19428 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 

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

2 17 CFR 240.19b–4. 

3See 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 IndexLinked Exchangeable Notes in order to conform its 

proposal with the listing requirements for IndexLinked 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. 

5NASDAQ 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. 

6See proposed Rules 5710(k)(iii)–(v). 

7See introductory paragraphs to Rule 5710, as 

proposed to be amended. 

8See proposed Rule 5710(h) (formerly Rule 

5710(j)). 

9See proposed Commentary .01 to Rule 5710. 

10The Exchange has proposed to adopt generic 

listing standards for Linked Securities and IndexLinked Exchangeable Notes, both generic and nongeneric listing standards for Currency Trust Shares, 

and non-generic listing standards for all other 

Subject Securities. 

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. 

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 IndexLinked Securities and CommodityLinked 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; CommodityBased 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. 

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 IndexLinked Securities, Futures-Linked 

Securities, and Multifactor IndexLinked 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: 

• 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’’). 

• The payment at maturity with 

respect to Futures-Linked Securities is 

based on the performance of an index of 

(a) futures on Treasury Securities, GSE 

Securities, supranational debt and debt 

of a foreign country or a subdivision 

thereof, or options or other derivatives 

on any of the foregoing; or (b) interest 

rate futures or options or derivatives on 

the foregoing in this subparagraph (b); 

or (c) CBOE Volatility Index (VIX) 

Futures (‘‘Futures Reference Asset’’). 

• The payment at maturity with 

respect to Multifactor Index-Linked 

Securities is based on the performance 

of any combination of two or more 

Equity Reference Assets, Commodity 

Reference Assets, Fixed Income 

Reference Assets or Futures Reference 

Assets (‘‘Multifactor Reference Asset,’’ 

and together with Equity Reference 

Assets, Commodity Reference Assets, 

Fixed Income Reference Assets and 

Futures Reference Assets, ‘‘Reference 

Assets’’). A Multifactor Reference Asset 

may include as a component a notional 

investment in cash or a cash equivalent 

based on a widely accepted overnight 


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Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 19429 

11Rules 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. 

12See supra note 5. 

13Proposed Rules 5710(g), (i) and (j) provide as 

follows: 

(g) Maintenance and Dissemination—(i) If the 

index is maintained by a broker-dealer, the brokerdealer 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 brokerdealer. (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. 

14See proposed Rule 5710(h) (formerly Rule 

5710(j). 

15Proposed 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. 

16See supra notes 4 and 5. 

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

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). 

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

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

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

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

In addition to the existing obligations 

under NASDAQ rules regarding the 


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

19As discussed above, Rule 5710(g) would be 

deleted and replaced in its entirety by proposed 

Rule 5710(k)(i)(A). 

20Proposed 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. 

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

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

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

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

25Consistent with its proposal to conform the 

continued listing requirements applicable to Equity 

Index-Linked Securities to those of NYSE Arca and 

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. 

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, CommodityLinked 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

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

In connection with an Equity IndexLinked 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

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: 

• If the aggregate market value or the 

principal amount of the Equity IndexLinked Securities publicly held is less 

than $400,000; 

• If the value of the index or 

composite value of the indexes is no 

longer calculated or widely 

disseminated on at least a 15-second 

basis with respect to indexes containing 

only securities listed on a national 

securities exchange, or on at least a 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 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable.23

Finally, the proposed rule provides 

that indexes underlying Equity IndexLinked Securities would be rebalanced 

at least annually.24

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


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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. 26As discussed above, Rule 5710(h) would be 

deleted and replaced in its entirety by proposed 

Rule 5710(k)(ii)(A). 27Proposed 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, CommodityRelated Securities if their underlying Commodities 

are currencies or currency derivatives, or a basket 

or index of any of the foregoing. 

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

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

30Consistent 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. 31See proposed Rule 5710(k)(iii)(B). 

