Document ID: SEC-2007-0810-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-06-12T04:00Z

[Federal Register: June 12, 2007 (Volume 72, Number 112)]
[Notices]               
[Page 32380-32383]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12jn07-81]                         

[[Page 32380]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55862; File No. SR-NASDAQ-2007-053]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change Relating to Trading Shares of the PowerShares DB Energy 
Fund, the PowerShares DB Oil Fund, the PowerShares DB Precious Metals 
Fund, the PowerShares DB Gold Fund, the PowerShares DB Silver Fund, the 
PowerShares DB Base Metals Fund, and the PowerShares DB Agriculture 
Fund Pursuant to Unlisted Trading Privileges

June 5, 2007.
    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 16, 2007, The NASDAQ Stock Market LLC (``Nasdaq''), filed with 
the Securities and Exchange Commission (``Commission'') the proposed 
rule change as described in Items I and II below, which Items have been 
substantially prepared by Nasdaq. This order provides notice of the 
proposed rule change and approves the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to trade, pursuant to unlisted trading privileges 
(``UTP''), shares (``Shares'') of the PowerShares DB Energy Fund, the 
PowerShares DB Oil Fund, the PowerShares DB Precious Metals Fund, the 
PowerShares DB Gold Fund, the PowerShares DB Silver Fund, the 
PowerShares DB Base Metals Fund, and the PowerShares DB Agriculture 
Fund (collectively the ``Funds''). The text of the proposed rule change 
is available from Nasdaq's Web site at http://nasdaq.complinet.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 and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item III 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
    Nasdaq is proposing to trade the Shares on a UTP basis. The Shares 
are currently trading on Nasdaq on a three-month pilot basis.\3\ 
Approval of this filing will allow the Shares to continue to trade 
after the expiration of the pilot. The Commission previously approved a 
proposal to list and trade the Shares of the Funds by the American 
Stock Exchange LLC (the ``Amex'').\4\
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    \3\ Securities Exchange Act Release No. 55386 (March 2, 2007), 
72 FR 10801 (March 9, 2007) (SR-NASDAQ-2007-016) (``Pilot Order'').
    \4\ See Securities Exchange Act Release No. 55029 (December 29, 
2006), 72 FR 806 (January 8, 2007) (SR-Amex-2006-76) (the ``Amex 
Order'').
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    The Shares represent beneficial ownership interests in the 
corresponding Fund's net assets, consisting solely of the common units 
of beneficial interests of the DB Energy Master Fund, the DB Oil Master 
Fund, the DB Precious Metals Master Fund, the DB Gold Master Fund, the 
DB Silver Master Fund, the DB Base Metals Master Fund, and the DB 
Agriculture Master Fund, respectively (collectively, the ``Master 
Funds''). DB Multi-Sector Commodity Master Trust (the ``Master Trust'') 
is organized as a Delaware statutory trust with each of the Master 
Funds representing a series of the Master Trust. The Master Funds will 
hold primarily \5\ futures contracts \6\ on the commodities comprising 
the Deutsche Bank Liquid Commodity Index--Optimum Yield Energy Excess 
ReturnTM, Deutsche Bank Liquid Commodity Index--Optimum 
Yield Crude Oil Excess ReturnTM, Deutsche Bank Liquid 
Commodity Index--Optimum Yield Precious Metals Excess 
ReturnTM, Deutsche Bank Liquid Commodity Index--Optimum 
Yield Gold Excess ReturnTM, Deutsche Bank Liquid Commodity 
Index--Optimum Yield Silver Excess ReturnTM, Deutsche Bank 
Liquid Commodity Index Optimum Yield Industrial Metals Excess 
ReturnTM, and Deutsche Bank Liquid Commodity Index--Optimum 
Yield Agriculture Excess ReturnTM (collectively, the 
``Indexes''), as the case may be. The sponsor of the Indexes is 
Deutsche Bank AG London (the ``Index Sponsor''). Each of the Funds and 
each of the Master Funds are commodity pools operated by DB Commodity 
Services LLC (the ``Managing Owner'').\7\
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    \5\ Other holdings of the Master Fund will include cash and U.S. 
Treasury securities for deposit with futures commission merchants as 
margin, and other high-credit-quality short-term fixed income 
securities.
    \6\ The following is a list of futures contracts and other 
commodity interests in which the respective Master Fund may invest 
and the exchanges on which they trade: Energy Index--sweet light 
crude (NYMEX), heating oil (NYMEX), brent crude oil (ICE Futures), 
RBOB gasoline (NYMEX), natural gas (NYMEX); Oil Index--sweet light 
crude (NYMEX); Precious Metals Index--gold (COMEX), silver (COMEX); 
Gold Index--gold (COMEX); Silver Index--silver (COMEX); Base Metals 
Index--aluminum (LME), zinc (LME), copper-grade A (LME); Agriculture 
Index--corn (CBOT), wheat (CBOT), soybeans (CBOT), sugar (NYBOT).
    \7\ The Managing Owner is registered as a commodity pool 
operator (``CPO'') and commodity trading advisor (``CTA'') with the 
Commodity Futures Trading Commission (``CFTC'') and is a member of 
the National Futures Association (``NFA''). The Managing Owner will 
serve as the CPO and CTA of each of the Funds and each of the Master 
Funds.
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    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to the Nasdaq's existing rules governing 
the trading of equity securities, including Rule 4630. The Shares will 
trade on Nasdaq from 9:30 a.m. until 4:15 p.m. Eastern Time (``ET''), 
except that shares of the PowerShares DB Base Metals Fund will also 
trade from 4:15 p.m. until 8 p.m. ET, even if the Indicative Fund Value 
(``IFV''), as discussed below, is not disseminated from 4:15 p.m. until 
8 p.m. ET.\8\ Nasdaq has appropriate rules to facilitate transactions 
in the Shares during these trading sessions.
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    \8\ Because the LME is closed for floor and electronic trading 
during Nasdaq's after-hours trading session (from 4:15 p.m. until 8 
p.m. ET), an updated IFV for the PowerShares DB Base Metals Fund 
cannot be calculated during such session. As provided by Rule 4120, 
Nasdaq may rely on the listing market to monitor dissemination of 
the IFV during Nasdaq's regular trading session (9:30 a.m. to 4:15 
p.m. ET). Currently the Index Sponsor for the PowerShares DB Base 
Metals Fund's index does not calculate updated index values during 
Nasdaq's late trading session; however, if the Index Sponsor did so 
in the future, Nasdaq will not trade shares of the PowerShares DB 
Base Metals Fund unless such official index value is widely 
disseminated.
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    Like other exchange-traded fund products, each of the Funds issues 
and redeems its Shares on a continuous basis at a price equal to the 
NAV per Share next determined after an order is received in proper 
form. Also, each of the Funds issues and redeem its Shares only in 
aggregations of 200,000 shares (``Basket Aggregations'') and only 
through qualified market participants that have entered into agreements 
with the Managing Owner (each, an ``Authorized Participant''). 
Additional information about the creation and redemption process is 
included in the Amex Order. In summary, to create Shares, an Authorized 
Participant must properly place a creation order and

