Document ID: SEC-2007-0314-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-03-05T05:00Z

[Federal Register: March 5, 2007 (Volume 72, Number 42)]
[Notices]               
[Page 9799-9801]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr07-87]                         

[[Page 9799]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55344; File No. SR-NASDAQ-2006-057]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change as Modified by Amendment No. 2 Thereto To Trade Certain 
CurrencyShares Trusts Pursuant to Unlisted Trading Privileges

February 23, 2007.
    Pursuant to Section l9(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 12, 2006, The NASDAQ Stock Market LLC (``Nasdaq'') filed 
with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III below, which 
Items have been substantially prepared by Nasdaq. On January 29, 2007, 
Nasdaq filed Amendment No. 1 to the proposed rule change. On February 
16, 2007, Nasdaq filed Amendment No. 2 to the proposed rule change.\3\ 
This order provides notice of the proposed rule change, as amended, and 
approves the proposal on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(l).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 2 superceded the original filing and Amendment 
No. 1.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    Nasdaq seeks to continue trading pursuant to unlisted trading 
privileges (``UTP'') certain securities whose value is linked to the 
value of one or more non-U.S. currencies (``Currency Trust Shares''). 
The securities consist of shares (``Shares'') in the following currency 
trusts (``Trusts''):
     CurrencySharesTM Australian Dollar Trust, which 
issues Australian Dollar Shares;
     CurrencySharesTM British Pound Sterling Trust, 
which issues British Pound Sterling Shares;
     CurrencySharesTM Canadian Dollar Trust, which 
issues Canadian Dollar Shares;
     CurrencySharesTM Euro Trust, which issues Euro 
Shares;
     CurrencySharesTM Japanese Yen Trust, which 
issues Japanese Yen Shares;
     CurrencySharesTM Mexican Peso Trust, which 
issues Mexican Peso Shares;
     CurrencySharesTM Swedish Krona Trust, which 
issues Swedish Krona Shares; and
     CurrencySharesTM Swiss Franc Trust, which 
issues Swiss Franc Shares.
    The text of the proposed rule change is available on 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. Nasdaq is 
submitting this filing because its current listing standards do not 
extend to Currency Trust Shares. However, systems operated by Nasdaq 
and its affiliates currently trade the Shares on an over-the-counter 
basis as facilities of NASD. The filing will allow Nasdaq to continue 
trading the Shares as an exchange.
    The Commission previously approved the original listing and trading 
of the Shares on the New York Stock Exchange (``NYSE'').\4\
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    \4\ Securities Exchange Act Release No. 55268 (February 9, 
2007), 72 FR 7793 (February 20, 2007) (SR-NYSE-2007-03) (approving 
listing and trading of Japanese Yen Shares); Securities Exchange Act 
Release No. 52843 (November 28, 2005), 70 FR 72486 (December 5, 
2005) (SR-NYSE-2005-65) (approving listing and trading of Euro 
Shares); Securities Exchange Act Release No. 54020 (June 20, 2006), 
71 FR 36579 (June 27, 2006) (SR-NYSE-2006-35) (approving listing and 
trading of the six additional CurrencyShares Trusts).
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    The Australian Dollar Shares represent units of fractional 
undivided beneficial interest in and ownership of the Australian Dollar 
Trust. The investment objective of the Australian Dollar Trust is for 
the Australian Dollar Shares to reflect the price of the Australian 
dollar.
    The British Pound Sterling Shares represent units of fractional 
undivided beneficial interest in and ownership of the British Pound 
Sterling Trust. The investment objective of the British Pound Sterling 
Trust is for the British Pound Sterling Shares to reflect the price of 
the British pound.
    The Canadian Dollar Shares represent units of fractional undivided 
beneficial interest in and ownership of the Canadian Dollar Trust. The 
investment objective of the Canadian Dollar Trust is for the Canadian 
Dollar Shares to reflect the price of the Canadian dollar.
    The Euro Shares represent units of fractional undivided beneficial 
interest in and ownership of the Euro Trust. The investment objective 
of the Euro Trust is for the Euro Shares to reflect the price of the 
euro.
    The Japanese Yen Shares represent units of fractional undivided 
beneficial interest in and ownership of the Japanese Yen Trust. The 
investment objective of the Japanese Yen Trust is for the Japanese Yen 
Shares to reflect the price of the Japanese yen.
    The Mexican Peso Shares represent units of fractional undivided 
beneficial interest in and ownership of the Mexican Peso Trust. The 
investment objective of the Mexican Peso Trust is for the Mexican Peso 
Shares to reflect the price of the Mexican peso.
    The Swedish Krona Shares represent units of fractional undivided 
beneficial interest in and ownership of the Swedish Krona Trust. The 
investment objective of the Swedish Krona Trust is for the Swedish 
Krona Shares to reflect the price of the Swedish krona.
    The Swiss Franc Shares represent units of fractional undivided 
beneficial interest in and ownership of the Swiss Franc Trust. The 
investment objective of the Swiss Franc Trust is for the Swiss Franc 
Shares to reflect the price of the Swiss franc.
    The Trusts are not registered investment companies under the 
Investment Company Act of 1940. Nasdaq deems the Shares to be equity 
securities, thus rendering trading in the Shares subject to Nasdaq's 
existing rules governing the trading of equity securities, including 
Nasdaq Rule 4630.\5\ The primary trading hours for the Shares on Nasdaq 
would be 9:30 a.m. to 4:15 p.m. (EST). The Shares may also be traded in 
a pre-market session from 7 a.m. to 9:30 a.m. (EST) and a post-

