Document ID: SEC-2008-1218-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NASDAQ Stock Market LLC
Posted Date: 2008-09-04T04:00Z

[Federal Register: September 4, 2008 (Volume 73, Number 172)]
[Notices]               
[Page 51672-51676]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04se08-71]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58440; File No. SR-NASDAQ-2008-071]

 
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change Relating to the Generic Listing Standards for Index 
Multiple Exchange Traded Fund Shares and Index Inverse Exchange Traded 
Fund Shares

August 28, 2008.
    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 August 20, 2008, 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 prepared by Nasdaq. The Commission is 
publishing this notice and order to solicit comments on the proposed 
rule change from interested persons and to approve 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 is filing a proposed rule change to amend Nasdaq Rule 
4420(j) to list and trade, or trade pursuant to unlisted trading 
privileges (``UTP''), shares of a series of Index Multiple Exchange 
Traded Fund Shares (``Multiple Fund Shares'') and Index Inverse 
Exchange Traded Fund Shares (``Inverse Fund Shares'') (collectively, 
the ``Fund Shares''). 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.
    Proposed new language is italicized; proposed deletions are in 
brackets.\3\
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    \3\ Changes are marked to the rule text that appears in the 
electronic manual of Nasdaq found at http://
nasdaq.cchwallstreet.com.
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* * * * *

4420. Quantitative Listing Criteria

* * * * *
    (a)-(i) No Change.
    (j) Index Fund Shares
    (1) No Change
    (A) No Change
    (B)(i) The term ``Index Fund Share'' includes a security issued by 
an open-end management investment company that seeks to provide 
investment results that either exceed the performance of a specified 
domestic equity, international or global equity, or fixed income index 
or a combination thereof by a specified multiple or that correspond to 
the inverse (opposite) of the performance of a specified domestic 
equity, international or global equity, or fixed income index or a 
combination thereof by a specified multiple. Such a security is issued 
in a specified aggregate number in return for a deposit of a specified 
number of shares of stock, a specified portfolio of fixed income 
securities or a combination of the above and/or cash as defined in 
subparagraph (1)(B)(ii) of this rule with a value equal to the next 
determined net asset value. When aggregated in the same specified 
minimum number, Index Fund Shares may be redeemed at a holder's request 
by such open-end investment company which will pay to the redeeming 
holder the stock, fixed income securities or a combination thereof and/
or cash with a value equal to the next determined net asset value.
    (ii) In order to achieve the investment result that it seeks to 
provide, such an investment company may hold a combination of financial 
instruments, including, but not limited to, stock index futures 
contracts; options on futures contracts; options on securities and 
indices; equity caps, collars and floors; swap agreements; forward 
contracts; repurchase agreements and reverse repurchase agreements (the 
``Financial Instruments''), but only to the extent and in the amounts 
or percentages as set forth in the registration statement for such 
Index Fund Shares.
    (iii) Any open-end management investment company which issues Index 
Fund Shares referenced in this subparagraph (1)(B) that seeks to 
provide investment results, before fees and expenses, in an amount that 
exceeds -200% of the percentage performance on a given day of a 
particular domestic equity, international or global equity or fixed 
income securities index or a combination thereof shall not be approved 
by the Exchange for listing and trading pursuant to Rule 19b-4(e) under 
the Securities Exchange Act of 1934.
    (iv) For the initial and continued listing of a series of Index 
Fund Shares referenced in the provisions of this subparagraph (1)(B) of 
this rule, the following requirements must be adhered to:
    Daily public Web site disclosure of portfolio holdings that will 
form the basis for the calculation of the net asset value by the issuer 
of such series, including, as applicable, the following instruments:
    a. The identity and number of shares held of each specific equity 
security;
    b. The identity and amount held for each specific fixed income 
security;
    c. The specific types of Financial Instruments and characteristics 
of such Financial Instruments; and
    d. Cash equivalents and the amount of cash held in the portfolio.
    If the Exchange becomes aware that the net asset value related to 
an Index Fund Shares included in the provisions of this subparagraph 
(1)(B)(ii) of this rule, is not being disseminated to all market 
participants at the same time or the daily public Web site disclosure 
of portfolio holdings does not occur, the Exchange shall halt trading 
in such series of Index Fund Share, as appropriate. The Exchange may 
resume trading in such Index Fund Shares only when the net asset value 
is disseminated to all market participants at the same time or the 
daily public Web site

