55192 Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices 

16 17 CFR 240.19b–4(f)(6). 

17 17 CFR 240.19b–4(f)(6)(iii). 

18For purposes only of waiving the 30-day 

operative delay, the Commission has considered the 

proposed rule’s impact on efficiency, competition, 

and capital formation. 15 U.S.C. 78c(f). 

19 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58101 

(July 3, 2008), 73 FR 40002. 

4See e-mail from Kirk Allen, Managing Director, 

Trading, NWQ Investment Management, dated 

August 1, 2008 (‘‘NWQ Investment Letter’’) and 

letter from William D. Edick, Pickard and Djinis 

LLP, to Florence E. Harmon, Acting Secretary, 

Commission, dated September 11, 2008 (‘‘Pickard 

Letter’’). 

5Nasdaq states that a step-out is a clearing entry 

used to transfer a broker’s position in a security to 

another broker, or within accounts at a firm. 

6Rule 7038(b). 

7Rule 7038(c). 

8Rule 7042. Nasdaq states that this requirement 

follows the general standard for riskless principal 

transactions articulated in Financial Industry 

Regulatory Authority (‘‘FINRA’’) Rule 4632(d)(3)(B). 

9Rule 7038(d), 7042(b) and 7043(a). 

10Rule 7043. 

Act 16 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 17

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange has 

requested that the Commission waive 

the 30-day operative delay. The 

Commission believes that waiving the 

30-day operative delay is consistent 

with the protection of investors and the 

public interest. The Commission notes 

that under the proposal, the Exchange’s 

disseminated size should accurately 

reflect revised quotation sizes based on 

automatic executions through Phlx XL 

in real time. Accordingly, the 

Commission designates that the 

proposed rule change become operative 

immediately.18

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

the rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

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

Number SR–Phlx–2008–66 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–Phlx–2008–66. This file 

number should be included on the 

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

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for inspection and copying in 

the Commission’s Public Reference 

Room, 100 F Street, NE., Washington, 

DC 20549, on official business days 

between the hours of 10 am and 3 pm. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of Phlx. 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–Phlx–2008–66 and should 

be submitted on or before October 15, 

2008. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Lynn Taylor, 

Assistant Secretary. 

[FR Doc. E8–22378 Filed 9–23–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58569; File No. SR– 

NASDAQ–2008–033] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Order 

Approving Proposed Rule Change as 

Modified by Amendment Nos. 1 and 2 

Related to Submission of Non-Tape 

Reports 

September 17, 2008. 

I. Introduction 

On April 18, 2008, The NASDAQ 

Stock Market LLC (‘‘Nasdaq’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Exchange Act’’ 

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

a proposed rule change related to 

submission of non-tape reports. On July 

3, 2008, Nasdaq filed Amendment No. 1 

to the proposed rule change. The 

proposed rule change was published for 

comment in the Federal Register on July 

11, 2008.3 Two comments were received 

in support of the proposed rule change.4

On August 11, 2008, Nasdaq filed 

Amendment No. 2 to the proposed rule 

change to make certain technical, nonsubstantive modifications to the original 

rule filing. This order approves the 

proposed rule change, as amended. 

II. Description of the Proposal 

The proposed rule change would: 

Expand the scope of step-outs 5 to 

include all securities transfers from one 

Nasdaq member to another provided the 

transfer does not constitute a reportable 

trade,6 eliminate the requirement for an 

authorizing agreement when Nasdaq 

members use the Automated 

Confirmation Transaction service 

(‘‘ACT’’) to effect a step-out along with 

the transfer of a sales fee or similar fee,7

describe riskless transactions,8 state that 

members may not use the step-out 

function in lieu of reporting a trade,9

and establish a fee for the use of the 

step-out function to transfer a 

transaction fee.10

Nasdaq will allow members to submit 

records for riskless transfers using the 

following capacities: ‘‘Riskless 

Principal’’ where the member acted as 

principal on the trade or trades related 

to the riskless submission; ‘‘Agent’’ 

where the member acted as agent on the 

trade or trades related to the riskless 

submission; and ‘‘Intra-Broker’’ where 

the transfer is occurring strictly within 

a member firm. 

Transaction Fees 

According to Nasdaq, trade reporting 

rules of other SROs allow transaction 

fees to be included in clearing reports. 

Nasdaq proposes to permit members to 

include transaction fees in clearing 

reports submitted under Rule 7038 or 

7042, if the members agree in advance 

to transfer the transaction fee and if they 

are parties to a written agreement 


jlentini on PROD1PC65 with NOTICES
Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices 55193 

11Nasdaq states that under NASD Rule 7002B, 

FINRA/Nasdaq TRF participants are charged a fee 

of $0.03 per side for submission of a clearing report 

to transfer a transaction fee charged by one FINRA 

member to another. 

