Document ID: SEC-2013-1532-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: BATS Exchange, Inc.
Posted Date: 2013-08-29T04:00Z

[Federal Register Volume 78, Number 168 (Thursday, August 29, 2013)]
[Notices]
[Pages 53509-53535]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-21036]

[[Page 53509]]

Vol. 78

Thursday,

No. 168

August 29, 2013

Part II

Securities and Exchange Commission

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Self-Regulatory Organizations; BATS Exchange, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 1, to Adopt Listing 
Standards for Certain Securities; Notice

  Federal Register / Vol. 78 , No. 168 / Thursday, August 29, 2013 / 
Notices  

[[Page 53510]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70250; File No. SR-BATS-2013-038]

Self-Regulatory Organizations; BATS Exchange, Inc.; Order 
Approving a Proposed Rule Change, as Modified by Amendment No. 1, To 
Adopt Listing Standards for Certain Securities

August 23, 2013.

I. Introduction

    On June 21, 2013, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (the ``Act'' or ``Exchange Act''),\1\ and Rule 
19b-4 thereunder,\2\ a proposed rule change to adopt rules for the 
qualification, listing and delisting of securities on the Exchange. On 
July 2, 2013, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The proposed rule change, as modified by Amendment No. 1, 
was published for comment in the Federal Register on July 10, 2013.\4\ 
The Commission received no comments on the proposal. This order 
approves the proposed rule change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 amends and replaces in its entirety the 
proposal as originally submitted on September 25, 2012. Amendment 
No. 1 corrects certain inconsistencies between the proposed rules 
and the descriptions of such proposed rules as well as various 
typographical and grammatical errors contained in the original 
filing.
    \4\ See Securities Exchange Act Release No. 69931 (July 3, 
2013), 78 FR 41462 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to adopt rules applicable to the 
qualification, listing, trading, and delisting on BATS (``Listing 
Rules'') of certain securities. Specifically, BATS proposes to amend 
Rule 14.11(d) (``Securities Linked to the Performance of Indexes and 
Commodities (Including Currencies)'') to: (i) Incorporate generic 
continued listing standards for Equity Index-Linked Securities and 
Commodity-Linked Securities (collectively, ``Existing Linked 
Securities'') under Rule 14.11(d); \5\ (ii) adopt initial and continued 
generic listing standards for Fixed Income Index-Linked Securities, 
Futures-Linked Securities, and Multifactor Index-Linked Securities 
(collectively, ``Additional Linked Securities,'' and together with the 
Existing Linked Securities, ``Linked Securities''); \6\ (iii) revise 
the introductory paragraph to incorporate references to, and provide 
descriptions of, the Additional Linked Securities; \7\ (iv) revise the 
paragraph of Rule 14.11(d)(2)(H) relating to trading halts to clarify 
that it applies to all Linked Securities; \8\ (v) adopt Interpretations 
and Policies .01 relating to obligations of market makers in Linked 
Securities; \9\ (vi) revise the continued listing standards of Rule 
14.11(h), (``Listing Requirements for Securities Not Specified Above 
(Other Securities)'') to require the aggregate market value or 
principal amount of publicly-held units must be at least $1 million; 
(vii) amend Rule 14.11(d)(2)(D) so that the Exchange may list Linked 
Securities that provide for three times accelerated payment at maturity 
instead of twice the accelerated payment at maturity; and (viii) 
correct cross references and conform defined terms. In addition, BATS 
proposes new Rule 14.11(e),\10\ (``Trading of Certain Derivative 
Securities'') to adopt initial and continued listing criteria for the 
following securities: Index-Linked Exchangeable Notes; Equity Gold 
Shares; Trust Certificates; Commodity-Based Trust Shares; Currency 
Trust Shares; Commodity Index Trust Shares; Commodity Futures Trust 
Shares; Partnership Units; Trust Units; Managed Trust Securities; and 
Currency Warrants (together with the Linked Securities, collectively, 
the ``Subject Securities'').\11\ The proposed Listing Rules are based 
on, and are substantially similar to, the listing standards of Nasdaq 
Stock Market LLC (``Nasdaq'') for the listing and trading of the 
Subject Securities.
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    \5\ Exchange Rules 14.11(d)(2)(G) and (H) currently include 
initial listing standards applicable to Equity Index-Linked 
Securities and Commodity-Linked Securities. The Exchange proposes to 
re-number the existing rule text in Rules 14.11(d)(2)(G) and (H), 
and to adopt continuing listing standards applicable to Equity 
Index-Linked Securities and Commodity-Linked Securities, in proposed 
Rules 14.11(d)(2)(K)(i) and (ii).
    \6\ See proposed Rules 14.11(d)(2)(k)(iii), (iv) and (v).
    \7\ See introductory paragraphs to Rule 14.11(d), as proposed to 
be amended.
    \8\ See proposed Rule 14.11(d)(2)(H) (formerly Rule 
14.11(d)(2)(J)).
    \9\ See proposed Interpretation and Policies .01 to Rule 
14.11(d).
    \10\ Existing Rule 14.11(e), Selected Equity-linked Debt 
Securities (``SEEDS''), would be renumbered as Rule 14.11(e)(12).
    \11\ The Exchange has proposed to adopt generic listing 
standards for Linked Securities and Index-Linked Exchangeable Notes, 
both generic and non-generic listing standards for Currency Trust 
Shares, and non-generic listing standards for all other Subject 
Securities.
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A. Proposed Changes to Rule 14.11(d) (``Securities Linked to the 
Performance of Indexes and Commodities (Including Currencies)'')

    BATS proposes to amend the introductory paragraph of Rule 14.11(d) 
to state that the Exchange will consider for listing and trading of 
Equity Index- Linked Securities and Commodity-Linked Securities, fixed 
income index-linked securities (``Fixed Income Index-Linked 
Securities''), futures-linked securities (``Futures Linked 
Securities'') and multifactor index-linked securities (``Multifactor 
Index-Linked Securities'' and, together with Equity Index-Linked 
Securities and Commodity-Linked Securities, Fixed Income Index-Linked 
Securities and Futures-Linked Securities, ``Linked Securities'') to the 
rule. In addition, the Exchange proposes to amend the introductory 
paragraph to provide a definition for ``Reference Assets,'' which 
refers to the basis for the payment at maturity of the Linked 
Securities that in each case meet the applicable criteria of Rule 
14.11(d). BATS further proposes to amend the introductory paragraph to 
describe the basis for payment at maturity of each of the Linked 
Securities as follows:
     The payment at maturity of a cash amount with respect to 
Equity Index-Linked Securities is based on the performance of an 
underlying equity index or indexes (an ``Equity Reference Asset'').
     The payment at maturity with respect to Commodity-Linked 
Securities is based on one or more physical Commodities or Commodity 
futures, options or other Commodity derivatives, Commodity-Related 
Securities, or a basket or index of any of the foregoing (a ``Commodity 
Reference Asset''). The terms ``Commodity'' and ``Commodity-Related 
Security'' are defined in Rule 14.11.
     The payment at maturity with respect to Fixed Income 
Index-Linked Securities is based on the performance of one or more 
indexes or portfolios of notes, bonds, debentures or evidence of 
indebtedness that include, but are not limited to, U.S. Department of 
Treasury securities (``Treasury Securities''), government-sponsored 
entity securities (``GSE Securities''), municipal securities, trust 
preferred securities, supranational debt and debt of a foreign country 
or a subdivision thereof or a basket or index of any of the foregoing 
(a ``Fixed Income Reference Asset'').
     The payment at maturity with respect to Futures-Linked 
Securities is based on the performance of an index of (a) futures on 
Treasury Securities, GSE Securities, supranational debt and debt

