51672 Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Changes are marked to the rule text that appears 

in the electronic manual of Nasdaq found at http:// 

nasdaq.cchwallstreet.com. 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room 100 F Street, NE., Washington, DC 

20549 on official business days between 

the hours of 10 a.m. and 3 p.m. Copies 

of such filing also will be available for 

inspection and copying at the principal 

office of the self-regulatory organization. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2008–070, and 

should be submitted on or before 

September 25, 2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20516 Filed 9–3–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58440; File No. SR–

NASDAQ–2008–071] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Order Granting Accelerated 

Approval of Proposed Rule Change 

Relating to the Generic Listing 

Standards for Index Multiple Exchange 

Traded Fund Shares and Index Inverse 

Exchange Traded Fund Shares 

August 28, 2008. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on August 

20, 2008, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by Nasdaq. The 

Commission is publishing this notice 

and order to solicit comments on the 

proposed rule change from interested 

persons and to approve the proposal on 

an accelerated basis. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Nasdaq is filing a proposed rule 

change to amend Nasdaq Rule 4420(j) to 

list and trade, or trade pursuant to 

unlisted trading privileges (‘‘UTP’’), 

shares of a series of Index Multiple 

Exchange Traded Fund Shares 

(‘‘Multiple Fund Shares’’) and Index 

Inverse Exchange Traded Fund Shares 

(‘‘Inverse Fund Shares’’) (collectively, 

the ‘‘Fund Shares’’). The text of the 

proposed rule change is available from 

Nasdaq’s Web site at http:// 

nasdaq.cchwallstreet.com, at Nasdaq’s 

principal office, and at the 

Commission’s Public Reference Room. 

Proposed new language is italicized; 

proposed deletions are in brackets.3

* * * * * 

4420. Quantitative Listing Criteria 

* * * * * 

(a)–(i) No Change. 

(j) Index Fund Shares 

(1) No Change 

(A) No Change 

(B)(i) The term ‘‘Index Fund Share’’

includes a security issued by an openend management investment company 

that seeks to provide investment results 

that either exceed the performance of a 

specified domestic equity, international 

or global equity, or fixed income index 

or a combination thereof by a specified 

multiple or that correspond to the 

inverse (opposite) of the performance of 

a specified domestic equity, 

international or global equity, or fixed 

income index or a combination thereof 

by a specified multiple. Such a security 

is issued in a specified aggregate 

number in return for a deposit of a 

specified number of shares of stock, a 

specified portfolio of fixed income 

securities or a combination of the above 

and/or cash as defined in subparagraph 

(1)(B)(ii) of this rule with a value equal 

to the next determined net asset value. 

When aggregated in the same specified 

minimum number, Index Fund Shares 

may be redeemed at a holder’s request 

by such open-end investment company 

which will pay to the redeeming holder 

the stock, fixed income securities or a 

combination thereof and/or cash with a 

value equal to the next determined net 

asset value. 

(ii) In order to achieve the investment 

result that it seeks to provide, such an 

investment company may hold a 

combination of financial instruments, 

including, but not limited to, stock 

index futures contracts; options on 

futures contracts; options on securities 

and indices; equity caps, collars and 

floors; swap agreements; forward 

contracts; repurchase agreements and 

reverse repurchase agreements (the 

‘‘Financial Instruments’’), but only to 

the extent and in the amounts or 

percentages as set forth in the 

registration statement for such Index 

Fund Shares. 

(iii) Any open-end management 

investment company which issues Index 

Fund Shares referenced in this 

subparagraph (1)(B) that seeks to 

provide investment results, before fees 

and expenses, in an amount that 

exceeds ¥200% of the percentage 

performance on a given day of a 

particular domestic equity, international 

or global equity or fixed income 

securities index or a combination 

thereof shall not be approved by the 

Exchange for listing and trading 

pursuant to Rule 19b–4(e) under the 

Securities Exchange Act of 1934. 