12See Securities Exchange Act Release No. 56345 

(August 31, 2007), 72 FR 51880 (September 11, 

2007). 

13 Id. 

14See Securities Exchange Act Release No. 56929 

(December 7, 2007), 72 FR 71176 (December 14, 

2007). 

15Nasdaq represents that step-outs are already 

completed pursuant to formal agreements among 

Nasdaq members or through ACT’s comparison 

processes, which renders the current requirement 

for an authorizing agreement duplicative. 

This proposed rule change would not change the 

requirement of a formal sales fee transfer agreement 

between firms that wish to use ACT to move sales 

fees without an accompanying transfer of securities. 

Nasdaq believes that it is important to retain the 

requirement that the parties to a fee transfer have 

a written agreement specifically permitting the fee 

transfers because a sales fee transfer that moves no 

shares is not a step-out and therefore there are no 

specific share movements for firms to readily 

identify as being associated with the fee transfer. 

16See Rules 7038(d), 7042(b) and 7043(a). 

17 In approving this proposed rule change the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

18 15 U.S.C. 78f. 

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

20See supra note 4. 

21See NWQ Letter, supra note 4. 

22 17 CFR 240.10b–10. 

23See Pickard Letter, supra note 4. The 

Commission believes that this comment raises an 

interpretive question regarding the applicability of 

Exchange Act Rule 10b–10 and is outside of the 

scope of NASDAQ’s proposed rule change. 

Procedures applicable to requests for no-action and 

interpretive letters from the Division of Trading and 

Markets are available in Securities Act Release No. 

6269 (December 5, 1980) (available at: http:// 

www.sec.gov/rules/other/33–6269.pdf). 

24The Commission notes that Nasdaq represents 

it will continue to honor Attachment 2’s and 

Uniform Trade Reporting Agreements on file with 

it or the FINRA/Nasdaq TRF. 

25When a firm uses this function the fee will be 

electronically billed and collected. 

permitting the submission of feeinclusive clearing reports. Nasdaq 

would allow members to transfer to 

another Nasdaq member transaction fees 

using the clearing reports that Nasdaq 

forwards to the National Securities 

Clearing Corporation (‘‘NSCC’’) to clear 

a trade. Nasdaq will impose a fee of 

$0.03 per-side for each such clearing 

report.11

Step-Outs 

A step-out is a transfer of all or a 

portion of a broker-dealer’s securities 

position to another broker-dealer which 

transfer does not constitute a trade. 

According to Nasdaq, this proposal 

builds upon previous attempts to 

provide step-out parameters for its 

members. Nasdaq initially offered stepout capability in 2007 because FINRA 

rules restricted the use of step-outs to 

those portions of trades that were 

originally executed by, and reported to, 

FINRA facilities.12 Certain brokerdealers wished to engage in step-outs 

but did not have systems in place to 

capture the venue of the original trade 

execution and/or they may have 

executed various portions of the 

underlying trade in non-FINRA 

facilities. FINRA rules do not permit the 

use of step-outs under these conditions. 

Accordingly, Nasdaq amended its rules 

to allow the use of step-outs in 

connection with any trade to which a 

Nasdaq member was a party regardless 

of the market on which the trade was 

executed.13

Nasdaq amended its step-out rules 

again in 2007 to require clearing 

member firms that wanted to transfer 

certain sales fees without transferring 

the underlying shares to have an 

authorizing agreement. No authorizing 

agreement is required when Nasdaq 

members conduct step-outs if the 

transfers are limited to transfer of the 

underlying shares.14

Nasdaq is again expanding its step-out 

parameters: first, it proposes to expand 

the scope of step-outs to include all 

securities transfers from one Nasdaq 

member to another provided that the 

transfer does not constitute a reportable 

trade; second, Nasdaq is eliminating the 

requirement for an authorizing 

agreement when Nasdaq members use 

ACT to effect a step-out along with the 

transfer of a sales or similar fee.15 Third, 

Nasdaq is reiterating in its rules that 

step-outs are not trade reports and 

cannot be used as such and reminding 

members of the need to comply with 

trade reporting rules of other SROs 

governing a particular transaction.16

Finally, Nasdaq is implementing a fee 

for step-outs that also transfer a 

transaction fee. 