[[Page 53511]]

of a foreign country or a subdivision thereof, or options or other 
derivatives on any of the foregoing; (b) interest rate futures or 
options or derivatives or (c) CBOE Volatility Index (VIX) Futures (a 
``Futures Reference Asset'').
     The payment at maturity with respect to Multifactor Index-
Linked Securities is based on the performance of any combination of two 
or more Equity Reference Assets, Commodity Reference Assets, Fixed 
Income Reference Assets or Futures Reference Assets (a ``Multifactor 
Reference Asset,'' and together with Equity Reference Assets, Commodity 
Reference Assets, Fixed Income Reference Assets and Futures Reference 
Assets, ``Reference Assets''). A Multifactor Reference Asset may 
include as a component a notional investment in cash or a cash 
equivalent based on a widely accepted overnight loan interest rate, 
LIBOR, Prime Rate, or an implied interest rate based on observed market 
spot and foreign currency forward rates.
    Based on the Exchange's proposed amendments to the introductory 
paragraphs of Rule 14.11(d), the definition of ``Linked Securities'' in 
Rule 14.11(d) now encompasses the Additional Linked Securities. 
Therefore, under the Exchange's proposal, all provisions of Rule 
14.11(d) that apply to Linked Securities now apply to the Additional 
Linked Securities.
    As stated in Rule 14.11(d)(2), BATS may consider for listing and 
trading pursuant to Rule 19b-4(e) under the Act Linked Securities 
(including the Additional Linked Securities) that meet the standards 
set forth in Rule 14.11(d)(2), and BATS may submit a rule filing 
pursuant to Section 19(b)(2) of the Act to permit the listing and 
trading of Linked Securities (including the Additional Linked 
Securities) that do not otherwise meet the standards set forth in Rule 
14.11(d)(2).
    The Exchange is not proposing any amendments to Rules 
14.11(d)(2)(A)-(C) or (E)-(F) and such provisions would apply to all 
Linked Securities (including the Additional Linked Securities).\12\ 
BATS Rule 14.11(d)(2)(D) states that pursuant to Rule 19b-4(e) under 
the Act \13\ a loss or negative payment at maturity of a Linked 
Security may be accelerated by a multiple of twice the performance of 
an underlying asset. The Exchange proposes to amend Rule 14.11(d)(2)(D) 
to permit the Exchange to list Linked Securities that provide for three 
times accelerated payment at maturity instead of twice the accelerated 
payment at maturity. BATS Rule 14.11(d)(2)(D) is based on, and is 
substantively identical to, Nasdaq Rule 5710(d).\14\ Rule 
14.11(d)(2)(D), as amended, would apply to all Linked Securities 
(including Additional Linked Securities).
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    \12\ Current Rule14.11(d)(2)(A)-(C) states:
    (A) Both the issue and the issuer of such security meet the 
criteria for other securities set forth in Rule 14.11(h), except 
that if the security is traded in $1,000 denominations or is 
redeemable at the option of holders thereof on at least a weekly 
basis, then no minimum number of holders and no minimum public 
distribution of trading units shall be required.
    (B) The issue has a term of not less than one (1) year and not 
greater than thirty (30) years.
    (C) The issue must be the non-convertible debt of the Company.
    Current Rule 14.11(d)(2)(E) and (F) state:
    (E) The Company will be expected to have a minimum tangible net 
worth in excess of $250,000,000 and to exceed by at least 20% the 
earnings requirements set forth in paragraph (a)(1) of this Rule. In 
the alternative, the Company will be expected: (i) To have a minimum 
tangible net worth of $150,000,000 and to exceed by at least 20% the 
earnings requirement set forth in paragraph (a)(1) of this Rule, and 
(ii) not to have issued securities where the original issue price of 
all the Company's other index-linked note offerings (combined with 
index-linked note offerings of the Company's affiliates) listed on a 
national securities exchange exceeds 25% of the Company's net worth.
    (F) The Company is in compliance with Rule 10A-3 under the Act.
    \13\ 17 CFR 240.19b-4(e).
    \14\ The proposal is also consistent with NYSE Arca Equities 
Rule 5.2(j)(6)(A)(d) and Section 703.22(B)(6) of the New York Stock 
Exchange Listed Company Manual.
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    Additionally, the Exchange proposes to re-number the current text 
of Rule 14.11(d) by deleting current Rules 14.11(d)(2)(G) and (H) and 
moving the text of these two sections into proposed Rules 
14.11(d)(2)(K)(i) and (ii).\15\ Further, the Exchange proposes to re-
number the remaining existing sections of Rule 14.11(d), and to amend 
references and defined terms in such sections such that they would 
apply to all Linked Securities.
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    \15\ See supra note 5.
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1. Equity Index-Linked Securities
    BATS is renumbering current Rule 14.11(d)(2)(G), which sets forth 
the initial listing criteria for Equity Index-Linked Securities, as 
proposed Rule 14.11(d)(2)(K)(i)(a). BATS is not proposing any 
substantive changes to its initial listing criteria for Equity Index-
Linked Securities.
    Proposed Rule 14.11(d)(2)(K)(i)(b) establishes continued listing 
criteria for Equity Index-Linked Securities, which are based on Nasdaq 
Rule 5710(k)(i). The proposed rule provides that the Exchange will 
commence delisting or removal proceedings (unless the Commission has 
approved the continued trading of the subject Equity Index-Linked 
Security), if any of the initial listing standards are not continuously 
maintained, except that:
     The criteria that no single component represent more than 
25% of the dollar weight of the index and the five highest dollar 
weighted components in the index cannot represent more than 50% (or 60% 
for indexes with less than 25 components) of the dollar weight of the 
index, need only be satisfied at the time the index is rebalanced; and
     Component stocks that in the aggregate account for at 
least 90% of the weight of the index each shall have a minimum global 
monthly trading volume of 500,000 shares, or minimum global notional 
volume traded per month of $12,500,000, averaged over the last six 
months.\16\
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    \16\ See proposed Rule 14.11(d)(2)(K)(i)(b)(1).
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    In connection with an Equity Index-Linked Security that is listed 
pursuant to Rule 14.11(d)(2)(K)(i)(a), the Exchange will commence 
delisting or removal proceedings (unless the Commission has approved 
the continued trading of the subject Equity Index-Linked Security) if 
the underlying index fails or indexes fail to satisfy the maintenance 
standards or conditions as set forth by the Commission in its order 
under Section 19(b)(2) of the Act approving the index or indexes for 
the trading of options or other derivatives.
    Additionally, the Exchange will commence delisting or removal 
proceedings (unless the Commission has approved the continued trading 
of the subject Equity Index-Linked Security), under any of the 
following circumstances:
     If the aggregate market value or the principal amount of 
the Equity Index- Linked Securities publicly held is less than 
$400,000;
     If the value of the index or composite value of the 
indexes is no longer calculated or widely disseminated on at least a 
15-second basis with respect to indexes containing only securities 
listed on a national securities exchange, or on at least a 60-second 
basis with respect to indexes containing foreign country securities, 
provided, however, that, if the official index value does not change 
during some or all of the period when trading is occurring on the 
Exchange (for example, for indexes of foreign country securities, 
because of time zone differences or holidays in the countries where 
such indexes' component stocks trade) then the last calculated official 
index value must remain available

