23902 Federal Register / Vol. 74, No. 97 / Thursday, May 21, 2009 / Notices 

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). 

5See Securities Exchange Act Release Nos. 58571 

(September 17, 2008), 73 FR 55188 (September 24, 

2008) (SR–Phlx–2008–60) (notice of filing and 

immediate effectiveness regarding Index-Linked 

Securities and Currency Trust Shares); 57715 (April 

25, 2009), 73 FR 23518 (April 30, 2008) (SR–Phlx– 

2008–30) (notice of filing and immediate 

effectiveness regarding Index Multiple ETFs and 

Index Inverse ETFs); and 55951 (June 25, 2007), 72 

FR 37298 (July 9, 2007) (SR–Phlx–2007–35) 

(approval order regarding Commodity Pool ETFs). 

6See, regarding Index-Linked Securities, 

Exchange Act Release Nos. 58204 (July 22, 2008), 

73 FR 43807 (July 28, 2008) (SR–CBOE–2008–64) 

(approval order); and 58985 (November 20, 2008), 

73 FR 72538 (November 28, 2008) (SR–ISE–2008– 

86) (notice of filing and immediate effectiveness). 

See also, regarding Index Multiple ETFs and Index 

Inverse ETFs, Exchange Act Release No. 56715 

(October 29, 2007), 72 FR 62287 (November 2, 2007) 

(SR–CBOE–2007–119) (approval order); and 56871 

(November 30, 2007), 72 FR 68924 (December 6, 

2007) (SR–ISE–2007–87) (approval order). See also, 

regarding Commodity Pool Units (ETFs), 55630 

(April 13, 2007), 72 FR 19993 (April 20, 2007) (SR– 

CBOE–2007–21) (approval order); and 55635 (April 

16, 2007), 72 FR 19999 (April 20, 2007) (SR–ISE– 

2007–16) (approval order). See also, regarding 

Currency Trust Shares, Securities Exchange Act 

Release No. 54983 (December 20, 2006), 71 FR 

78476 (December 29, 2006) (AMEX–2006–87) 

(approval order). 

7See Securities Exchange Act Release No. 58179 

(July 17, 2008), 73 FR 42874 (July 23, 2008) (SR– 

Phlx–2008–31). See also Securities Exchange Act 

Release No. 58183 (July 17, 2008), 73 FR 26182 

(May 8, 2008) (SR–NASDAQ–2008–035). 

8See, e.g., Securities Exchange Act Release No. 

59697 (April 2, 2009), 74 FR 16249 (April 9, 2009), 

(SR–Phlx–2009–23) (notice of filing); and 59794 

(April 20, 2009), 74 FR 18761 (April 24, 2009) (SR– 

Phlx–2009–17) (approval order). 

rulemaking be better used to improve 

decisionmaking? 

• What alternative models exist to 

improve the quality of decisionmaking 

and increase opportunities for citizen 

participation? 

• What are the limitations to 

transparency? 

• What strategies might be employed 

to adopt greater use of Web 2.0 in 

agencies? 

• What policy impediments to 

innovation in government currently 

exist? 

• What changes in training or hiring 

of personnel would enhance 

innovation? 

• What performance measures are 

necessary to determine the effectiveness 

of open government policies? 

This public process is not intended to, 

and does not, create any right or benefit, 

substantive or procedural, enforceable at 

law or in equity by any party against the 

United States, its departments, agencies, 

or entities, its officers, employees, or 

agents, or any other person. 

John P. Holdren, 

Director, Office of Science and Technology 

Policy. 

[FR Doc. E9–12026 Filed 5–20–09; 8:45 am] 

BILLING CODE 3170–W9–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59923; File No. SR– 

NASDAQ–2009–046] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to the 

Criteria for Securities That Underlie 

Options Traded on the Exchange 

May 14, 2009. 

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 May 8, 

2009, The NASDAQ Stock Market LLC 

(‘‘Nasdaq’’) filed with the Securities and 

Exchange Commission (‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by Nasdaq. Nasdaq filed the proposed 

rule change as a ‘‘non-controversial’’ 

proposed rule change pursuant to 

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

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

the proposal 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 

Nasdaq proposes for NOM to modify 

Chapter IV, Section 3 (Criteria for 

Underlying Securities) and Section 4 

(Withdrawal of Approval of Underlying 

Securities) of its options rules to: (1) 

Enable listing and trading of options on 

equity index-linked securities, 

commodity-linked securities, currencylinked securities, fixed income indexlinked securities, futures-linked 

securities, and multifactor index-linked 

securities (collectively referred to as 

‘‘Index-Linked Securities’’) that are 

principally traded on a national 

securities exchange and an ‘‘NMS 

stock’’ as defined in Rule 600 of 

Regulation NMS; (2) enable listing and 

trading of options on Index Multiple 

Exchange Traded Fund Shares (‘‘Index 

Multiple ETFs’’) and Index Inverse 

Exchange Traded Fund Shares (‘‘Index 

Inverse ETFs’’); (3) enable listing and 

trading of options on certain funds that 

hold specified non-U.S. currencies 

(‘‘Currency Trust Shares’’); and (4) 

enable listing and trading of options on 

commodity pool interests that hold and/ 

or manage portfolios or baskets of 

securities, commodity futures contracts, 

options on commodity futures contracts, 

swaps, forward contracts and/or options 

on physical commodities and/or nonU.S. currency (‘‘Commodity Pool 

ETFs’’). 