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

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: 

• If the aggregate market value or the 

principal amount of the CommodityLinked Securities publicly held is less 

than $400,000; 

• If the value of the Commodity 

Reference Asset is no longer calculated 

or available and a new Commodity 

Reference Asset is substituted, unless 

the new Commodity Reference Asset 

meets the requirements of the proposed 

rule; or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable.29

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

3. Fixed Income Index-Linked Securities 

Proposed Rule 5710(k)(iii) would 

establish initial and continued listing 

standards for Fixed Income IndexLinked 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: 

• Components of the Fixed Income 

Reference Asset that in the aggregate 

account for at least 75% of the weight 

of the Fixed Income Reference Asset 

must each have a minimum original 

principal amount outstanding of $100 

million or more; 

• A component of the Fixed Income 

Reference Asset may be a convertible 

security; however, once the convertible 

security component converts to the 

underlying equity security, the 

component is removed from the Fixed 

Income Reference Asset; 

• No component of the Fixed Income 

Reference Asset (excluding Treasury 

Securities and GSE Securities) will 

represent more than 30% of the dollar 

weight of the Fixed Income Reference 

Asset, and the five highest dollar 

weighted components in the Fixed 

Income Reference Asset will not in the 

aggregate account for more than 65% of 

the dollar weight of the Fixed Income 

Reference Asset; 

• An underlying Fixed Income 

Reference Asset (excluding one 

consisting entirely of exempted 

securities) must include a minimum of 

13 non-affiliated issuers; and 

• Component securities that in the 

aggregate account for at least 90% of the 

dollar weight of the Fixed Income 

Reference Asset must be from one of the 

following: (a) Issuers that are required to 

file reports pursuant to Sections 13 and 

15(d) of the Act; or (b) issuers that have 

a worldwide market value of 

outstanding common equity held by 

non-affiliates of $700 million or more; 

or (c) issuers that have outstanding 

securities that are notes, bonds, 

debentures, or evidence of indebtedness 

having a total remaining principal 

amount of at least $1 billion; or (d) 

exempted securities as defined in 

Section 3(a)(12) of the Act; or (e) issuers 

that are a government of a foreign 

country or a political subdivision of a 

foreign country. 

In addition, the value of the Fixed 

Income Reference Asset must be widely 

disseminated to the public by one or 

more major market vendors at least once 

per business day.31

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: 

• The aggregate market value or the 

principal amount of the Fixed Income 

Index-Linked Securities publicly held is 

less than $400,000; 

• 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 

• 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 


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32The ‘‘Intraday Indicative Value’’ is an estimate 

of the value of a share of each series of a particular 

security. 

33See proposed Rule 5710(k)(iv)(B). 

34See proposed Rule 5711(a). 

35 17 CFR 240.19b–4(e). 

the issue must meet one of the following 

initial listing standards: 

• The Futures Reference Asset to 

which the security is linked shall have 

been reviewed and approved for the 

trading of Futures-Linked Securities or 

options or other derivatives by the 

Commission under Section 19(b)(2) of 

the Act and rules thereunder and the 

conditions set forth in the Commission’s 

approval order, including with respect 

to comprehensive surveillance sharing 

agreements, continue to be satisfied; or 

• The pricing information for 

components of a Futures Reference 

Asset must be derived from a market 

which is 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: 

• 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 

• 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

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: 

• If the aggregate market value or the 

principal amount of the Futures-Linked 

Securities publicly held is less than 

$400,000; 

• If the value of the Futures Reference 

Asset is no longer calculated or 

available and a new Futures Reference 

Asset is substituted, unless the new 

Futures Reference Asset meets the 

requirements of proposed Rule 5710(k); 

or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable. 