(iv) For the initial and continued 

listing of a series of Index Fund Shares 

referenced in the provisions of this 

subparagraph (1)(B) of this rule, the 

following requirements must be adhered 

to: 

Daily public Web site disclosure of 

portfolio holdings that will form the 

basis for the calculation of the net asset 

value by the issuer of such series, 

including, as applicable, the following 

instruments: 

a. The identity and number of shares 

held of each specific equity security; 

b. The identity and amount held for 

each specific fixed income security; 

c. The specific types of Financial 

Instruments and characteristics of such 

Financial Instruments; and 

d. Cash equivalents and the amount 

of cash held in the portfolio. 

If the Exchange becomes aware that 

the net asset value related to an Index 

Fund Shares included in the provisions 

of this subparagraph (1)(B)(ii) of this 

rule, is not being disseminated to all 

market participants at the same time or 

the daily public Web site disclosure of 

portfolio holdings does not occur, the 

Exchange shall halt trading in such 

series of Index Fund Share, as 

appropriate. The Exchange may resume 

trading in such Index Fund Shares only 

when the net asset value is disseminated 

to all market participants at the same 

time or the daily public Web site 


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Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 51673 

4 17 CFR 240.19b–4(e). 

5See Securities Exchange Act Release No. 57660 

(April 14, 2008), 73 FR 21391 (April 21, 2008) (SR–

Amex–2007–131). 

6 17 CFR 240.19b–4(e). 

7 15 U.S.C. 78s(b)(2). 

8 17 CFR 240.19b–4(e). 

9The Exchange submits that the failure of a 

particular Fund Share portfolio to comply with the 

proposed generic listing and trading standards 

under Rule 19b–4(e) would not, however, preclude 

the Exchange from submitting a separate filing 

pursuant to Section 19(b)(2) requesting Commission 

approval to list and trade a particular Fund Share. 

disclosure of portfolio holdings occurs, 

as appropriate. 

(C) [(B)] Reporting Authority. The 

term ‘‘Reporting Authority’’ in respect 

of a particular series of Index Fund 

Shares means Nasdaq, a wholly-owned 

subsidiary of Nasdaq, or an institution 

or reporting service designated by 

Nasdaq or its subsidiary as the official 

source for calculating and reporting 

information relating to such series, 

including, but not limited to, any 

current index or portfolio value; the 

current value of the portfolio of any 

securities required to be deposited in 

connection with issuance of Index Fund 

Shares; the amount of any dividend 

equivalent payment or cash distribution 

to holders of Index Fund Shares, net 

asset value, and other information 

relating to the issuance, redemption or 

trading of Index Fund Shares. 

Nothing in this paragraph shall imply 

that an institution or reporting service 

that is the source for calculating and 

reporting information relating to Index 

Fund Shares must be designated by 

Nasdaq; the term ‘‘Reporting Authority’’

shall not refer to an institution or 

reporting service not so designated. 

(D) [(C)] US Component Stock. The 

term ‘‘US Component Stock’’ shall mean 

an equity security that is registered 

under Sections 12(b) or 12(g) of the Act, 

or an American Depository Receipt, the 

underlying equity security of which is 

registered under Sections 12(b) or 12(g) 

of the Act. 

(E) [(D)] Non-US Component Stock. 

The term ‘‘Non-US Component Stock’’

shall mean an equity security that (a) is 

not registered under Sections 12(b) or 

12(g) of the Act, (b) is issued by an 

entity that is not organized, domiciled 

or incorporated in the United States, 

and (c) is issued by an entity that is an 

operating company (including Real 

Estate Investment Trusts (REITs) and 

income trusts, but excluding investment 

trusts, unit trusts, mutual funds, and 

derivatives). 

(2)–(10) No Change 

(k)–(o) No Change. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

Nasdaq included statements concerning 

the purpose of, and basis for, the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item III below, and 

is set forth in Sections A, B, and C 

below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Nasdaq Rule 4420(j) provides 