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. 

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 IV below. 

Nasdaq has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

This proposed rule change is based 

directly on recent rule change proposals 

of NASDAQ OMX PHLX, Inc. (‘‘Phlx’’) 5

and other option exchanges.6

This rule change is being proposed, 

subsequent to the merger of The 

NASDAQ OMX Group, Inc. (‘‘NASDAQ 

OMX’’) and the Philadelphia Stock 

Exchange, Inc. (now NASDAQ OMX 

PHLX),7 to more closely align, to the 

extent practicable, certain listing rules 

of the Exchange (NOM) and Phlx.8

Chapter IV, Sections 3 and 4 (referred 

to in this filing as ‘‘Sections 3 and 4’’ 

or individually as ‘‘Section 3’’ and 

‘‘Section 4’’) generally indicate on 

which underlying securities the 

Exchange may initially list and continue 

to list options. The purpose of the 

proposed rule change is to revise 

Sections 3 and 4 to enable the listing 

and trading of options on: Index-Linked 

Securities that are principally traded on 

a national securities exchange and an 

‘‘NMS stock’’ as defined in Rule 600 of 

Regulation NMS; Index Multiple ETFs 

and Index Inverse ETFs (together known 

as ‘‘Multiple Inverse ETFs’’); Currency 


dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 97 / Thursday, May 21, 2009 / Notices 23903 

9 ‘‘Currency Trust Shares’’ is defined as a security 

that: (a) Holds a specified non-U.S. currency 

deposited with the trust or similar entity; (b) when 

aggregated in some specified minimum number 

may be surrendered to the trust by the beneficial 

owner to receive the specified non-U.S. currency or 

currencies; and (c) pays the beneficial owner 

interest and other distributions on deposited nonU.S. currency or currencies, if any, declared and 

paid by the trust. See proposed Section 3(i), which 

is based on Commentary .06 to Phlx Rule 1009. See 

also Securities Exchange Act Release No. 58571 

(September 17, 2008), 73 FR 55188 (September 24, 

2008)(SR–Phlx–2008–60)(notice of filing and 

immediate effectiveness). 

10See NOM Rules Chapter III, Sections 7 and 8; 

Chapter XIV, Sections 7 and 8; Chapter III, Section 

9; and Chapter XIV, Section 9. 

11See NOM Rules Chapter VIII. 

12See, e.g., Section 3(l)(iv)(discussing, among 

other things, comprehensive surveillance 

agreements). 

Trust Shares; and Commodity Pool 

ETFs. 

Index-Linked Securities 

Index-Linked Securities are designed 

for investors who desire to participate in 

a specific market segment by providing 

exposure to one or more identifiable 

underlying securities, commodities, 

currencies, derivative instruments or 

market indexes of the foregoing 

(‘‘Underlying Index’’ or ‘‘Underlying 

Indexes’’). Index-Linked Securities are 

the non-convertible debt of an issuer 

that have a term of at least one (1) year 

but not greater than thirty (30) years. 

Despite the fact that Index-Linked 

Securities are linked to an underlying 

index, each trades as a single, exchangelisted security. Accordingly, rules 

pertaining to the listing and trading of 

standard equity options will apply to 

Index-Linked Securities. 

Listing Criteria (Index-Linked 

Securities) 

Currently, there is no provision in the 

Exchange’s initial listing rules, which 

are found in Section 3, for trading 

options on Index-Linked Securities. The 

Exchange will consider listing and 

trading options on Index-Linked 

Securities provided that they meet the 

new criteria for underlying securities set 

forth in Section 3. 

The Exchange proposes to add new 

subsection (l) to Section 3, which 

indicates that six types of Index-Linked 

Securities are deemed appropriate for 

options representing ownership of a 

security that provides for the payment at 

maturity, as described below: 

(1) Equity Index-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of an underlying index 

or indexes of equity securities (‘‘Equity 

Reference Asset’’); 

(2) Commodity-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of one or more physical 

commodities or commodity futures, 

options or other commodity derivatives 

or Commodity-Based Trust Shares or a 

basket or index of any of the foregoing 

(‘‘Commodity Reference Asset’’); 

(3) Currency-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount based on 

the performance of one or more 

currencies, or options or currency 

futures or other currency derivatives or 

Currency Trust Shares 9 or a basket or 

index of any of the foregoing (‘‘Currency 

Reference Asset’’); 

(4) Fixed Income Index-Linked 

Securities are securities that provide for 

the payment at maturity of a cash 

amount based on the performance of 

one or more 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’’); 

(5) Futures-Linked Securities are 

securities that provide for the payment 

at maturity of a cash amount 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) 