[[Page 51673]]

disclosure of portfolio holdings occurs, as appropriate.
    (C) [(B)] Reporting Authority. The term ``Reporting Authority'' in 
respect of a particular series of Index Fund Shares means Nasdaq, a 
wholly-owned subsidiary of Nasdaq, or an institution or reporting 
service designated by Nasdaq or its subsidiary as the official source 
for calculating and reporting information relating to such series, 
including, but not limited to, any current index or portfolio value; 
the current value of the portfolio of any securities required to be 
deposited in connection with issuance of Index Fund Shares; the amount 
of any dividend equivalent payment or cash distribution to holders of 
Index Fund Shares, net asset value, and other information relating to 
the issuance, redemption or trading of Index Fund Shares.
    Nothing in this paragraph shall imply that an institution or 
reporting service that is the source for calculating and reporting 
information relating to Index Fund Shares must be designated by Nasdaq; 
the term ``Reporting Authority'' shall not refer to an institution or 
reporting service not so designated.
    (D) [(C)] US Component Stock. The term ``US Component Stock'' shall 
mean an equity security that is registered under Sections 12(b) or 
12(g) of the Act, or an American Depository Receipt, the underlying 
equity security of which is registered under Sections 12(b) or 12(g) of 
the Act.
    (E) [(D)] Non-US Component Stock. The term ``Non-US Component 
Stock'' shall mean an equity security that (a) is not registered under 
Sections 12(b) or 12(g) of the Act, (b) is issued by an entity that is 
not organized, domiciled or incorporated in the United States, and (c) 
is issued by an entity that is an operating company (including Real 
Estate Investment Trusts (REITs) and income trusts, but excluding 
investment trusts, unit trusts, mutual funds, and derivatives).
    (2)-(10) No Change
    (k)-(o) No Change.
* * * * *

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 III below, and is set forth in Sections A, B, and C below.

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

1. Purpose
    Nasdaq Rule 4420(j) provides standards for listing Index Fund 
Shares (``IFSs'') on the Exchange. Nasdaq proposes to amend the 
definition of ``Index Fund Share'' set forth in proposed Nasdaq Rule 
4420(j)(1)(B) to permit the listing and trading, or trading pursuant to 
UTP, of Fund Shares and to properly reflect the fact that domestic 
equity, international or global equity, or fixed income securities 
indexes or a combination thereof may be used as the underlying 
performance benchmark for Fund Shares. Accordingly, this proposal would 
enable the Exchange to list and trade Multiple Fund Shares and certain 
Inverse Fund Shares pursuant to Rule 19b-4(e) of the Act.\4\ The 
Exchange also notes that the Commission has approved the original 
listing and trading of Fund Shares on the American Stock Exchange LLC 
(``Amex'').\5\
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    \4\ 17 CFR 240.19b-4(e).
    \5\ See Securities Exchange Act Release No. 57660 (April 14, 
2008), 73 FR 21391(April 21, 2008) (SR-Amex-2007-131).
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Generic Listing Standards