[[Page 53512]]

throughout Regular Trading Hours \17\ and both the Pre-Opening \18\ and 
After Hours Trading Sessions; \19\ or
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    \17\ Regular Trading Hours are defined in Exchange Rule 1.5(w) 
as the time between 9:30 a.m. to 4:00 p.m. E.T.
    \18\ The Pre-Opening Session is defined in Exchange Rule 1.5(r) 
and currently means the time between 8:00 a.m. to 9:30 a.m. E.T.
    \19\ The After Hours Trading Session is defined in Exchange Rule 
1.5(c) and currently means the time between 4:00 p.m. to 5:00 p.m. 
E.T.
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     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Finally, the proposed rule provides that Equity-Linked Indexes will 
be rebalanced at least annually.
2. Commodity-Linked Securities
    BATS proposes to renumber the initial listing standards for 
Commodity-Linked Securities--currently are set forth in Rule 
14.11(d)(2)(H)--to Proposed Rule 14.11(d)(2)(K)(ii)(a). BATS is not 
proposing any substantive changes to its initial listing criteria for 
Commodity-Linked Securities.
    Proposed Rule 14.11(d)(2)(K)(ii)(b) establishes continued listing 
criteria for Commodity-Linked Securities. The Exchange will commence 
delisting or removal proceedings if any of the initial listing criteria 
are not continuously maintained. Additionally, under the proposed rule, 
the Exchange will commence delisting or removal proceedings under any 
of the following circumstances:
     If the aggregate market value or the principal amount of 
the Commodity-Linked Securities publicly held is less than $400,000;
     If the value of the Commodity Reference Asset is no longer 
calculated or available and a new Commodity Reference Asset is 
substituted, unless the new Commodity Reference Asset meets the 
requirements of the proposed rule; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule change relating to Commodity-Linked Securities is 
based on Nasdaq Rule 5710(k)(ii).
3. Fixed Income-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(iii) sets forth the listing criteria 
for Fixed Income Index-Linked Securities. The proposed initial and 
continuing listing standards for Fixed-Income Linked Securities are 
based on Nasdaq Rule 5710(k)(iii).
    Proposed Rule 14.11(d)(2)(k)(iii)(a) states that either: (1) The 
Fixed Income Reference Asset to which the security is linked shall have 
been reviewed and approved for the trading of options, Index Fund 
Shares, or other derivatives by the Commission under Section 19(b)(2) 
of the Act and rules thereunder and the conditions set forth in the 
Commission's approval order continue to be satisfied; or (2) the issue 
must meet the following initial listing criteria:
     Components of the Fixed Income Reference Asset that in the 
aggregate account for at least 75% of the weight of the Fixed Income 
Reference Asset must each have a minimum original principal amount 
outstanding of $100 million or more;
     A component of the Fixed Income Reference Asset may be a 
convertible security, however, once the convertible security component 
converts to the underlying equity security, the component is removed 
from the Fixed Income Reference Asset;
     No component of the Fixed Income Reference Asset 
(excluding Treasury Securities and GSE Securities) will represent more 
than 30% of the dollar weight of the Fixed Income Reference Asset, and 
the five highest dollar weighted components in the Fixed Income 
Reference Asset will not in the aggregate account for more than 65% of 
the dollar weight of the Fixed Income Reference Asset;
     An underlying Fixed Income Reference Asset (excluding one 
consisting entirely of exempted securities) must include a minimum of 
13 non-affiliated issuers; and
     Component securities that in the aggregate account for at 
least 90% of the dollar weight of the Fixed Income Reference Asset must 
be from one of the following: (i) Issuers that are required to file 
reports pursuant to Sections 13 and 15(d) of the Act; or (ii) issuers 
that have a worldwide market value of outstanding common equity held by 
non-affiliates of $700 million or more; or (iii) issuers that have 
outstanding securities that are notes, bonds, debentures, or evidence 
of indebtedness having a total remaining principal amount of at least 
$1 billion; or (iv) exempted securities as defined in Section 3(a)(12) 
of the Act, or (v) issuers that are a government of a foreign country 
or a political subdivision of a foreign country.
    In addition, proposed Rule 14.11(d)(2)(k)(iii)(b) states the value 
of the Fixed Income Reference Asset must be widely disseminated to the 
public by one or more major market vendors at least once per business 
day.
    Proposed Rule 14.11(d)(2)(K)(iii)(c) provides that the Exchange 
will commence delisting or removal proceedings if any of the initial 
listing criteria described above are not continuously maintained, and 
that the Exchange will also commence delisting or removal proceedings 
if:
     If the aggregate market value or the principal amount of 
the Fixed Income Index-Linked Securities publicly held is less than 
$400,000;
     If the value of the Fixed Income Reference Asset is no 
longer calculated or available and a new Fixed Income Reference Asset 
is substituted, unless the new Fixed Income Reference Asset meets the 
requirements of proposed Rule 14.11(d)(2)(K); or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
4. Futures-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(iv) establishes listing standards for 
Futures-Linked Securities. This proposed rule is based on Nasdaq Rule 
5710(k)(iv).
    Proposed Rule 14.11(d)(2)(K)(iv)(a) states that the issue must meet 
either of the following the initial listing standards:
     The Futures Reference Asset to which the security is 
linked shall have been reviewed and approved for the trading of 
Futures-Linked Securities or options or other derivatives by the 
Commission under Section 19(b)(2) of the Act and rules thereunder and 
the conditions set forth in the Commission's approval order, including 
with respect to comprehensive surveillance sharing agreements, continue 
to be satisfied, or
     The pricing information for components of a Futures 
Reference Asset must be derived from a market which is an ISG member or 
affiliate or with which the Exchange has a comprehensive surveillance 
sharing agreement. A Futures Reference Asset may include components 
representing not more than 10% of the dollar weight of such Futures 
Reference Asset for which the pricing information is derived from 
markets that do not meet the requirements of proposed Rule 
14.11(d)(2)(K)(iv)(a)(2); provided, however, that no single component 
subject to this exception exceeds 7% of the dollar weight of the 
Futures Reference Asset.
    In addition, proposed Rule 14.11(d)(2)(k)(iv)(b) states that the 
issue must meet both of the following initial listing criteria:
     The value of the Futures Reference Asset must be 
calculated and widely disseminated by one or more major market data 
vendors on at least a 15-second basis during the regular market 
session, and

[[Page 53513]]