(‘‘Futures Reference Asset’’); and 

(6) Multifactor Index-Linked 

Securities are securities that provide for 

the payment at maturity of a cash 

amount based on the performance of 

any combination of two or more Equity 

Reference Assets, Commodity Reference 

Assets, Currency Reference Assets, 

Fixed Income Reference Assets or 

Futures Reference Assets (‘‘Multifactor 

Reference Asset’’). For the purposes of 

Section 3(l), Equity Reference Assets, 

Commodity Reference Assets, Currency 

Reference Assets, Fixed Income 

Reference Assets, Futures Reference 

Assets and Multifactor Reference Assets, 

will be collectively referred to as 

‘‘Reference Assets.’’ Index-Linked 

Securities must meet the criteria and 

guidelines for underlying securities set 

forth in Section 3(b), or the IndexLinked Securities must be redeemable at 

the option of the holder at least on a 

weekly basis through the issuer at a 

price related to the applicable 

underlying Reference Asset. In addition, 

the issuing company is obligated to 

issue or repurchase the securities in 

aggregation units for cash or cash 

equivalents satisfactory to the issuer of 

Index-Linked Securities which underlie 

the option as described in the IndexLinked Securities prospectus. 

Continued Listing Requirements (IndexLinked Securities) 

The Exchange proposes to establish 

new Section 4(k), which will include 

criteria related to the continued listing 

of options on Index-Linked Securities. 

Under the applicable continued 

listing criteria proposed in Section 4(k), 

options on Index Linked Securities 

initially approved for trading pursuant 

to proposed Section 3(l) may be subject 

to the suspension of opening 

transactions as follows: (1) Noncompliance with the terms of Section 

3(l); (2) non-compliance with the terms 

of Section 4(b), except in the case of 

options covering Index Linked 

Securities approved pursuant to Section 

3(l)(iii)2 that are redeemable at the 

option of the holder at least on a weekly 

basis, then option contracts of the class 

covering such securities may only 

continue to be open for trading as long 

as the securities are listed on a national 

securities exchange and are an ‘‘NMS 

stock’’ as defined in Rule 600 of 

Regulation NMS; (3) in the case of any 

Index-Linked Security trading pursuant 

to Section 3(l), the value of the 

Reference Asset is no longer calculated 

or available; or (4) such other event 

shall occur or condition exist that in the 

opinion of the Exchange makes further 

dealing in such options on the Exchange 

inadvisable. 

The Exchange represents that the 

listing and trading of options on IndexLinked Securities under Section 3(l) 

will not have any effect on the rules 

pertaining to position and exercise 

limits 10 or margin.11 Options on IndexLinked Securities will be subject to all 

rules governing the trading of equity 

options and the current continuing or 

maintenance listing standards for 

options trading on the Exchange. 

The Exchange represents that its 

existing surveillance procedures 

applicable to trading in options are 

adequate to properly monitor the 

trading in options on Index-Linked 

Securities and to deter and detect 

violations of Exchange rules.12


dwashington3 on PROD1PC60 with NOTICES
23904 Federal Register / Vol. 74, No. 97 / Thursday, May 21, 2009 / Notices 

13ETFs are also know as ‘‘Fund Shares’’ or 

‘‘Funds;’’ these terms may be used interchangeably. 

14 Index Multiple ETFs and Index Inverse ETFs 

together may be known as ‘‘Multiple-Inverse ETFs.’’ 

15See Securities Exchange Act Release Nos. 

52553 (October 3, 2005), 70 FR 59100 (October 11, 

2005)(SR–AMEX–2004–62)(approving the listing 

and trading of Ultra Funds and Short Funds) and 

54040 (June 23, 2006), 71 FR 37629 (June 30, 

2006)(SR–AMEX–2006–41)(approving the listing 

and trading of the UltraShort Funds). The Ultra 

Funds are expected to gain, on a percentage basis, 

approximately twice (200%) as much as the 

underlying benchmark index and should lose 

approximately twice (200%) as much as the 

underlying benchmark index when such prices 

decline. The Short Funds are expected to achieve 

investment results, before fees and expenses, that 

correspond to the inverse or opposite of the daily 

performance (¥100%) or an underlying benchmark 

index. Lastly, the UltraShort Funds are expected to 

achieve investment result, before fees and expenses, 

that correspond to twice the inverse or opposite of 

the daily performance (¥200%) of the underlying 

benchmark index. 

16Similarly to Commentary .06 to Phlx Rule 1009, 

the Exchange proposes to indicate in Section 3(i) 

that these interests may be in the SPDR Gold Trust 

or issued by the iShares COMEX Gold Trust or 

iShares Silver Trust. 17 ‘‘Financial Instruments’’ are defined to include 

stock index futures contracts, options on futures, 

options on securities and indexes, equity caps, 

collars and floors, swap agreements, forward 

contracts, repurchase agreements and reverse 

repurchase agreements. ‘‘Money Market 

Instruments’’ are defined to include U.S. 

government securities and repurchase agreements. 

See Section 3(i), which is based on Commentary .06 

to Phlx Rule 1009. 

