which may provide for termination 
if the value of the trust falls below a specified amount.\61\
---------------------------------------------------------------------------

    \61\ Id.
---------------------------------------------------------------------------

    Proposed Rule 5711(e)(v)(C) provides that the stated term of the 
trust shall be as stated in the trust prospectus; however, a trust may 
be terminated under such earlier circumstances as may be specified in 
the trust prospectus.
    Proposed Rule 5711(e)(v)(D) provides 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. In addition, no change is to 
be made in the trustee of a listed issue without prior notice to and 
approval of NASDAQ.
    Proposed Rule 5711(e)(v)(E) provides that voting rights shall be as 
set forth in the applicable trust prospectus.
    Proposed Rules 5711(e)(vi) and (vii) set forth the limitation of 
NASDAQ liability and requirements for Market Makers in Currency Trust 
Shares (see ``General Provisions--Limitation of Nasdaq Liability'' and 
``General Provisions--Market Maker Accounts'' below for a description 
of these requirements).
    NASDAQ may submit a rule filing pursuant to Section 19(b)(2) of the 
Act to permit the listing and trading of Currency Trust Shares that do 
not otherwise meet the standards set forth in Commentary .04 to 
proposed Rule 5711(e).\62\
---------------------------------------------------------------------------

    \62\ See proposed Rule 5711(e)(viii).
---------------------------------------------------------------------------

    Proposed Commentary .01 to Rule 5711(e) states that a Currency 
Trust Share is a Trust Issued Receipt that holds a specified non-U.S. 
currency or currencies deposited with the Trust.
    Proposed Commentary .02 to Rule 5711(e) requires that Members 
provide all purchasers of newly issued Currency Trust Shares a 
prospectus for the series of Currency Trust Shares.
    Proposed Commentary .03 to Rule 5711(e) provides that transactions 
in Currency Trust Shares would occur during the trading hours specified 
in NASDAQ Rule 4120.
    Proposed Commentary .04 to Rule 5711(e) provides that NASDAQ may 
approve an issue of Currency Trust Shares for listing and/or trading 
(including pursuant to unlisted trading privileges) pursuant to Rule 
19b-4(e) under the Act if such issue satisfies the criteria set forth 
in the proposed Rule 5711(e), together with the following criteria:
    <bullet> A minimum of 100,000 shares of a series of Currency Trust 
Shares is required to be outstanding at commencement of trading (this 
is not required for issues trading pursuant to unlisted trading 
privileges);
    <bullet> The value of the applicable non-U.S. currency, currencies 
or currency index must be disseminated by one or

[[Page 19436]]

more major market data vendors on at least a 15-second delayed basis;
    <bullet> The Intraday Indicative Value must be calculated and 
widely disseminated by NASDAQ or one or more major market data vendors 
on at least a 15-second basis during the Regular Market Session; and
    <bullet> NASDAQ will implement written surveillance procedures 
applicable to Currency Trust Shares.
    Proposed Commentary .05 to Rule 5711(e) states that if the value of 
a Currency Trust Share is based, in whole or in part, on an index that 
is maintained by a broker-dealer, the broker-dealer must 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.
    Proposed Commentary .06 to Rule 5711(e) provides that Currency 
Trust Shares would be subject to NASDAQ's equity trading rules.
    Proposed Commentary .07 to Rule 5711(e) states that if the Intraday 
Indicative Value or the value of the non-U.S. currency or currencies or 
the currency index applicable to a series of Currency Trust Shares is 
not being disseminated as required, NASDAQ may halt trading during the 
day on which such interruption first occurs. If such interruption 
persists past the trading day in which it occurred, NASDAQ would halt 
trading no later than the beginning of the trading day following the 
interruption. If NASDAQ becomes aware that the net asset value 
applicable to a series of Currency Trust Shares is not being 
disseminated to all market participants at the same time, it would halt 
trading in such series until such time as the net asset value is 
available to all market participants.
    The proposed listing standards relating to Currency Trust Shares 
are based on, and substantively identical to, NYSE Arca Equities Rule 
8.202 (``Currency Trust Shares'').
6. Commodity Index Trust Shares
    Pursuant to proposed Rule 5711(f), NASDAQ would consider for 
trading, whether by listing or pursuant to unlisted trading privileges, 
Commodity Index Trust Shares that meet the criteria of the rule.\63\ 
The term ``Commodity Index Trust Shares'' as used in the proposed rule 
(unless the context otherwise requires) means a security that: (i) is 
issued by a trust that (A) is a commodity pool as defined in the CEA 
and regulations thereunder, and that is managed by a commodity pool 
operator registered with the Commodity Futures Trading Commission 
(``CFTC''); and (B) 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.\64\ NASDAQ may 
trade, either by listing or pursuant to unlisted trading privileges, 
Commodity Index Trust Shares based on one or more securities, and 
Commodity Index Trust Shares based on particular securities would be 
designated as a separate series and would be identified by a unique 
symbol.\65\
---------------------------------------------------------------------------

    \63\ Proposed Rule 5711(f) would be applicable only to Commodity 
Index Trust Shares. Except to the extent inconsistent with the 
proposed rule, or unless the context otherwise requires, the 
provisions of the Trust Issued Receipts rules, Bylaws, and all other 
rules and procedures of the Board of Directors shall be applicable 
to the trading on NASDAQ of such securities. Commodity Index Trust 
Shares are included within the definition of ``security'' or 
``securities'' as such terms are used in the Bylaws and Rules of 
NASDAQ. See proposed Rule 5711(f)(ii).
    \64\ See proposed Rule 5711(f)(iii). The term ``futures 
contract'' is commonly known as a ``contract of sale of a commodity 
for future delivery'' as set forth in Section 2(a) of the CEA. Id.
    \65\ See proposed Rule 5711(f)(iv).
---------------------------------------------------------------------------

    NASDAQ would establish a minimum number of Commodity Index Trust 
Shares required to be outstanding at the time of commencement of 
trading on NASDAQ.\66\ NASDAQ would consider the suspension of trading 
in or removal from listing of a series of Commodity Index Trust Shares 
under any of the following circumstances:
---------------------------------------------------------------------------

    \66\ See proposed Rule 5711(f)(v)(A).
---------------------------------------------------------------------------

    <bullet> 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;
    <bullet> 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;
    <bullet> If the net asset value for the trust is no longer 
disseminated to all market participants at the same time;
    <bullet> If the Intraday Indicative Value is no longer made 
available on at least a 15-second delayed basis; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ 
inadvisable.\67\
---------------------------------------------------------------------------

    \67\ See proposed Rule 5711(f)(v)(B).
---------------------------------------------------------------------------

    Upon termination of a trust, NASDAQ would require that Commodity 
Index Trust Shares issued in connection with such entity trust be 
removed from NASDAQ listing. A trust may terminate in accordance with 
the provisions of the trust prospectus, which may provide for 
termination if the value of the trust falls below a specified 
amount.\68\
---------------------------------------------------------------------------

    \68\ Id.
---------------------------------------------------------------------------

    Proposed Rule 5711(f)(v)(C) provides that the stated term of the 
trust shall be as stated in the trust prospectus; however, a trust may 
be terminated under such earlier circumstances as may be specified in 
the trust prospectus.
    Proposed Rule 5711(f)(v)(D) provides 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. In addition, no change is to 
be made in the trustee of a listed issue without prior notice to and 
approval of NASDAQ.
    Proposed Rule 5711(f)(v)(E) provides that voting rights shall be as 
set forth in the applicable trust prospectus.
    Proposed Rules 5711(f)(vi) and (vii) set forth the limitation of 
NASDAQ liability and requirements for Market Makers in Commodity Index 
Trust Shares (see ``General Provisions--Limitation of NASDAQ 
Liability'' and ``General Provisions--Market Maker Accounts'' below for 
a description of these requirements).
    Proposed Commentary .01 to Rule 5711(f) states that a Commodity 
Index Trust Share is a Trust Issued Receipt that holds long positions 
in futures contracts on a specified commodity index, or interests in a 
commodity pool which, in turn, holds such long positions, deposited 
with the Trust.
    Proposed Commentary .02 to Rule 5711(f) requires that Members 
provide all purchasers of newly issued Commodity Index Trust Shares a 
prospectus for the series of Commodity Index Trust Shares.

[[Page 19437]]

    Proposed Commentary .03 to Rule 5711(f) states that transactions in 
Commodity Index Trust Shares would occur during the trading hours 
specified in NASDAQ Rule 4120.
    Proposed Commentary .04 to Rule 5711(f) states that NASDAQ would 
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 requirements relating to Commodity Index Trust Shares 
are based on, and substantively identical to NYSE Arca Equities Rule 
8.203 (``Commodity Index Trust Shares'').
7. Commodity Futures Trust Shares
    Pursuant to proposed Rule 5711(g), NASDAQ would consider for 
trading, whether by listing or pursuant to unlisted trading privileges, 
Commodity Futures Trust Shares that meet the criteria of the proposed 
rule.\69\ The term ``Commodity Futures Trust Shares'' as used in the 
proposed rules means, unless the context otherwise requires, a security 
that: (ii) is issued by a trust that (A) is a commodity pool as defined 
in the CEA and regulations thereunder, and that is managed by a 
commodity pool operator registered with the CFTC, 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.\70\ NASDAQ may trade, 
either by listing or pursuant to unlisted trading privileges, Commodity 
Futures Trust Shares based on an underlying commodity futures contract, 
and each issue of Commodity Futures Trust Shares shall be designated as 
a separate series and shall be identified by a unique symbol.\71\
---------------------------------------------------------------------------

    \69\ Proposed Rule 5711(g) would apply only to Commodity Futures 
Trust Shares. Except to the extent inconsistent with the proposed 
Rule, or unless the context otherwise requires, the provisions of 
the trust issued receipts rules, Bylaws, and all other rules and 
procedures of the Board of Directors shall be applicable to the 
trading on NASDAQ of such securities. Commodity Futures Trust Shares 
are included within the definition of ``security'' or ``securities'' 
as such terms are used in the Bylaws and Rules of NASDAQ. See 
proposed Rule 5711(g)(ii).
    \70\ See proposed Rule 5711(g)(iii). The term ``futures 
contract'' is a ``contract of sale of a commodity for future 
delivery'' set forth in Section 2(a) of the CEA. The term 
``commodity'' is defined in Section 1(a)(4) of the CEA. Id.
    \71\ See proposed Rule 5711(g)(iv).
---------------------------------------------------------------------------

    NASDAQ would establish a minimum number of Commodity Futures Trust 
Shares required to be outstanding at the time of commencement of 
trading on NASDAQ.\72\ NASDAQ would consider the suspension of trading 
in or removal from listing of a series of Commodity Futures Trust 
Shares under any of the following circumstances:
---------------------------------------------------------------------------

    \72\ See proposed Rule 5711(g)(v)(A).
---------------------------------------------------------------------------

    <bullet> If, following the initial twelve-month period beginning 
upon the commencement of trading of the Commodity Futures Trust Shares: 
(i) the trust has fewer than 50,000 Commodity Futures Trust Shares 
issued and outstanding; (ii) the market value of all Commodity Futures 
Trust Shares issued and outstanding is less than $1,000,000; or (iii) 
there are fewer than 50 record and/or beneficial holders of Commodity 
Futures Trust Shares for 30 consecutive trading days;
    <bullet> If the value of the underlying futures contracts is no 
longer calculated or available on at least a 15-second delayed basis 
during NASDAQ's Regular Market Session from a source unaffiliated with 
the sponsor, the trust or the trustee of the trust;
    <bullet> If the net asset value for the trust is no longer 
disseminated to all market participants at the same time;
    <bullet> If the Intraday Indicative Value is no longer disseminated 
on at least a 15-second delayed basis during NASDAQ's Regular Market 
Session; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ 
inadvisable.\73\
---------------------------------------------------------------------------

    \73\ See proposed Rule 5711(g)(v)(B).
---------------------------------------------------------------------------

    Upon termination of a trust, NASDAQ requires that Commodity Futures 
Trust Shares issued in connection with such trust be removed from 
NASDAQ listing. A trust would terminate in accordance with the 
provisions of the trust prospectus.\74\
---------------------------------------------------------------------------

    \74\ Id.
---------------------------------------------------------------------------

    Proposed Rule 5711(g)(v)(C) provides that the stated term of the 
trust shall be as stated in the prospectus; however, a trust may be 
terminated under such earlier circumstances as may be specified in the 
trust prospectus.
    Proposed Rule 5711(g)(v)(D) provides 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. In addition, no change is to 
be made in the trustee of a listed issue without prior notice to and 
approval of NASDAQ.
    Proposed Rule 5711(g)(v)(E) provides that voting rights shall be as 
set forth in the applicable trust prospectus.
    Proposed Rules 5711(g)(vi) and (vii) set forth the limitation of 
NASDAQ liability and requirements for Market Makers in Commodity 
Futures Trust Shares (see ``General Provisions--Limitation of NASDAQ 
Liability'' and ``General Provisions--Market Maker Accounts'' below for 
a description of these requirements).
    Proposed Rule 5711(g)(viii) states that NASDAQ would 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.
    Proposed Commentary .01 to Rule 5711(g) would require Members 
trading in Commodity Futures Trust Shares to provide all purchasers of 
newly issued Commodity Futures Trust Shares a prospectus for the series 
of Commodity Futures Trust Shares.
    Proposed Commentary .02 to Rule 5711(g) states that transactions in 
Commodity Futures Trust Shares would occur during the trading hours 
specified in NASDAQ Rule 4120.
    Proposed Commentary .03 to Rule 5711(g) states that if the Intraday 
Indicative Value or the value of the underlying futures contract is not 
being disseminated as required, NASDAQ may halt trading during the day 
in which the interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying futures contract 
occurs. If the interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying futures contract 
persists past the trading day in which it occurred, NASDAQ would halt 
trading no later than the beginning of the trading day following the 
interruption.
    In addition, if NASDAQ becomes aware that the net asset value with 
respect to a series of Commodity Futures Trust Shares is not 
disseminated to all market participants at the same time, it would halt 
trading in such series until such time as the net asset value is 
available to all market participants.
    Proposed Commentary .04 to Rule 5711(g) states that NASDAQ's rules 
governing the trading of equity securities apply to Commodity Futures 
Trust Shares.
    Proposed Commentary .05 to Rule 5711(g) states that NASDAQ would 
implement written surveillance procedures for Commodity Futures Trust 
Shares.
    The proposed requirements relating to Commodity Futures Trust 
Shares are based on, and substantively identical to, NYSE Arca Equities 
Rule 8.204 (``Commodity Futures Trust Shares'').