The proposed 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) (‘‘FuturesLinked 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: 

• Each component of the Multifactor 

Reference Asset to which the security is 

linked shall have been reviewed and 

approved for the trading of either 

options, Index Fund Shares, or other 

derivatives under Section 19(b)(2) of the 

Act and rules thereunder and the 

conditions set forth in the Commission’s 

approval order continue to be satisfied; 

or 

• Each Reference Asset included in 

the Multifactor Reference Asset must 

meet the applicable initial and 

continued listing criteria set forth in the 

relevant subsection of proposed Rule 

5710(k). 

In addition, proposed Rule 

5710(k)(v)(B) provides that the issue 

must meet both of the following 

additional initial listing criteria: 

• The value of the Multifactor 

Reference Asset must be calculated and 

widely disseminated to the public on at 

least a 15-second basis during the time 

the Multifactor Index-Linked Security 

trades on NASDAQ; and 

• In the case of Multifactor IndexLinked Securities that are periodically 

redeemable, the 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: 

• Any of the initial listing criteria 

described above are not continuously 

maintained; 

• The aggregate market value or the 

principal amount of the Multifactor 

Index-Linked Securities publicly held is 

less than $400,000; 

• 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 

• 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 IndexLinked 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 IndexLinked Exchangeable Notes. IndexLinked 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

Index-Linked Exchangeable Notes 

would be considered for listing and 

trading by NASDAQ pursuant to Rule 

19b–4(e) under the Act,35 provided: 

• 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 


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

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

38Rule 5405(b) sets forth initial listing standards 

for primary equity securities. 

39See proposed Rule 5711(a)(iii). 

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

41See proposed Rule 5711(a)(v). 

42See 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 IndexLinked Exchangeable Notes. Id. 

43See 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 IndexLinked Exchangeable Notes. Id. 

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

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

46See proposed Rule 5711(b)(ii). 

47See proposed Rule 5711(b)(iii). 

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

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

public distribution and no minimum 

number of holders.36

• The issue has a minimum term of 

one year.37

• 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

• The index to which an IndexLinked 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 ‘‘ThirdParty 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

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

Beginning twelve months after the 

initial issuance of a series of IndexLinked 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: 

• If the series has fewer than 50,000 

notes issued and outstanding; 

• If the market value of all IndexLinked Exchangeable Notes of that 

series issued and outstanding is less 

than $1,000,000; or 

• If such other event shall occur or 

such other condition exists which in the 

opinion of NASDAQ makes further 

dealings of NASDAQ inadvisable.44

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

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

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: 

• An underlying index or indexes of 

equity securities (‘‘Trust Certificate 

Equity Reference Asset’’); 

• Instruments that are direct 

obligations of the issuing company, 

either exercisable throughout their life 

(i.e., American style) or exercisable only 

on their expiration date (i.e., European 

style), entitling the holder to a cash 

settlement in U.S. dollars to the extent 

that the foreign or domestic index has 

declined below (for a put warrant) or 

increased above (for a call warrant) the 

pre-stated cash settlement value of the 

index (‘‘Index Warrants’’); or 

• A combination of two or more Trust 

Certificate Equity Reference Assets or 

Index Warrants.48

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

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: 

• If the aggregate market value or the 

principal amount of the securities 

publicly held is less than $400,000; 

• If the value of the index or 

composite value of the indexes is no 

longer calculated or widely 

disseminated on at least a 15-second 

basis with respect to indexes containing 

only securities listed on a national 

securities exchange, or on at least a 60- 

second basis with respect to indexes 

containing foreign country securities; 

provided, however, that, if the official 

index value does not change during 

some or all of the period when trading 

is occurring on the NASDAQ Stock 


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50Proposed 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). 

51See 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). 

52See proposed Rule 5711(d)(iv). 

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

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

55 Id. 

Market (for example, for indexes of 

foreign country securities, because of 

time zone differences or holidays in the 

countries where such indexes’ 

component stocks trade) then the last 

calculated official index value must 

remain available throughout NASDAQ 

trading hours; or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable. 