18 ‘‘Partnership Unit’’ is defined as a security that: 

(a) Is issued by a partnership that invests in any 

combination of futures contracts, options on futures 

contracts, forward contracts, commodities (as 

defined in Section 1(a)(4) of the Commodity 

Exchange Act) and/or securities; and (b) is issued 

and redeemed daily in specified aggregate amounts 

at net asset value. See proposed Section 3(m), 

which is based on Commentary .06 to Phlx Rule 

1009. 

19Commodity pool interests that are principally 

engaged, directly or indirectly, in holding and/or 

managing portfolios or baskets of securities, 

commodity futures contracts, options on 

commodity futures contracts, swaps, forward 

contracts and/or options on physical commodities 

and/or non-U.S. currency are known as 

‘‘Commodity Pool ETFs.’’ See Chapter IV, Section 

3(i), which is based on Commentary .06 to Phlx 

Rule 1009. 

20Section 3(i) as proposed, and Commentary .06 

to Phlx Rule 1009, are substantially similar to 

Interpretation and Policy .06(ii) and (v)(D) to CBOE 

Rule 5.3 and ISE Rule 502(h)(ii) and (h)(B)(4). 

Index Multiple ETFs and Index Inverse 

ETFs 

Index Multiple ETFs 13 seek to 

provide investment results, before fees 

and expenses, that correspond to a 

specified multiple of the percentage 

performance on a given day of a 

particular foreign or domestic stock 

index. Index Inverse ETFs seek to 

provide investment results, before fees 

and expenses, that correspond to the 

inverse (opposite) of the percentage 

performance on a given day of a 

particular foreign or domestic stock 

index by a specified multiple. Index 

Multiple ETFs and Index Inverse ETFs 

differ from traditional exchange-traded 

fund shares in that they do not merely 

correspond to the performance of a 

given index, but rather attempt to match 

a multiple or inverse of such underlying 

index performance.14 The ProShares 

Ultra Funds, which currently trade on 

NYSE Arca and traded on the American 

Stock Exchange (‘‘Amex’’), is an 

example of an Index Multiple ETF. 

NYSE Arca also currently lists for 

trading Index Inverse ETFs, namely the 

Short Funds and the UltraShort 

Funds.15

Generally, in order to achieve 

investment results that provide either a 

positive multiple or inverse of the 

benchmark index, Index Multiple ETFs 

or Index Inverse ETFs may hold a 

combination of financial instruments, 

including, among other things: Stock 

index futures contracts; options on 

futures; options on securities and 

indexes; equity caps, collars and floors; 

swap agreements; forward contracts; 

repurchase agreements; and reverse 

repurchase agreements. The underlying 

portfolios of Index Multiple ETFs 

generally will hold at least 85% of their 

assets in the component securities of the 

underlying relevant benchmark index. 

The remainder of any assets is devoted 

to Financial Instruments that are 

intended to create the additional needed 

exposure to such underlying index 

necessary to pursue its investment 

objective. Normally, 100% of the value 

of the underlying portfolios of Index 

Inverse ETFs will be devoted to 

Financial Instruments and money 

market instruments, including U.S. 

government securities and repurchase 

agreements. 

Listing Criteria (Index Multiple ETFs 

and Index Inverse ETFs) 

Currently, there is no provision in the 

Exchange’s initial listing rules for 

trading options on Index Multiple ETFs 

or Index Inverse ETFs. Section 3(i) 

currently provides that securities 

deemed appropriate for options trading 

shall include shares or other securities 

(‘‘Fund Shares’’) that represent interests 

in registered investment companies (or 

series thereof) organized as open-end 

management investment companies, 

unit investment trusts or similar entities 

that are principally traded on a national 

securities exchange or through the 

facilities of a national securities 

association and reported as ‘‘national 

market’’ securities, and that hold 

portfolios of securities comprising or 

otherwise based on or representing 

investments in indexes or portfolios of 

securities (or that hold securities in one 

or more other registered investment 

companies that themselves hold such 

portfolios of securities) (‘‘Funds ‘‘) or 

represent interests in the SPDR Gold 

Trust.16

The Exchange proposes to amend 

Section 3(i) to indicate that Index 

Multiple ETFs or Index Inverse ETFs are 

deemed appropriate for options trading. 

Section 3(i) is expanded to indicate that 

options eligible for listing and trading 

include those that are based on Index 

Multiple ETFs and Index Inverse ETFs 

that may hold or invest in any 

combination of securities, Financial 

Instruments and/or Money Market 

Instruments.17

As further set forth in proposed 

amended Section 3(l), securities deemed 

appropriate for options trading (Fund 

Shares) that may include Partnership 

Units,18 Index Multiple ETFs and Index 

Inverse ETFs must be traded on a 

national securities exchange and must 

be an ‘‘NMS stock’’ as defined under 

Rule 600 of Regulation NMS. In 

addition, securities deemed appropriate 

for options trading must meet either: (i) 

The criteria and guidelines under 

Chapter 3, Section 3(b); or (ii) be 

available for creation or redemption 

each business day in cash or in kind 

from the investment company, 

commodity pool19 or other entity at a 

price related to net asset value. In 

addition, the investment company, 

commodity pool or other entity shall 

provide that shares may be created even 

though some or all of the securities and/ 

or cash (in lieu of the Financial 

Instruments) needed to be deposited 

have not been received by the unit 

investment trust or the management 

investment company, provided the 

authorized creation participant has 

undertaken to deliver the shares and/or 

cash as soon as possible and such 

undertaking has been secured by the 

delivery and maintenance of collateral 

consisting of cash or cash equivalents 

satisfactory to the fund which underlies 

the option as described in the 

prospectus. 

