Document ID: SEC-2007-0722-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NASDAQ Stock Market LLC
Posted Date: 2007-05-22T04:00Z

[Federal Register: May 22, 2007 (Volume 72, Number 98)]
[Notices]               
[Page 28736-28739]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr22my07-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55760; File No. SR-NASDAQ-2007-046]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change to Trade Three iPath Exchange-Traded Notes Pursuant to 
Unlisted Trading Privileges

May 15, 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 1, 2007, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
This order provides notice of the

[[Page 28737]]

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''), index-linked securities (``Securities'') of Barclays Bank 
PLC (``Barclays'') linked to the performance of certain commodities 
indexes. The specific Securities to be traded are the iPath Exchange-
Traded Notes (``GSCI Securities'') Linked to the Performance of the 
GSCI Total Return Index (``GSCI Index''); the iPath Exchange-Traded 
Notes (``AIG Securities'') Linked to the Performance of the Dow Jones--
AIG Commodity Index Total Return (``AIG Index''); and the iPath 
Exchange Traded Notes (``Oil Securities'') Linked to the Performance of 
the Goldman Sachs Crude Oil Total Return Index (``Oil Index'') (the 
GSCI Index, the AIG Index, and the Oil Index collectively, 
``Indexes''). The text of the proposed rule change is available at 
Nasdaq, the Commission's Public Reference Room, and http://nasdaq.complinet.com
.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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. The Exchange 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
    Pursuant to Rule 4630, Nasdaq proposes to trade the Securities 
pursuant to UTP. The Securities are currently trading on Nasdaq on a 
three-month pilot basis.\3\ Approval of this filing would allow the 
Securities to continue to trade after the expiration of the pilot.
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    \3\ See Securities Exchange Act Release No. 55386 (March 2, 
2007), 72 FR 10801 (March 9, 2007) (SR-NASDAQ-2007-016).
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    The Securities are medium-term debt securities of Barclays that 
provide for a cash payment at maturity or upon earlier exchange at the 
holder's option, based on the performance of the applicable Index. The 
AIG Index is designed to be a diversified benchmark for commodities as 
an asset class; the AIG Index is currently composed of the prices of 19 
exchange-traded futures contracts on physical commodities, namely 
aluminum, coffee, copper, corn, cotton, crude oil, gold, heating oil, 
hogs, live cattle, natural gas, nickel, silver, soybeans, soybean oil, 
sugar, unleaded gasoline, wheat, and zinc. The GSCI Index is also 
designed as a diversified benchmark for physical commodities as an 
asset class; the composition of the GSCI is modified on a monthly basis 
by Goldman, Sachs & Co., its sponsor. The Oil Index is a sub-index of 
the GSCI Index that reflects a portion of the crude oil component of 
the GSCI Index (currently the WTI Crude Oil future contract traded on 
the New York Mercantile Exchange (``NYMEX'')). The Commission 
previously approved the original listing and trading of the Securities 
by the New York Stock Exchange LLC (``NYSE'').\4\
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    \4\ See Securities Exchange Act Release Nos. 53849 (May 22, 
2006), 71 FR 30706 (May 30, 2006) (SR-NYSE-2006-20); 53876 (May 25, 
2006), 71 FR 32158 (June 2, 2006) (SR-NYSE-2006-16); and 54177 (July 
19, 2006), 71 FR 42700 (July 27, 2006) (SR-NYSE-2006-19) (``NYSE 
Orders'').
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    Nasdaq deems the Securities to be equity securities, thus rendering 
trading in the Securities subject to its existing rules governing the 
trading of equity securities, including Nasdaq Rule 4630, which governs 
the trading of Commodity-Related Securities such as the Securities. The 
primary trading hours for the Securities on Nasdaq will be 7 a.m. to 8 
p.m. Eastern Time (``ET'').
    Quotations for and last-sale information regarding the Securities 
are disseminated through the Consolidated Quotation System. An 
``Intraday Indicative Value'' (``IIV'') meant to approximate the 
intrinsic economic value of the Securities is calculated and published 
via the facilities of the Consolidated Tape Association every 15 
seconds from 9:30 a.m. to 4 p.m. ET on each day on which the Securities 
are traded on NYSE. Additionally, Barclays or an affiliate calculates 
and publishes the closing IIV of the Securities on each trading day at 
http://www.ipathetn.com. The providers of the Indexes disseminate 