standards for listing Index Fund Shares 

(‘‘IFSs’’) on the Exchange. Nasdaq 

proposes to amend the definition of 

‘‘Index Fund Share’’ set forth in 

proposed Nasdaq Rule 4420(j)(1)(B) to 

permit the listing and trading, or trading 

pursuant to UTP, of Fund Shares and to 

properly reflect the fact that domestic 

equity, international or global equity, or 

fixed income securities indexes or a 

combination thereof may be used as the 

underlying performance benchmark for 

Fund Shares. Accordingly, this proposal 

would enable the Exchange to list and 

trade Multiple Fund Shares and certain 

Inverse Fund Shares pursuant to Rule 

19b–4(e) of the Act.4 The Exchange also 

notes that the Commission has approved 

the original listing and trading of Fund 

Shares on the American Stock Exchange 

LLC (‘‘Amex’’).5

Generic Listing Standards 

Nasdaq Rule 4420(j) provides 

standards for listing IFSs, which are 

securities issued by an open-end 

management investment company 

(open-end mutual fund) based on a 

portfolio of securities that seeks to 

provide investment results that 

correspond generally to the price and 

yield performance or total return 

performance of a specified foreign or 

domestic securities index or fixed 

income index. Pursuant to Nasdaq Rule 

4420(j)(1)(A), IFSs must be issued in a 

specified aggregate minimum number in 

return for a deposit of specified 

securities and/or a cash amount, with a 

value equal to the next determined net 

asset value (‘‘NAV’’). When aggregated 

in the same specified minimum number, 

IFSs must be redeemed by the issuer for 

the securities and/or cash, with a value 

equal to the next determined NAV. 

Consistent with Nasdaq Rule 

4420(j)(9)(A)(ii), the NAV is calculated 

once a day after the close of the regular 

trading day. 

The proposed revisions to Nasdaq 

Rule 4420(j) would allow the listing and 

trading of Multiple Fund Shares and 

Inverse Fund Shares that sought to 

provide investment results, before fees 

and expenses, in an amount not 

exceeding ¥200% of the underlying 

benchmark index pursuant to Rule 19b–

4(e) under the Act,6 where the other 

applicable generic listing standards for 

IFSs are satisfied. In connection with 

Inverse Funds that seek to provide 

investment results, before fees and 

expenses, in an amount that exceeds 

¥200% of the underlying benchmark 

index, the Exchange’s proposal would 

continue to require specific Commission 

approval pursuant to Section 19(b)(2) of 

the Act.7 In particular, Nasdaq Rule 

4420(j)(1)(B)(iii) would expressly 

prohibit Inverse Funds that seek to 

provide investment results, before fees 

and expenses, in an amount that 

exceeds ¥200% of the underlying 

benchmark index, from being approved 

by the Exchange for listing and trading 

pursuant to Rule 19b–4(e) under the 

Act.8

Current Nasdaq Rule 4420(j)(1)(A)(i), 

in pertinent part, defines the term 

‘‘Index Fund Share’’ as based on a 

specified foreign or domestic stock 

index. In conjunction with the current 

proposal, the Exchange proposes to 

amend this definition to include 

domestic equity, international or global 

equity, or fixed income securities 

indexes and combinations thereof as 

permissible underlying performance 

benchmarks. The Exchange states that 

the proposed revision is consistent with 

Nasdaq Rule 4420(j) reflecting the fact 

that domestic equity, international or 

global equity, or fixed income securities 

indexes or a combination thereof may be 

used as the underlying performance 

benchmark for IFSs, including Fund 

Shares. 

The Exchange believes that adopting 

generic listing and trading standards for 

Fund Shares based on domestic equity, 

international or global equity and/or 

fixed income securities indexes and 

applying Rule 19b–4(e) should fulfill 

the intended objective of that Rule by 

allowing those IFSs that satisfy the 

proposed standards to commence 

trading, without the need for 

individualized Commission approval. 

The proposed rules have the potential to 

reduce the time frame for bringing Fund 

Shares to market, thereby reducing the 

burdens on issuers and other market 

participants.9

The Commission has approved 

generic standards providing for the 

listing and trading of derivative 


sroberts on PROD1PC77 with NOTICES
51674 Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 

10 15 U.S.C. 78s(b)(2). See Securities Exchange 

Act Release No. 54765 (November 16, 2006), 71 FR 

67668 (November 22, 2006) (SR–Nasdaq–2006–009) 

(Commodity-Linked Securities). 11 17 CFR 240.19b–4(e). 12 15 U.S.C. 78s(b)(2). 13 15 U.S.C. 78s(b)(2). 

14 17 CFR 240.19b–4(e). 