The Exchange proposes to also make 

clarifying changes to Section 3(i) to 

conform it to Commentary .06 of Phlx 

Rule 1009, as well as the rules of other 

option exchanges, regarding interests in 

a fund or trust that holds a specified 

non-U.S. currency or currencies, and 

surveillance agreements in respect 

thereof.20 Thus, the Exchange proposes 

to amend its Section 3(i) to expand the 

type of options to include options on 

funds (trusts) that represent an interest 

in a trust or other similar entity that 

holds specified non-U.S. currency or 

currencies deposited with the trust or 


dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 97 / Thursday, May 21, 2009 / Notices 23905 

21See, e.g., Securities Exchange Act Release No. 

54983 (December 20, 2006), 71 FR 78476 (December 

29, 2006)(AMEX–2006–87). AMEX noted in the 

filing that the proposed amendments to its Rule 915 

would permit it to list options on products such as 

the Euro Currency Trust, which issues Euro Shares 

that represent units of fractional undivided 

beneficial interest in, and ownership of, the noted 

trust; and that the investment objective of the trust 

was for the Euro Shares to reflect the price of the 

euro. 

22As discussed in detail below, the Exchange will 

not open for trading any additional series of equity 

options already approved for trading that do not 

meet the requirements for continued approval and 

may determine to delist the entire class of options 

for inadequate volume. See proposed Section 4(l), 

which is based on Commentary .11 to Phlx Rule 

1010. 

23See NOM Rules Chapter III, Sections 7 and 8; 

Chapter XIV, Sections 7 and 8; Chapter III, Section 

9; and Chapter XIV, Section 9. 

24See NOM Rules Chapter VIII. 

25See Securities Exchange Act Release Nos. 

52553 (October 3, 2005), 70 FR 59100 (October 11, 

2005)(SR–AMEX–2004–62 and 54040 (June 23, 

2006), 71 FR 37629 (June 3)(SR–AMEX–2006–41). 

26See, e.g., Section 3 (i)(i)(discussing, among 

other things, comprehensive surveillance 

agreements). 

27A ‘‘commodity pool’’ is defined in CFTC 

Regulation 4.10(d)(1) as any investment trust, 

syndicate, or similar form of enterprise operated for 

the purpose of trading commodity interests. CFTC 

regulations further provide that a ‘‘commodity 

interest’’ means a commodity futures contract and 

any contract, agreement or transaction subject to 

Commission regulation under section 4c or 19 of 

the Act. See CFTC Regulation 4.10(a). 

28The manager or operator of a ‘‘commodity 

pool’’ is required to register, unless applicable 

exclusions apply, as a commodity pool operator 

(‘‘CPO’’) and commodity trading advisor (‘‘CTA’’) 

with the CFTC and become a member of the 

National Futures Association (‘‘NFA’’). 29See Section 3(i)(ii), which is based on 

Commentary .06 to Phlx Rule 1009. See also 55951 

(June 25, 2007), 72 FR 37298 (July 9, 2007) (SR– 

Phlx–2007–35). 

30For Commodity Pool ETFs that engage in 

holding and/or managing portfolios or baskets 

commodity futures contracts, options on 

commodity futures contracts, swaps, forward 

contracts, options on physical commodities, options 

on non-U.S. currency and/or securities, the 

Exchange has entered into a comprehensive 

surveillance sharing agreement with the 

marketplace or marketplaces with last sale reporting 

that represent(s) the highest volume in such 

commodity futures contracts and/or options on 

commodity futures contracts on the specified 

commodities or non-U.S. currency, which are 

utilized by the national securities exchange where 

the underlying Commodity Pool ETFs are listed and 

traded. See Section 3(i)(iv), which is based on 

Commentary .06(b) to Phlx Rule 1009. 

similar entity (Currency Trust Shares). 