     In the case of Futures-Linked Securities that are 
periodically redeemable, the value of a share of each series of a 
particular security (the ``Intraday Indicative Value'') of the subject 
Futures-Linked Securities must be calculated and widely disseminated by 
the Exchange or one or more major market data vendors on at least a 15-
second basis during the Exchange's regular market session.
    Proposed Rule 14.11(d)(2)(K)(iv)(c) states that the Exchange will 
commence delisting or removal proceedings if any of the initial listing 
criteria described above are not continuously maintained, and that the 
Exchange will also commence delisting or removal proceedings under any 
of the following circumstances:
     If the aggregate market value or the principal amount of 
the Futures-Linked Securities publicly held is less than $400,000;
     If the value of the Futures Reference Asset is no longer 
calculated or available and a new Futures Reference Asset is 
substituted, unless the new Futures Reference Asset meets the 
requirements of proposed Rule 14.11(d)(2)(K); or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
5. Multifactor Index-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(v) governs the listing standards for 
Multifactor Index-Linked Securities. The proposed rule is based on 
Nasdaq Rule 5710(k)(v).
    Proposed Rule 14.11(D)(2)(K)(v)(a) states that the issue must meet 
one of the following initial listing standards:
     Each component of the Multifactor Reference Asset to which 
the security is linked shall have been reviewed and approved for the 
trading of either options, Index Fund Shares, or other derivatives 
under Section 19(b)(2) of the Act and rules thereunder and the 
conditions set forth in the Commission's approval order continue to be 
satisfied; or
     Each Reference Asset included in the Multifactor Reference 
Asset must meet the applicable initial and continued listing criteria 
set forth in the relevant subsection of proposed Rule 14.11(d)(2)(K).
    In addition, proposed Rule 14.11(d)(2)(K)(v)(b) states that the 
issue must meet both of the following initial listing criteria:
     The value of the Multifactor Reference Asset must be 
calculated and widely disseminated to the public on at least a 15-
second basis during the time the Multifactor Index-Linked Security 
trades on the Exchange; and
     In the case of Multifactor Index-Linked Securities that 
are periodically redeemable, the indicative value of the Multifactor 
Index-Linked Securities must be calculated and widely disseminated by 
one or more major market data vendors on at least a 15-second basis 
during the time the Multifactor Index-Linked Securities trade on the 
Exchange.
    Proposed Rule 14.11(d)(2)(K)(v)(c) states that the Exchange will 
commence delisting or removal proceedings:
     If any of the initial listing criteria described above are 
not continuously maintained;
     If the aggregate market value or the principal amount of 
the Multifactor Index-Linked Securities publicly held is less than 
$400,000;
     If the value of the Multifactor Reference Asset is no 
longer calculated or available and a new Multifactor Reference Asset is 
substituted, unless the new Multifactor Reference Asset meets the 
requirements of proposed Rule 14.11(d)(2)(K); or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Interpretation and Policy .01 to proposed Rule 14.11(d)(2)(K) 
establishes certain regulatory requirements for registered market 
makers in Linked Securities. These regulatory requirements for 
registered market makers in Linked Securities are based on Nasdaq Rule 
5710, Commentary .01. Under the proposed rule, the registered market 
maker in Linked Securities:
     Must file with the Exchange, in a manner prescribed by the 
Exchange, and keep current a list identifying all accounts for trading 
in the Reference Asset components, the commodities, currencies or 
futures underlying the Reference Asset components, or any derivative 
instruments based on the Reference Asset or based on any Reference 
Asset component or any physical commodity, currency or futures 
underlying a Reference Asset component, which the registered market 
maker may have or over which it may exercise investment discretion.
     Shall not trade in the Reference Asset components, the 
commodities, currencies or futures underlying the Reference Asset 
components, or any derivative instruments based on the Reference Asset 
or based on any Reference Asset component or any physical commodity, or 
futures currency underlying a Reference Asset component, in an account 
in which a registered market maker, directly or indirectly, controls 
trading activities, or has a direct interest in the profits or losses 
thereof, which has not been reported to the Exchange as required by the 
proposed Rule.
    In addition to the existing obligations under Exchange rules 
regarding the production of books and records,\20\ the registered 
market maker in Linked Securities will be required to make available to 
the Exchange such books, records or other information pertaining to 
transactions by such entity or any limited partner, officer or approved 
person thereof, registered or nonregistered employee affiliated with 
such entity for its or their own accounts in the Reference Asset 
components, the commodities, currencies or futures underlying the 
Reference Asset components, or any derivative instruments based on the 
Reference Asset or based on any Reference Asset component or any 
physical commodity, currency or futures underlying a Reference Asset 
component, as may be requested by the Exchange.
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    \20\ See, e.g., Rule 4.2.
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B. Proposed Changes to Rule 14.11(e) (``Trading of Certain Derivative 
Securities'')

    The Exchange proposes to adopt new Rule 14.11(e), Trading of 
Certain Derivative Securities, which sets forth listing standards for 
the following securities: Index-Linked Exchangeable Notes; Equity Gold 
Shares; Trust Certificates; Commodity-Based Trust Shares; Currency 
Trust Shares; Commodity Index Trust Shares; Commodity Futures Trust 
Shares; Partnership Units; Trust Units; Managed Trust Securities; and 
Currency Warrants.
1. Index-Linked Exchangeable Notes
    Proposed Rule 14.11(e)(1) adopts listing standards for Index-Linked 
Exchangeable Notes. Index-Linked Exchangeable Notes are exchangeable 
debt securities that are exchangeable at the option of the holder 
(subject to the requirement that the holder in most circumstances 
exchange a specified minimum amount of notes), on call by the issuer, 
or at maturity for a cash amount (the ``Cash Value Amount'') based on 
the reported market prices of the underlying stocks of an underlying 
index. Although the notes are linked to an index, they will trade as a 
single security.
    Index-Linked Exchangeable Notes will be considered for listing and 
trading by the Exchange pursuant to

[[Page 53514]]