15Authorized Participants are the only persons 

that may place orders to create and redeem Creation 

Units. Authorized Participants must be registered 

broker-dealers or other securities market 

participants, such as banks and other financial 

institutions that are exempt from registration as 

broker-dealers to engage in securities transactions, 

who are participants in DTC. The format of the 

disclosure of portfolio holdings to Authorized 

Participants may differ from the format of the 

public Web site disclosure. 

products pursuant to Rule 19b–4(e) 

based on indexes previously approved 

by the Commission under Section 

19(b)(2) of the Act 10 and also notes that 

the generic listing standards provide for 

indexes that have been approved by the 

Commission in connection with the 

listing of Portfolio Depository Receipts, 

Index Fund Shares or Index-Linked 

Securities. The Exchange believes that 

the application of that standard to Fund 

Shares is appropriate because the 

underlying securities index will have 

been subject to detailed and specific 

Commission review in the context of the 

approval of listing of other derivatives. 

The Exchange notes that existing 

Nasdaq Rule 4420(j)(9)(B) provides 

continued listing standards for all IFSs. 

For example, where the value of the 

underlying index or portfolio of 

securities on which the IFS is based is 

no longer calculated or available, or in 

the event that the IFS chooses to 

substitute a new index or portfolio for 

the existing index or portfolio, the 

Exchange would commence delisting 

proceedings if the new index or 

portfolio does not meet the 

requirements of and listing standards set 

forth in Nasdaq Rule 4420(j). If an IFS 

chose to substitute an index that did not 

meet any of the generic listing standards 

for listing of IFSs pursuant to Rule 19b–

4(e) of the Act,11 then for continued 

listing and trading, approval by the 

Commission of a separate filing 

pursuant to Section 19(b)(2) of the Act 12

to list and trade that IFS is required. In 

addition, the Exchange further notes 

that existing Nasdaq Rule 

4420(j)(9)(A)(ii) provides that, prior to 

approving an IFS for listing, the 

Exchange will obtain a representation 

from the issuer that the NAV per share 

will be calculated daily and made 

available to all market participants at 

the same time. 

The Exchange proposes to add Nasdaq 

Rule 4420(j)(1)(B)(iv) to provide for the 

halt of trading for Fund Shares if the 

Exchange becomes aware that the openend investment company fails to 

properly disseminate the appropriate 

NAV to market participants at the same 

time. In addition, the proposed rule 

would also require a halt to trading if 

the open-end investment company 

issuing the Fund Shares failed to 

provide daily public Web site disclosure 

of its portfolio holdings. In particular, 

proposed Nasdaq Rule 4420(j)(1)(B)(iv) 

provides that the Exchange will halt 

trading in a series of Multiple Fund 

Shares and/or Inverse Fund Shares if 

the Exchange becomes aware that the 

open-end investment company issuing 

the Fund Shares fails to disseminate the 

appropriate NAV to all market 

participants at the same time and/or 

fails to provide daily public Web site 

disclosure of its portfolio holdings. 

The investment objective associated 

with the Fund Shares must be expected 

to achieve investment results, before 

fees and expenses, by a specified 

multiple (Multiple Fund Shares) or 

inversely up to ¥200% (Inverse Fund 

Shares) of the underlying performance 

benchmark domestic equity, 

international or global equity and/or 

fixed income indexes, as applicable. 

Fund Shares differ from traditional 

exchange-traded fund shares in that 

they do not merely correspond to the 

performance of a given securities index, 

but rather attempt to match a multiple 

or inverse of such underlying index 

performance. 

In order to achieve investment results 

that provide either a positive multiple 

or inverse of the benchmark index, 

Fund Shares may hold a combination of 

financial instruments, including, but not 

limited to: Stock index futures 

contracts; options on futures; options on 

securities and indices; equity caps, 

collars and floors; swap agreements; 

forward contracts; repurchase 

agreements; and reverse repurchase 

agreements (the ‘‘Financial 

Instruments’’). Normally, 100% of the 

value of the underlying portfolios for 

the Inverse Fund Shares will be devoted 

to Financial Instruments and money 

market instruments, including U.S. 

government securities and repurchase 

agreements (the ‘‘Money Market 

Instruments’’). The underlying 

portfolios for Multiple Fund Shares may 

consist of a combination of securities, 

Financial Instruments and Money 

Market Instruments. 