The Exchange is also proposing to 

require in Section 3(i)(iv) that for Funds 

that hold specified non-U.S. currencies 

deposited with the trust, the Exchange 

will have entered into a comprehensive 

surveillance sharing agreement with the 

marketplace or marketplaces with last 

sale reporting that represent(s) the 

highest volume in derivatives (options 

or futures) on the non-U.S. currency or 

currencies, which are utilized by the 

national securities exchange where the 

underlying Funds are listed and 

traded.21

Continued Listing Requirements (Index 

Multiple ETFs and Index Inverse ETFs) 

The Exchange proposes to amend 

Section 4 to indicate that the index or 

portfolio may consist of various 

securities, Financial Instruments and/or 

Money Market Instruments. The 

Exchange proposes to clarify that the 

relevant instruments have to be an 

‘‘NMS stock’’ under Rule 600 of 

Regulation NMS. Under the applicable 

continued listing criteria in Section 

4(h), options on ETFs may be subject to 

the suspension of opening transactions 

as follows: (1) Following the initial 

twelve-month period beginning upon 

the commencement of trading of the 

ETFs, there are fewer than 50 record 

and/or beneficial holders of the ETFs for 

30 or more consecutive trading days; (2) 

the value of the index or portfolio of 

securities, non-U.S. currency, or 

portfolio of commodities including 

commodity futures contracts, options on 

commodity futures contracts, swaps, 

forward contracts and/or options on 

physical commodities and/or Financial 

Instruments and Money Market 

Instruments on which Fund Shares 

(ETFs) are based is no longer calculated 

or available; or (3) such other event 

occurs or condition exists that in the 

opinion of the Exchange makes further 

dealing in such options inadvisable.22

Section 4(h) is expanded, similarly to 

Section 3(i), to indicate that options 

eligible for continued listing and trading 

include those that are based on Index 

Multiple ETFs and Index Inverse ETFs 

that may hold or invest in any 

combination of securities, Financial 

Instruments and/or Money Market 

Instruments. 

The Exchange represents that the 

listing and trading of options on Index 

Multiple ETFs and Index Inverse ETFs 

will not have any effect on the rules 

pertaining to position and exercise 

limits 23 or margin.24 Options on Index 

Multiple ETFs and Index Inverse ETFs 

will be subject to all rules governing the 

trading of equity options and the current 

continuing or maintenance listing 

standards for options trading on the 

Exchange. 

This proposal is necessary to enable 

the Exchange to list and trade options 

on the shares of funds such as the Short 

Fund and UltraShort Fund of the 

ProShares Trust.25 The proposed 

amendment is also necessary to enable 

the Exchange to continue to list and 

trade interests in Funds that hold 

specified non-U.S. currencies. The 

Exchange believes that the ability to 

trade options on these products will 

provide investors with greater risk 

management tools. 

The Exchange represents that its 

existing surveillance procedures 

applicable to trading in options are 

adequate to properly monitor the 

trading in options on Index Multiple 

ETFs and Index Inverse ETFs and to 

deter and detect violations of Exchange 

rules.26

Commodity Pool ETFs 

Commodity Pool ETFs directly or 

indirectly trade commodity futures 

products. As such, Commodity Pool 

ETFs are subject to the Commodity 

Exchange Act due to their status as a 

commodity pool,27 and therefore are 

regulated by the Commodity Futures 

Trading Commission (‘‘CFTC’’).28

Commodity Pool ETFs may hold or 

trade in one or more types of 

investments that may include any 

combination of securities, commodity 

futures contracts, options on commodity 

futures contracts, swaps, and forward 

contracts. 

Listing Criteria and Continued Listing 

Requirements (Commodity Pool ETFs) 

Currently, there is no provision in the 

Exchange’s initial listing rules for 

trading options on Commodity Pool 

ETFs. 

The Exchange proposes to amend 

Section 3(i) to indicate that, similarly to 

Index-Linked Securities and Index 

Multiple ETFs and Index Inverse ETFs, 

Commodity Pool ETFs are deemed 

appropriate for options trading. As such, 

Commodity Pool ETFs are proposed to 

represent commodity pool interests 

principally engaged, directly or 

indirectly, in holding and/or managing 

portfolios or baskets of securities, 

commodity futures contracts, options on 

commodity futures contracts, swaps, 

forward contracts and/or options on 

physical commodities and/or non-U.S. 

currency.29 To be eligible for options 

trading, Commodity Pool ETFs, like 

other option eligible securities, must be 

registered with the SEC and be an ‘‘NMS 

stock’’ as defined in Rule 600 of 

Regulation NMS under the Exchange 

Act. 

The Exchange also proposes in 

Section 3 to establish a comprehensive 

surveillance agreement requirement for 

Commodity Pool ETFs.30 The Exchange 

represents that its existing surveillance 

procedures applicable to trading in 

options are adequate to properly 

monitor the trading in options on 

Commodity Pool ETFs and to deter and 

detect violations of Exchange rules. 

The listing and trading of options on 

Commodity Pool ETFs will not have any 


dwashington3 on PROD1PC60 with NOTICES
23906 Federal Register / Vol. 74, No. 97 / Thursday, May 21, 2009 / Notices 

31See NOM Rules Chapter III, Sections 7 and 8; 

Chapter XIV, Sections 7 and 8; Chapter III, Section 

9; and Chapter XIV, Section 9. 

32See NOM Rules Chapter VIII. 