[[Page 19438]]

8. Partnership Units
    Pursuant to proposed Rule 5711(h), NASDAQ would consider for 
trading, whether by listing or pursuant to unlisted trading privileges, 
Partnership Units that meet the criteria of the proposed rule. The term 
``Partnership Units'' for purposes of the proposed rule means a 
security (i) 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 (ii) that is issued and 
redeemed daily in specified aggregate amounts at net asset value.\75\ 
NASDAQ may list and trade Partnership Units based on an underlying 
asset, commodity or security, and each issue of a Partnership Unit 
would be designated as a separate series and would be identified by a 
unique symbol.\76\
---------------------------------------------------------------------------

    \75\ See proposed Rule 5711(h)(ii). The term ``commodity'' is 
defined in Section 1(a)(4) of the CEA. Id.
    \76\ See proposed Rule 5711(h)(iii).
---------------------------------------------------------------------------

    NASDAQ would establish a minimum number of Partnership Units 
required to be outstanding at the time of commencement of trading on 
NASDAQ.\77\ NASDAQ would consider removing from listing Partnership 
Units under any of the following circumstances:
---------------------------------------------------------------------------

    \77\ See proposed Rule 5711(h)(iv)(A).
---------------------------------------------------------------------------

    <bullet> If, following the initial twelve month period from the 
date of commencement of trading of the Partnership Units: (i) 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; (ii) the partnership has 
fewer than 50,000 Partnership Units issued and outstanding; or (iii) 
the market value of all Partnership Units issued and outstanding is 
less than $1,000,000;
    <bullet> If the value of the underlying benchmark investment, 
commodity or asset is no longer calculated or available on at least a 
15-second delayed basis or NASDAQ stops providing a hyperlink on its 
Web site to any such investment, commodity or asset value;
    <bullet> If the Intraday Indicative Value is no longer made 
available on at least a 15-second delayed basis; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ 
inadvisable.\78\
---------------------------------------------------------------------------

    \78\ See proposed Rule 5711(h)(iv)(B).
---------------------------------------------------------------------------

    Upon termination of a partnership, NASDAQ requires that Partnership 
Units issued in connection with such partnership be removed from NASDAQ 
listing. A partnership would terminate in accordance with the 
provisions of the partnership prospectus.\79\
---------------------------------------------------------------------------

    \79\ Id.
---------------------------------------------------------------------------

    Proposed Rule 5711(h)(iv)(C) provides that the stated term of the 
partnership shall be as stated in the prospectus; however, such entity 
may be terminated under such earlier circumstances as may be specified 
in the Partnership prospectus.
    Proposed Rule 5711(h)(iv)(D) provides that 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. In addition, no change is to be made in the general partner of 
a listed issue without prior notice to and approval of NASDAQ.
    Proposed Rule 5711(h)(iv)(E) provides that voting rights shall be 
as set forth in the applicable partnership prospectus.
    Proposed Rules 5711(h)(v) and (vi) set forth the limitation of 
NASDAQ liability and requirements for Market Makers in Partnership 
Units (see ``General Provisions--Limitation of NASDAQ Liability'' and 
``General Provisions--Market Maker Accounts'' below for a description 
of these requirements).
    Proposed Rule 5711(h)(vii) states that NASDAQ would 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.
    Proposed Commentary .01 to Rule 5711(h) requires that Members 
provide to all purchasers of newly issued Partnership Units a 
prospectus for the series of Partnership Units.
    The proposed requirements relating to Partnership Units are based 
on, and substantively identical to, NYSE Arca Equities Rule 8.300 
(``Partnership Units'').
9. Trust Units
    NASDAQ proposes to add new Rule 5711(i) in order to permit trading, 
either by listing or pursuant to unlisted trading privileges, of Trust 
Units.\80\ As defined in the proposed rule, 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.\81\ Under the proposal, NASDAQ may list and trade Trust 
Units based on an underlying asset, commodity, security or portfolio, 
and each issue of a Trust Unit shall be designated as a separate series 
and shall be identified by a unique symbol.\82\
---------------------------------------------------------------------------

    \80\ The provisions of proposed Rule 5711(i) are applicable only 
to Trust Units. Except to the extent inconsistent with the proposed 
rule or unless the context otherwise requires, the rules and 
procedures of the Board of Directors shall be applicable to the 
trading on NASDAQ of such securities. Trust Units are included 
within the definition of ``security,'' ``securities'' and 
``derivative securities products'' as such terms are used in the 
Rules of NASDAQ. See proposed Rule 5711(i)(i).
    \81\ See proposed Rule 5711(i)(ii). The term ``commodity'' is 
defined in Section 1(a)(4) of the CEA. Id.
    \82\ See proposed Rule 5711(i)(iii).
---------------------------------------------------------------------------

    NASDAQ would establish a minimum number of Trust Units required to 
be outstanding at the time of commencement of trading on NASDAQ.\83\ 
NASDAQ would obtain a representation from the issuer of each series of 
Trust Units that the net asset value per share for the series would be 
calculated daily and be made available to all market participants at 
the same time.\84\
---------------------------------------------------------------------------

    \83\ See proposed Rule 5711(i)(iv)(A)(1).
    \84\ See proposed Rule 5711(i)(iv)(A)(2).
---------------------------------------------------------------------------

    NASDAQ would remove Trust Units from listing under any of the 
following circumstances:
    <bullet> If following the initial twelve month period following the 
commencement of trading of Trust Units: (i) The trust has more than 60 
days remaining until termination and there are fewer than 50 record 
and/or beneficial holders of Trust Units for 30 or more consecutive 
trading days; (ii) the trust has fewer than 50,000 Trust Units issued 
and outstanding; or (iii) the market value of all Trust Units issued 
and outstanding is less than $1,000,000; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of the NASDAQ makes further dealings on NASDAQ 
inadvisable.\85\
---------------------------------------------------------------------------

    \85\ See proposed Rule 5711(i)(iv)(B)(1).
---------------------------------------------------------------------------

    Proposed Rule 5711(i)(iv)(B)(2) provides that NASDAQ would halt 
trading in a series of Trust Units if the circuit breaker parameters in 
NASDAQ Rule 4120(a)(11) have been reached. In exercising its discretion 
to halt or suspend trading in a series of Trust Units, NASDAQ may 
consider any relevant factors. In particular, if the portfolio and net 
asset value per share are not being disseminated as required, NASDAQ 
may halt trading during the day in which the interruption to the 
dissemination of the portfolio holdings or net asset value per share 
occurs. If the

[[Page 19439]]

interruption to the dissemination of the portfolio holdings or net 
asset value per share persists past the trading day in which it 
occurred, NASDAQ would halt trading no later than the beginning of the 
trading day following the interruption.
    Upon termination of a trust, NASDAQ would require that Trust Units 
issued in connection with such trust be removed from NASDAQ listing. A 
trust would terminate in accordance with the provisions of the 
prospectus.\86\
---------------------------------------------------------------------------

    \86\ See proposed Rule 5711(i)(iv)(B)(2).
---------------------------------------------------------------------------

    Proposed Rule 5711(i)(iv)(C) provides that the stated term of the 
trust shall be as stated in the prospectus; however, such entity may be 
terminated under such earlier circumstances as may be specified in the 
prospectus.
    Proposed Rule 5711(i)(iv)(D) provides 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. In addition, no change is to 
be made in the trustee of a listed issue without prior notice to and 
approval of NASDAQ.
    Proposed Rule 5711(i)(iv)(E) provides that voting rights shall be 
as set forth in the prospectus.
    Proposed Rules 5711(i)(v) and (vi) set forth the limitation of 
NASDAQ liability and requirements for Market Makers in Trust Units (see 
``General Provisions--Limitation of NASDAQ Liability'' and ``General 
Provisions--Market Maker Accounts'' below for a description of these 
requirements).
    Proposed Commentary .01 to Rule 5711(i) requires that Members 
provide to all purchasers of newly issued Trust Units a prospectus for 
the series of Trust Units.
    Proposed Commentary .02 to Rule 5711(i) states that transactions in 
Trust Units would occur during the trading hours specified in NASDAQ 
Rule 4120.
    Proposed Commentary .03 to Rule 5711(i) states that NASDAQ would 
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 requirements relating to Trust Units are based on, and 
substantively identical to, NYSE Arca Equities Rule 8.500 (``Trust 
Units'').
10. Managed Trust Securities
    Pursuant to proposed Rule 5711(j), NASDAQ would consider for 
trading, whether by listing or pursuant to unlisted trading privileges, 
Managed Trust Securities that meet the criteria of the proposed 
rule.\87\ As used in the proposed rule and unless the context otherwise 
requires, the term ``Managed Trust Securities'' means a security that 
is registered under the Securities Act of 1933, as amended, and which: 
(i) Is issued by a trust that (A) is a commodity pool as defined in the 
CEA and regulations thereunder, and that is managed by a commodity pool 
operator registered with the CFTC, and (B) 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 would 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 (ii) is issued and redeemed 
continuously in specified aggregate amounts at the next applicable net 
asset value.\88\ NASDAQ may trade, either by listing or pursuant to 
unlisted trading privileges, Managed Trust Securities based on the 
underlying portfolio of exchange-traded futures and/or certain currency 
forward contracts described in the related prospectus, and each issue 
of Managed Trust Securities shall be designated as a separate trust or 
series and shall be identified by a unique symbol.\89\
---------------------------------------------------------------------------

    \87\ Proposed Rule 5711(j) would apply only to Managed Trust 
Securities. Managed Trust Securities are included within the 
definition of ``security'' or ``securities'' as such terms are used 
in the Bylaws and Rules of NASDAQ. See proposed Rule 5711(j)(ii).
    \88\ See proposed Rule 5711(j)(iii)(A). Proposed Rule 
5711(j)(iii) includes the following additional definitions 
concerning Managed Trust Securities:
    <bullet> 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. See proposed Rule 
5711(j)(iii)(B).
    <bullet> 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. See proposed Rule 5711(j)(iii)(C).
    <bullet> The term ``Reporting Authority'' in respect of a 
particular series of Managed Trust Securities means NASDAQ, an 
institution, or a reporting or information service designated by 
NASDAQ or by the trust or the exchange that lists a particular 
series of Managed Trust Securities (if NASDAQ is trading such series 
pursuant to unlisted trading privileges) as the official source for 
calculating and reporting information relating to such series, 
including, but not limited to, the Intraday Indicative Value, the 
Disclosed Portfolio, the amount of any cash distribution to holders 
of Managed Trust Securities, net asset value, or other information 
relating to the issuance, redemption or trading of Managed Trust 
Securities. A series of Managed Trust Securities may have more than 
one Reporting Authority, each having different functions. See 
proposed Rule 5711(j)(iii)(D).
    \89\ See proposed Rule 5711(j)(iv).
---------------------------------------------------------------------------

    Managed Trust Securities would be listed and traded on NASDAQ 
subject to application of the following initial listing criteria:
    <bullet> NASDAQ will establish a minimum number of Managed Trust 
Securities required to be outstanding at the time of commencement of 
trading on NASDAQ; and
    <bullet> NASDAQ will obtain a representation from the issuer of 
each series of Managed Trust Securities that the net asset value per 
share for the series will be calculated daily and that the net asset 
value and the Disclosed Portfolio will be made available to all market 
participants at the same time.\90\
---------------------------------------------------------------------------

    \90\ See proposed Rule 5711(j)(v)(A). 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. See proposed Rule 5711(j)(iii)(B).
---------------------------------------------------------------------------

    Under proposed Rule 5711(j)(v)(B), each series of Managed Trust 
Securities would be listed and traded on NASDAQ subject to application 
of the following continued listing criteria:
    <bullet> The Intraday Indicative Value for Managed Trust Securities 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the time when the Managed Trust 
Securities trade on NASDAQ.
    <bullet> The Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the same 
time.
    <bullet> 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.\91\
---------------------------------------------------------------------------

    \91\ The term ``Reporting Authority'' in respect of a particular 
series of Managed Trust Securities means NASDAQ, an institution, or 
a reporting or information service designated by NASDAQ or by the 
trust or the exchange that lists a particular series of Managed 
Trust Securities (if NASDAQ is trading such series pursuant to 
unlisted trading privileges) as the official source for calculating 
and reporting information relating to such series, including, but 
not limited to, the Intraday Indicative Value, the Disclosed 
Portfolio, the amount of any cash distribution to holders of Managed 
Trust Securities, net asset value, or other information relating to 
the issuance, redemption or trading of Managed Trust Securities. A 
series of Managed Trust Securities may have more than one Reporting 
Authority, each having different functions. See proposed Rule 
5711(j)(iii)(D).