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

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 CommodityBased Trust Shares, NASDAQ would 

consider the suspension of trading in or 

removal from listing of such series 

under any of the following 

circumstances: 

• If the trust has more than 60 days 

remaining until termination and there 

are fewer than 50 record and/or 

beneficial holders of Commodity-Based 

Trust Shares for 30 or more consecutive 

trading days; 

• If the trust has fewer than 50,000 

receipts issued and outstanding; 

• If the market value of all receipts 

issued and outstanding is less than 

$1,000,000; 

• 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; 

• If the Intraday Indicative Value is 

no longer made available on at least a 

15-second delayed basis; or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable.54

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

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. 


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56Proposed 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). 

57See proposed Rule 5711(e)(iii). 58See proposed Rule 5711(e)(iv). 59See proposed Rule 5711(e)(v)(A). 60See proposed Rule 5711(e)(v)(B). 61 Id. 62See proposed Rule 5711(e)(viii). 

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 CommodityBased 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 CommodityBased 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

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: 

• If the trust has more than 60 days 

remaining until termination and there 

are fewer than 50 record and/or 

beneficial holders of Currency Trust 

Shares for 30 or more consecutive 

trading days; 

• If the trust has fewer than 50,000 

Currency Trust Shares issued and 

outstanding; 

• If the market value of all Currency 

Trust Shares issued and outstanding is 

less than $1,000,000; 

• If the value of the applicable nonU.S. currency is no longer calculated or 

available on at least a 15-second delayed 

basis from a source unaffiliated with the 

sponsor, trust, custodian or NASDAQ or 

NASDAQ stops providing a hyperlink 

on its Web site to any such unaffiliated 

applicable non-U.S. currency value; 

• If the Intraday Indicative Value is 

no longer made available on at least a 

15-second delayed basis; or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable.60

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

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

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: 

• 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); 

• The value of the applicable nonU.S. currency, currencies or currency 

index must be disseminated by one or 


tkelley on DSK3SPTVN1PROD with NOTICES2
19436 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 

63Proposed 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). 

64See 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. 

65See proposed Rule 5711(f)(iv). 

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

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

68 Id. 

more major market data vendors on at 

least a 15-second delayed basis; 

• The Intraday Indicative Value must 

be calculated and widely disseminated 

by NASDAQ or one or more major 

market data vendors on at least a 15- 

second basis during the Regular Market 

Session; and 

• 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 nonU.S. currency or currencies or the 

currency index applicable to a series of 

Currency Trust Shares is not being 

disseminated as required, NASDAQ 

may halt trading during the day on 

which such interruption first occurs. If 

such interruption persists past the 

trading day in which it occurred, 

NASDAQ 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

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: 

• Following the initial twelve-month 

period beginning upon the 

commencement of trading of the 

Commodity Index Trust Shares, there 

are fewer than 50 record and/or 

beneficial holders of Commodity Index 

Trust Shares for 30 or more consecutive 

trading days; 

• If the value of the applicable 

underlying index is no longer calculated 

or available on at least a 15-second 

delayed basis from a source unaffiliated 

with the sponsor, the trust or the trustee 

of the trust; 

• If the net asset value for the trust is 

no longer disseminated to all market 

participants at the same time; 

• If the Intraday Indicative Value is 

no longer made available on at least a 

15-second delayed basis; or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable.67

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

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. 


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69Proposed 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). 

70See 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. 

71See proposed Rule 5711(g)(iv). 

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

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

74 Id. 

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

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: 

• If, following the initial twelvemonth 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; 

• 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; 

• If the net asset value for the trust is 

no longer disseminated to all market 

participants at the same time; 

• If the Intraday Indicative Value is 

no longer disseminated on at least a 15- 

second delayed basis during NASDAQ’s 

Regular Market Session; or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable.73

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

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’’). 


tkelley on DSK3SPTVN1PROD with NOTICES2
19438 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 

75See proposed Rule 5711(h)(ii). The term 

‘‘commodity’’ is defined in Section 1(a)(4) of the 

CEA. Id. 