[[Page 9800]]

market session from 4:15 p.m. to 8 p.m. (EST).
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    \5\ On November 16, 2006, the Commission approved a rule filing 
by Nasdaq to adopt Rule 4630, a new rule governing the trading of 
and surveillance procedures applicable to Commodity-Based Trust 
Shares. See Securities Exchange Act Release No. 54765 (November 16, 
2006), 71 FR 67668 (November 22, 2006) (SR-NASDAQ-2006-009). Because 
foreign currency is included within the rule's definition of a 
commodity, Rule 4630 is applicable to Currency Trust Shares.
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    Quotations for and last sale information regarding the Shares is 
disseminated through the Consolidated Tape System. The net asset value 
(``NAV'') and NAV per Share for each Trust are calculated by The Bank 
of New York as the Trustee for each Trust. To calculate the NAV, the 
Trustee adds the total value of Trust assets, including accrued 
receivables, and then subtracts Trust liabilities, including accrued 
expenses. The Trustee determines the NAV per Share by dividing the NAV 
of a Trust by the number of outstanding Shares. The NAV per Share is 
published on the Trusts' Web site at http://www.currencyshares.com (to which Nasdaq would provide a link from its http://www.nasdaq.com Web 

site). The Trusts' Web site is publicly accessible at no charge and 
also contains the spot price for each applicable foreign currency, 
including the bid and offer and the midpoint between the bid and offer 
for the foreign currency spot price, updated at least every 15 seconds; 
an intraday indicative value (``IIV'') \6\ per Share calculated by 
multiplying the indicative spot price of the currency by the quantity 
of the currency backing each Share, at least every 15 seconds, and for 
certain Shares on a five-to ten-second delayed basis; and other 
pertinent information about the value of a Share.\7\
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    \6\ The IIV of the Shares is analogous to the intraday optimized 
portfolio value (sometimes referred to as the IOPV), indicative 
portfolio value, or IIV associated with the trading of exchange-
traded funds.
    \7\ The Trusts' Web site's foreign currency spot price is 
provided by FactSet Research Systems (http://www.factset.com). 