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

[[Page 19440]]

    Under proposed Rule 5711(j)(v)(B)(3), NASDAQ would consider the 
suspension of trading in or removal from listing of a series of Managed 
Trust Securities under any of the following circumstances:
    <bullet> If, following the initial twelve-month period beginning 
upon the commencement of trading of the Managed Trust Securities: (i) 
The Trust has fewer than 50,000 Managed Trust Securities issued and 
outstanding; (ii) the market value of all Managed Trust Securities 
issued and outstanding is less than $1,000,000; or (iii) there are 
fewer than 50 record and/or beneficial holders of Managed Trust 
Securities for 30 consecutive trading days;
    <bullet> 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;
    <bullet> If the Trust issuing the Managed Trust Securities has 
failed to file any filings required by the Commission or if NASDAQ is 
aware that the trust is not in compliance with the conditions of any 
exemptive order or no-action relief granted by the Commission to the 
Trust with respect to the series of Managed Trust Securities; or
    <bullet> If such other event shall occur or condition exists which 
in the opinion of NASDAQ makes further dealings on NASDAQ inadvisable.
    Proposed Rule 5711(j)(v)(B)(4) provides that, if the Intraday 
Indicative Value of a series of Managed Trust Securities is not being 
disseminated as required, NASDAQ may halt trading during the day in 
which the interruption to the dissemination of the Intraday Indicative 
Value occurs. If the interruption to the dissemination of the Intraday 
Indicative Value persists past the trading day in which it occurred, 
NASDAQ would halt trading no later than the beginning of the trading 
day following the interruption. If a series of Managed Trust Securities 
is trading on NASDAQ pursuant to unlisted trading privileges, NASDAQ 
would halt trading in that series as specified in NASDAQ Rule 4120(a) 
or (b), as applicable. In addition, if NASDAQ becomes aware that the 
net asset value or the Disclosed Portfolio with respect to a series of 
Managed Trust Securities is not disseminated to all market participants 
at the same time, it would 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 5711(j)(v)(B)(5) provides that upon termination of a 
trust, NASDAQ requires that Managed Trust Securities issued in 
connection with such trust be removed from NASDAQ listing. A trust 
would terminate in accordance with the provisions of the trust 
prospectus.
    Proposed Rule 5711(j)(v)(C) provides that the term of the trust 
shall be as stated in the prospectus; however, a trust may be 
terminated under such earlier circumstances as may be specified in the 
trust prospectus.
    Proposed Rule 5711(j)(v)(D) provides 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. In addition, no change is to 
be made in the trustee of a listed issue without prior notice to and 
approval of NASDAQ.
    Proposed Rule 5711(j)(v)(E) provides that voting rights shall be as 
set forth in the applicable trust prospectus.
    Proposed Rules 5711(j)(vi) and (vii) set forth the limitation of 
NASDAQ liability and requirements for Market Makers in Managed Trust 
Securities (see ``General Provisions--Limitation of NASDAQ Liability'' 
and ``General Provisions--Market Maker Accounts'' below for a 
description of these requirements).
    Proposed Rule 5711(j)(viii) provides that NASDAQ would file 
separate proposals under Section 19(b) of the Act before listing and 
trading separate and distinct Managed Trust Securities.
    Proposed Commentary .01 to Rule 5711(j) requires that Members 
provide all purchasers of newly issued Managed Trust Securities a 
prospectus for the series of Managed Trust Securities.
    Proposed Commentary .02 to Rule 5711(j) states that transactions in 
Managed Trust Securities would occur during the trading hours specified 
in NASDAQ Rule 4120.
    Proposed Commentary .03 to Rule 5711(j) states that NASDAQ's rules 
governing the trading of equity securities apply to Managed Trust 
Securities.
    Proposed Commentary .04 to Rule 5711(j) states that NASDAQ would 
implement written surveillance procedures for Managed Trust Securities.
    Proposed Commentary .05 to Rule 5711(j) states that if the trust's 
advisor is affiliated with a broker-dealer, the broker-dealer shall 
erect a ``fire wall'' around the personnel who have access to 
information concerning changes and adjustments to the Disclosed 
Portfolio. Personnel who make decisions on the trust's portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material nonpublic information regarding the 
applicable trust portfolio.
    The proposed requirements relating to Managed Trust Securities are 
based on, and substantively identical to, NYSE Arca Equities Rule 8.700 
(``Managed Trust Securities'').
11. Currency Warrants
    Proposed Rule 5711(k) would govern the listing of Currency 
Warrants, and the proposed rule provides that the listing of Currency 
Warrant issues is considered on a case-by-case basis. Pursuant to 
proposed Rule 5711(k)(i), Currency Warrant issues would be evaluated 
for listing against the following criteria:
    <bullet> The warrant issuer will be expected to have a minimum 
tangible net worth in excess of $250,000,000 and otherwise to exceed 
substantially the earnings requirements set forth in Rule 5405(b).\92\ 
In the alternative, the warrant issuer will be expected: (i) To have a 
minimum tangible net worth of $150,000,000 and otherwise to exceed 
substantially the earnings requirements set forth in Rule 5405(b); and 
(ii) not to have issued warrants where the original issue price of all 
the issuer's currency warrant offerings (combined with currency warrant 
offerings of the issuer's affiliates) listed on a national securities 
exchange or traded through the facilities of NASDAQ exceeds 25% of the 
warrant issuer's net worth.\93\
---------------------------------------------------------------------------

    \92\ Rule 5405(b) sets forth initial listing standards for 
primary equity securities.
    \93\ See proposed Rule 5711(k)(i)(A).
---------------------------------------------------------------------------

    <bullet> The term must be one to five years from date of 
issuance.\94\
---------------------------------------------------------------------------

    \94\ See proposed Rule 5711(k)(i)(B).
---------------------------------------------------------------------------

    <bullet> 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.\95\
---------------------------------------------------------------------------

    \95\ See proposed Rule 5711(k)(i)(C).
---------------------------------------------------------------------------

    <bullet> The warrants must be cash settled in U.S. dollars.\96\
---------------------------------------------------------------------------

    \96\ See proposed Rule 5711(k)(i)(D).
---------------------------------------------------------------------------

    <bullet> All currency warrants must include in their terms 
provisions specifying the time by which all exercise notices must

[[Page 19441]]

be submitted, and that all unexercised warrants that are in the money 
will be automatically exercised on their expiration date or on or 
promptly following the date on which such warrants are delisted by 
NASDAQ (if such warrant issue has not been listed on another organized 
securities market in the United States).\97\
---------------------------------------------------------------------------

    \97\ See proposed Rule 5711(k)(i)(E).
---------------------------------------------------------------------------

    NASDAQ would file separate proposals under Section 19(b) of the Act 
before listing and trading separate and distinct Currency Warrants.\98\
---------------------------------------------------------------------------

    \98\ See proposed Rule 5711(k)(ii).
---------------------------------------------------------------------------

    Proposed Rule 5711(k)(iii) describes regulatory requirements 
applicable to Currency Warrants. Specifically:
    <bullet> No Member shall accept an order from a customer to 
purchase or sell a Currency Warrant unless the customer's account has 
been approved for options trading pursuant to NOM Rules, Chapter XI, 
Section 7.\99\
---------------------------------------------------------------------------

    \99\ See proposed Rule 5711(k)(iii)(A).
---------------------------------------------------------------------------

    <bullet> The provisions of NOM Rules, Chapter XI, Section 9 shall 
apply to recommendations in Currency Warrants and the term ``option'' 
as used therein shall be deemed to include Currency Warrants.\100\
---------------------------------------------------------------------------

    \100\ See proposed Rule 5711(k)(iii)(B).
---------------------------------------------------------------------------

    <bullet> Any account in which a Member exercises discretion to 
trade in Currency Warrants shall be subject to the provisions of NOM 
Rules, Chapter XI, Section 10 with respect to such trading, and the 
terms ``option'' and ``options contract'' as used in therein shall be 
deemed to include Currency Warrants.\101\
---------------------------------------------------------------------------

    \101\ See proposed Rule 5711(k)(iii)(C).
---------------------------------------------------------------------------

    <bullet> NOM Rules, Chapter XI, Section 8 shall apply to all 
customer accounts of a Member in which transactions in Currency 
Warrants are effected, and the term ``option'' as used therein shall be 
deemed to include Currency Warrants.\102\
---------------------------------------------------------------------------

    \102\ See proposed Rule 5711(k)(iii)(D).
---------------------------------------------------------------------------

    <bullet> NOM Rules, Chapter XI, Section 24 shall apply to all 
public customer complaints received by a Member regarding Currency 
Warrants, and the term ``option'' as used therein shall be deemed to 
include Currency Warrants.\103\
---------------------------------------------------------------------------

    \103\ See proposed Rule 5711(k)(iii)(E).
---------------------------------------------------------------------------

    <bullet> Members participating in Currency Warrants shall be bound 
to comply with the ``Communications and Disclosures'' rule of the 
Financial Industry Regulatory Authority (``FINRA''), as applicable, as 
though such rule were part of NASDAQ's proposed rules relating to 
Currency Warrants.\104\
---------------------------------------------------------------------------

    \104\ See proposed Rule 5711(k)(iii)(F).
---------------------------------------------------------------------------

    Under proposed Rule 5711(k)(iv), trading on NASDAQ in any Currency 
Warrant would be halted whenever NASDAQ deems such action appropriate 
in the interests of a fair and orderly market or to protect investors. 
Trading in Currency Warrants that have been the subject of a halt or 
suspension by NASDAQ may resume if NASDAQ determines that the 
conditions which led to the halt or suspension are no longer present, 
or that the interests of a fair and orderly market are best served by a 
resumption of trading.
    Proposed Rule 5711(k)(v) would govern reporting of Currency Warrant 
positions. Proposed Rule 5711(k)(v)(A) would require each Member to 
file with NASDAQ a report with respect to each account in which the 
Member has an interest, each account of a partner, officer, director, 
or employee of such Member, and each customer account that has 
established an aggregate position (whether long or short) of 100,000 
warrants covering the same underlying currency, combining for purposes 
of the proposed rule: (i) long positions in put warrants and short 
positions in call warrants; and (i) short positions in put warrants 
with long positions in call warrants. The report shall be in such form 
as may be prescribed by NASDAQ and shall be filed no later than the 
close of business on the next day following the day on which the 
transaction or transactions requiring the filing of such report 
occurred.
    Proposed Rule 5711(k)(v)(B) provides that whenever a report shall 
be required to be filed with respect to an account pursuant to the 
proposed rule, the Member filing the same must file with NASDAQ such 
additional periodic reports with respect to such account as NASDAQ may 
from time to time require.
    Proposed Rule 5711(k)(v)(C) provides that all reports required by 
the proposed rule shall be filed with NASDAQ in such manner and form as 
prescribed by NASDAQ.
    The proposed requirements relating to Currency Warrants are based 
on, and substantively identical to, the requirements for Currency 
Warrants set forth in NYSE Arca Equities Rules 8.3 (``Listing of 
Currency and Index Warrants''), 8.4 (``Account Approval''), 8.5 
(``Suitability''), 8.6 (``Discretionary Accounts''), 8.7 (``Supervision 
of Accounts''), 8.8 (``Customer Complaints''), 8.9 (``Prior Approval of 
Certain Communications to Customers''), 8.12 (``Trading Halts or 
Suspensions''), and 8.13 (``Reporting of Warrant Positions'').

C. General Provisions

    To the extent not specifically addressed in the respective proposed 
rules, and unless otherwise noted below, the following general 
provisions apply to all of the proposed rules and Subject Securities.
1. Information Circular
    Prior to the commencement of trading, NASDAQ will inform its 
Members in an Information Circular of the special characteristics and 
risks associated with trading the Subject Securities. Specifically, the 
Information Circular will discuss the following: (i) The procedures for 
purchases and redemptions of the Subject Securities (and/or that the 
Subject Securities are not individually redeemable); (ii) NASDAQ Rule 
2310, which imposes suitability obligations on NASDAQ Members with 
respect to recommending transactions in the Subject Securities to 
customers; (iii) how information regarding the Intraday Indicative 
Value is disseminated; (iv) the requirement that Members deliver a 
prospectus to investors purchasing newly issued Subject Securities 
prior to or concurrently with the confirmation of a transaction; and 
(v) trading information.
    In addition, the Information Circular will advise Members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the Subject Securities. Members purchasing Subject 
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 
Subject 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 Subject Securities and, if applicable, the Net Asset Value 
(``NAV'') calculation time for the Subject Securities. The Information 
Circular will disclose that information about the Subject Securities 
and the corresponding indexes, if applicable, will be publicly 
available on the Web site for the Subject 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

[[Page 19442]]

has no jurisdiction over the trading of physical commodities or futures 
contracts on which the value of the Subject Securities may be based.
    The Information Circular will also reference the risks involved in 
trading the Subject Securities during the Opening Process and the Post-
Market Session when an updated Intraday Indicative Value will not be 
calculated or publicly disseminated and, if applicable, the risks 
involved in trading the Subject Securities during the Regular Market 
Session when the Intraday Indicative Value may be static or based in 
part on the fluctuation of currency exchange rates when the underlying 
markets have closed prior to the close of NASDAQ's Regular Market 
Session.
2. Limitation of NASDAQ Liability
    Neither NASDAQ, any agent of NASDAQ, nor the Reporting Authority 
(if applicable), shall have any liability for damages, claims, losses 
or expenses caused by any errors, omissions, or delays in calculating 
or disseminating any applicable underlying index or asset value; the 
current value of the applicable positions or interests required to be 
deposited to a Trust, if applicable, in connection with issuance of the 
securities; net asset value; or any other information relating to the 
purchase, redemption, or trading of the Subject Securities, resulting 
from any negligent act or omission by NASDAQ, any agent of NASDAQ, or 
the Reporting Authority (if applicable), or any act, condition or cause 
beyond the reasonable control of NASDAQ, any agent of NASDAQ, or the 
Reporting Authority (if applicable), including, but not limited to, an 
act of God; fire; flood; extraordinary weather conditions; war; 
insurrection; riot; strike; accident; action of government; 
communications or power failure; equipment or software malfunction; or 
any error, omission or delay in the reports of transactions in the 
applicable positions or interests.
3. Market Maker Accounts
    A registered Market Maker in the securities described below must 
file with NASDAQ, in a manner prescribed by NASDAQ, and keep current a 
list identifying all accounts for trading in:
    <bullet> In the case of Commodity-Based Trust Shares, the 
applicable underlying commodity, related commodity futures or options 
on commodity futures, or any other related commodity derivatives, which 
the registered Market Maker may have or over which it may exercise 
investment discretion (``Underlying Commodities'');
    <bullet> In the case of Currency Trust Shares, the applicable 
underlying non-U.S. currency, options, futures or options on futures on 
such currency, or any other derivatives based on such currency, which 
the registered Market Maker may have or over which it may exercise 
investment discretion (``Underlying Currencies'');
    <bullet> In the case of Commodity Index Trust Shares, the 
applicable physical commodities included in, or options, futures or 
options on futures on, an index underlying an issue of Commodity Index 
Trust Shares or any other derivatives based on such index or based on 
any commodity included in such index, which the registered Market Maker 
may have or over which it may exercise investment discretion 
(``Underlying Commodity Index Assets'');
    <bullet> In the case of Commodity Futures Trust Shares, the 
applicable underlying commodity, related futures or options on futures, 
or any other related derivatives, which the registered Market Maker may 
have or over which it may exercise investment discretion (``Underlying 
Commodity Futures'');
    <bullet> In the case of Partnership Units, the applicable 
underlying asset or commodity, related futures or options on futures, 
or any other related derivatives, which the registered Market Maker may 
have or over which it may exercise investment discretion (``Underlying 
Partnership Unit Assets'');
    <bullet> In the case of Trust Units, the applicable underlying 
commodity, related commodity futures or options on commodity futures, 
or any other related commodity derivatives, which the registered Market 
Maker may have or over which it may exercise investment discretion 
(``Underlying Trust Unit Assets''); and
    <bullet> In the case of Managed Trust Securities, the underlying 
commodity or applicable currency, related futures or options on 
futures, or any other related derivatives, which a registered Market 
Maker may have or over which it may exercise investment discretion 
(``Underlying Managed Trust Assets'').
    No registered Market Maker in the above mentioned securities shall 
trade in the respective Underlying Commodities, Underlying Currencies, 
Underlying Commodity Index Assets, Underlying Commodity Futures, 
Underlying Partnership Unit Assets, Underlying Trust Unit Assets, and/
or the Underlying Managed Trust Assets (collectively, ``Underlying 
Assets'') in an account in which a Market Maker, directly or 
indirectly, controls trading activities, or has a direct interest in 
the profits or losses thereof, which has not been reported to NASDAQ.
    In addition to the existing obligations under NASDAQ rules 
regarding the production of books and records (see, e.g., Rule 4625), a 
registered Market Maker in the above mentioned securities is required 
to make available to NASDAQ such books, records or other information 
pertaining to transactions by such entity or registered or non-
registered employee affiliated with such entity for its or their own 
accounts for trading the applicable Underlying Assets as may be 
requested by NASDAQ.
4. Trading Rules
    NASDAQ deems the Subject Securities to be equity securities, thus 
rendering trading in the Subject Securities subject to NASDAQ's 
existing rules governing the trading of equity securities. The Subject 
Securities will trade on NASDAQ from 8 a.m. to 8 p.m. E.T. NASDAQ has 
appropriate rules to facilitate transactions in the Subject Securities 
during all trading sessions. The minimum price increment for quoting 
and entry of orders in equity securities traded on NASDAQ is $0.01, 
with the exception of securities that are priced less than $1.00 for 
which the minimum price increment for order entry is $0.0001.
5. Surveillance
    NASDAQ believes that its surveillance procedures are adequate to 
address any concerns about the trading of the Subject Securities on 
NASDAQ. Trading of the Subject Securities on NASDAQ will be subject to 
FINRA's surveillance procedures for derivative products.\105\ NASDAQ 
may obtain information via the ISG from other exchanges who are members 
or affiliates of the ISG.\106\
---------------------------------------------------------------------------