    Nasdaq Rule 4420(j) provides standards for listing IFSs, which are 
securities issued by an open-end management investment company (open-
end mutual fund) based on a portfolio of securities that seeks to 
provide investment results that correspond generally to the price and 
yield performance or total return performance of a specified foreign or 
domestic securities index or fixed income index. Pursuant to Nasdaq 
Rule 4420(j)(1)(A), IFSs must be issued in a specified aggregate 
minimum number in return for a deposit of specified securities and/or a 
cash amount, with a value equal to the next determined net asset value 
(``NAV''). When aggregated in the same specified minimum number, IFSs 
must be redeemed by the issuer for the securities and/or cash, with a 
value equal to the next determined NAV. Consistent with Nasdaq Rule 
4420(j)(9)(A)(ii), the NAV is calculated once a day after the close of 
the regular trading day.
    The proposed revisions to Nasdaq Rule 4420(j) would allow the 
listing and trading of Multiple Fund Shares and Inverse Fund Shares 
that sought to provide investment results, before fees and expenses, in 
an amount not exceeding -200% of the underlying benchmark index 
pursuant to Rule 19b-4(e) under the Act,\6\ where the other applicable 
generic listing standards for IFSs are satisfied. In connection with 
Inverse Funds that seek to provide investment results, before fees and 
expenses, in an amount that exceeds -200% of the underlying benchmark 
index, the Exchange's proposal would continue to require specific 
Commission approval pursuant to Section 19(b)(2) of the Act.\7\ In 
particular, Nasdaq Rule 4420(j)(1)(B)(iii) would expressly prohibit 
Inverse Funds that seek to provide investment results, before fees and 
expenses, in an amount that exceeds -200% of the underlying benchmark 
index, from being approved by the Exchange for listing and trading 
pursuant to Rule 19b-4(e) under the Act.\8\
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    \6\ 17 CFR 240.19b-4(e).
    \7\ 15 U.S.C. 78s(b)(2).
    \8\ 17 CFR 240.19b-4(e).
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    Current Nasdaq Rule 4420(j)(1)(A)(i), in pertinent part, defines 
the term ``Index Fund Share'' as based on a specified foreign or 
domestic stock index. In conjunction with the current proposal, the 
Exchange proposes to amend this definition to include domestic equity, 
international or global equity, or fixed income securities indexes and 
combinations thereof as permissible underlying performance benchmarks. 
The Exchange states that the proposed revision is consistent with 
Nasdaq Rule 4420(j) reflecting the fact that domestic equity, 
international or global equity, or fixed income securities indexes or a 
combination thereof may be used as the underlying performance benchmark 
for IFSs, including Fund Shares.
    The Exchange believes that adopting generic listing and trading 
standards for Fund Shares based on domestic equity, international or 
global equity and/or fixed income securities indexes and applying Rule 
19b-4(e) should fulfill the intended objective of that Rule by allowing 
those IFSs that satisfy the proposed standards to commence trading, 
without the need for individualized Commission approval. The proposed 
rules have the potential to reduce the time frame for bringing Fund 
Shares to market, thereby reducing the burdens on issuers and other 
market participants.\9\
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    \9\ The Exchange submits that the failure of a particular Fund 
Share portfolio to comply with the proposed generic listing and 
trading standards under Rule 19b-4(e) would not, however, preclude 
the Exchange from submitting a separate filing pursuant to Section 
19(b)(2) requesting Commission approval to list and trade a 
particular Fund Share.
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    The Commission has approved generic standards providing for the 
listing and trading of derivative

[[Page 51674]]