[[Page 32381]]

deliver the specified ``cash deposit amount'' \9\ and applicable 
transaction fee to The Bank of New York (the ``Fund Administrator''). 
The Fund Administrator will issue to the Authorized Participant the 
appropriate number of Basket Aggregations. To redeem Shares, an 
Authorized Participant must properly place a redemption order and 
deliver Shares that in the aggregate constitute one or more Basket 
Aggregations, plus any applicable transaction fee. The Fund 
Administrator will deliver the appropriate ``cash redemption amount'' 
\10\ for each Basket Aggregation that an Authorized Participant 
redeems.
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    \9\ The ``cash deposit amount'' equals the NAV per Share of the 
applicable Fund times 200,000 (i.e., NAV per Basket Aggregation).
    \10\ The ``cash redemption amount'' equals the NAV per Basket 
Aggregation.
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    On each business day, the Administrator makes available immediately 
prior to the opening of trading on Amex, through the facilities of the 
Consolidated Tape Association (``CTA''), the Basket Amount for the 
creation of a Basket. According to the Amex Order, Amex disseminates 
every 15 seconds throughout the trading day, via the facilities of the 
CTA, an amount representing on a per-Share basis, the current values of 
the Basket Amounts for each of the Funds.
    After 4 p.m. ET each business day, the Administrator determines the 
NAV for each of the Funds, utilizing the current settlement value of 
the particular commodity futures contracts. The calculation methodology 
for the NAV is described in more detail in the Amex Order. After 4 p.m. 
ET each business day, the Administrator, Amex, and the Managing Owner 
disseminate the NAVs for the Shares and the Basket Amounts (for orders 
placed during the day). The Basket Amounts and the NAVs are 
communicated by the Administrator to all Authorized Participants via 
facsimile or e-mail, and the NAV is available on the Funds' Web site at 
http://www.dbfunds.db.com.\11\

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    \11\ The Funds also maintain information on a Web site at http://www.powershares.com.
 Nasdaq will provide a link from its Web site 

at http://www.nasdaq.com to the Funds' Web sites.