Nasdaq believes that the above 

changes will enhance the ability of 

Nasdaq members to transfer securities 

positions and their associated fees in an 

efficient and transparent manner. 

III. Discussion and Commission 

Findings 

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 17 and, in 

particular, the requirements of Section 6 

of the Act.18 Specifically, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act,19 which requires, 

among other things, that the 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 

regulating, clearing, settling, processing 

information with respect to, and 

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. Nasdaq’s proposal to 

expand the use of step-outs, as 

described above should enhance the 

efficiency and transparency to members 

of their post-trade operations. 

The Commission received two 

comment letters on the proposed rule 

change.20 One commenter expressed 

support for Nasdaq’s proposal and 

stated it believes Nasdaq’s proposal will 

bring added transparency.21 The other 

commenter questioned the impact this 

proposed rule change may have on 

Exchange Act Rule 10b–10 22 disclosure 

requirements.23

Nasdaq’s proposal to allow 

submission of non-tape, riskless 

principal reports through ACT should 

facilitate the transfer of information 

between parties to the transaction and 

make the trade record information 

electronically available. It can facilitate 

the ultimate transmission of the transfer 

records to the appropriate clearing 

agency.24 The Commission notes that 

Nasdaq members can not satisfy any 

trade reporting obligations by 

submitting non-tape, clearing, or nontape, non-clearing records to ACT. 

Furthermore, the Commission expects 

Nasdaq to monitor the expanded use of 

the step-out functionality to ensure that 

its members use these position 

movements as specified in the rule, and 

not to effect trades. 

Nasdaq’s proposal to allow the 

transfer of fees in conjunction with the 

step-out is analogous to rules of other 

SROs which allow transaction fees to be 

included in clearing reports.25 The 

Commission understands that although 

Nasdaq no longer requires members to 

have agreements in place for step-out 

transactions, the transaction comparison 

process itself requires the acquiescence 

of both parties for the ACT system to 

complete the transaction. A member 

retains the opportunity to manually 

reject or reverse the step-out and fee 

transfer arrangement if it disagrees with 

their terms when the terms are 

presented to the member even after the 


jlentini on PROD1PC65 with NOTICES
55194 Federal Register / Vol. 73, No. 186 / Wednesday, September 24, 2008 / Notices 

26Nasdaq represents that it determined through 

discussions with its member firms that many firms 

preferred to handle step-outs on a match/compare 

basis, i.e. manually, even when they had a fee 

agreement between them and that it was an 

unnecessary burden for firms to sign separate 

agreements to move fees associated with step-out 

submissions to ACT since this functionality already 

was in place on ACT. 

27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 58396 

(August 20, 2008), 73 FR 50385 (‘‘Notice’’). 

4Managed Fund Shares are securities that 

represent an interest in a registered investment 

company organized as an open-end management 

investment company or similar entity that invests 

in a portfolio of securities selected by such 

investment company’s investment adviser 

consistent with such investment company’s 

investment objectives and policies. See NYSE Arca 

Equities Rule 8.600(c)(1); Securities Exchange Act 

Release No. 57619 (April 4, 2008), 73 FR 19544 

(April 10, 2008) (SR–NYSEArca–2008–25) 

(approving, among other things, rules permitting 

the listing and trading of Managed Fund Shares). 

5See Post-Effective Amendment No. 14 to 

Registration Statement on Form N–1A for the Trust 

(File Nos. 333–132380 and 811–21864) 

(‘‘Registration Statement’’). The Exchange states 

that the descriptions of the Fund and the Shares 

contained in the Notice are based on information 

in the Registration Statement. 

6WisdomTree Investments, Inc. is the parent 

company of WisdomTree Asset Management. 

7The Commission has issued an order granting 

certain exemptive relief to the Trust under the 

Investment Company Act of 1940 (15 U.S.C. 80a– 

1) (‘‘1940 Act’’). See Investment Company Act 

Release No. 28147 (February 6, 2008), 73 FR 7776 

(February 11, 2008) (File No. 812–13470). In 

compliance with Commentary .05 to NYSE Arca 

Equities Rule 8.600, which applies to Managed 

Fund Shares based on an international or global 

portfolio, the Exchange states that the Trust’s 

application for exemptive relief under the 1940 Act 

provides that the Fund will comply with federal 

securities laws in accepting securities for deposits 

and satisfying redemptions with redemption 

securities, including that the securities accepted for 

deposits and the securities used to satisfy 

redemption requests are sold in transactions that 

would be exempt from registration under the 

Securities Act of 1933 (15 U.S.C. 77a). 

step-out and fee transfer had initially 

been affirmed.26

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and in 

particular Section 6 of the Act and the 

rules and regulations thereunder. 