76See proposed Rule 5711(h)(iii). 

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

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

79 Id. 

80The 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). 

81See proposed Rule 5711(i)(ii). The term 

‘‘commodity’’ is defined in Section 1(a)(4) of the 

CEA. Id. 

82See proposed Rule 5711(i)(iii). 

83See proposed Rule 5711(i)(iv)(A)(1). 

84See proposed Rule 5711(i)(iv)(A)(2). 

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

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

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: 

• 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; 

• If the value of the underlying 

benchmark investment, commodity or 

asset is no longer calculated or available 

on at least a 15-second delayed basis or 

NASDAQ stops providing a hyperlink 

on its Web site to any such investment, 

commodity or asset value; 

• If the Intraday Indicative Value is 

no longer made available on at least a 

15-second delayed basis; or 

• If such other event shall occur or 

condition exists which in the opinion of 

NASDAQ makes further dealings on 

NASDAQ inadvisable.78

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

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

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

NASDAQ would remove Trust Units 

from listing under any of the following 

circumstances: 

• If following the initial twelve 

month period following the 

commencement of trading of Trust 

Units: (i) The trust has more than 60 

days remaining until termination and 

there are fewer than 50 record and/or 

beneficial holders of Trust Units for 30 

or more consecutive trading days; (ii) 

the trust has fewer than 50,000 Trust 

Units issued and outstanding; or (iii) the 

market value of all Trust Units issued 

and outstanding is less than $1,000,000; 

or 

• If such other event shall occur or 

condition exists which in the opinion of 

the NASDAQ makes further dealings on 

NASDAQ inadvisable.85

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 


tkelley on DSK3SPTVN1PROD with NOTICES2
Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 19439 

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

87Proposed 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). 88See proposed Rule 5711(j)(iii)(A). Proposed 

Rule 5711(j)(iii) includes the following additional 

definitions concerning Managed Trust Securities: 

• 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). 

• 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). 

• 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). 

89See proposed Rule 5711(j)(iv). 

90See 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). 

91The 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 

Continued 

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

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 exchangetraded 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

Managed Trust Securities would be 

listed and traded on NASDAQ subject to 

application of the following initial 

listing criteria: 

• NASDAQ will establish a minimum 

number of Managed Trust Securities 

required to be outstanding at the time of 

commencement of trading on NASDAQ; 

and 

• 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

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: 

• The Intraday Indicative Value for 

Managed Trust Securities will be widely 

disseminated by one or more major 

market data vendors at least every 15 

seconds during the time when the 

Managed Trust Securities trade on 

NASDAQ. 

• The Disclosed Portfolio will be 

disseminated at least once daily and 

will be made available to all market 

participants at the same time. 

• The Reporting Authority that 

provides the Disclosed Portfolio must 

implement and maintain, or be subject 

to, procedures designed to prevent the 

use and dissemination of material nonpublic information regarding the actual 

components of the portfolio.91


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may have more than one Reporting Authority, each 

having different functions. See proposed Rule 

5711(j)(iii)(D). 

92Rule 5405(b) sets forth initial listing standards 

for primary equity securities. 

93See proposed Rule 5711(k)(i)(A). 

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

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

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

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: 

• If, following the initial twelvemonth 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; 

• If the Intraday Indicative Value for 

the trust is no longer calculated or 

available or the Disclosed Portfolio is 

not made available to all market 

participants at the same time; 

• If the Trust issuing the Managed 

Trust Securities has failed to file any 

filings required by the 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 

• 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: 

• 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

• The term must be one to five years 

from date of issuance.94

• 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

• The warrants must be cash settled 

in U.S. dollars.96

• All currency warrants must include 

in their terms provisions specifying the 

time by which all exercise notices must 


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

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

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

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

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

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

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

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

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

NASDAQ would file separate 

proposals under Section 19(b) of the Act 

before listing and trading separate and 

distinct Currency Warrants.98

Proposed Rule 5711(k)(iii) describes 

regulatory requirements applicable to 

Currency Warrants. Specifically: 

• No Member shall accept an order 

from a customer to purchase or sell a 

Currency Warrant unless the customer’s 

account has been approved for options 

trading pursuant to NOM Rules, Chapter 

XI, Section 7.99

• 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

• 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

• 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

• 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

• 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

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 


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105FINRA surveils trading on NASDAQ pursuant 

to a regulatory services agreement. NASDAQ is 

responsible for FINRA’s performance under this 

regulatory services agreement. 