    \105\ FINRA surveils trading on NASDAQ pursuant to a regulatory 
services agreement. NASDAQ is responsible for FINRA's performance 
under this regulatory services agreement.
    \106\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
---------------------------------------------------------------------------

    In addition, to the extent that a Subject Security invests in 
futures contracts, not more than 10% of the weight of such futures 
contracts in the aggregate shall consist of components whose principal 
trading market is not a member of ISG or is a market with which the 
Exchange does not have a comprehensive surveillance sharing agreement. 
NASDAQ has a general policy prohibiting the distribution of material, 
non-public information by its employees.
    As a general matter, NASDAQ has regulatory jurisdiction over its 
Members

[[Page 19443]]

and their associated persons, which includes any person or entity 
controlling a Member, as well as a subsidiary or affiliate of a Member 
that is in the securities business. A subsidiary or affiliate of a 
Member that does business only in commodities or futures contracts 
would not be subject to NASDAQ jurisdiction, but NASDAQ could obtain 
information regarding the activities of such subsidiary or affiliate 
through surveillance sharing agreements with regulatory organizations 
of which such subsidiary or affiliate is a Member.
6. Trading Halts
    With respect to trading halts, in addition to the trading halt 
requirements set forth in the proposed rules, NASDAQ may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Subject Securities. Trading in the Subject Securities 
may be halted because of market conditions or for reasons that, in the 
view of NASDAQ, make trading in the Subject Securities inadvisable. 
These may include: (i) the extent to which trading in the underlying 
asset or assets is not occurring; or (ii) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. In addition, trading in the Subject 
Securities will be subject to trading halts caused by extraordinary 
market volatility pursuant to NASDAQ's ``circuit breaker'' Rule 
4120(a)(11) or by the halt or suspension of the trading of the current 
underlying asset or assets.
    If the applicable Intraday Indicative Value, value of the 
underlying index, or the value of the underlying asset or assets (e.g., 
securities, commodities, currencies, futures contracts, or other 
assets) is not being disseminated as required, NASDAQ may halt trading 
during the day in which such interruption to the dissemination occurs. 
If the interruption to the dissemination of the applicable Intraday 
Indicative Value, value of the underlying index, or the value of the 
underlying asset or assets persists past the trading day in which it 
occurred, NASDAQ will halt trading no later than the beginning of the 
trading day following the interruption. In addition, if NASDAQ becomes 
aware that the net asset value with respect to a series of the Subject 
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.
7. Suitability
    Currently, NASDAQ Rule 2310 governs Recommendations to Customers 
(Suitability), Fair Dealing with Customers, Suitability Obligations to 
Institutional Customers, and Direct Participation Programs.
    Prior to the commencement of trading of any inverse, leveraged, or 
inverse leveraged Subject Securities, NASDAQ will inform its Members of 
the suitability requirements of NASDAQ Rule 2310 in an Information 
Circular. Specifically, Members will be reminded in the Information 
Circular that, in recommending transactions in these securities, they 
must have a reasonable basis to believe that: (i) The recommendation is 
suitable for a customer given reasonable inquiry concerning the 
customer's investment objectives, financial situation, needs, and any 
other information known by such Member; and (ii) the customer can 
evaluate the special characteristics, and is able to bear the financial 
risks, of an investment in the securities. In connection with the 
suitability obligation, the Information Circular will also provide that 
Members must make reasonable efforts to obtain the following 
information: (1) The customer's financial status; (2) the customer's 
tax status; (3) the customer's investment objectives; and (4) such 
other information used or considered to be reasonable by such Member or 
registered representative in making recommendations to the customer.
    In addition, FINRA has implemented increased sales practice and 
customer margin requirements for FINRA members applicable to inverse, 
leveraged, and inverse leveraged securities and options on such 
securities, as described in FINRA Regulatory Notices 09-31 (June 2009), 
09-53 (August 2009) and 09-65 (November 2009) (``FINRA Regulatory 
Notices''). Members that carry customer accounts will be required to 
follow the FINRA guidance set forth in the FINRA Regulatory Notices. 
The Information Circular will reference the FINRA Regulatory Notices 
regarding sales practice and customer margin requirements for FINRA 
members applicable to inverse, leveraged, and inverse leveraged 
securities and options on such securities.
    NASDAQ notes that, for such inverse, leveraged, and inverse 
leveraged securities, the corresponding funds seek leveraged, inverse, 
or leveraged inverse returns on a daily basis, and do not seek to 
achieve their stated investment objective over a period of time greater 
than one day because compounding prevents the funds from perfectly 
achieving such results. Accordingly, results over periods of time 
greater than one day typically will not be a leveraged multiple 
(+200%), the inverse (-100%) or a leveraged inverse multiple (-200%) of 
the period return of the applicable benchmark and may differ 
significantly from these multiples. NASDAQ's Information Circular, as 
well as the applicable registration statement, will provide information 
regarding the suitability of an investment in such securities.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of Section 6 of 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\107\ In particular, the Commission finds 
that the proposed rule change, as amended, is consistent with the 
requirements of Section 6(b)(5) of the Act,\108\ which requires, among 
other things, that rules of a national securities exchange be designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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 notes that it 
has previously approved substantively identical listing standards for 
the listing and trading of the Subject Securities on NYSE Arca.\109\
---------------------------------------------------------------------------

    \107\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \108\ 15 U.S.C. 78f(b)(5).
    \109\ See NYSE Arca Equities Rules 5.2(j)(4); 5.2(j)(5); 
5.2(j)(6)(B)(I)(2), 5.2(j)(6)(B)(II)(2), 5.2(j)(6)(B)(IV); 
5.2(j)(6)(B)(V); 5.2(j)(6)(B)(VI); Commentary .01 to NYSE Arca 
Equities Rule 5.2(j)(6); NYSE Arca Equities Rules 5.2(j)(7); 8.201; 
8.202; 8.203; 8.204; NYSE Arca Rules 8.3-8.9, 8.12, 8.13; and NYSE 
Arca Equities Rules 8.300; 8.500; and 8.700. The Exchange has 
represented that there are no material substantive differences 
between the proposed rules and the NYSE Arca Equities Rules on which 
they are based.
---------------------------------------------------------------------------

A. Generic Listing Standards

    Rule 19b-4(e) under the Act \110\ provides that the listing and 
trading of a new derivative securities product by a self-regulatory 
organization (``SRO'') shall not be deemed a proposed rule change, 
pursuant to Section (c)(1) of Rule 19b-4,\111\ if the Commission has 
approved, pursuant to Section 19(b) of

[[Page 19444]]

the Act,\112\ the SRO's trading rules, procedures, and listing 
standards for the product class that would include the new derivatives 
securities product, and the SRO has a surveillance program for the 
product class. The Exchange is proposing to: (i) Amend the continued 
generic listing standards for Equity Index-Linked Securities and 
Commodity-Linked Securities under amended Rule 5710; (ii) adopt initial 
and continued generic listing standards for Fixed Income-Linked 
Securities, Futures-Linked Securities, and Multifactor Index-Linked 
Securities under amended Rule 5710; (iii) adopt generic listing 
standards for Index-Linked Exchangeable Notes under proposed Rule 
5711(a); and (iv) adopt generic listing standards for Currency Trust 
Shares under proposed Rule 5711(e), pursuant to which the Exchange will 
be able to list and trade such securities without Commission approval 
of each individual product under Rule 19b-4(e).\113\ Accordingly, any 
securities that the Exchange lists and/or trades pursuant to NASDAQ 
Rules 5710, 5711(a) and 5711(e), as proposed, must satisfy the 
standards set forth therein.\114\
---------------------------------------------------------------------------

    \110\ 17 CFR 240.19b-4(e)
    \111\ 17 CFR 240.19b-4(c)(1).
    \112\ 15 U.S.C. 78s(b).
    \113\ 17 CFR 240.19b-4(e).
    \114\ Under the proposal, the failure of a particular product or 
index to comply with the proposed generic listing standards under 
Rule 19b-4(e) for Linked Securities or Currency Trust Shares would 
not preclude the Exchange from submitting a separate filing pursuant 
to Section 19(b)(2) of the Act, requesting Commission approval to 
list and trade a particular series of Linked Securities or Currency 
Trust Shares. See introductory paragraphs to Rule 5710 and proposed 
Rule 5711(e) (providing that NASDAQ may submit a rule filing 
pursuant to Section 19(b)(2) of the Act to permit the listing and 
trading of Linked Securities or Currency Trust Shares, respectively, 
that do not otherwise meet the generic listing standards set forth 
in the relevant rules applicable to them).
---------------------------------------------------------------------------

1. Equity Index-Linked Securities and Commodity Linked Securities
    The Commission has previously approved, pursuant to Section 19(b) 
of the Act and in accordance with Rule 19b-4(e) thereunder, the 
adoption of generic initial and continued listing standards for the 
listing and trading of Equity Index-Linked Securities and Commodity-
Linked Securities on the Exchange, so that securities that satisfy such 
proposed generic listing standards for Equity Index-Linked Securities 
and Commodity-Linked Securities may commence trading on the Exchange 
without public comment and Commission approval.\115\ The Commission 
notes that it has previously approved the same generic listing 
standards for Equity Index-Linked Securities and Commodity-Linked 
Securities for NYSE Arca.\116\ The Commission believes that, because 
the proposed continued listing requirements under proposed Rules 
5710(k)(i)(B) and (k)(ii)(B) for Equity Index-Linked Securities and 
Commodity-Linked Securities, respectively,\117\ are substantively 
identical to those of NYSE Arca and present no unique or novel 
regulatory issues, such proposed requirements are reasonably designed 
to protect investors and the public interest. Specifically, and as 
further discussed above, under the proposed continued listing 
standards, NASDAQ would commence delisting or removal proceedings of a 
series of Equity Index-Linked Securities or Commodity-Linked Securities 
if: (i) The initial listing criteria are not continuously maintained 
(subject to certain exceptions in the case of Equity Index-Linked 
Securities as described above); (ii) the aggregate market value or 
principal amount publicly held is less than $400,000; (iii) the value 
of the index or Reference Asset is no longer available or being 
disseminated; or (iv) if circumstances exist which make further 
dealings in the securities on NASDAQ inadvisable. The Commission 
believes that the proposed continued listing standards are adequately 
designed to ensure transparency of key values and information regarding 
the securities and will help ensure a minimum level of liquidity for 
such securities to allow for the maintenance of fair and orderly 
markets.
---------------------------------------------------------------------------

    \115\ See Securities Exchange Act Release Nos. 54167 (July 18, 
2009), 71 FR 42145 (July 25, 2006) (SR-NASDAQ-2006-002) (approving 
generic listing standards for Equity Index-Linked Securities on 
NASDAQ) and 56910 (December 5, 2007), 72 FR 70628 (December 12, 
2007) (SR-NASDAQ-2007-071) (approving generic listing standards for 
Commodity-Linked Securities).
    \116\ See Securities Exchange Act Release No. 52204 (August 3, 
2005), 72 FR 46559 (August 10, 2005) (SR-PCX-2005-63) (approving 
generic listing standards for Index-Linked Securities). See also 
NYSE Arca Equities Rules 5.2(j)(6)(B)(I)(2) and (B)(II)(2).
    \117\ See supra note 4.
---------------------------------------------------------------------------

2. Fixed Income Index-Linked Securities, Futures Linked Securities, and 
Multifactor Index-Linked Securities
    In addition, the Commission has previously approved the adoption of 
generic initial and continued listing standards for Fixed-Income Index-
Linked Securities, Futures-Linked Securities, and Multifactor Index-
Linked Securities, each of which are specific types of ``Index-Linked 
Securities,'' on NYSE Arca.\118\ Consistent with its previous orders, 
the Commission believes that the generic listing standards proposed by 
the Exchange for Fixed-Income Index-Linked Securities, Futures-Linked 
Securities, and Multifactor Index-Linked Securities should fulfill the 
intended objective of Rule 19b-4(e) by allowing those Additional Linked 
Securities that satisfy the generic listing standards to commence 
trading without public comment and Commission approval.\119\ The 
Exchange's ability to rely on Rule 19b-4(e) to list and trade 
Additional Linked Securities that meet the applicable requirements and 
minimum standards should reduce the time frame for bringing these 
securities to market and thereby reduce the burdens on issuers and 
other market participants, while also promoting competition and making 
such securities available to investors more quickly. In addition, the 
Commission believes the Exchange's proposal to list and trade the 
Additional Linked Securities will provide an additional avenue for 
investors to achieve desired investment objectives through the purchase 
of Index-Linked Securities, and will benefit investors by increasing 
competition among markets that trade Index-Linked Securities.
---------------------------------------------------------------------------