Limitation on Leverage 

In connection with Inverse Funds that 

seek to provide investment results, 

before fees and expenses, in an amount 

that exceeds ¥200% of the underlying 

benchmark index, the Exchange’s 

proposal would continue to require 

specific Commission approval pursuant 

to Section 19(b)(2) of the Act.13 In 

particular, Nasdaq Rule 4420(j)(1)(B)(iii) 

would expressly prohibit Inverse Funds 

that seek to provide investment results, 

before fees and expenses, in an amount 

that exceeds ¥200% of the underlying 

benchmark index, from being approved 

by the Exchange for listing and trading 

pursuant to Rule 19b–4(e) under the 

Act.14

In connection with Multiple Fund 

Shares, Nasdaq Rule 4420(j)(1)(B) does 

not provide a similar limitation on 

leverage. Instead, the proposal would 

permit the underlying registered 

management investment company or 

fund to seek to provide investment 

results, before fees and expenses, that 

correspond to any multiple, without 

limitation, of the percentage 

performance on a given day of a 

particular domestic equity, international 

or global equity, or fixed income 

securities indexes or a combination 

thereof. 

Availability of Information About Fund 

Shares and Underlying Indexes 

Proposed Nasdaq Rule 

4420(j)(1)(B)(iv) provides that the 

portfolio composition of a Fund will be 

disclosed on a public Web site. Web site 

disclosure of portfolio holdings that will 

form the basis for the calculation of the 

NAV by the issuer of a series of Fund 

Shares will be made daily and will 

include, as applicable, the identity and 

number of shares held of each specific 

equity security, the identity and amount 

held of each fixed income security, the 

specific types of Financial Instruments 

and characteristics of such instruments, 

cash equivalents and amount of cash 

held in the portfolio of a fund. This 

public Web site disclosure of the 

portfolio composition of a Fund, that 

will form the basis for the calculation of 

the NAV, will coincide with the 

disclosure of the same information to 

‘‘Authorized Participants.’’ 15 Investors 

will have access to the current portfolio 

composition of a Fund through the 

Fund’s Web site and/or at the 

Exchange’s Web site at http:// 

www.nasdaqomx.com. 

Trading Halts 

Existing trading halt requirements for 

IFSs will apply to Fund Shares. Nasdaq 

will halt trading in Fund Shares under 

the conditions specified in Nasdaq 

Rules 4120 and 4121, as well as subject 

to proposed Nasdaq Rule 

4420(j)(1)(B)(iv). The conditions for a 

halt include a regulatory halt by the 

listing market. UTP trading in Fund 


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Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 51675 

16FINRA surveils trading on Nasdaq pursuant to 

a regulatory services agreement. Nasdaq is 

responsible for FINRA’s performance under this 

regulatory services agreement. 

17For a list of the current members and affiliate 

members of ISG, see www.isgportal.com. 

18 15 U.S.C. 78f. 

19 15 U.S.C. 78f(b)(5). 

Shares will also be governed by 

provisions of Nasdaq Rule 4120(b) 

relating to temporary interruptions in 

the calculation or wide dissemination of 

the calculation of the estimated NAV 

(‘‘Intraday Indicative Value’’), which is 

updated regularly during the trading 

day, among other values. 

If Nasdaq becomes aware that the 

NAV or the identities and quantities of 

the portfolio of securities and other 

assets (the ‘‘Disclosed Portfolio’’) with 

respect to a Fund Share is not 

disseminated to all market participants 

at the same time, it will halt trading in 

such series until such time as the NAV 

or the Disclosed Portfolio is available to 

all market participants. 

In the case of the Financial 

Instruments held by a Multiple or 

Inverse Fund, the Exchange represents 

that a notification procedure will be 

implemented so that timely notice from 

the investment adviser of such Multiple 

or Inverse Fund is received by the 

Exchange when a particular Financial 

Instrument is in default or shortly to be 

in default. The Exchange will then 

determine on a case-by-case basis 

whether a default of a particular 

Financial Instrument justifies a trading 

halt of the Multiple and/or Inverse Fund 

Shares. 