106For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

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: 

• In the case of Commodity-Based 

Trust Shares, the applicable underlying 

commodity, related commodity futures 

or options on commodity futures, or any 

other related commodity derivatives, 

which the registered Market Maker may 

have or over which it may exercise 

investment discretion (‘‘Underlying 

Commodities’’); 

• In the case of Currency Trust 

Shares, the applicable underlying nonU.S. currency, options, futures or 

options on futures on such currency, or 

any other derivatives based on such 

currency, which the registered Market 

Maker may have or over which it may 

exercise investment discretion 

(‘‘Underlying Currencies’’); 

• In the case of Commodity Index 

Trust Shares, the applicable physical 

commodities included in, or options, 

futures or options on futures on, an 

index underlying an issue of 

Commodity Index Trust Shares or any 

other derivatives based on such index or 

based on any commodity included in 

such index, which the registered Market 

Maker may have or over which it may 

exercise investment discretion 

(‘‘Underlying Commodity Index 

Assets’’); 

• In the case of Commodity Futures 

Trust Shares, the applicable underlying 

commodity, related futures or options 

on futures, or any other related 

derivatives, which the registered Market 

Maker may have or over which it may 

exercise investment discretion 

(‘‘Underlying Commodity Futures’’); 

• In the case of Partnership Units, the 

applicable underlying asset or 

commodity, related futures or options 

on futures, or any other related 

derivatives, which the registered Market 

Maker may have or over which it may 

exercise investment discretion 

(‘‘Underlying Partnership Unit Assets’’); 

• In the case of Trust Units, the 

applicable underlying commodity, 

related commodity futures or options on 

commodity futures, or any other related 

commodity derivatives, which the 

registered Market Maker may have or 

over which it may exercise investment 

discretion (‘‘Underlying Trust Unit 

Assets’’); and 

• In the case of Managed Trust 

Securities, the underlying commodity or 

applicable currency, related futures or 

options on futures, or any other related 

derivatives, which a registered Market 

Maker may have or over which it may 

exercise investment discretion 

(‘‘Underlying Managed Trust Assets’’). 

No registered Market Maker in the 

above mentioned securities shall trade 

in the respective Underlying 

Commodities, Underlying Currencies, 

Underlying Commodity Index Assets, 

Underlying Commodity Futures, 

Underlying Partnership Unit Assets, 

Underlying Trust Unit Assets, and/or 

the Underlying Managed Trust Assets 

(collectively, ‘‘Underlying Assets’’) in 

an account in which a Market Maker, 

directly or indirectly, controls trading 

activities, or has a direct interest in the 

profits or losses thereof, which has not 

been reported to NASDAQ. 

In addition to the existing obligations 

under NASDAQ rules regarding the 

production of books and records (see, 

e.g., Rule 4625), a registered Market 

Maker in the above mentioned securities 

is required to make available to 

NASDAQ such books, records or other 

information pertaining to transactions 

by such entity or registered or nonregistered 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

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 


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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). 

109See 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. 

110 17 CFR 240.19b–4(e) 

111 17 CFR 240.19b–4(c)(1). 

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

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 


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112 15 U.S.C. 78s(b). 

113 17 CFR 240.19b–4(e). 

114Under 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). 

115See 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). 

116See 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). 

117See supra note 4. 

118See 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). 

119The 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. 

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 IndexLinked 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

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. 