    \118\ See Securities Exchange Act Release No. 52204 (August 3, 
2005), 72 FR 46559 (August 10, 2005) (SR-PCX-2005-63) (approving 
generic listing standards for Index-Linked Securities).
    \119\ The Commission notes that the failure of a particular 
Additional Linked Security issue to satisfy the proposed generic 
initial listing standards pursuant to Rule 19b-4(e), however, would 
not preclude the Exchange from submitting a separate filing pursuant 
to Section 19(b)(2), requesting Commission approval to list and 
trade a particular Linked Security. See supra note 114.
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Fixed Income-
Linked Securities, Futures-Linked Securities, and Multifactor Index-
Linked Securities pursuant to Rule 19b-4(e) on the Exchange. Such 
Additional Linked Securities listed under the proposed standards will 
be subject to the full panoply of NASDAQ rules and procedures that 
govern the trading of Linked Securities, and also the rules and 
procedures that govern the trading of equity securities on the Exchange 
including, among others, rules and procedures governing trading halts, 
surveillance procedures, disclosures to members, customer suitability 
requirements, and Market Maker obligations. In addition, the Additional 
Linked Securities will be subject to the asset/equity requirements and 
tangible net worth requirements applicable to Linked Securities, as 
well as the minimum holder and distribution

[[Page 19445]]

requirements, principal/market value requirements, and term thresholds 
for Linked Securities.\120\ In addition, as set forth more fully above, 
the proposed listing criteria for Fixed Income-Linked Securities 
include additional requirements relating to relative weighting, 
outstanding principal, market capitalization and diversification. These 
requirements are designed to ensure that the trading markets for index 
components underlying the Linked Securities are adequately capitalized 
and sufficiently liquid, and that no one component dominates the index. 
Further, the proposed listing criteria for Futures Linked Securities 
require, subject to certain limited exceptions, that the pricing 
information for components be derived from an ISG member market or its 
affiliate, or a market with which NASDAQ has a comprehensive 
surveillance sharing agreement. The Commission believes that these 
requirements should significantly minimize the potential for 
manipulation.
---------------------------------------------------------------------------

    \120\ See Rules 5710 (a)-(e), supra note 11.
---------------------------------------------------------------------------

    The Exchange's proposed requirements for Multifactor Index-Linked 
Securities are linked to criteria for other types of Linked Securities 
set forth in Rule 5710, including the proposed standards applicable to 
Fixed Income-Linked Securities and Futures-Linked Securities. 
Accordingly, any underlying Reference Asset for a Multifactor-Index 
Linked Security would have to satisfy the criteria set out in the 
Exchange's rules for Reference Assets underlying other Linked 
Securities.
    The generic listing standards permit listing of Additional Linked 
Securities if the Commission previously approved the underlying index 
for trading in connection with another derivative product. The 
Commission believes that if it has previously determined that such 
index and its components were sufficiently transparent, then the 
Exchange may rely on this finding, provided that the conditions set 
forth in the Commission's approval order continue to be satisfied.
    The Commission believes that the proposed continued listing 
requirements for the Additional Linked Securities are reasonably 
designed to protect investors and the public interest. Under the 
proposed continued listing standards, NASDAQ would commence delisting 
or removal proceedings of a series of Fixed Income Index-Linked 
Securities, Futures-Linked Securities, or Multifactor Index-Linked 
Securities if: (i) The initial listing criteria are not continuously 
maintained; (ii) the aggregate market value or principal amount 
publicly held is less than $400,000; (iii) the value of the Reference 
Asset is no longer available or being disseminated; or (iv) if 
circumstances exist which make further dealings in the securities on 
NASDAQ inadvisable. The Commission believes that the proposed continued 
listing standards are adequate to ensure transparency of key values and 
information regarding the Additional Linked Securities. The Commission 
further believes that the continued listing standards will help ensure 
a minimum level of liquidity exists for such securities to allow for 
the maintenance of fair and orderly markets. In addition, the Exchange 
will have flexibility to delist a series of such securities if 
circumstances warrant such action.
b. Dissemination of Information
    The Additional Linked Securities will be subject to the Reference 
Asset information dissemination requirements applicable to all Linked 
Securities.\121\ The proposed listing requirements for Additional 
Linked Securities also require that: (i) in the case of Fixed Income-
Linked Securities, the Reference Asset must be widely disseminated to 
the public at least once per business day; and (ii) in the case of 
Futures-Linked Securities and Multifactor Index-Linked Securities, the 
Reference Asset must be, and, if the security is periodically 
redeemable, the Intraday Indicative Value of the security also must be, 
widely disseminated at least every 15 seconds during the Regular Market 
Session. In addition, the Additional Linked Securities will be subject 
to the trading halts requirements applicable to all Linked Securities, 
which provide that NASDAQ may halt trading during the day on which an 
interruption to the dissemination of the Intraday Indicative Value (if 
required to be disseminated) or the index or Reference Asset value 
occurs, and that NASDAQ will halt trading no later than the beginning 
of trading following the trading day when the interruption began if 
such interruption persists at that time.\122\ The Commission believes 
that the proposed rules are reasonably designed to promote the timely 
and fair disclosure of useful information that may be necessary to 
price the Additional Linked Securities appropriately, and to prevent 
trading when a reasonable degree of transparency cannot be assured.
---------------------------------------------------------------------------

    \121\ See proposed Rule 5710(g)(ii) (formerly Rule 5710(i)(ii)), 
which provides that, subject to certain exceptions, the current 
value of the index or Reference Asset of a Linked Securities must be 
widely disseminated at least every 15 seconds during NASDAQ's 
regular market session.
    \122\ See proposed Rule 5710(h) (formerly Rule 5710(j)).
---------------------------------------------------------------------------

c. Surveillance
    The Additional Linked Securities will be subject to the 
surveillance procedure requirements applicable to Linked 
Securities.\123\ In addition, the Exchange has represented that trading 
of the Additional Linked Securities on NASDAQ will be subject to 
FINRA's surveillance procedures for derivative products, and that the 
Exchange's surveillance procedures applicable to derivative products 
are adequate to address any concerns about the trading of the Linked 
Securities on NASDAQ.\124\ Further, the proposed listing criteria for 
Futures Linked Securities require, subject to certain limited 
exceptions, that the pricing information for components be derived from 
an ISG member market or its affiliate, or a market with which NASDAQ 
has a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \123\ See proposed Rule 5710(i) (formerly Rule 5710(k)), which 
provides that FINRA will implement on behalf of NASDAQ written 
surveillance procedures for Linked Securities, and that NASDAQ will 
enter into adequate comprehensive surveillance sharing agreements 
for non-U.S. securities, as applicable.
    \124\ See Notice at 6848.
---------------------------------------------------------------------------

d. Additional Provisions
    The Additional Linked Securities will be subject to the requirement 
that issuers comply with Rule 10A-3 under the Act.\125\ In addition, 
the Additional Linked Securities will be subject to the index 
calculation and ``firewall'' requirements applicable to all Linked 
Securities.\126\ The Commission believes that the ``firewall'' 
restrictions applicable to Linked Securities are designed to prevent 
the use and dissemination of material, non-public information regarding 
an underlying index and prevent conflicts of interest with respect to 
personnel of a broker-dealer maintaining an index underlying such 
securities. NASDAQ has also represented that it has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.\127\ The Commission believes that these requirements, taken 
together, should significantly minimize the

[[Page 19446]]

potential for manipulation and will allow for maintenance of a fair and 
orderly market in the Additional Linked Securities.
---------------------------------------------------------------------------

    \125\ 17 CFR 240.10A-3. See Rule 5710(f).
    \126\ See proposed Rule 5710(g)(i) (formerly Rule 5710(i)(i)), 
which requires that if an index is maintained by a broker-dealer, 
the broker-dealer must erect a ``firewall'' around the personnel who 
have access to information concerning changes and adjustments to the 
index and that the index must be calculated by a third party who is 
not a broker-dealer.
    \127\ See Notice at 6848.
---------------------------------------------------------------------------

    Proposed Commentary .01(a) to Rule 5710 would impose additional 
reporting requirements, trading restrictions and books and records 
obligations on Members acting as registered Market Makers in Linked 
Securities. The Commission believes that such restrictions, reporting 
and record-keeping requirements are reasonably designed to promote a 
fair and orderly market for Linked Securities and will assist the 
Exchange in identifying situations potentially susceptible to 
manipulation.
    In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Additional Linked Securities, 
the Exchange will inform its Members in an Information Circular of the 
special characteristics and risks associated with trading the 
Additional Linked Securities.\128\ The Commission believes that the 
Exchange's proposal should ensure that its Members have information 
that will allow them to be adequately apprised of the terms, 
characteristics, and risks of trading the Additional Linked Securities.
---------------------------------------------------------------------------

    \128\ See Notice at 6847.
---------------------------------------------------------------------------

    As discussed above, the Exchange proposes to make certain technical 
revisions so that the Additional Linked Securities are included in the 
provisions of Rule 5710 that apply to all Linked Securities. The 
Commission finds that the technical revisions to NASDAQ Rule 5710 are 
reasonable and promote transparency and consistent application of 
certain rules imposed with respect to types of Linked Securities.
    The Commission notes that the proposed generic listing standards 
for Fixed Income Index-Linked Securities, Futures-Linked Securities, 
and Multifactor Index-Linked Securities are substantively identical to 
those previously approved by the Commission for the listing and trading 
of Fixed Income Index-Linked Securities, Futures Linked Securities and 
Multifactor Index-Linked Securities on NYSE Arca.\129\ As such, the 
Commission believes that the proposed generic listing standards present 
no unique or novel regulatory issues and, for the reasons discussed 
above, are reasonably designed to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \129\ See NYSE Arca Equities Rule 5.2(j)(6)(B)(IV), (V), and 
(VI).
---------------------------------------------------------------------------

3. Index-Linked Exchangeable Notes
    As discussed above, the Commission has previously approved the 
adoption of generic listing standards for various classes of new 
derivative securities products to be listed and traded pursuant to Rule 
19b-4(e).\130\ In addition, the Commission has previously approved the 
adoption of generic initial and continued listing standards for Index-
Linked Exchangeable Notes on NYSE Arca.\131\ Consistent with its 
previous orders, the Commission believes that the generic listing 
standards proposed by the Exchange for Index-Linked Exchangeable Notes 
should fulfill the intended objective of Rule 19b-4(e) by allowing 
those Index-Linked Exchangeable Notes that satisfy the generic listing 
standards to commence trading without public comment and Commission 
approval. The Exchange's ability to rely on Rule 19b-4(e) to list and 
trade Index-Linked Exchangeable Notes that meet the applicable 
requirements and minimum standards should reduce the time frame for 
bringing these securities to market and thereby reduce the burdens on 
issuers and other market participants, while also promoting competition 
and making such securities available to investors more quickly. In 
addition, the Commission believes the Exchange's proposal to list and 
trade Index-Linked Exchangeable Notes will provide an additional avenue 
for investors to achieve desired investment objectives through the 
purchase of index-linked exchangeable debt securities, and will benefit 
investors by increasing competition among markets that trade index-
linked exchangeable debt.
---------------------------------------------------------------------------

    \130\ See supra note 115.
    \131\ See Securities Exchange Act Release No. 49532 (April 7, 
2004), 69 FR 19593 (April 13, 2004) (SR-PCX-2004-01) (approving 
generic listing standards for Index-Linked Exchangeable Notes).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that NASDAQ's proposal contains adequate rules 
and procedures to govern the listing and trading of Index-Linked 
Exchangeable Notes pursuant to Rule 19b-4(e). Index-Linked Exchangeable 
Notes listed under the standards will be subject to the full panoply of 
NASDAQ rules and procedures that currently govern the trading of equity 
securities on the Exchange including, among others, rules and 
procedures governing trading halts, surveillance procedures, 
disclosures to Members, customer suitability requirements, and Market 
Maker obligations.
    The Commission is satisfied with the Exchange's development of 
specific listing and delisting criteria for Index-Linked Exchangeable 
Notes. As described more fully above, the proposed listing criteria 
include minimum tangible net worth and earnings requirements for 
issuers. These criteria are, in part, intended to ensure that the 
issuer has enough assets to meet its obligations under the terms of the 
note and should help to reduce systematic risk. The proposed listing 
criteria also include minimum holder and distribution requirements, 
which should serve to establish a minimum level of liquidity for each 
series of Index-Linked Exchangeable Notes to allow for maintenance of 
fair and orderly markets.
    The proposed initial listing criteria also contain minimum 
requirements for the indices the Index-Linked Exchangeable Notes can be 
linked to, and the underlying components of those indices. The 
Exchange's proposed requirements for indices underlying Index-Linked 
Exchangeable Notes are linked to other approved criteria for index-
related products. Accordingly, any underlying index would have to 
follow the criteria adopted by the Exchange and already in the 
Exchange's rules for that index, including the criteria for component 
stocks. These requirements will generally contain, among other things, 
minimum market capitalization, trading volume, and concentration 
requirements that are designed to reduce manipulation concerns and 
ensure a minimum level of liquidity for component securities. 
Accordingly, the Commission believes that these criteria should serve 
to ensure that the underlying stocks of underlying indices of Index-
Linked Exchangeable Notes are well capitalized and actively traded, and 
should thus significantly minimize the potential for manipulation.
    The Commission believes that the proposed continued listing 
requirements for Index-Linked Exchangeable Notes are reasonably 
designed to protect investors and the public interest. As further 
discussed above, under the proposed continued listing standards, 
beginning 12 months after the initial issuance of a series of Index-
Linked Exchangeable Notes, NASDAQ would consider suspension of trading 
in or removal of listing of such series if: (i) The series has fewer 
than 50,000 notes issued and outstanding; (ii) the outstanding market 
value of the series held is less than $1,000,000; or (iii) if 
circumstances exist which make further dealings in the securities on 
NASDAQ inadvisable. The Commission