products pursuant to Rule 19b-4(e) based on indexes previously approved 
by the Commission under Section 19(b)(2) of the Act \10\ and also notes 
that the generic listing standards provide for indexes that have been 
approved by the Commission in connection with the listing of Portfolio 
Depository Receipts, Index Fund Shares or Index-Linked Securities. The 
Exchange believes that the application of that standard to Fund Shares 
is appropriate because the underlying securities index will have been 
subject to detailed and specific Commission review in the context of 
the approval of listing of other derivatives.
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    \10\ 15 U.S.C. 78s(b)(2). See Securities Exchange Act Release 
No. 54765 (November 16, 2006), 71 FR 67668 (November 22, 2006) (SR-
Nasdaq-2006-009) (Commodity-Linked Securities).
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    The Exchange notes that existing Nasdaq Rule 4420(j)(9)(B) provides 
continued listing standards for all IFSs. For example, where the value 
of the underlying index or portfolio of securities on which the IFS is 
based is no longer calculated or available, or in the event that the 
IFS chooses to substitute a new index or portfolio for the existing 
index or portfolio, the Exchange would commence delisting proceedings 
if the new index or portfolio does not meet the requirements of and 
listing standards set forth in Nasdaq Rule 4420(j). If an IFS chose to 
substitute an index that did not meet any of the generic listing 
standards for listing of IFSs pursuant to Rule 19b-4(e) of the Act,\11\ 
then for continued listing and trading, approval by the Commission of a 
separate filing pursuant to Section 19(b)(2) of the Act \12\ to list 
and trade that IFS is required. In addition, the Exchange further notes 
that existing Nasdaq Rule 4420(j)(9)(A)(ii) provides that, prior to 
approving an IFS for listing, the Exchange will obtain a representation 
from the issuer that the NAV per share will be calculated daily and 
made available to all market participants at the same time.
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    \11\ 17 CFR 240.19b-4(e).
    \12\ 15 U.S.C. 78s(b)(2).
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    The Exchange proposes to add Nasdaq Rule 4420(j)(1)(B)(iv) to 
provide for the halt of trading for Fund Shares if the Exchange becomes 
aware that the open-end investment company fails to properly 
disseminate the appropriate NAV to market participants at the same 
time. In addition, the proposed rule would also require a halt to 
trading if the open-end investment company issuing the Fund Shares 
failed to provide daily public Web site disclosure of its portfolio 
holdings. In particular, proposed Nasdaq Rule 4420(j)(1)(B)(iv) 
provides that the Exchange will halt trading in a series of Multiple 
Fund Shares and/or Inverse Fund Shares if the Exchange becomes aware 
that the open-end investment company issuing the Fund Shares fails to 
disseminate the appropriate NAV to all market participants at the same 
time and/or fails to provide daily public Web site disclosure of its 
portfolio holdings.
    The investment objective associated with the Fund Shares must be 
expected to achieve investment results, before fees and expenses, by a 
specified multiple (Multiple Fund Shares) or inversely up to -200% 
(Inverse Fund Shares) of the underlying performance benchmark domestic 
equity, international or global equity and/or fixed income indexes, as 
applicable. Fund Shares differ from traditional exchange-traded fund 
shares in that they do not merely correspond to the performance of a 
given securities index, but rather attempt to match a multiple or 
inverse of such underlying index performance.
    In order to achieve investment results that provide either a 
positive multiple or inverse of the benchmark index, Fund Shares may 
hold a combination of financial instruments, including, but not limited 
to: Stock index futures contracts; options on futures; options on 
securities and indices; equity caps, collars and floors; swap 
agreements; forward contracts; repurchase agreements; and reverse 
repurchase agreements (the ``Financial Instruments''). Normally, 100% 
of the value of the underlying portfolios for the Inverse Fund Shares 
will be devoted to Financial Instruments and money market instruments, 
including U.S. government securities and repurchase agreements (the 
``Money Market Instruments''). The underlying portfolios for Multiple 
Fund Shares may consist of a combination of securities, Financial 
Instruments and Money Market Instruments.

Limitation on Leverage

    In connection with Inverse Funds that seek to provide investment 
results, before fees and expenses, in an amount that exceeds -200% of 
the underlying benchmark index, the Exchange's proposal would continue 
to require specific Commission approval pursuant to Section 19(b)(2) of 
the Act.\13\ In particular, Nasdaq Rule 4420(j)(1)(B)(iii) would 
expressly prohibit Inverse Funds that seek to provide investment 
results, before fees and expenses, in an amount that exceeds -200% of 
the underlying benchmark index, from being approved by the Exchange for 
listing and trading pursuant to Rule 19b-4(e) under the Act.\14\
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    \13\ 15 U.S.C. 78s(b)(2).
    \14\ 17 CFR 240.19b-4(e).
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    In connection with Multiple Fund Shares, Nasdaq Rule 4420(j)(1)(B) 
does not provide a similar limitation on leverage. Instead, the 
proposal would permit the underlying registered management investment 
company or fund to seek to provide investment results, before fees and 
expenses, that correspond to any multiple, without limitation, of the 
percentage performance on a given day of a particular domestic equity, 
international or global equity, or fixed income securities indexes or a 
combination thereof.