It is therefore ordered, pursuant to 

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

proposed rule change (File No. SR– 

NASDAQ–2008–033), as modified by 

Amendments No. 1 and 2, be and 

hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

J. Lynn Taylor, 

Assistant Secretary. 

[FR Doc. E8–22379 Filed 9–23–08; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–58564; File No. SR– 

NYSEArca–2008–86] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Accelerated 

Approval of Proposed Rule Change To 

List and Trade the WisdomTree 

Dreyfus Emerging Markets Fund 

September 17, 2008. 

I. Introduction 

On August 11, 2008, NYSE Arca, Inc. 

(‘‘Exchange’’ or ‘‘NYSE Arca’’), through 

its wholly owned subsidiary, NYSE 

Arca Equities, Inc. (‘‘NYSE Arca 

Equities’’), 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 list and trade 

the WisdomTree Dreyfus Emerging 

Markets Fund (‘‘Fund’’). The proposed 

rule change was published for comment 

in the Federal Register on August 26, 

2008.3 The Commission received no 

comment letters on the proposal. This 

order approves the proposed rule 

change on an accelerated basis. 

II. Description of the Proposed Rule 

Change 

The Exchange proposes to list and 

trade the shares (‘‘Shares’’) of the Fund 

pursuant to NYSE Arca Equities Rule 

8.600, which governs the listing and 

trading of Managed Fund Shares on the 

Exchange.4 The Fund will be an actively 

managed exchange traded fund. The 

Shares will be offered by the 

WisdomTree Trust (‘‘Trust’’), which was 

established as a Delaware statutory trust 

on December 15, 2005. The Trust is 

registered with the Commission as an 

investment company.5

A. Description of the Shares and the 

Fund 

WisdomTree Asset Management, Inc. 

(‘‘WisdomTree Asset Management’’) is 

the investment adviser to the Fund.6

The Exchange represents that 

WisdomTree Asset Management is not 

affiliated with any broker-dealer. The 

Bank of New York is the administrator, 

custodian, and transfer agent for the 

Fund. ALPS Distributors, Inc. serves as 

the distributor for the Fund.7

The Fund seeks to earn current 

income reflective of money market rates 

in emerging market currencies available 

to foreign investors, as well as provide 

exposure to changes in the value of 

emerging market currencies relative to 

the U.S. dollar. The Exchange notes that 

because the Fund’s investment objective 

was adopted as a non-fundamental 

investment policy, the Fund’s 

investment objective may be changed 

without a vote of shareholders. 

The Fund seeks to achieve its 

investment objective by investing in 

short-term securities and instruments 

designed to provide exposure to the 

currencies and money market rates of a 

specified set of emerging market 

countries. The set of countries is 

selected and reconstituted on an annual 

basis with similar allocations to each 

country being established (in U.S. dollar 

terms) at the reconstitution date and 

consequently reset each quarter. 

Although the Fund is actively managed, 

the Exchange states that the Fund would 

strive to adhere to these general 

parameters in both currency selection 

and approximate allocation, unless it is 

believed to be to the detriment of the 

Fund. 

A basket of from five to twelve 

currencies is selected at least annually 

from a pool of eligible currencies to 

provide a representative and diversified 

proxy for developing market currencies 

relative to the U.S. dollar. Countries and 

their capital markets are first classified 

as frontier, emerging, developing, and 

developed markets based on a number 

of quantitative and qualitative factors to 

determine eligibility. Only the 

currencies of countries and capital 

markets classified as developing or 

emerging markets will be deemed 

eligible. The selection of the constituent 

currencies is then driven by the 

liquidity and tradability of the 

individual currencies, a country’s 

economic and capital market 

development, and optimized regional 

and economic diversification. The Fund 

attempts to invest in instruments that 

provide exposure to the most liquid 

currencies in the geographical regions in 

which the Fund invests. The Fund will 

seek to provide an equally-weighted 

exposure to these currencies. The Fund 

will be rebalanced on a quarterly basis 

to maintain this equal weighting. The 

basket will be reconstituted each year 

following a similar classification and 

selection process. Significant events, 

such as the reclassification of a 

country’s currency from developing to 

developed, may cause the Fund to 

reconstitute its portfolio more 

frequently than annually. At launch, the 

Fund initially will select a subset of the 

following markets: Brazil, Chile, China, 

the Czech Republic, Hungary, India, 

Malaysia, Mexico, Poland, Russia, South 


jlentini on PROD1PC65 with NOTICES