Additionally, Nasdaq may cease 

trading Fund Shares if other unusual 

conditions or circumstances exist 

which, in the opinion of Nasdaq, make 

further dealings on Nasdaq detrimental 

to the maintenance of a fair and orderly 

market. Nasdaq will also follow any 

procedures with respect to trading halts 

as set forth in Nasdaq Rule 4120(c). 

Finally, Nasdaq will stop trading Fund 

Shares if the listing market delists them. 

Suitability 

Prior to commencement of trading, 

the Exchange will issue an Information 

Circular to its members and member 

organizations providing guidance with 

regard to member firm compliance 

responsibilities (including suitability 

obligations) when effecting transactions 

in the Fund Shares and highlighting the 

special risks and characteristics of 

Funds Shares as well as applicable 

Exchange rules. 

Specifically, the Information Circular 

will discuss the following: (1) The 

procedures for purchases and 

redemptions of Fund Shares in Baskets 

(and that Fund Shares are not 

individually redeemable); (2) Nasdaq 

Rule 2310, which imposes suitability 

obligations on Nasdaq members with 

respect to recommending transactions in 

Fund Shares to customers; (3) how 

information regarding the Intraday 

Indicative Value is disseminated; (4) the 

requirement that members deliver a 

prospectus to investors purchasing 

newly issued Fund Shares prior to or 

concurrently with the confirmation of a 

transaction; (5) the risks involved in 

trading Fund Shares during the PreMarket and Post-Market Sessions when 

an updated Intraday Indicative Value 

will not be calculated or publicly 

disseminated; and (6) trading 

information. 

The Exchange notes that investors 

purchasing Fund Shares directly from a 

Fund will receive a prospectus. 

Members purchasing Fund Shares from 

a Fund 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 Fund Shares are 

subject to various fees and expenses 

described in the Registration Statement. 

The Information Circular will also 

disclose the trading hours of the Fund 

Shares of the Funds and that the NAV 

for the Fund Shares will be calculated 

after 4 p.m. (Eastern Time) each trading 

day. 

Surveillance 

The Exchange intends to utilize its 

existing surveillance procedures 

applicable to derivative products 

(including exchange-traded funds) to 

monitor trading in Fund Shares. The 

Exchange represents that such 

procedures are adequate to address any 

concerns about the trading of Fund 

Shares on Nasdaq. Trading of Fund 

Shares through Nasdaq will be subject 

to FINRA’s surveillance procedures for 

equity securities in general and ETFs in 

particular.16 The Exchange may obtain 

information via the Intermarket 

Surveillance Group (‘‘ISG’’) from other 

exchanges who are members or affiliate 

members of the ISG.17

2. Statutory Basis 

Nasdaq believes that the proposal is 

consistent with Section 6(b) of the Act 18

in general and Section 6(b)(5) of the 

Act 19 in particular in that it is 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, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. The 

Exchange believes that the proposed 

rules will facilitate the listing and 

trading of Fund Shares and will 

enhance competition among market 

participants, to the benefit of investors 

and the marketplace. In addition, the 

listing and trading criteria set forth in 

the proposed rules are intended to 

protect investors and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (www.sec.gov/rules/ 

sro.shtml); or 

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

Number SR–NASDAQ–2008–071 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street, NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2008–071. This 

file number should be included on the 

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

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (www.sec.gov/rules/ 

sro.shtml). Copies of the submission, all 

subsequent amendments, all written 

statements with respect to the proposed 

rule change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 


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51676 Federal Register / Vol. 73, No. 172 / Thursday, September 4, 2008 / Notices 

20 In approving this 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). 

21 15 U.S.C. 78f(b)(5). 

22 15 U.S.C. 78s(b)(1). 

23 17 CFR 240.19b–4. 

24 17 CFR 240.19b–4(e). 

25 17 CFR 240.19b–4(c)(1). 

26See Securities Exchange Act Release No. 57660 

(April 14, 2008), 73 FR 21391 (April 21, 2008) (SR–

Amex–2007–131). The Commission notes that it 

received no comments on the Amex’s proposal. 

27 15 U.S.C. 78s(b)(2). 