[[Page 19447]]

believes that the continued listing standards will help ensure a 
minimum level of liquidity exists for such securities to allow for the 
maintenance of fair and orderly markets. In addition, the Exchange will 
have flexibility to delist a series if circumstances warrant such 
action.
b. Dissemination of Information
    The proposed rule requires that an estimate of the value of a note 
for each series of Index-Linked Exchangeable Notes will be calculated 
and widely disseminated at least every 15 seconds, and that the value 
of any underlying index will also be publicly disseminated to 
investors, on a real time basis, every 15 seconds.\132\ In addition, 
the Exchange has represented that it may halt trading during the day on 
which an interruption to the dissemination of either of these values 
occurs, and that NASDAQ will halt trading no later than the beginning 
of trading following the trading day when the interruption began if 
such interruption persists at that time.\133\ The Commission believes 
that the proposed rules are reasonably designed to promote the timely 
and fair disclosure of useful information that may be necessary to 
price the Index-Linked Exchangeable Notes appropriately, and to prevent 
trading when a reasonable degree of transparency cannot be assured.
---------------------------------------------------------------------------

    \132\ See supra note 4.
    \133\ See Notice at 6848.
---------------------------------------------------------------------------

c. Surveillance
    The Exchange has represented that trading of the Index-Linked 
Exchangeable Notes on NASDAQ will be subject to FINRA's surveillance 
procedures for derivative products, and that the Exchange's 
surveillance procedures applicable to derivative products are adequate 
to address any concerns about the trading of the Index-Linked 
Exchangeable Notes on NASDAQ.\134\
---------------------------------------------------------------------------

    \134\ See Notice at 6848.
---------------------------------------------------------------------------

d. Additional Provisions
    The Commission notes that the proposed listing criteria requires 
that if the underlying index is maintained by a broker-dealer, the 
index must be calculated by a third party who is not a broker-dealer, 
and the broker-dealer is required to erect firewalls around its 
personnel who have access to information concerning changes in and 
adjustments to the index.\135\ NASDAQ has also represented that it has 
a general policy prohibiting the distribution of material, non-public 
information by its employees.\136\ The Commission believes that such 
firewalls and information barrier policies and procedures are adequate 
to prevent the misuse of material, non-public information regarding 
changes to the underlying index, and to address the unauthorized 
transfer and misuse of material, non-public information.
---------------------------------------------------------------------------

    \135\ See proposed Rule 5711(a)(iv)(which requires that an 
Issuer Index comply with the requirements of NOM Rules, Chapter XIV, 
Section 6(b)(12).
    \136\ See Notice at 6848.
---------------------------------------------------------------------------

    In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Index-Linked Exchangeable Notes, 
the Exchange will inform its Members in an Information Circular of the 
special characteristics and risks associated with trading the Index-
Linked Exchangeable Notes.\137\ The Commission believes that the 
Exchange's proposal should ensure that investors have information that 
will allow them to be adequately apprised of the terms, 
characteristics, and risks of trading the Index-Linked Exchangeable 
Notes.
---------------------------------------------------------------------------

    \137\ See Notice at 6847.
---------------------------------------------------------------------------

    The Commission notes that the proposed generic listing standards 
for Index-Linked Exchangeable Notes are substantively identical to 
those previously approved by the Commission for the listing and trading 
of Index-Linked Exchangeable Notes on NYSE Arca.\138\ As such, the 
Commission believes that the proposed generic listing standards present 
no unique or novel regulatory issues and, for the reasons discussed 
above, are reasonably designed to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \138\ See NYSE Arca Equities Rule 5.2(j)(4).
---------------------------------------------------------------------------

4. Currency Trust Shares
    As discussed above, the Commission has previously approved the 
adoption of generic listing standards for various classes of new 
derivative securities products to be listed and traded pursuant to Rule 
19b-4(e).\139\ In addition, the Commission has previously approved 
generic listing standards for the listing and trading of Currency Trust 
Shares pursuant to Rule 19b-4(e) on NYSE Arca.\140\ The Commission 
believes that proposed generic listing standards for Currency Trust 
Shares should fulfill the intended objective of Rule 19b-4(e) and allow 
securities that satisfy the proposed generic listing standards to 
commence trading without public comment and Commission approval.\141\ 
The Exchange's ability to rely on Rule 19b-4(e) to list and trade 
Currency Trust Shares that meet the applicable requirements and minimum 
standards should reduce the time frame for bringing these securities to 
market and thereby reduce the burdens on issuers and other market 
participants, while also promoting competition and making such 
securities available to investors more quickly. In addition, the 
Commission believes the Exchange's proposal to list and trade Currency 
Trust Shares will provide an additional avenue for investors to achieve 
desired investment objectives through the purchase of currency trust 
shares, and will benefit investors by increasing competition among 
markets that trade currency trust shares.
---------------------------------------------------------------------------

    \139\ See supra note 115.
    \140\ See Securities Exchange Act Release No. 60065 (June 8, 
2009), 74 FR 28310 (June 15, 2009) (SR-NYSEArca-2009-47) (approving 
generic listing standards for Currency Trust Shares under NYSE Arca 
Equities Rule 8.202).
    \141\ The Commission notes that the failure of a particular 
product or index to comply with the proposed generic listing 
standards under Rule 19b-4(e), however, would not preclude the 
Exchange from submitting a separate filing pursuant to Section 
19(b)(2) of the Act, requesting Commission approval to list and 
trade a particular series of Currency Trust Shares. See supra note 
114.
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the proposal contains adequate rules and 
procedures to govern the listing and trading of Currency Trust Shares 
pursuant to Rule 19b-4(e) on the Exchange. The Currency Trust Shares 
listed and traded under the proposed listing standards will be subject 
to the full panoply of NASDAQ rules and procedures that govern the 
trading equity securities on the Exchange including, among others, 
rules and procedures governing trading halts, surveillance procedures, 
disclosures to Members, customer suitability requirements, and Market 
Maker obligations.
    For the Exchange to approve an issue of Currency Trust Shares for 
listing under the generic listing standards, a minimum of 100,000 
Currency Trust Shares must be outstanding at the commencement of 
trading. This requirement should serve to ensure a minimum level of 
liquidity for each series of Currency Trust Shares, to allow for the 
maintenance of fair and orderly markets and reduce the potential for 
manipulation.
    As further discussed above, beginning 12 months after the initial 
issuance of a series of Currency Trust Shares, the Exchange may 
consider suspending trading in, or removing from listing, such series 
if: (i) The trust has more than 60 days remaining until termination and 
there are fewer than 50 record and/or beneficial holders of

[[Page 19448]]

Currency Trust Shares for 30 or more consecutive trading days; (ii) the 
trust has fewer than 50,000 Currency Trust Shares issued and 
outstanding; (iii) the market value of all the Currency Trust Shares 
issued and outstanding is less than $1,000,000; (iv) the Intraday 
Indicative Value of the Currency Trust Shares or the value of the 
underlying currency is no longer calculated or being disseminated on at 
least a 15-second delayed basis; or (iv) if circumstances exist which 
make further dealings in the securities on NASDAQ inadvisable. The 
Commission believes that the proposed continued listing standards are 
adequate to ensure transparency of key values and information regarding 
the Currency Trust Shares, and will help ensure a minimum level of 
liquidity exists for such securities to allow for the maintenance of 
fair and orderly markets. In addition, the Exchange will have 
flexibility to delist a series if circumstances warrant such action.
b. Dissemination of Information
    For Currency Trust Shares to be approved for listing on the 
Exchange, or for trading pursuant to unlisted trading privileges, under 
the generic listing standards, each issue must satisfy the following 
requirements: (i) the value of the underlying non-U.S. currency, 
currencies, or currency index, as the case may be, must be disseminated 
by one or more major market data vendors on at least a 15-second 
delayed basis; and (ii) the Intraday Indicative Value must be 
calculated and widely disseminated by NASDAQ or one or more major 
market data vendors on at least a 15-second basis during the Regular 
Market Session. In addition, if either the Intraday Indicative Value or 
the value of the underlying non-U.S. currency, currencies, or currency 
index, as the case may be, is not being disseminated as required, the 
Exchange may halt trading during the day on which such interruption 
first occurs, and 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. Further, 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 generic listing standards seek to ensure a 
minimum level of transparency with respect to key values of the 
underlying currency assets, and establish events that would trigger a 
trading halt in Currency Trust Shares when the availability of such key 
information related to Currency Trust Shares becomes impaired. The 
Commission believes that the proposed rules are reasonably designed to 
promote the timely and fair disclosure of useful information that may 
be necessary to price the Currency Trust Shares appropriately, and to 
prevent trading when a reasonable degree of transparency cannot be 
assured.
c. Surveillance
    For an issue of Currency Trust Shares to be approved for listing or 
trading pursuant to unlisted trading provision under the generic 
listing standards, NASDAQ must implement written surveillance 
procedures applicable to Currency Trust Shares. The Exchange has 
represented that trading of Currency Trust Shares on NASDAQ will be 
subject to FINRA's surveillance procedures for derivative products, and 
that the Exchange's surveillance procedures applicable to derivative 
products are adequate to address any concerns about the trading of the 
Currency Trust Shares on NASDAQ.\142\
---------------------------------------------------------------------------

    \142\ See Notice at 6848.
---------------------------------------------------------------------------

d. Other Provisions
    NASDAQ has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. In 
addition, Currency Trust Shares approved for listing and trading, or 
trading pursuant to unlisted trading privileges, pursuant to the 
generic listing standards will be subject to certain firewall 
requirements. These requirements provide 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 shall erect a 
``firewall'' around the personnel responsible for the maintenance of 
the underlying 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. Furthermore, 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. The Commission believes 
that the proposed ``firewall'' restrictions applicable to Currency 
Trust Shares are designed to prevent the use and dissemination of 
material, non-public information regarding an underlying index and 
prevent conflicts of interest with respect to personnel of a broker-
dealer maintaining an index underlying such securities. NASDAQ has also 
represented that it has a general policy prohibiting the distribution 
of material, non-public information by its employees.\143\
---------------------------------------------------------------------------

    \143\ See Notice at 6848.
---------------------------------------------------------------------------

    The proposed rules contain additional reporting requirements, 
trading restrictions and books and records obligations on Members 
acting as registered Market Makers in Currency Trust Shares. The 
Commission believes that such restrictions, reporting and recordkeeping 
requirements are reasonably designed to promote a fair and orderly 
market for Currency Trust Shares and will assist the Exchange in 
identifying situations potentially susceptible to manipulation.
    The proposed rules prescribe prospectus delivery requirements for 
purchasers of each newly issued series of Currency Trust Shares. 
Further, the Exchange has represented that prior to the commencement of 
trading in a series of Currency Trust Shares, the Exchange will inform 
its Members in an Information Circular of the special characteristics 
and risks associated with trading the Additional Linked 
Securities.\144\ The Commission believes that the Exchange's proposal 
should ensure that investors have information that will allow them to 
be adequately apprised of the terms, characteristics, and risks of 
trading the Currency Trust Shares.
---------------------------------------------------------------------------

    \144\ See Notice at 6847.
---------------------------------------------------------------------------

    The Commission notes that the proposed generic listing standards 
for Currency Trust Shares are substantively identical to those 
previously approved by the Commission for the listing and trading of 
Currency Trust Shares on NYSE Arca.\145\ As such, the Commission 
believes that the proposed generic listing standards present no unique 
or novel regulatory issues and, for the reasons discussed above, are 
reasonably designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \145\ See NYSE Arca Equities Rule 8.202.
---------------------------------------------------------------------------

B. Non-Generic Listing Standards

    The Exchange is proposing to adopt non-generic listing standards 
for Trust Certificates, Equity Gold Shares, Commodity-Based Trust 
Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, Trust Units, Managed

[[Page 19449]]

Trust Securities, and Currency Warrants. NASDAQ would be required to 
file a separate proposed rule change pursuant to Section 19(b) of the 
Act for each series of such securities NASDAQ seeks to list and/or 
trade on the Exchange.
1. Trust Certificates
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Trust Certificates are 
consistent with the Act. The Commission believes the Exchange's 
proposal to list and trade Trust Certificates will benefit investors by 
increasing competition among markets that trade Trust Certificates. The 
Commission notes that it has previously approved the adoption of 
listing standards for Trust Certificates on NYSE Arca.\146\
---------------------------------------------------------------------------

    \146\ See Securities Exchange Act Release No. 59051 (December 4, 
2008), 73 FR 75155 (December 10, 2008) (SR-NYSEArca-2008-123) 
(approving listing standards for Trust Certificates).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that NASDAQ's proposal contains adequate rules 
and procedures to govern the listing and trading of Trust Certificates. 
Prior to listing and/or trading on the Exchange, NASDAQ must file a 
separate proposed rule change pursuant to Section 19(b) of the Act for 
each series of Trust Certificates. All such Trust Certificates listed 
and/or traded under proposed Rule 5711(c) will be subject to the full 
panoply of NASDAQ rules and procedures that currently govern the 
trading of equity securities on the Exchange including, among others, 
rules and procedures governing trading halts, surveillance procedures, 
disclosures to Members, customer suitability requirements, and Market 
Maker obligations.
    The Commission believes that the proposed criteria under proposed 
Rule 5711(c) and in particular, the continued listing requirements 
under proposed Commentary .01 thereto, are reasonably designed to 
protect investors and the public interest. Specifically, the Exchange 
must commence delisting or removal proceedings with respect to an issue 
of Trust Certificates if: (i) The aggregate market value or the 
principal amount publicly held is less than $400,000; (ii) the value of 
the index or composite value of the indexes is no longer calculated or 
widely disseminated as required; or (iii) such other event shall occur 
or condition exists which, in the opinion of the Exchange, makes 
further dealings in Trust Certificates on the Exchange inadvisable. The 
Commission believes that the proposed continued listing standards are 
adequate to ensure transparency of key values and information regarding 
the Trust Certificates, and will help ensure a minimum level of 
liquidity exists for such securities to allow for the maintenance of 
fair and orderly markets. In addition, the Exchange will have 
flexibility to delist a series if circumstances warrant such action.
b. Dissemination of Information
    The Exchange has represented that it may halt trading during the 
day on which an interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying index or assets occurs, 
and that NASDAQ will halt trading no later than the beginning of 
trading following the trading day when the interruption began if such 
interruption persists at that time.\147\ In addition, the Exchange has 
represented that if it becomes aware that the net asset value 
applicable to a series of Trust Certificates 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.\148\ The Commission believes that the proposal is 
reasonably designed to promote the timely and fair disclosure of useful 
information that may be necessary to price the Trust Certificates 
appropriately, and to prevent trading when a reasonable degree of 
transparency cannot be assured.
---------------------------------------------------------------------------