Rule 19b-4(e) under the Act,\21\ provided:
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    \21\ 17 CFR 240.19b-4(e).
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     Both the issue and the issuer of such security meet the 
requirements of Rule 14.11(h), Listing Requirements for Securities Not 
Specified Above (Other Securities), except that the minimum public 
distribution shall be 150,000 notes with a minimum of 400 public note-
holders, except, if traded in thousand dollar denominations or 
redeemable at the option of the holders thereof on at least a weekly 
basis, then no minimum public distribution and no minimum number of 
holders.
     The issue has a minimum term of one year.
     The issuer will be expected to have a minimum tangible net 
worth in excess of $250,000,000, and to otherwise substantially exceed 
the earnings requirements set forth in Rule 14.8(b)(2). In the 
alternative, the issuer will be expected: (i) To have a minimum 
tangible net worth of $150,000,000 and to otherwise substantially 
exceed the earnings requirements set forth in Rule 14.8(b)(2); and (ii) 
not to have issued Index-Linked Exchangeable Notes where the original 
issue price of all the issuer's other Index-Linked Exchangeable Note 
offerings (combined with other index-linked exchangeable note offerings 
of the issuer's affiliates) listed on a national securities exchange 
exceeds 25% of the issuer's net worth.
     The index to which an exchangeable-note is linked shall 
either be: (i) Indices that have been created by a third party and been 
reviewed and have been approved for the trading of options or other 
derivatives securities (each, a ``Third-Party Index'') either by the 
Commission under Section 19(b)(2) of the Act and rules thereunder or by 
the Exchange under rules adopted pursuant to Rule 19b-4(e); or (ii) 
indices which the issuer has created and for which the Exchange will 
have obtained approval from either the Commission pursuant to Section 
19(b)(2) and rules thereunder or from the Exchange under rules adopted 
pursuant to Rule 19b-4(e) (each an ``Issuer Index''). The Issuer 
Indices and their underlying securities must meet one of the following: 
(A) The procedures and criteria set forth in BATS Options Rules 29.6(b) 
and (c), or (B) the criteria set forth in Rules 14.11(e)(12)(B)(iii) 
and (iv), the index concentration limits set forth in BATS Options Rule 
29.6, and BATS Options Rule 29.6(b)(12) insofar as it relates to BATS 
Options Rule 29.6(b)(6).
    BATS will treat Index-Linked Exchangeable Notes as equity 
instruments.
    Proposed Rule 14.11(e)(1)(F) requires that the Intraday Indicative 
Value of the Index-Linked Exchangeable Notes be calculated and widely 
disseminated by the Exchange or one or more major market data vendors 
on at least a 15-second basis during the Exchange's regular market 
session. Additionally, under proposed Rule 14.11(e)(1)(G), the value of 
the underlying index must be publicly available to investors, on a real 
time basis, every 15 seconds. Proposed Rule 14.11(e)(1)(F) also 
includes a definition of ``Intraday Indicative Value'' that is specific 
to the proposed rule: the term ``Intraday Indicative Value'' means an 
estimate of the value of a note or a share of the series of Index-
Linked Exchangeable Notes. Proposed Rules 14.11(e)(1)(F) and (G) 
require that the value of an Index-Linked Exchangeable Note and its 
underlying index are publicly available on a real time basis.
    Beginning 12 months after the initial issuance of a series of 
Index-Linked Exchangeable Notes, the Exchange will consider the 
suspension of trading in or removal from listing of that series of 
Index-Linked Exchangeable Notes under any of the following 
circumstances:
     If the series has fewer than 50,000 notes issued and 
outstanding;
     If the market value of all Index-Linked Exchangeable Notes 
of that series issued and outstanding is less than $1,000,000; or
     If such other event shall occur or such other condition 
exists which in the opinion of the Exchange makes further dealings on 
the Exchange inadvisable.
    The proposed rule relating to Index-Linked Exchangeable Notes is 
based on, and substantively identical to, Nasdaq Rule 5711(a).
2. Equity Gold Shares
    Proposed Rule 14.11(e)(2) applies to Equity Gold Shares, which 
represent units of fractional undivided beneficial interest in, and 
ownership of, the Equity Gold Trust. The proposed rule change relating 
to Equity Gold Shares is based on, and substantively identical, Nasdaq 
Rule 5711(b). While Equity Gold Shares are not technically ``Index Fund 
Shares,'' and thus are not covered by Exchange Rule 14.11(c), all other 
of the Exchange's rules that reference ``Index Fund Shares'' also apply 
to Equity Gold Shares.
    Except to the extent that specific provisions in proposed Rule 
14.11(e)(2) govern, or unless the context otherwise requires, the 
provisions of all other Exchange Rules and policies apply to the 
trading of Equity Gold Shares on the Exchange. The provisions set forth 
in proposed Rule 14.11(e)(4) relating to Commodity-Based Trust Shares 
also apply to Equity Gold Shares.
3. Trust Certificates
    Proposed Rule 14.11(e)(3) establishes the listing standards 
applicable to Trust Certificates. The proposed rule is based on, and 
substantively identical to, Nasdaq Rule 5711(c).
    The Exchange will consider for trading, whether by listing or 
pursuant to unlisted trading privileges, Trust Certificates. Trust 
Certificates represent an interest in a special purpose trust (the 
``Trust'') created pursuant to a trust agreement, and may or may not 
provide for the repayment of the original principal investment amount. 
Trust Certificates pay an amount at maturity which is based upon the 
performance of specified assets as set forth below:
     An underlying index or indexes of equity securities (an 
``Trust Certificate Equity Reference Asset'');
     Instruments that are direct obligations of the issuing 
company, either exercisable throughout their life (i.e., American 
style) or exercisable only on their expiration date (i.e., European 
style), entitling the holder to a cash settlement in U.S. dollars to 
the extent that the foreign or domestic index has declined below (for 
put warrant) or increased above (for a call warrant) the pre-stated 
cash settlement value of the index (``Index Warrants''); or
     A combination of two or more Equity Reference Assets or 
Index Warrants.
    The Exchange will file separate proposals under Section 19(b) of 
the Act before trading, either by listing or pursuant to unlisted 
trading privileges, Trust Certificates.
    Proposed Interpretation and Policy .01 to proposed Rule 14.11(e)(3) 
states that the Exchange will commence delisting or removal proceedings 
with respect to an issue of Trust Certificates (unless the Commission 
has approved the continued trading of such issue), under any of the 
following circumstances:
     If the aggregate market value or the principal amount of 
the securities publicly held is less than $400,000;
     If the value of the index or composite value of the 
indexes is no longer calculated or widely disseminated on at least a 
15-second basis with respect to indexes containing only securities 
listed on a national securities exchange, or on at least a 60-second 
basis with respect to indexes containing foreign country securities, 
provided, however, that, if the official index value does not change 
during some or all of the period when trading is occurring on the 
Exchange (for

[[Page 53515]]