28 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6). 

5NYSE Rule 54 provides that only members are 

permitted to ‘‘make or accept bids or offers, 

consummate transactions, or otherwise transact 

business on the Floor for any security admitted to 

dealings on the [Exchange].* * * ’’ See also NYSE 

Rule 2. 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 a.m. and 3 p.m. 

Copies of the filing also will be available 

for inspection and copying at the 

principal office of the Exchange. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2008–071 and 

should be submitted on or before 

September 25, 2008. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.20 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with Section 6(b)(5) of the Act,21 which 

requires that the rules of an exchange be 

designed, among other things, to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

Pursuant to Section 19(b) of the Act 22

and Rule 19b–4 thereunder,23 the listing 

and trading of a new derivative 

securities product is a proposed rule 

change that must be filed with and 

approved by the Commission. Rule 19b–

4(e) under the Act 24 further provides 

that the listing and trading of a new 

derivative securities product by an 

exchange will not be deemed a 

proposed rule change pursuant to Rule 

19b–4(c)(1) under the Act 25 if the 

Commission has approved, pursuant to 

Section 19(b) of the Act, the exchange’s 

trading rules, procedures, and listing 

standards for the product class that 

would include the new derivative 

securities product, and the exchange has 

a surveillance program for the product 

class. 

The Commission believes that the 

Exchange’s adoption of listing and 

trading standards for Index Fund Shares 

that meet the requirements of Nasdaq 

Rule 4420(j) should fulfill the intended 

objective of Rule 19b–4(e) by allowing 

such Index Fund Shares to commence 

trading on the Exchange without the 

need for individualized Commission 

approval. Accordingly, the proposed 

rule should allow the Exchange to bring 

these securities to market without delay, 

thereby reducing the burdens on issuers 

and other market participants while 

promoting competition. 

The Commission finds that the 

Exchange’s proposal contains adequate 

rules and procedures to govern the 

trading and listing pursuant to Rule 

19b–4(e) of Inverse Fund Shares and 

Multiple Fund Shares listed pursuant to 

Rule 19b–4(e) on the Exchange. Among 

other things, the proposal would require 

daily public Web site disclosure of a 

fund’s portfolio holdings and 

dissemination of its NAV to all market 

participants at the same time, or else the 

Exchange would be obligated to halt 

trading in the fund’s shares. In addition, 

Fund Shares listed and/or traded under 

the proposed ‘‘generic’’ standards would 

be subject to existing Nasdaq rules that 

govern the continued listing and trading 

of Index Fund Shares. 

The Commission finds good cause for 

approving this proposal before the 30th 

day after the publication of notice 

thereof in the Federal Register. The 

Commission notes that it has recently 

approved a similar proposal of another 

exchange,26 and Nasdaq’s proposal does 

not raise any novel regulatory issues. 

Accordingly, the Commission believes 

that accelerating approval of this 

proposal is appropriate and will enable 

the Exchange to amend its rules to 

reflect the standards for listing and 

trading Inverse and Multiple Fund 

Shares, thereby conforming Nasdaq’s 

rules to those of other exchanges 

without delay. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,27 that the 

proposed rule change (SR–NASDAQ–

2008–071) be, and it hereby is, approved 

on an accelerated basis. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.28

Florence E. Harmon, 

Acting Secretary. 

[FR Doc. E8–20517 Filed 9–3–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58429; File No. SR–NYSE–

2008–71] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Amending 

NYSE Rule 123B (Exchange Automated 

Order Routing System) To Allow a 

Member Organization To Provide Other 

Market Participants With Access to the 

Exchange on an Agency Basis 

August 27, 2008. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on August 

18, 2008, New York Stock Exchange 

LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by NYSE. NYSE filed the 

proposed rule change as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6) thereunder,4

which renders it effective upon filing 

with the Commission. The Commission 

is publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NYSE proposes to amend NYSE Rule 

123B to set forth the requirements that 

would allow a member organization to 

provide other market participants with 

access to the Exchange on an agency 

basis for the entry and execution of 

orders on the Exchange.5 The text of the 

proposed rule change is available at 

NYSE, the Commission’s Public 


sroberts on PROD1PC77 with NOTICES