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 IndexLinked Securities, Futures-Linked 

Securities, and Multifactor IndexLinked 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 IndexLinked Securities, Futures-Linked 

Securities, and Multifactor IndexLinked 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. 

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 IncomeLinked Securities, Futures-Linked 

Securities, and Multifactor IndexLinked 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 


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

121See 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. 

122See proposed Rule 5710(h) (formerly Rule 

5710(j)). 

123See 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. 

124See Notice at 6848. 

125 17 CFR 240.10A–3. See Rule 5710(f). 

126See 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 brokerdealer. 

127See Notice at 6848. 

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. 

The Exchange’s proposed 

requirements for Multifactor IndexLinked 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 FuturesLinked 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 FuturesLinked 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. 

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. 

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 brokerdealer 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 


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128See Notice at 6847. 

129See NYSE Arca Equities Rule 5.2(j)(6)(B)(IV), 

(V), and (VI). 

130See supra note 115. 

131See 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). 

potential for manipulation and will 

allow for maintenance of a fair and 

orderly market in the Additional Linked 

Securities. 

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 recordkeeping 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. 

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. 

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. 

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 IndexLinked 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 


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132See supra note 4. 

133See Notice at 6848. 

134See Notice at 6848. 

135See proposed Rule 5711(a)(iv)(which requires 

that an Issuer Index comply with the requirements 

of NOM Rules, Chapter XIV, Section 6(b)(12). 

136See Notice at 6848. 

137See Notice at 6847. 

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

139See supra note 115. 

140See 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). 

141The 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. 

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. 

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 IndexLinked Exchangeable Notes on 

NASDAQ.134

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, nonpublic information. 

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. 

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 IndexLinked 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. 

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. 

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 


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142See Notice at 6848. 

143See Notice at 6848. 

144See Notice at 6847. 

145See NYSE Arca Equities Rule 8.202. 

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

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, nonpublic 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

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. 

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. 

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 


tkelley on DSK3SPTVN1PROD with NOTICES2
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146See 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). 

147See Notice at 6848. 

148See Notice at 6848–6849. 

149See Notice at 6848. 

150See Notice at 6848. 

151See Notice at 6847. 

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

153See 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). 

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

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. 

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

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

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. 

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 CommodityBased 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

a. Listing and Trading Rules 

The Commission finds that the 

Exchange’s proposal contains adequate 

rules and procedures to govern the 


tkelley on DSK3SPTVN1PROD with NOTICES2
19450 Federal Register / Vol. 77, No. 62 / Friday, March 30, 2012 / Notices 

154The 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. 

155See Notice at 6848. A similar requirement is 

contained in the proposed rules relating to 

Currency Trust Shares, Commodity Futures Trust 

Shares and Trust Units. 

156See 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. 

157See Notice at 6848. 

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 CommodityBased 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. 

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 CommodityBased 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. 

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. 

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 recordkeeping 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 


tkelley on DSK3SPTVN1PROD with NOTICES2
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158See Notice at 6847. 

159See 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). 

160See 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). 

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). 

162See Notice at 6848. 

163See Notice at 6848. 

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

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. 

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

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. 

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

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 


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164See Notice at 6847. 

165See NYSE Arca Equities Rule 8.700. 

166See 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)). 

167See Notice at 6848. 

168See Notice at 6848. 

169See Notice at 6848. 

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, nonpublic 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 brokerdealer maintaining the Disclosed 

Portfolio and to promote fair and 

orderly markets. 

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

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 recordkeeping 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. 

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

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

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. 

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

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 


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170See Notice at 6848. 

171See Notice at 6847. 

172See 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). 

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. 

174Specifically, 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. 

175See supra notes 109, 116, 129, 138, 145, 152, 

159, 165, and 172. 

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

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. 

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

(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. 

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

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 


tkelley on DSK3SPTVN1PROD with NOTICES2
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176 15 U.S.C. 78f(b)(5). 

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

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

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. 

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 


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