example, for indexes of foreign country securities, because of time 
zone differences or holidays in the countries where such indexes' 
component stocks trade) then the last calculated official index value 
must remain available throughout Regular Trading Hours and both the 
Pre-Opening and After Hours Trading Sessions; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Proposed Interpretation and Policy .02 to Rule 14.11(e)(3) provides 
that the term of the Trust shall be stated in the Trust prospectus.
    Proposed Interpretation and Policy .03 to Rule 14.11(e)(3) provides 
that the trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee. The trustee of a listed issue may not be changed without prior 
notice to and approval of the Exchange.
    Proposed Interpretation and Policy .04 to Rule 14.11(e)(3) provides 
that voting rights will be set forth in the Trust prospectus.
    Proposed Interpretation and Policy .05 to Rule 14.11(e)(3) provides 
that the Exchange will implement written surveillance procedures for 
Trust Certificates.
    Proposed Interpretation and Policy .06 to Rule 14.11(e)(3) provides 
that the Trust Certificates will be subject to the Exchange's equity 
trading rules.
    Proposed Interpretation and Policy .07 to Rule 14.11(e)(3) provides 
that, prior to the commencement of trading of a particular Trust 
Certificates listing pursuant to this Rule, the Exchange will evaluate 
the nature and complexity of the issue and, if appropriate, distribute 
a circular to members providing guidance regarding compliance 
responsibilities (including suitability recommendations and account 
approval) when handling transactions in Trust Certificates.
    Proposed Interpretation and Policy .08 to Rule 14.11(e)(3) provides 
that Trust Certificates may be exchangeable at the option of the holder 
into securities that participate in the return of the applicable 
underlying asset. In the event that the Trust Certificates are 
exchangeable at the option of the holder and contain an Index Warrant, 
then a member must ensure that the member's account is approved for 
options trading in accordance with the rules of the Exchange's options 
market (``BATS Options'') to exercise such rights.
    Proposed Interpretation and Policy .09 to Rule 14.11(e)(3) provides 
that Trust Certificates may pass-through periodic payments of interest 
and principle of the underlying securities.
    Proposed Interpretation and Policy .10 to Rule 14.11(e)(3) provides 
that the Trust payments may be guaranteed pursuant to a financial 
guaranty insurance policy which may include swap agreements.
    Proposed Interpretation and Policy .11 to Rule 14.11(e)(3) provides 
that the Trust Certificates may be subject to early termination or call 
features.
4. Commodity-Based Trust Shares
    Proposed Rule 14.11(e)(4) permits the listing and trading, or 
trading pursuant to unlisted trading privileges, of Commodity-Based 
Trust Shares on the Exchange. The proposed rule change relating to 
Trust Certificates is based on, and substantively identical to, Nasdaq 
Rule 5711(c).
    Proposed Rule 14.11(e)(4) applies only to Commodity-Based Trust 
Shares. Except to the extent inconsistent with the proposed Rule, or 
unless the context otherwise requires, the provisions of the trust 
issued receipts rules, Bylaws, and all other rules and procedures of 
the Board of Directors shall be applicable to the trading on the 
Exchange of such securities. Commodity-Based Trust Shares are included 
within the definition of ``security'' or ``securities'' as such terms 
are used in the Rules of the Exchange.
    ``Commodity-Based Trust Shares,'' as defined in proposed Rule 
14.11(e)(4)(C)(i), means a security that: (a) Is issued by a Trust that 
holds a specified commodity deposited with the Trust; (b) is issued by 
such Trust in a specified aggregate minimum number in return for a 
deposit of a quantity of the underlying commodity; and (c) when 
aggregated in the same specified minimum number, may be redeemed at a 
holder's request by such Trust which will deliver to the redeeming 
holder the quantity of the underlying commodity. Proposed Rule 
14.11(e)(4)(C)(ii) states that the term ``commodity'' is defined in 
Section 1(a)(4) of the Commodity Exchange Act (``CEA'').
    Proposed Rule 14.11(e)(4)(D) states that the Exchange may trade, 
either by listing or pursuant to unlisted trading privileges, 
Commodity-Based Trust Shares based on an underlying commodity. Each 
issue of a Commodity-Based Trust Share will be designated as a separate 
series and will be identified by a unique symbol.
    Proposed Rule 14.11(e)(4)(E)(i) states that the Exchange will 
establish a minimum number of Commodity-Based Trust Shares required to 
be outstanding at the time of commencement of trading on the Exchange.
    Proposed Rule 14.11(e)(4)(E)(ii) provides that following the 
initial 12-month period following commencement of trading on the 
Exchange of Commodity-Based Trust Shares, the Exchange will consider 
the suspension of trading in or removal from listing of such series 
under any of the following circumstances: if
     The Trust has more than 60 days remaining until 
termination and there are fewer than 50 record and/or beneficial 
holders of Commodity-Based Trust Shares for 30 or more consecutive 
trading days;
     The Trust has fewer than 50,000 receipts issued and 
outstanding;
     The market value of all receipts issued and outstanding is 
less than $1,000,000;
     The value of the underlying commodity is no longer 
calculated or available on at least a 15-second delayed basis from a 
source unaffiliated with the sponsor, Trust, custodian or the Exchange 
or the Exchange stops providing a hyperlink on its Web site to any such 
unaffiliated commodity value;
     The Intraday Indicative Value \22\ is no longer made 
available on at least a 15-second delayed basis; or
---------------------------------------------------------------------------

    \22\ The Intraday Indicative Value is an estimate, updated at 
least every 15 seconds, of the value of a share of each series 
during the Exchange's regular market session. See, e.g., Exchange 
Rules 14.11(b)(3)(C) and (c)(3)(C).
---------------------------------------------------------------------------

     Such other event shall occur or condition exists which in 
the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Upon termination of a Trust, the Exchange requires that Commodity-
Based Trust Shares issued in connection with such entity Trust be 
removed from Exchange listing. A Trust may terminate in accordance with 
the provisions of the Trust prospectus, which may provide for 
termination if the value of the Trust falls below a specified amount.
    Proposed Rule 14.11(e)(4)(E)(iii) provides that the stated term of 
the Trust shall be stated in the Trust prospectus. However, a Trust may 
be terminated under such earlier circumstances as may be specified in 
the Trust prospectus.
    Proposed Rule 14.11(e)(4)(E)(iv) sets forth the following 
requirements for the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for

[[Page 53516]]