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    Quotations for and last-sale information regarding the Shares are 
disseminated through the Consolidated Tape System (``CTS''). The Index 
Sponsor publishes the value of each of the Indexes at least once every 
15 seconds throughout each trading day on the CTA, Bloomberg, Reuters, 
and on the Fund's Web site at http://www.dbfunds.db.com. The closing 

Index levels similarly are provided by the Index Sponsor. In addition, 
any adjustments or changes to the Indexes are provided by the Index 
Sponsor and Amex on their respective Web sites.
    The Web site for the Funds at http://www.powershares.com, which is 

publicly accessible at no charge, contains the following information: 
(a) The current NAV per Share daily and the prior business day's NAV 
and the reported closing price; (b) the mid-point of the bid-ask price 
in relation to the NAV as of the time the NAV is calculated (the ``Bid-
Ask Price'');\12\ (c) the calculation of the premium or discount of 
such price against such NAV; (d) data in chart form displaying the 
frequency distribution of discounts and premiums of the Bid-Ask Price 
against the NAV, within appropriate ranges for each of the four 
previous calendar quarters; (e) the prospectus; and (f) other 
applicable quantitative information.
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    \12\ The Bid-Ask Price of Shares is determined using the highest 
bid and lowest offer as of the time of calculation of the NAV.
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    As described above, the respective NAVs for the Funds are 
calculated and disseminated daily to all market participants at the 
same time. According to the Amex Order, Amex also intends to 
disseminate for each of the Funds on a daily basis by means of CTA/CTS 
High Speed Lines information with respect to the corresponding IFV (as 
discussed below), recent NAV, and shares outstanding. Amex will also 
make available on its Web site daily trading volume of the Shares of 
each of the Funds, closing prices of such Shares, and the corresponding 
NAV. The closing price and settlement prices of the futures contracts 
comprising the Indexes and held by the corresponding Master Funds are 
also readily available from the relevant futures exchanges, automated 
quotation systems, published or other public sources, or on-line 
information services such as Bloomberg or Reuters.
    Amex has represented that it will disseminate through the 
facilities of the CTA an updated IFV for each of the Funds. The 
respective IFVs will be disseminated on a per-Share basis at least 
every 15 seconds from 9:30 a.m. to 4:15 p.m. ET, according to the Amex 
Order. The IFVs will be calculated based on the cash required for 
creations and redemptions for the respective Funds adjusted to reflect 
the price changes of the corresponding Index commodities through 
investments held by the Master Funds, i.e., futures contracts. The IFVs 
will not reflect price changes to the price of an underlying commodity 
between the close of trading of the futures contract at the relevant 
futures exchange and 4:15 p.m. ET. While the Shares will trade on 
Nasdaq from 9:30 a.m. to 4:15 p.m. ET (and until 8 p.m. ET in the case 
of the shares of the PowerShares DB Base Metals Fund), regular trading 
hours for each of the Index commodities on the various futures 
exchanges vary widely, as set forth in detail in the Amex Order. 
Therefore, the value of a Share may be influenced by non-concurrent 
trading hours between the Nasdaq and the various futures exchanges on 
which the futures contracts based on the Index commodities are traded.
    Nasdaq will halt trading in the Shares under the conditions 
specified in Nasdaq Rules 4120 and 4121. The conditions for a halt 
include a regulatory halt by the listing market. UTP trading in the 
Shares will also be governed by provisions of Nasdaq Rule 4120 relating 
to temporary interruptions in the calculation or wide dissemination of 
the IFV or the value of the Index. Additionally, Nasdaq may cease 
trading the 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 the 
Shares if the listing market delists them.
    Nasdaq believes that its surveillance procedures are adequate to 
address any concerns about the trading of the Shares on Nasdaq. Trading 
of the Shares through Nasdaq facilities is currently subject to NASD's 
surveillance procedures for equity securities in general and ETFs in 
particular.\13\ Nasdaq is able to obtain information regarding trading 
in the Shares and the underlying futures contracts through its members 
in connection with the proprietary or customer trades that such members 
effect on any relevant market. In addition, Nasdaq may obtain trading 
information via the Intermarket Surveillance Group (``ISG'') from other 
exchanges who are members or affiliates of the ISG, including the CBOT 
and the NYBOT, and Nasdaq has Information Sharing Agreements in place 
with ICE, NYMEX, and LME. Nasdaq has issued an Information Circular to 
inform its members of the special characteristics and risks associated 
with trading the Shares.
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    \13\ NASD surveils trading pursuant to a regulatory services 
agreement. Nasdaq is responsible for NASD's performance under this 
regulatory services agreement.