Availability of Information About Fund Shares and Underlying Indexes

    Proposed Nasdaq Rule 4420(j)(1)(B)(iv) provides that the portfolio 
composition of a Fund will be disclosed on a public Web site. Web site 
disclosure of portfolio holdings that will form the basis for the 
calculation of the NAV by the issuer of a series of Fund Shares will be 
made daily and will include, as applicable, the identity and number of 
shares held of each specific equity security, the identity and amount 
held of each fixed income security, the specific types of Financial 
Instruments and characteristics of such instruments, cash equivalents 
and amount of cash held in the portfolio of a fund. This public Web 
site disclosure of the portfolio composition of a Fund, that will form 
the basis for the calculation of the NAV, will coincide with the 
disclosure of the same information to ``Authorized Participants.'' \15\ 
Investors will have access to the current portfolio composition of a 
Fund through the Fund's Web site and/or at the Exchange's Web site at 
http://www.nasdaqomx.com.
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    \15\ Authorized Participants are the only persons that may place 
orders to create and redeem Creation Units. Authorized Participants 
must be registered broker-dealers or other securities market 
participants, such as banks and other financial institutions that 
are exempt from registration as broker-dealers to engage in 
securities transactions, who are participants in DTC. The format of 
the disclosure of portfolio holdings to Authorized Participants may 
differ from the format of the public Web site disclosure.
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Trading Halts

    Existing trading halt requirements for IFSs will apply to Fund 
Shares. Nasdaq will halt trading in Fund Shares under the conditions 
specified in Nasdaq Rules 4120 and 4121, as well as subject to proposed 
Nasdaq Rule 4420(j)(1)(B)(iv). The conditions for a halt include a 
regulatory halt by the listing market. UTP trading in Fund

[[Page 51675]]

Shares will also be governed by provisions of Nasdaq Rule 4120(b) 
relating to temporary interruptions in the calculation or wide 
dissemination of the calculation of the estimated NAV (``Intraday 
Indicative Value''), which is updated regularly during the trading day, 
among other values.
    If Nasdaq becomes aware that the NAV or the identities and 
quantities of the portfolio of securities and other assets (the 
``Disclosed Portfolio'') with respect to a Fund Share is not 
disseminated to all market participants at the same time, it will halt 
trading in such series until such time as the NAV or the Disclosed 
Portfolio is available to all market participants.
    In the case of the Financial Instruments held by a Multiple or 
Inverse Fund, the Exchange represents that a notification procedure 
will be implemented so that timely notice from the investment adviser 
of such Multiple or Inverse Fund is received by the Exchange when a 
particular Financial Instrument is in default or shortly to be in 
default. The Exchange will then determine on a case-by-case basis 
whether a default of a particular Financial Instrument justifies a 
trading halt of the Multiple and/or Inverse Fund Shares.
    Additionally, Nasdaq may cease trading Fund 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 Fund Shares if the listing market delists them.

Suitability

    Prior to commencement of trading, the Exchange will issue an 
Information Circular to its members and member organizations providing 
guidance with regard to member firm compliance responsibilities 
(including suitability obligations) when effecting transactions in the 
Fund Shares and highlighting the special risks and characteristics of 
Funds Shares as well as applicable Exchange rules.
    Specifically, the Information Circular will discuss the following: 
(1) The procedures for purchases and redemptions of Fund Shares in 
Baskets (and that Fund Shares are not individually redeemable); (2) 
Nasdaq Rule 2310, which imposes suitability obligations on Nasdaq 
members with respect to recommending transactions in Fund Shares to 
customers; (3) how information regarding the Intraday Indicative Value 
is disseminated; (4) the requirement that members deliver a prospectus 
to investors purchasing newly issued Fund Shares prior to or 
concurrently with the confirmation of a transaction; (5) the risks 
involved in trading Fund Shares during the Pre-Market and Post-Market 
Sessions when an updated Intraday Indicative Value will not be 
calculated or publicly disseminated; and (6) trading information.
    The Exchange notes that investors purchasing Fund Shares directly 
from a Fund will receive a prospectus. Members purchasing Fund Shares 
from a Fund for resale to investors will deliver a prospectus to such 
investors. The Information Circular will also discuss any exemptive, 
no-action and interpretive relief granted by the Commission from any 
rules under the Act.
    In addition, the Information Circular will reference that Fund 
Shares are subject to various fees and expenses described in the 
Registration Statement. The Information Circular will also disclose the 
trading hours of the Fund Shares of the Funds and that the NAV for the 
Fund Shares will be calculated after 4 p.m. (Eastern Time) each trading 
day.

Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (including exchange-traded 
funds) to monitor trading in Fund Shares. The Exchange represents that 
such procedures are adequate to address any concerns about the trading 
of Fund Shares on Nasdaq. Trading of Fund Shares through Nasdaq will be 
subject to FINRA's surveillance procedures for equity securities in 
general and ETFs in particular.\16\ The Exchange may obtain information 
via the Intermarket Surveillance Group (``ISG'') from other exchanges 
who are members or affiliate members of the ISG.\17\
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    \16\ FINRA surveils trading on Nasdaq pursuant to a regulatory 
services agreement. Nasdaq is responsible for FINRA's performance 
under this regulatory services agreement.
    \17\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
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2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act \18\ in general and Section 6(b)(5) of the Act \19\ in 
particular in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to foster cooperation and coordination with 
persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system. The Exchange believes that the 
proposed rules will facilitate the listing and trading of Fund Shares 
and will enhance competition among market participants, to the benefit 
of investors and the marketplace. In addition, the listing and trading 
criteria set forth in the proposed rules are intended to protect 
investors and the public interest.
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    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(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 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 (www.sec.gov/
rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2008-071 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2008-071. 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 (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

[[Page 51676]]

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 the 
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-2008-071 and should be submitted on or before 
September 25, 2008.

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

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\20\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\21\ which 
requires that the rules of an exchange be designed, among other things, 
to prevent fraudulent and manipulative acts and practices, 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.
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    \20\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \21\ 15 U.S.C. 78f(b)(5).
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    Pursuant to Section 19(b) of the Act \22\ and Rule 19b-4 
thereunder,\23\ the listing and trading of a new derivative securities 
product is a proposed rule change that must be filed with and approved 
by the Commission. Rule 19b-4(e) under the Act \24\ further provides 
that the listing and trading of a new derivative securities product by 
an exchange will not be deemed a proposed rule change pursuant to Rule 
19b-4(c)(1) under the Act \25\ if the Commission has approved, pursuant 
to Section 19(b) of the Act, the exchange's trading rules, procedures, 
and listing standards for the product class that would include the new 
derivative securities product, and the exchange has a surveillance 
program for the product class.
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    \22\ 15 U.S.C. 78s(b)(1).
    \23\ 17 CFR 240.19b-4.
    \24\ 17 CFR 240.19b-4(e).
    \25\ 17 CFR 240.19b-4(c)(1).
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    The Commission believes that the Exchange's adoption of listing and 
trading standards for Index Fund Shares that meet the requirements of 
Nasdaq Rule 4420(j) should fulfill the intended objective of Rule 19b-
4(e) by allowing such Index Fund Shares to commence trading on the 
Exchange without the need for individualized Commission approval. 
Accordingly, the proposed rule should allow the Exchange to bring these 
securities to market without delay, thereby reducing the burdens on 
issuers and other market participants while promoting competition.
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the trading and listing pursuant to Rule 
19b-4(e) of Inverse Fund Shares and Multiple Fund Shares listed 
pursuant to Rule 19b-4(e) on the Exchange. Among other things, the 
proposal would require daily public Web site disclosure of a fund's 
portfolio holdings and dissemination of its NAV to all market 
participants at the same time, or else the Exchange would be obligated 
to halt trading in the fund's shares. In addition, Fund Shares listed 
and/or traded under the proposed ``generic'' standards would be subject 
to existing Nasdaq rules that govern the continued listing and trading 
of Index Fund Shares.
    The Commission finds good cause for approving this proposal before 
the 30th day after the publication of notice thereof in the Federal 
Register. The Commission notes that it has recently approved a similar 
proposal of another exchange,\26\ and Nasdaq's proposal does not raise 
any novel regulatory issues. Accordingly, the Commission believes that 
accelerating approval of this proposal is appropriate and will enable 
the Exchange to amend its rules to reflect the standards for listing 
and trading Inverse and Multiple Fund Shares, thereby conforming 
Nasdaq's rules to those of other exchanges without delay.
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    \26\ See Securities Exchange Act Release No. 57660 (April 14, 
2008), 73 FR 21391 (April 21, 2008) (SR-Amex-2007-131). The 
Commission notes that it received no comments on the Amex's 
proposal.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NASDAQ-2008-071) be, and it 
hereby is, approved on an accelerated basis.
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    \27\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
 [FR Doc. E8-20517 Filed 9-3-08; 8:45 am]

BILLING CODE 8010-01-P