Nasdaq would provide a link to the Trusts' Web site. The NYSE has 
stated that FactSet Research Systems is not affiliated with the 
Trusts, their Trustee, their sponsor, other entities involved in 
distributing or holding deposits associated with the Trusts, or the 
NYSE. In the event that the Trusts' Web site should cease to provide 
currency spot price information from an unaffiliated source and the 
IIV of the Shares, NYSE has stated that it would halt trading in the 
Shares and commence delisting proceedings for the Shares. Nasdaq 
would also halt trading in the Shares in the event that NYSE halts 
trading because the spot price and/or IIV is no longer available, or 
if NYSE delists the Shares for other reasons.
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    Nasdaq would halt trading in the Shares of a Trust 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 also would be governed by provisions of Nasdaq Rule 4120 
relating to temporary interruptions in the calculation or wide 
dissemination of the IIV.\8\
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    \8\ See Securities Exchange Act Release No. 55269 (February 9, 
2007), 72 FR 7490 (February 15, 2007) (SR-NASDAQ-2006-050).
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    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 NASD facilities operated by Nasdaq is currently 
subject to NASD's surveillance procedures for equity securities in 
general and ETFs in particular. After Nasdaq begins to trade the Shares 
as an exchange, NASD, on behalf of Nasdaq, will continue to surveil 
Nasdaq's trading of the Shares. Nasdaq's transition to trading the 
Shares as an exchange will not result in any change in the surveillance 
process with respect to the Shares.\9\
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    \9\ Surveillance of all trading on NASD facilities operated by 
Nasdaq, including the trading of Shares, is currently being 
conducted by NASD. When Nasdaq begins to trade the Shares as an 
exchange, NASD will surveil trading pursuant to a regulatory 
services agreement. Nasdaq is responsible for NASD's performance 
under this regulatory services agreement.
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    In connection with trading the Shares as an exchange, Nasdaq will 
issue an information circular (``Circular'') that will discuss the 
following: (1) The special characteristics and risks of trading the 
Shares; (2) the procedures for purchases and redemptions of Shares; (3) 
applicable Nasdaq rules including suitability rules; (4) how 
information regarding the IIV is disseminated; and (5) trading 
information. The Circular will also refer members to language in the 
Registration Statements regarding prospectus delivery requirements for 
the Shares, and note to members their obligations regarding prospectus 
delivery. Nasdaq notes that investors purchasing Shares directly from 
the Trusts will receive a prospectus. Nasdaq members purchasing Shares 
from the Trusts for resale to investors will deliver a prospectus to 
such investors.
    In addition, the Circular will reference that the Trusts are 
subject to various fees and expenses described in the Registration 
Statements. The Circular will explain that if the Trusts are required 
to sell currency to pay the Trusts' expenses, the amount of foreign 
currency required to create a basket of Shares issued by the Trusts or 
to be delivered upon a redemption of a basket of Shares may gradually 
decrease over time. If this is done when the price of the currency is 
relatively low, the selling of the currency could adversely affect the 
value of the Shares. Finally, the Circular will also reference the fact 
that there is no regulated source of last-sale information regarding 
currency and that the Commission has no jurisdiction over the trading 
of currency.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with the provisions 
of Section 6 of the Act,\10\ in general, and with Section 6(b)(5) of 
the Act,\11\ in particular, in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to a free and open 
market and a national market system, and, in general, to protect 
investors and the public interest.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(5).
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    In addition, Nasdaq believes that the proposal is consistent with 
Rule 12f-5 under the Act \12\ because it deems the Shares to be equity 
securities, thus rendering trading in the Shares subject to Nasdaq's 
rules governing the trading of equity securities.
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    \12\ 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 would 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 proposal 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-2006-057 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-2006-057. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your

[[Page 9801]]

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 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-2006-057 and should 
be submitted on or before March 26, 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, as amended, is consistent with the requirements of the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\13\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\14\ 
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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    \13\ 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).
    \14\ 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,\15\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\16\ The Commission notes that it previously approved the 
listing and trading of the Shares on NYSE.\17\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\18\ 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. Nasdaq 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 Nasdaq's existing rules governing 
the trading of equity securities.
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    \15\ 15 U.S.C. 78l(f).
    \16\ 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.
    \17\ See supra note 4.
    \18\ 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,\19\ 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 Consolidated Tape 
Association. Furthermore, the Trusts' Web site, which is publicly 
accessible at no charge, provides the IIV at least every 15 seconds, 
and for certain Shares on a five-second to ten-second delayed basis, 
throughout Nasdaq's trading sessions. In addition, Nasdaq has 
represented that, if the listing market halts trading when the IIV is 
not being calculated or disseminated, Nasdaq would halt trading in the 
Shares. Nasdaq would follow the procedures with respect to trading 
halts set forth in Nasdaq Rules 4120 and 4122.
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    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission notes that, if the Shares should be delisted by the 
listing exchange, the Nasdaq would no longer have authority to trade 
the Shares pursuant to this order.
    In support of this proposal, the Nasdaq has made the following 
representations:
    1. Nasdaq's surveillance procedures are adequate to address any 
concerns about the trading of the Shares on Nasdaq.
    2. Nasdaq will issue an information circular that will discuss the 
special characteristics and risks of trading the Shares, the procedures 
for the purchases and redemptions of the Shares, applicable Nasdaq 
rules including suitability rules, how information regarding the IIV is 
disseminated, and trading information.
    3. In connection with trading the Shares as an exchange, Nasdaq 
will issue an information circular that will refer members to the 
language in the Registration Statements regarding prospectus delivery 
requirements for the Shares and will also note to Nasdaq members their 
obligations regarding prospectus delivery. Investors purchasing Shares 
directly from the Trusts will receive a prospectus. In addition, Nasdaq 
members purchasing Shares from the Trust for resale to investors will 
deliver a prospectus to such investors.

This approval order is conditioned on the Nasdaq's adherence to these 
representations.

    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 NYSE 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 Nasdaq 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,\20\ that the proposed rule change (SR-NASDAQ-2006-057), as 
amended, be and it hereby is, approved on an accelerated basis.
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    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-3742 Filed 3-2-07; 8:45 am]

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