handling corporate trust business. In cases where, for any reason, an 
individual has been appointed as trustee, a qualified trust company or 
banking institution must be appointed co-trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Exchange.
    Proposed Rule 14.11(e)(4)(E)(v) states that voting rights shall be 
as set forth in the Trust prospectus.
    Proposed Rules 14.11(e)(4)(F) and (G) describe the limitation of 
the Exchange liability and requirements for market makers in Commodity-
Based Trust Shares (see below for a general discussion of these 
requirements).
    Interpretation and Policy .01 to proposed Exchange Rule 14.11(e)(4) 
provides that a Commodity-Based Trust Share is a Trust Issued Receipt 
that holds a specified commodity deposited with the Trust.
    Interpretation and Policy .02 to proposed Exchange Rule 14.11(e)(4) 
provides that the Exchange requires that members provide all purchasers 
of newly issued Commodity-Based Trust Shares a prospectus for the 
series of Commodity-Based Trust Shares.
    Interpretation and Policy .03 to proposed Exchange Rule 14.11(e)(4) 
provides that transactions in Commodity-Based Trust Shares will occur 
during Regular Trading Hours and both the Pre-Opening and After Hours 
Trading Sessions.
    Interpretation and Policy .04 to proposed Exchange Rule 14.11(e)(4) 
provides that the Exchange will file separate proposals under Section 
19(b) of the Exchange Act before the listing and/or trading of 
Commodity-Based Trust Shares.
5. Currency Trust Shares
    The Exchange proposes to adopt new Exchange Rule 14.11(e)(5) for 
the purpose of permitting the listing and trading, or trading pursuant 
to unlisted trading privileges, of Currency Trust Shares. The proposed 
rule change relating to Currency Trust Shares is based on Nasdaq Rule 
5711(e).
    Proposed Rule 14.11(e)(5) would apply only to Currency Trust 
Shares. Except to the extent inconsistent with the proposed Rule, or 
unless the context otherwise requires, the provisions of the trust 
issued receipts rules, Bylaws, and all other rules and procedures of 
the Board of Directors shall be applicable to the trading on the 
Exchange of such securities. Currency Trust Shares are included within 
the definition of ``security'' or ``securities'' as such terms are used 
in the Rules of the Exchange.
    Proposed Rule 14.11(e)(5)(C) provides that the term ``Currency 
Trust Shares'' as used in these proposed rules means, unless the 
context otherwise requires, a security that:
     Is issued by a Trust that holds a specified non-U.S. 
currency or currencies deposited with the Trust;
     When aggregated in some specified minimum number may be 
surrendered to the Trust by an Authorized Participant (as defined in 
the Trust's prospectus) to receive the specified non-U.S. currency or 
currencies; and
     Pays beneficial owners interest and other distributions on 
the deposited non-U.S. currency or currencies, if any, declared and 
paid by the Trust.
    Proposed Rule 14.11(e)(5)(D) states that the Exchange may trade, 
either by listing or pursuant to unlisted trading privileges, Currency 
Trust Shares that hold a specified non-U.S. currency or currencies. 
Each issue of Currency Trust Shares would be designated as a separate 
series and shall be identified by a unique symbol.
    The Exchange will establish a minimum number of Currency Trust 
Shares required to be outstanding at the time of commencement of 
trading on the Exchange.
    Proposed Rule 14.11(e)(5)(E)(ii) provides that, following the 
initial 12-month period following commencement of trading on the 
Exchange of Currency Trust Shares, the Exchange will consider the 
suspension of trading in or removal from listing of such series under 
any of the following circumstances: if
     The Trust has more than 60 days remaining until 
termination and there are fewer than 50 record and/or beneficial 
holders of Currency Trust Shares for 30 or more consecutive trading 
days;
     The Trust has fewer than 50,000 Currency Trust Shares 
issued and outstanding;
     If the market value of all Currency Trust Shares issued 
and outstanding is less than $1,000,000;
     The value of the applicable non-U.S. currency is no longer 
calculated or available on at least a 15-second delayed basis from a 
source unaffiliated with the sponsor, Trust, custodian or the Exchange 
or the Exchange stops providing a hyperlink on its Web site to any such 
unaffiliated applicable non-U.S. currency value;
     The Intraday Indicative Value is no longer made available 
on at least a 15-second delayed basis; or
     Such other event shall occur or condition exists which in 
the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule requires that, upon termination of a Trust, 
Currency Trust Shares issued in connection with such Trust be removed 
from Exchange listing. A Trust may terminate in accordance with the 
provisions of the Trust prospectus, which may provide for termination 
if the value of the Trust falls below a specified amount.
    Proposed Rule 14.11(e)(5)(E)(iii) states that the stated term of 
the Trust shall be as stated in the Trust prospectus. However, a Trust 
may be terminated under such earlier circumstances as may be specified 
in the Trust prospectus.
    Proposed Rule 14.11(e)(5)(E)(iv) states that the following 
requirements apply to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Exchange.
    Proposed Rule 14.11(e)(5)(E)(v) states that voting rights shall be 
as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(5)(F) and (G) set forth the requirements 
respecting limitation of the Exchange liability and market maker 
accounts (see below for a general discussion of these requirements).
    Proposed Rule 14.11(e)(5)(H) states that the Exchange may submit a 
rule filing pursuant to Section 19(b)(2) of the Act to permit the 
listing and trading of Currency Trust Shares that do not otherwise meet 
the standards set forth in Interpretation and Policy .04 to proposed 
Rule 14.11(e)(5).
    Interpretation and Policy .01 to proposed Rule 14.11(e)(5) states 
that a Currency Trust Share is a Trust Issued Receipt that holds a 
specified non-U.S. currency or currencies deposited with the Trust.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(5) states 
that the Exchange requires that members provide all purchasers of newly 
issued Currency Trust Shares a prospectus for the series of Currency 
Trust Shares.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(5) provides 
that transactions in Currency Trust Shares will occur during Regular 
Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(5) provides 
that the Exchange may approve an issue of

[[Page 53517]]

Currency Trust Shares for listing and/or trading (including pursuant to 
unlisted trading privileges) pursuant to Rule 19b-4(e) under the Act. 
Such issue shall satisfy the criteria set forth in the proposed rule, 
together with the following criteria:
     A minimum of 100,000 shares of a series of Currency Trust 
Shares is required to be outstanding at commencement of trading (this 
would not apply to issues trading pursuant to unlisted trading 
privileges);
     The value of the applicable non-U.S. currency, currencies 
or currency index must be disseminated by one or more major market data 
vendors on at least a 15-second delayed basis;
     The Intraday Indicative Value must be calculated and 
widely disseminated by the Exchange or one or more major market data 
vendors on at least a 15- second basis during the regular market 
session; and
     The Exchange will implement written surveillance 
procedures applicable to Currency Trust Shares.
    Interpretation and Policy .05 to proposed Rule 14.11(e)(5) states 
that if the value of a Currency Trust Share is based in whole or in 
part on an index that is maintained by a broker-dealer, the broker-
dealer would be required to erect a ``firewall'' around the personnel 
responsible for the maintenance of such index or who have access to 
information concerning changes and adjustments to the index, and the 
index shall be calculated by a third party who is not a broker-dealer. 
Additionally, any advisory committee, supervisory board or similar 
entity that advises an index licensor or administrator or that makes 
decisions regarding the index or portfolio composition, methodology and 
related matters must implement and maintain, or be subject to, 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the applicable index or portfolio.
    Interpretation and Policy .06 to proposed Rule 14.11(e)(5) provides 
that Currency Trust Shares will be subject to the Exchange's equity 
trading rules.
    Proposed Interpretation and Policy .07 to Rule 14.11(e)(5) states 
that if the Intraday Indicative Value, or the value of the non-U.S. 
currency or currencies or the currency index applicable to a series of 
Currency Trust Shares is not being disseminated as required, the 
Exchange may halt trading during the day on which such interruption 
first occurs. If such interruption persists past the trading day in 
which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption. If the 
Exchange becomes aware that the net asset value applicable to a series 
of Currency Trust Shares is not being disseminated to all market 
participants at the same time, it will halt trading in such series 
until such time as the net asset value is available to all market 
participants.
6. Commodity Index Trust Shares
    The Exchange will consider for trading, whether by listing or 
pursuant to unlisted trading privileges, Commodity Index Trust Shares 
that meet the criteria of proposed Rule 14.11(e)(6). The proposed rule 
change relating to Commodity Index Trust Shares is based on Nasdaq Rule 
5711(f).
    Proposed Rule 14.11(e)(6)(B) states that proposed Rule 14.11(e)(6) 
would be applicable only to Commodity Index Trust Shares. Except to the 
extent inconsistent with the proposed Rule, or unless the context 
otherwise requires, the provisions of the trust issued receipts rules, 
Bylaws, and all other rules and procedures of the Board of Directors 
shall be applicable to the trading on the Exchange of such securities. 
Commodity Index Trust Shares are included within the definition of 
``security'' or ``securities'' as such terms are used in the Rules of 
the Exchange.
    Proposed Rule 14.11(e)(6)(C) defines the term ``Commodity Index 
Trust Shares'' to mean (unless the context otherwise requires) a 
security that: (i) Is issued by a Trust that (a) is a commodity pool as 
defined in the CEA and regulations thereunder, and that is managed by a 
commodity pool operator registered with the Commodity Futures Trading 
Commission (``CFTC''); and (b) that holds long positions in futures 
contracts on a specified commodity index, or interests in a commodity 
pool which, in turn, holds such long positions; and (ii) when 
aggregated in some specified minimum number may be surrendered to the 
Trust by the beneficial owner to receive positions in futures contracts 
on a specified index and cash or short term securities. The term 
``futures contract'' is commonly known as a ``contract of sale of a 
commodity for future delivery'' set forth in Section 2(a) of the CEA.
    Proposed Rule 14.11(e)(6)(D) states that the Exchange may trade, 
either by listing or pursuant to unlisted trading privileges, Commodity 
Index Trust Shares based on one or more securities. The Commodity Index 
Trust Shares based on particular securities would be designated as a 
separate series and would be identified by a unique symbol.
    Proposed Rule 14.11(e)(6)(E)(i) states that the Exchange will 
establish a minimum number of Commodity Index Trust Shares required to 
be outstanding at the time of commencement of trading on the Exchange.
    Under proposed Rule 14.11(e)(6)(E)(ii), the Exchange will consider 
the suspension of trading in or removal from listing of a series of 
Commodity Index Trust Shares under any of the following circumstances:
     Following the initial 12-month period beginning upon the 
commencement of trading of the Commodity Index Trust Shares, there are 
fewer than 50 record and/or beneficial holders of Commodity Index Trust 
Shares for 30 or more consecutive trading days;
     If the value of the applicable underlying index is no 
longer calculated or available on at least a 15-second delayed basis 
from a source unaffiliated with the sponsor, the Trust or the trustee 
of the Trust;
     If the net asset value for the trust is no longer 
disseminated to all market participants at the same time;
     If the Intraday Indicative Value is no longer made 
available on at least a 15-second delayed basis; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule requires that, upon termination of a Trust, the 
Exchange will delist the Trust's Commodity Index Trust Shares. A Trust 
may terminate in accordance with the provisions of the Trust 
prospectus, which may provide for termination if the value of the Trust 
falls below a specified amount.
    Proposed Rule 14.11(e)(6)(E)(iii) provides that the stated term of 
the Trust shall be as stated in the Trust prospectus. However, a Trust 
may be terminated under such earlier circumstances as may be specified 
in the Trust prospectus.
    Proposed Rule 14.11(e)(6)(E)(iv) states that the following 
requirements apply to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Exchange.
    Proposed Rule 14.11(e)(6)(E)(v) provides that voting rights shall 
be as set forth in the applicable Trust prospectus.