33See Securities Exchange Act No. 56881 

(December 3, 2007), 72 FR 69276 (December 7, 

2007) (SR–Phlx-2007–72) (approval order regarding 

delisting equity options classes where average daily 

volume is less that 20 contracts). Other options 

exchanges have similar delisting provisions. See 

Securities Exchange Act Release Nos. 55154 

(January 23, 2007), 72 FR 4743 (February 1, 2007) 

(SR–CBOE–2006–92) (delisting equity options 

classes where ADV is less than 20 contracts); and 

55161 (January 24, 2007), 72 FR 4754 (February 1, 

2007) (SR–ISE–2006–62) (delisting equity options 

classes where ADV is less than 20 contracts). 

34See Securities Exchange Act No. 56881 

(December 3, 2007), 72 FR 69276 (December 7, 

2007) (SR–Phlx-2007–72). 

35 15 U.S.C. 78f(b). 

36 15 U.S.C. 78f(b)(5). 

37 15 U.S.C. 78s(b)(3)(A). 

38 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

provide the Commission with written notice of its 

intent to file the proposed rule change, along with 

a brief description and text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. The 

Exchange has fulfilled this requirement. 

39See e.g., NASDAQ OMX PHLX Rules 1009 and 

1010; Chicago Board Options Exchange Rules 5.3 

and 5.4, and International Securities Exchange 

Rules 502 and 503. 

40For purposes only of waiving the 30-day 

operative delay, the Commission has also 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

effect on the rules pertaining to position 

and exercise limits 31 or margin.32

Options on Commodity Pool ETFs will 

be subject to all rules governing the 

trading of equity options and the current 

continuing or maintenance listing 

standards for options trading on the 

Exchange. 

Inadequate Volume Delisting 

In terms of housekeeping, the 

Exchange proposes to amend Section 4 

so that the Exchange may delist options 

that have inadequate trading volume, 

similarly to Phlx and other option 

exchanges.33

Section 4(l), which is based on 

Commentary .11 to Phlx Rule 1010,34

would allow the Exchange to cease 

listing additional series of equity 

options and to delist the class of equity 

options where the option has been 

trading on the Exchange not less than 

six (6) months and the Exchange average 

daily volume (‘‘ADV’’) of the entire class 

of options was less than twenty (20) 

contracts over the last six (6) month 

period. The proposal also would 

provide that if an option is singly listed 

only on the Exchange, the Exchange will 

cease to add new series and may delist 

the option when there is no remaining 

open interest in the product. Should the 

Exchange determine to delist an equity 

option pursuant to subsection (l) of 

Section 4, it will provide notification of 

the determination to delist such option 

not less than three (3) days prior to the 

scheduled delisting date. 

The Exchange believes that its low 

ADV delisting proposal is consistent 

with the Exchange’s maintenance and 

delisting criteria in Section 4 and 

should reduce or eliminate the 

quotation traffic attendant to low 

volume options listings that may 

nevertheless experience significant 

quoting activity. This should, in turn, 

diminish the total number of strikes that 

need to be maintained by the Exchange 

and potentially may thereby reduce 

technology costs for the Exchange and 

its member organizations and free up 

Exchange capacity. The Exchange 

further believes that expanding its 

ability to manage quotation traffic 

should benefit not only the Exchange 

and its members, but also public and 

professional traders and ultimately the 

industry. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act 35 in general, and furthers the 

objectives of Section 6(b)(5) of the Act 36

in particular, in that it is designed to 

promote just and equitable principles of 

trade, to remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general to protect 

investors and the public interest. The 

Exchange believes that the proposed 

rules applicable to trading Index-Linked 

Securities, Multiple-Inverse ETFs, 

Currency Trust Shares, and Commodity 

Pool ETFs, together with the Exchange’s 

surveillance procedures applicable to 

trading in the securities covered by the 

proposed rules, serve to foster investor 

protection. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Nasdaq does not believe that the 

proposed rule change will result in 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. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change: (1) Does not significantly affect 

the protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) by its terms does not become 

operative for 30 days after the date of 

this filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) of the Act 37 and 

Rule 19b–4(f)(6) thereunder.38

A proposed rule change filed under 

Rule 19b–4(f)(6) normally does not 

become operative for 30 days after the 

date of filing. However, Rule 19b– 

4(f)(6)(iii) permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange requests that the Commission 

waive the 30-day operative delay so that 

the Exchange can list and trade options 

on Index-Linked Securities, Index 

Multiple ETFs, Index Inverse ETFs, 

Currency Trust Shares, and Commodity 

Pool ETFs immediately. The 

Commission notes the proposal is 

substantively identical to rules of other 

exchanges that have been previously 

approved by the Commission and does 

not raise any new regulatory issues.39 In 

addition, the proposal would allow 

Nasdaq to list and trade products that 

currently trade on other options 

exchanges. The Commission believes 

that waiving the 30-day operative delay 

to permit the listing and trading of 

options on these products on an 

additional exchange as soon as possible 

is consistent with the protection of 

investors and the public interest.40 For 

these reasons, the Commission 

designates the proposed rule change as 

operative upon filing. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such 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: 


dwashington3 on PROD1PC60 with NOTICES
Federal Register / Vol. 74, No. 97 / Thursday, May 21, 2009 / Notices 23907 

41 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78s(b)(3)(A)(iii). 