updated Index values approximately every 15 seconds during applicable 
portions of the trading day and publish a daily Index value between 4 
p.m. and 6 p.m. ET, in each case through Reuters.
    Nasdaq would halt trading in the Securities 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 
Securities will also be governed by provisions of Nasdaq Rule 4120 
relating to temporary interruptions in the calculation or wide 
dissemination of the IIV or Indexes. Additionally, Nasdaq may cease 
trading the Securities 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 would stop trading the 
Securities if the listing market delists them.
    Nasdaq believes that its surveillance procedures are adequate to 
address any concerns about the trading of the Securities on Nasdaq. 
Trading of the Securities through Nasdaq systems is currently subject 
to NASD's surveillance procedures for equity securities in general and 
index-linked securities in particular.\5\
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    \5\ 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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    Nasdaq is able to obtain information regarding trading in the 
Securities and the underlying Index components 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. Finally, Nasdaq is 
party to Information Sharing Agreements with NYMEX, ICE Futures, the 
London Metal Exchange, and the Kansas Board of Trade relating to the 
trading of commodity-based instruments on those markets. In connection 
with trading the Securities on a pilot basis, Nasdaq has informed its 
members in an Information Circular of the special characteristics and 
risks associated with trading the Securities.
2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act,\6\ in general, and Section 6(b)(5) of the Act,\7\ in 
particular, 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

[[Page 28738]]

with Rule 12f-5 under the Act \8\ because it deems the Securities to be 
equity securities, thus rendering trading in the Securities subject to 
Nasdaq's existing rules governing the trading of equity securities.
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    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \6\ 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-2007-046 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-2007-046. 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. 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-2007-046 and should be submitted on or before 
June 12, 2007.

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

    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.\9\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\10\ 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 Securities.
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    \9\ 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).
    \10\ 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,\11\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\12\ The Commission notes that it previously approved the 
listing and trading of the Securities on NYSE.\13\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\14\ 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 Securities to be equity securities, 
thus rendering trading in the Securities subject to the Exchange's 
existing rules governing the trading of equity securities.
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    \11\ 15 U.S.C. 78f(b)(5).
    \12\ 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.
    \13\ See NYSE Orders, supra note 4.
    \14\ 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,\15\ 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.
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    \15\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    In support of this proposal, the Exchange represents that its 
surveillance procedures are adequate to properly monitor the trading of 
the Securities on the Exchange. In addition, the Exchange represents 
that it is party to Information Sharing Agreements with NYMEX, ICE 
Futures, the London Metal Exchange, and the Kansas Board of Trade 
relating to the trading of commodity-based instruments on those 
markets. This approval order is conditioned on the Exchange'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 Securities by NYSE is consistent 
with the Act. In addition, the Commission previously found that the 
trading of the Securities by Nasdaq pursuant to UTP on a three-month 
pilot basis was consistent with the Act. The Commission presently is 
not aware of any regulatory issue that should cause it to revisit these 
earlier findings or would preclude the trading of the Securities on the 
Exchange pursuant to UTP. Therefore, accelerating approval of this 
proposed rule change should benefit investors by creating, without 
undue delay, additional competition in the market for the Securities. 
For these reasons, the Commission finds good cause to approve the 
proposal on an accelerated basis.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\16\ that the

[[Page 28739]]

proposed rule change (SR-NASDAQ-2007-046), be and it hereby is, 
approved on an accelerated basis.
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    \16\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\17\
Jill M. Peterson,
Assistant Secretary.
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    \17\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E7-9739 Filed 5-21-07; 8:45 am]

BILLING CODE 8010-01-P