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[[Page 32382]]

2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act \14\ in general and Section 6(b)(5) of the Act \15\ in 
particular, in that in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, remove impediments to a free and open market and a 
national market system, and, in general, to protect investors and the 
public interest. In addition, Nasdaq believes that the proposal is 
consistent with Rule 12f-5 under the Act \16\ because it deems the 
Shares to be an equity securities, thus rendering trading in the Shares 
subject to Nasdaq's existing rules governing the trading of equity 
securities.
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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ 17 CFR 240.12f-5.
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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 on the proposed rule change 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 (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2007-053 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2007-053. 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. Copies of such 
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-2007-053 and should be submitted on or before 
July 3, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful review, 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\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\18\ which 
requires that an exchange have rules designed, among other things, 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 Commission believes that this proposal should benefit 
investors by increasing competition among markets that trade the 
Shares.
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    \17\ In approving this rule change, the Commission notes that it 
has considered the proposal's impact on efficiency, competition, and 
capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\19\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\20\ The Commission notes that it previously approved the 
listing and trading of the Shares on Amex.\21\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\22\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. The Exchange has represented that it meets this 
requirement because it deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities.
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    \19\ 15 U.S.C. 78l(f).
    \20\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \21\ See supra note 4.
    \22\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\23\ which sets forth 
Congress' finding that it is in the public interest and appropriate for 
the protection of investors and the maintenance of fair and orderly 
markets to assure the availability to brokers, dealers, and investors 
of information with respect to quotations for and transactions in 
securities. Quotations for and last-sale information regarding the 
Shares are disseminated through the facilities of the CTA and the 
Consolidated Quotation System. Furthermore, the IFV of each Fund is 
disseminated every 15 seconds throughout the trading day by the 
national securities exchange on which the Fund is listed or by other 
information providers or market data vendors.
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    \23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission also believes that the Exchange's trading halt rules 
are reasonably designed to prevent trading in an ETF when transparency 
is impaired. Nasdaq will halt trading in the Shares under the 
conditions specified in Nasdaq Rules 4120 and 4121. The conditions for 
a halt include a regulatory halt by the listing market. UTP trading in 
the Shares will also be governed by provisions of Nasdaq Rule 4120 
relating to temporary interruptions in the calculation or wide 
dissemination of the IFV or the value of the Index. Additionally, 
Nasdaq may cease trading the Shares if other unusual conditions

[[Page 32383]]

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).
    The Commission notes that, if the Shares should be delisted by the 
listing exchange, the Exchange would no longer have authority to trade 
the Shares pursuant to this order.
    In support of this proposal, the Exchange has represented that its 
surveillance procedures are adequate to properly monitor Exchange 
trading of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules. This approval order is conditioned on the 
Exchange's adherence to this representation.
    In addition, the Commission recently approved the trading of the 
Shares on the Exchange pursuant to UTP for a pilot period of three 
months.\24\ In the Pilot Order, the Commission noted that exchanges 
that trade commodity-related securities generally have in place 
surveillance arrangements with markets that trade the underlying 
securities. In its proposal to trade the Shares for a pilot period, the 
Exchange represented that it was in the process of completing these 
surveillance arrangements and expected to do so ``in the near future.'' 
The Exchange recently provided the Commission with evidence that it has 
completed these surveillance arrangements.
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    \24\ See supra note 3.
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    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. As noted previously, the Commission previously found 
that the listing and trading of the Shares on Amex is consistent with 
the Act. The Commission presently is not aware of any regulatory issue 
that should cause it to revisit that finding or would preclude the 
trading of the Shares on the Exchange pursuant to UTP. Therefore, 
accelerating approval of this proposal should benefit investors by 
creating, without undue delay, additional competition in the market for 
the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\25\ that the proposed rule change (SR-NASDAQ-2007-053) thereto, be 
and it hereby is, approved on an accelerated basis.
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    \25\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-11181 Filed 6-11-07; 8:45 am]

BILLING CODE 8010-01-P