3 17 CFR 240.19b–4(f)(4). 

4FICC is amending Government Securities 

Division Rule 3, Section 9, and Mortgage-Backed 

Securities Division Article III, Rule 1, Section 7. 

NSCC is amending Rule 2, Section 4. DTC is 

amending Rule 2, Section 8. 

5The OFAC Letter is not intended to reallocate 

legal liability related to the sanctions administered 

and enforced by OFAC. 

6The form of the OFAC Letter is attached to each 

of the clearing agencies’ rule filings with the 

Commission. 

7 15 U.S.C. 78q–1. 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

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

Number SR–NASDAQ–2009–046 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2009–046. 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 a.m. and 3 p.m. 

Copies of such filing also will be 

available for inspection and copying at 

the principal office of the Nasdaq. 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–2009–046 and 

should be submitted on or before June 

11, 2009. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.41

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–11807 Filed 5–20–09; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59917; File Nos. SR–DTC– 

2009–07, SR–FICC–2009–06, SR–NSCC– 

2009–03] 

Self-Regulatory Organizations; The 

Depository Trust Company, Fixed 

Income Clearing Corporation, and 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Changes Relating to Economic 

Sanctions and Embargo Programs 

Administered and Enforced by the 

Office of Foreign Assets Control 

May 14, 2009. 

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

Securities Exchange Act of 1934 

(‘‘Act’’),1 notice is hereby given that on 

March 31, 2009, April 1, 2009, and 

April 22, 2009, the Fixed Income 

Clearing Corporation (‘‘FICC’’), the 

National Securities Clearing Corporation 

(‘‘NSCC’’), and The Depository Trust 

Company (‘‘DTC’’), respectively, filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Item I, II, and III, below, which Items 

have been prepared primarily by FICC, 

NSCC, and DTC (collectively, ‘‘Clearing 

Agencies’’). The Clearing Agencies filed 

the proposed rule changes pursuant to 

Section 19(b)(3)(A)(iii) of the Act 2 and 

Rule 19b–4(f)(4) thereunder 3 so that the 

proposals were effective upon filing 

with the Commission. The Commission 

is publishing this notice to solicit 

comments on the proposed rule changes 

from interested persons. 

I. Self-Regulatory Organizations’ 

Statement of Terms of Substance of the 

Proposed Rule Changes 

The Clearing Agencies are adding 

language to their rules to make clear that 

the Clearing Agencies’ participants, 

members, and pledgees (collectively, 

‘‘members’’) must comply with the U.S. 

Department of the Treasury’s Office of 

Foreign Asset Control’s (‘‘OFAC’’) 

sanctions and embargo programs and as 

part of their compliance with OFAC 

sanctions regulations must agree not to 

conduct any transaction or activity 

through the Clearing Agencies that 

violate OFAC regulations. 

II. Self-Regulatory Organizations’ 

Statement of Purpose of, and Statutory 

Basis for, the Proposed Rule Changes 

In their filing with the Commission, 

the Clearing Agencies included 

statements concerning the purpose of 

and basis for the proposed rule changes 

and discussed any comments they 

received on the proposed rule change. 

The text of these statements may be 

examined at the places specified in Item 

IV below. The Clearing Agencies have 

prepared summaries, set forth in Section 

A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organizations’ 

Statement of Purpose of, and Statutory 

Basis for, the Proposed Rule Changes 

The purpose of these rule filings is to 

add new language to the Clearing 

Agencies’ rules 4 to clarify that the 

Clearing Agencies’ members must 

comply with OFAC’s sanctions and 

embargo programs and as part of their 

compliance with OFAC sanctions 

regulations must agree not to conduct 

any transaction or activity through the 

Clearing Agencies that violate such 

OFAC regulations. 

In addition, members subject to 

United States jurisdiction must confirm 

to the Clearing Agencies that it has 

implemented a risk-based OFAC 

compliance program. The Clearing 

Agencies will require each member to 

execute a ‘‘Confirmation of an OFAC 

Program’’ letter (‘‘OFAC Letter’’), which 

will serve to confirm that the member 

has ‘‘implemented a risk-based program 

reasonably designed to comply with 

applicable OFAC sanctions 

regulations.’’ 5 Each U.S. member’s 

OFAC Compliance Officer, Chief 

Compliance Officer, or other individual 

with responsibility for managing the 

OFAC compliance program will be 

required to submit the OFAC Letter at 

least every two years.6 Failure to 

properly submit the OFAC Letter to the 

Clearing Agencies will result in a $5,000 

fine. 

The Clearing Agencies state that the 

proposed rule changes are consistent 

with the requirements of Section 17A of 

the Act 7 and the rules and regulations 

thereunder because such changes will 

enhance the Clearing Agencies’ ability 

to comply with applicable laws thereby 

reducing risks and associated costs to 

the Clearing Agencies and their 

participants. 


dwashington3 on PROD1PC60 with NOTICES