    \147\ See Notice at 6848.
    \148\ See Notice at 6848-6849.
---------------------------------------------------------------------------

c. Surveillance
    Pursuant to the proposed rules, NASDAQ will implement written 
surveillance procedures applicable to Trust Certificates. The Exchange 
has represented that trading of Trust Certificates on NASDAQ will be 
subject to FINRA's surveillance procedures for derivative products, and 
that the Exchange's surveillance procedures applicable to derivative 
products are adequate to address any concerns about the trading of the 
Trust Certificates on NASDAQ.\149\
---------------------------------------------------------------------------

    \149\ See Notice at 6848.
---------------------------------------------------------------------------

d. Other Provisions
    NASDAQ has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\150\ 
In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Trust Certificates, the Exchange 
will inform its Members in an Information Circular of the special 
characteristics and risks associated with trading the Trust 
Certificates.\151\
---------------------------------------------------------------------------

    \150\ See Notice at 6848.
    \151\ See Notice at 6847.
---------------------------------------------------------------------------

    The Commission notes that NASDAQ's proposed listing standards for 
Trust Certificates are substantively identical to the listing standards 
for Trust Certificates on NYSE Arca.\152\ As such, the Commission 
believes that the proposed listing standards present no unique or novel 
regulatory issues and, for the reasons discussed above, are reasonably 
designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \152\ See NYSE Arca Equities Rule 5.2(j)(7).
---------------------------------------------------------------------------

2. Commodity-Based Trust Shares, Equity Gold Shares, Commodity Index 
Trust Shares, Commodity Futures Trust Shares, Partnership Units, and 
Trust Units
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units are consistent with 
the Act. The Commission believes the Exchange's proposal to list and 
trade Commodity-Based Trust Shares, Equity Gold Shares, Commodity Index 
Trust Shares, Commodity Futures Trust Shares, Partnership Units, and 
Trust Units will benefit investors by increasing competition among 
markets that trade such products. The Commission notes that it has 
previously approved the adoption of listing standards for Commodity-
Based Trust Shares, Equity Gold Shares, Commodity Index Trust Shares, 
Commodity Futures Trust Shares, Partnership Units, and Trust Units on 
NYSE Arca.\153\
---------------------------------------------------------------------------

    \153\ See Securities Exchange Act Release Nos. 51067 (January 
21, 2005), 70 FR 3952 (January 27, 2005) (SR-PCX-2004-132) 
(approving listing standards for Commodity-Based Trust Shares); 
51245 (February 23, 2005), 70 FR 10731 (March 4, 2005) (SR-PCX-2004-
117) (approving the trading of Equity Gold Shares); 53253 (February 
8, 2006), 71 FR 8029 (February 15, 2006) (SR-PCX-2005-123) 
(approving listing standards for Currency Trust Shares); 54025 (June 
21, 2006), 71 FR 36856 (June 28, 2006) (SR-NYSEArca-2006-12) 
(approving listing standards for Commodity-Indexed Trust Shares); 
57838 (May 20, 2008), 73 FR 30649 (May 28, 2008) (SR-NYSEArca-2008-
09); 53875 (May 25, 2006), 71 FR 32164 (June 2, 2006) (SR-NYSEArca-
2006-11) (approving listing standards for Partnership Shares); and 
57059 (December 28, 2007), 73 FR 909 January 4, 2008) (SR-NYSEArca-
2006-76) (approving listing standards for Trust Units).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the

[[Page 19450]]

listing and trading of Commodity-Based Trust Shares, Equity Gold 
Shares,\154\ Commodity Index Trust Shares, Commodity Futures Trust 
Shares, Partnership Units, and Trust Units on the Exchange. Prior to 
listing and/or trading on the Exchange, NASDAQ must file a separate 
proposed rule change pursuant to Section 19(b) of the Act for each 
series of Commodity-Based Trust Shares, Equity Gold Shares, Commodity 
Index Trust Shares, Commodity Futures Trust Shares, Partnership Units, 
Trust Units and Managed Trust Shares. All such securities listed and/or 
traded will be subject to the full panoply of NASDAQ's rules and 
procedures that currently govern the trading of equity securities on 
the Exchange including, among others, rules and procedures governing 
trading halts, surveillance procedures, disclosures to Members, 
customer suitability requirements, and Market Maker obligations. For 
the initial listing of each series of Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units, the Exchange must 
establish a minimum number of such securities required to be 
outstanding at the commencement of trading on the Exchange. In 
addition, for the initial listing of Trust Units, NASDAQ must obtain a 
representation from the issuer of a 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.
---------------------------------------------------------------------------

    \154\ The proposed listing rules for Equity Gold Shares provide 
that the provisions set forth in proposed Rule 5711(d) (Commodity-
Based Trust Shares) will apply to Equity Gold Shares. Thus, all of 
the listing requirements applicable to Commodity-Based Trust Shares 
will also apply to Equity Gold Shares.
---------------------------------------------------------------------------

    As further discussed above, the Exchange may consider suspending 
trading in, or removing from listing, a series of Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index Trust Shares, Commodity 
Futures Trust Shares, Partnership Units, or Trust Units if there are 
fewer than 50 record and/or or beneficial holders of such series for 30 
or more consecutive trading days. In addition, with respect to 
Commodity-Based Trust Shares, Equity Gold Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units, the Exchange may 
consider suspending trading in, or removing from listing, a series if 
there are fewer than 50,000 such securities issued and outstanding or 
if the market value of all such securities issued and outstanding is 
less than $1,000,000. The Exchange may also consider suspending trading 
in, or removing from listing, a series of Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, or Partnership Units if the value of the underlying 
benchmark is no longer calculated or available on at least a 15-second 
delayed basis from an unaffiliated source, or the Intraday Indicative 
Value is no longer made available on at least a 15-second delayed 
basis. In the case of Commodity Index Trust Shares and Commodity 
Futures Trust Shares, the Exchange may further consider suspending 
trading in, or removing from listing, a series if the net asset value 
for such series is no longer disseminated to all market participants at 
the same time. Finally, the Exchange may consider suspending trading 
in, or removing from listing, such securities if such other event shall 
occur or condition exists which in the opinion of NASDAQ makes further 
dealings on NASDAQ inadvisable.
    The Commission believes that the proposed initial and continued 
listing standards are adequate to ensure transparency of key values and 
information regarding the Commodity-Based Trust Shares, Equity Gold 
Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, and Trust Units, and will help ensure a minimum 
level of liquidity exists for such securities to minimize the potential 
for manipulation and allow for the maintenance of fair and orderly 
markets. In addition, the Exchange will have flexibility to delist a 
series if circumstances warrant such action.
b. Dissemination of Information
    The Exchange has represented that it may halt trading during the 
day on which an interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying index or assets occurs, 
and that NASDAQ will halt trading no later than the beginning of 
trading following the trading day when the interruption began if such 
interruption persists at that time.\155\ In addition, the Exchange has 
represented that if it becomes aware that the net asset value 
applicable to a series of Commodity-Based Trust Shares, Equity Gold 
Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, or Trust Units 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.\156\ The Commission believes that the proposal is 
reasonably designed to promote the timely and fair disclosure of useful 
information that may be necessary to price the Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index Trust Shares, Commodity 
Futures Trust Shares, Partnership Units, and Trust Units appropriately, 
to prevent trading when a reasonable degree of transparency cannot be 
assured, and to maintain a fair and orderly market for such securities.
---------------------------------------------------------------------------

    \155\ See Notice at 6848. A similar requirement is contained in 
the proposed rules relating to Currency Trust Shares, Commodity 
Futures Trust Shares and Trust Units.
    \156\ See Notice at 6848-6849. A similar requirement is 
contained in the proposed rules relating to Currency Trust Shares, 
Commodity Futures Trust Shares and Trust Units.
---------------------------------------------------------------------------

c. Surveillance
    The Exchange has represented that trading of Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index Trust Shares, Commodity 
Futures Trust Shares, Partnership Units, and Trust Units on NASDAQ will 
be subject to FINRA's surveillance procedures for derivative products, 
and that the Exchange's surveillance procedures applicable to 
derivative products are adequate to address any concerns about the 
trading of the Trust Certificates on NASDAQ.\157\ In addition, the 
proposed rules require NASDAQ to implement written surveillance 
procedures for Commodity Futures Trust Shares.
---------------------------------------------------------------------------

    \157\ See Notice at 6848.
---------------------------------------------------------------------------

d. Other Provisions
    The proposed rules impose additional reporting requirements, 
trading restrictions and books and records obligations on Members 
acting as registered Market Makers in Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units. The Commission 
believes that such restrictions, reporting and record-keeping 
requirements are reasonably designed to promote a fair and orderly 
market for Commodity-Based Trust Shares, Equity Gold Shares, Commodity 
Index Trust Shares, Commodity Futures Trust Shares, Partnership Units, 
and Trust Units, and will assist the Exchange in identifying situations 
potentially susceptible to manipulation.
    NASDAQ has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. In 
addition, the proposed rules prescribe prospectus delivery requirements 
for purchasers of each newly issued series of Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index

[[Page 19451]]

Trust Shares, Commodity Futures Trust Shares, Partnership Units and 
Trust Units. Further, the Exchange has represented that prior to the 
commencement of trading in a series of Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units, the Exchange will 
inform its Members in an Information Circular of the special 
characteristics and risks associated with trading such securities.\158\
---------------------------------------------------------------------------

    \158\ See Notice at 6847.
---------------------------------------------------------------------------

    The Commission notes that NASDAQ's proposed listing standards for 
Commodity-Based Trust Shares, Equity Gold Shares, Commodity Index Trust 
Shares, Commodity Futures Trust Shares, Partnership Units, and Trust 
Units are substantively identical to the listing standards for such 
securities on NYSE Arca.\159\ As such, the Commission believes that the 
proposed listing standards for these securities present no unique or 
novel regulatory issues and, for the reasons discussed above, are 
reasonably designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \159\ See NYSE Arca Equities Rules 8.201 (Commodity-Based Trust 
Shares), 5.2(j)(5) (Equity Gold Shares), 8.202 (Currency Trust 
Shares), 8.203 (Commodity Index Trust Shares), 8.204 (Commodity 
Futures Trust Shares), 8.300 (Partnership Units), and 8.500 (Trust 
Units).
---------------------------------------------------------------------------

3. Managed Trust Securities
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Managed Trust Securities are 
consistent with the Act. The Commission believes the Exchange's 
proposal to list and trade Managed Trust Securities will benefit 
investors by increasing competition among markets that trade Managed 
Trust Securities. The Commission notes that it has previously approved 
the adoption of listing standards for Managed Trust Securities on NYSE 
Arca.\160\
---------------------------------------------------------------------------

    \160\ See Securities Exchange Act Release No. 60064 (June 8, 
2009), 74 FR 113 (June 15, 2009) (SR-NYSEArca-2009-30) (approving 
listing standards for Managed Trust Securities).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that NASDAQ's proposal contains adequate rules 
and procedures to govern the listing and trading of Managed Trust 
Securities. Prior to listing and/or trading on the Exchange, NASDAQ 
must file a separate proposed rule change pursuant to Section 19(b) of 
the Act for each series of Managed Trust Securities. All Managed Trust 
Securities listed and/or traded on NASDAQ will be subject to the full 
panoply of NASDAQ rules and procedures that currently govern the 
trading of equity securities on the Exchange including, among others, 
rules and procedures governing trading halts, surveillance procedures, 
disclosures to Members, customer suitability requirements, and Market 
Maker obligations. For the initial listing of each series of Managed 
Trust Securities, the Exchange must establish a minimum number of 
Managed Trust Securities required to be outstanding at the commencement 
of trading. In addition, the Exchange must obtain a representation from 
the issuer of Managed Trust Securities that the NAV per share will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.
    For continued listing of each series of Managed Trust Securities, 
the Intraday Indicative Value must be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
time when the Managed Trust Securities trade on the Exchange. Further, 
the Disclosed Portfolio must be disseminated at least once daily and 
made available to all market participants at the same time. The 
Exchange may also consider the suspension of trading in, or removal 
from listing of, a series of Managed Trust Securities if: (i) Following 
the initial twelve-month period after commencement of trading on the 
Exchange of a series of Managed Trust Securities, (A) the trust has 
fewer than 50,000 securities issued and outstanding, (B) the market 
value of all securities issued and outstanding is less than $1,000,000, 
or there are fewer than 50 beneficial holders of such series for 30 or 
more consecutive trading days; (ii) the Intraday Indicative Value is no 
longer calculated or available or the Disclosed Portfolio is not made 
available to all market participants at the same time; (iii) the trust 
has failed to file any filings required by the Commission or if the 
Exchange becomes aware that the trust is not in compliance with the 
conditions of any exemptive order or no-action relief granted by the 
Commission to the trust with respect to the series of Managed Trust 
Securities; or (iv) such other event shall occur or condition exists 
which in the opinion of the Exchange makes further dealings on the 
Exchange inadvisable.
    The Commission believes that the proposed initial and continued 
listing and trading standards for Managed Trust Securities are adequate 
to ensure transparency of key values and information regarding the 
securities, and will help ensure a minimum level of liquidity exists 
for such securities to allow for the maintenance of fair and orderly 
markets. In addition, the Exchange will have flexibility to delist a 
series if circumstances warrant such action.
b. Dissemination of Information
    The Commission finds that the Exchange's proposed rules with 
respect to trading halts should help ensure the availability of key 
values and information relating to Managed Trust Securities and to 
prevent trading when a reasonable degree of transparency cannot be 
assured. Under the proposal, if the Intraday Indicative Value 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 of such value persists 
past the trading day in which it occurred, the Exchange must halt 
trading no later than the beginning of the trading day following the 
interruption.\161\ In addition, if the Exchange becomes aware that the 
NAV or Disclosed Portfolio related to a series of Managed Trust 
Securities is not being disseminated to all market participants at the 
same time, the Exchange will halt trading in such series of Managed 
Trust Securities until such time as the NAV or the Disclosed Portfolio 
is available to all market participants.
---------------------------------------------------------------------------

    \161\ 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 NASDAQ Rules 4120(a) or 
(b), as applicable. See NASDAQ Rule 4120 (setting forth rules 
regarding trading halts for certain derivative securities products).
---------------------------------------------------------------------------

c. Surveillance
    Pursuant to the proposed rules, NASDAQ will implement written 
surveillance procedures applicable to Managed Trust Securities. The 
Exchange has represented that trading of Managed Trust Securities on 
NASDAQ will be subject to FINRA's surveillance procedures for 
derivative products, and that the Exchange's surveillance procedures 
applicable to derivative products are adequate to address any concerns 
about the trading of the Managed Trust Securities on NASDAQ.\162\
---------------------------------------------------------------------------

    \162\ See Notice at 6848.
---------------------------------------------------------------------------

d. Other Provisions
    NASDAQ has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\163\ 
In addition, the proposed rules require that: (i) If the trust's 
advisor is affiliated with a broker-dealer, the broker-dealer

[[Page 19452]]

must erect a ``firewall'' around the personnel who have access to 
information concerning changes and adjustments to the Disclosed 
Portfolio; (ii) 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; and (iii) the Reporting Authority that 
provides the Disclosed Portfolio 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. The Commission believes that the proposed ``firewall'' 
restrictions applicable to Managed Trust Securities are reasonably 
designed to prevent the use and dissemination of material, non-public 
information regarding the Disclosed Portfolio, prevent conflicts of 
interest with respect to personnel of a broker-dealer maintaining the 
Disclosed Portfolio and to promote fair and orderly markets.
---------------------------------------------------------------------------

    \163\ See Notice at 6848.
---------------------------------------------------------------------------

    The proposed rules prescribe prospectus delivery requirements for 
purchasers of each newly issued series of Managed Trust Securities. In 
addition, the Exchange has represented that prior to the commencement 
of trading in a series of Managed Trust Securities, the Exchange will 
inform its Members in an Information Circular of the special 
characteristics and risks associated with trading the Managed Trust 
Securities.\164\
---------------------------------------------------------------------------

    \164\ See Notice at 6847.
---------------------------------------------------------------------------

    The proposed rules impose additional reporting requirements, 
trading restrictions and books and records obligations on registered 
Market Makers in Managed Trust Securities. The Commission believes that 
such restrictions, reporting and record-keeping requirements are 
reasonably designed to promote a fair and orderly market for Managed 
Trust Securities, and will assist the Exchange in identifying 
situations potentially susceptible to manipulation.
    The Commission notes that NASDAQ's proposed listing standards for 
Managed Trust Securities are substantively identical to the listing 
standards for Managed Trust Securities on NYSE Arca.\165\ As such, the 
Commission believes that the proposed listing standards present no 
unique or novel regulatory issues and, for the reasons discussed above, 
are reasonably designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \165\ See NYSE Arca Equities Rule 8.700.
---------------------------------------------------------------------------

4. Currency Warrants
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Currency Warrants are 
consistent with the Act. The Commission believes the Exchange's 
proposal to list and trade Currency Warrants will benefit investors by 
increasing competition among markets that trade Currency Warrants. The 
Commission notes that it has approved the adoption of listing standards 
and related rules for Currency Warrants on the New York Stock Exchange 
(``NYSE'') and NYSE Arca.\166\
---------------------------------------------------------------------------

    \166\ See Securities Exchange Act Release No. 34-36165 (Aug. 29, 
1995), 60 FR 46653 (Sept. 7, 1995) (SR-NYSE-94-41) (approving the 
listing and trading of currency warrants on the NYSE). See also 
Securities Exchange Act Release No. 59886 (May 7, 2009), 74 FR 22779 
(May 14, 2009) (SR-NYSEArca-2009-39) (amending NYSE Arca Equities 
Rule 8.3 (Listing of Currency and Index Warrants)).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that NASDAQ's proposal contains adequate rules 
and procedures to govern the listing and trading of Currency Warrants. 
Prior to listing and/or trading on the Exchange, NASDAQ must file a 
separate proposed rule change pursuant to Section 19(b) of the Act for 
each series of Currency Warrants, and the listing of Currency Warrants 
will be considered on a case-by-case basis. The Exchange has 
represented that Currency Warrants are deemed to be equity securities, 
thus rendering trading in Currency Warrants subject to the Exchange's 
existing rules governing the trading of equity securities.\167\
---------------------------------------------------------------------------

    \167\ See Notice at 6848.
---------------------------------------------------------------------------

    The Commission is satisfied with the Exchange's development of 
specific listing criteria for Currency Warrants. As described more 
fully above, the proposed listing criteria include minimum tangible net 
worth and earnings requirements for issuers. These criteria are, in 
part, intended to ensure that the issuer has enough assets to meet its 
obligations under the terms of the warrant and should help to reduce 
systematic risk. The proposed listing criteria also include minimum 
holder, distribution and market value requirements, which should serve 
to establish a minimum level of liquidity for each series of Currency 
Warrants to allow for maintenance of fair and orderly markets.
b. Dissemination of Information
    The proposed rules provide that trading on NASDAQ in any Currency 
Warrant shall be halted whenever NASDAQ deems such action appropriate 
in the interests of a fair and orderly market or to protect investors. 
Trading in Currency Warrants that have been the subject of a halt or 
suspension by NASDAQ may resume if NASDAQ determines that the 
conditions which led to the halt or suspension are no longer present, 
or that the interests of a fair and orderly market are best served by a 
resumption of trading. In addition, the Exchange has represented that 
it may halt trading in a series of Currency Warrants during the day on 
which an interruption to the dissemination of the Intraday Indicative 
Value or the value of the underlying currency occurs, and that NASDAQ 
will halt trading no later than the beginning of trading following the 
trading day when the interruption began if such interruption persists 
at that time.\168\ The Commission believes that the proposal is 
reasonably designed to promote the timely and fair disclosure of useful 
information that may be necessary to price the Currency Warrants 
appropriately, and to prevent trading when a reasonable degree of 
transparency cannot be assured.
---------------------------------------------------------------------------

    \168\ See Notice at 6848.
---------------------------------------------------------------------------

c. Surveillance
    The Exchange has represented that trading of Currency Warrants on 
NASDAQ will be subject to FINRA's surveillance procedures for 
derivative products, and that the Exchange's surveillance procedures 
applicable to derivative products are adequate to address any concerns 
about the trading of the Currency Warrants on NASDAQ.\169\
---------------------------------------------------------------------------

    \169\ See Notice at 6848.
---------------------------------------------------------------------------

d. Other Provisions
    Due to their derivative and leveraged nature, and the fact that 
they are a wasting asset, many of the risks of trading in warrants are 
similar to the risks of trading standardized options. Accordingly, the 
Exchange has proposed to apply its options customer protection rules to 
Currency Warrants. In particular, the Commission notes that Currency 
Warrants will only be sold to options-approved accounts in accordance 
with NOM Rules, Chapter XI, Section 7. In addition, the Exchange will 
apply the options rules for suitability, discretionary accounts, 
supervision of accounts and public customer complaints to transactions 
in Currency Warrants, and that Members participating in Currency 
Warrants shall be bound to comply with the Communications and 
Disclosures rule of FINRA.
    The proposed rules establish reporting requirements for Members 
holding large positions in Currency

[[Page 19453]]

Warrants. The Commission believes that such reporting requirements are 
reasonably designed to promote a fair and orderly market for Currency 
Warrants, and will assist the Exchange in identifying situations 
potentially susceptible to manipulation.
    NASDAQ has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\170\ 
In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Currency Warrants, the Exchange 
will inform its Members in an Information Circular of the special 
characteristics and risks associated with trading the Currency 
Warrants.\171\
---------------------------------------------------------------------------

    \170\ See Notice at 6848.
    \171\ See Notice at 6847.
---------------------------------------------------------------------------

    The Commission notes that NASDAQ's proposed listing standards and 
regulatory requirements relating to Currency Warrants are substantively 
identical to the listing standards and regulatory requirements for 
Currency Warrants listed and traded on NYSE Arca.\172\ As such, the 
Commission believes that the proposed listing standards present no 
unique or novel regulatory issues and, for the reasons discussed above, 
are reasonably designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \172\ See NYSE Arca Equities Rules 8.3 (Listing of Currency and 
Index Warrants), 8.4 (Account Approval), 8.5 (Suitability), 8.6 
(Discretionary Accounts), 8.7 (Supervision of Accounts), 8.8 
(Customer Complaints), 8.9 (Prior Approval of Certain Communications 
to Customers), 8.12 (Trading Halts or Suspensions), and 8.13 
(Reporting of Warrant Positions).
---------------------------------------------------------------------------

C. Additional Representations

    As discussed above, the Exchange has represented that the Subject 
Securities are deemed to be equity securities, thus rendering trading 
in the Subject Securities subject to the Exchange's existing rules 
governing the trading of equity securities. In support of this 
proposal, the Exchange has made representations, including:
    (1) The Exchange has appropriate rules to facilitate transactions 
in the Subject Securities during all trading sessions.
    (2) The Exchange's surveillance procedures applicable to derivative 
products are adequate to address any concerns about the trading of the 
Subject Securities on NASDAQ. The Exchange may obtain information via 
the ISG from other exchanges who are members or affiliates of the ISG.
    (3) The Exchange has a general policy prohibiting the distribution 
of material, non-public information by its employees.
    (4) To the extent a Subject Security holds investments 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.
    (5) 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 Subject Securities. Specifically, 
the Information Circular will discuss the following: (a) The risks 
involved in trading the Subject Securities during the Opening Process 
and Post-Market Sessions when an updated Intraday Indicative Value will 
not be calculated or publicly disseminated and, if applicable, the 
risks involved in trading the Subject Securities during the Regular 
Market Session when the Intraday Indicative Value may be static or 
based in part on the fluctuation of currency exchange rates when the 
underlying markets have closed prior to the close of NASDAQ's Regular 
Market Session; (b) the procedures for purchases and redemptions of the 
Subject Securities (and/or that the Subject Securities are not 
individually redeemable); (c) NASDAQ Rule 2310, which imposes 
suitability obligations on Members with respect to recommending 
transactions in the securities to customers; (d) how information 
regarding the Intraday Indicative Value is disseminated; (e) the 
requirement that Members deliver a prospectus to investors purchasing 
newly issued Subject Securities prior to or concurrently with the 
confirmation of a transaction; and (f) trading information.
    (6) NASDAQ may consider all relevant factors in exercising its 
discretion to halt or suspend trading in the Subject Securities. 
Trading in the Subject Securities may be halted because of market 
conditions or for reasons that, in the view of NASDAQ, make trading in 
the securities inadvisable. These may include: (a) The extent to which 
trading in the underlying asset or assets is not occurring; or (b) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.\173\
---------------------------------------------------------------------------

    \173\ In addition, trading in the Subject Securities will be 
subject to trading halts caused by extraordinary market volatility 
pursuant to NASDAQ's ``circuit breaker'' Rule 4120(a)(11) or by the 
halt or suspension of the trading of the current underlying asset or 
assets. If the applicable Intraday Indicative Value, value of the 
underlying index, or the value of the underlying asset or assets 
(e.g., securities, commodities, currencies, futures contracts, or 
other assets) is not being disseminated as required, NASDAQ may halt 
trading during the day in which such interruption to the 
dissemination occurs. If the interruption to the dissemination of 
the applicable Intraday Indicative Value, value of the underlying 
index, or the value of the underlying asset or assets persists past 
the trading day in which it occurred, NASDAQ will halt trading no 
later than the beginning of the trading day following the 
interruption. In addition, if NASDAQ becomes aware that the net 
asset value with respect to a series of the Subject 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.
---------------------------------------------------------------------------

    (7) Prior to the commencement of trading of any inverse, leveraged, 
or inverse leveraged Subject Securities, NASDAQ will inform its Members 
of the suitability requirements of NASDAQ Rule 2310 in the Information 
Circular.\174\ The Information Circular will also reference, among 
other things, the FINRA Regulatory Notices regarding sales practice and 
customer margin requirements for FINRA members applicable to leveraged 
exchange-traded products and options thereon. Members that carry 
customer accounts will be required to follow the FINRA guidance set 
forth in the FINRA Regulatory Notices.
---------------------------------------------------------------------------

    \174\ Specifically, Members will be reminded in the Information 
Circular that, in recommending transactions in these securities, 
they must have a reasonable basis to believe that (1) the 
recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's investment objectives, financial 
situation, needs, and any other information known by such Member, 
and (2) the customer can evaluate the special characteristics, and 
is able to bear the financial risks, of an investment in the 
securities. In connection with the suitability obligation, the 
Information Circular will also provide that Members must make 
reasonable efforts to obtain the following information: (1) the 
customer's financial status; (2) the customer's tax status; (3) the 
customer's investment objectives; and (4) such other information 
used or considered to be reasonable by such Member or registered 
representative in making recommendations to the customer.

This approval order is based on all of the Exchange's representations. 
The Commission again notes that the proposed listing standards for the 
Subject Securities are substantively identical to previously approved 
listing standards for the corresponding products on NYSE Arca.\175\
---------------------------------------------------------------------------

    \175\ See supra notes 109, 116, 129, 138, 145, 152, 159, 165, 
and 172.

    The Commission believes that the proposal should help to facilitate 
the listing and trading of additional types of exchange-traded products 
that should enhance competition among market participants, to the 
benefit of investors and the marketplace. In addition, the Commission 
believes that the listing and trading criteria for the Subject 
Securities

[[Page 19454]]

set forth in amended Rule 5710 and proposed Rule 5711 are reasonably 
designed to protect investors and the public interest, as discussed 
herein. For the foregoing reasons, the Commission finds that the 
proposed rule change, as amended, is consistent with the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange, and, in particular, with Section 6(b)(5) of the Act.\176\
---------------------------------------------------------------------------

    \176\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\177\ that the proposed rule change (SR-NASDAQ-2012-013), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \177\ 15 U.S.C. 78s(b)(2).
    \178\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\178\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-7516 Filed 3-29-12; 8:45 am]
BILLING CODE 8011-01-P