[[Page 53518]]

    Proposed Rules 14.11(e)(6)(F) and (G) set forth the requirements 
respecting limitation of the Exchange liability and market maker 
accounts (see below for a general discussion of these requirements).
    Interpretation and Policy .01 to proposed Rule 14.11(e)(6) states 
that a Commodity Index Trust Share is a Trust Issued Receipt that holds 
long positions in futures contracts on a specified commodity index, or 
interests in a commodity pool which, in turn, holds such long 
positions, deposited with the Trust.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(6) states 
that the Exchange requires that members provide all purchasers of newly 
issued Commodity Index Trust Shares a prospectus for the series of 
Commodity Index Trust Shares.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(6) states 
that transactions in Commodity Index Trust Shares will occur during 
Regular Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(6) states 
that the Exchange will file separate proposals under Section 19(b) of 
the Act before trading, either by listing or pursuant to unlisted 
trading privileges, Commodity Index Trust Shares.
7. Commodity Futures Trust Shares
    Proposed Rule 14.11(e)(7) governs the listing of Commodity Futures 
Trust Shares. The Exchange will consider for trading, whether by 
listing or pursuant to unlisted trading privileges, Commodity Futures 
Trust Shares that meet the criteria of proposed Rule 14.11(e)(7). 
Proposed Rule 14.11(e)(7)(B) states that proposed Rule 14.11(e)(7) 
would apply only to Commodity Futures Trust Shares. Except to the 
extent inconsistent with the proposed Rule, or unless the context 
otherwise requires, the provisions of the trust issued receipts rules, 
Bylaws, and all other rules and procedures of the Board of Directors 
shall be applicable to the trading on the Exchange of such securities. 
Commodity Futures Trust Shares are included within the definition of 
``security'' or ``securities'' as such terms are used in the Rules of 
the Exchange.
    Proposed Rule 14.11(e)(7)(C) states that the term ``Commodity 
Futures Trust Shares'' as used in the proposed Rules means, unless the 
context otherwise requires, a security that: (i) Is issued by a Trust 
that (a) is a commodity pool as defined in the CEA and regulations 
thereunder, and that is managed by a commodity pool operator registered 
with the CFTC, and (b) holds positions in futures contracts that track 
the performance of a specified commodity, or interests in a commodity 
pool which, in turn, holds such positions; and (ii) is issued and 
redeemed daily in specified aggregate amounts at net asset value. The 
term ``futures contract'' is a ``contract of sale of a commodity for 
future delivery'' set forth in Section 2(a) of the CEA. The term 
``commodity'' is defined in Section 1(a)(4) of the CEA.
    Proposed Rule 14.11(e)(7)(D) states that the Exchange may trade, 
either by listing or pursuant to unlisted trading privileges, Commodity 
Futures Trust Shares based on an underlying commodity futures contract. 
Each issue of Commodity Futures Trust Shares shall be designated as a 
separate series and shall be identified by a unique symbol.
    Proposed Rule 14.11(e)(7)(E)(i) states that the Exchange will 
establish a minimum number of Commodity Futures Trust Shares required 
to be outstanding at the time of commencement of trading on the 
Exchange.
    Proposed Rule 14.11(e)(7)(E)(ii) states that the Exchange will 
consider the suspension of trading in or removal from listing of a 
series of Commodity Futures Trust Shares under any of the following 
circumstances:
     If, following the initial 12-month period beginning upon 
the commencement of trading of the Commodity Futures Trust Shares: (1) 
The Trust has fewer than 50,000 Commodity Futures Trust Shares issued 
and outstanding; or (2) the market value of all Commodity Futures Trust 
Shares issued and outstanding is less than $1,000,000; or (3) there are 
fewer than 50 record and/or beneficial holders of Commodity Futures 
Trust Shares for 30 consecutive trading days;
     If the value of the underlying futures contracts is no 
longer calculated or available on at least a 15-second delayed basis 
during the Exchange's regular market session from a source unaffiliated 
with the sponsor, the Trust or the trustee of the Trust;
     If the net asset value for the Trust is no longer 
disseminated to all market participants at the same time;
     If the Intraday Indicative Value is no longer disseminated 
on at least a 15- second delayed basis during the Exchange's regular 
market session; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule requires that, upon termination of a Trust, the 
Exchange delist Commodity Futures Trust Shares issued by the Trust. A 
Trust will terminate in accordance with the provisions of the Trust 
prospectus.
    Proposed Rule 14.11(e)(7)(E)(iii) states that the stated term of 
the Trust shall be stated in the prospectus. However, a Trust may be 
terminated under such earlier circumstances as may be specified in the 
Trust prospectus.
    Proposed Rule 14.11(e)(7)(E)(iv) states that the following 
requirements apply to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Exchange.
    Proposed Rule 14.11(e)(7)(E)(v) states that voting rights shall be 
as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(7)(F) and (G) describe the requirements for 
market makers and the limitation of the Exchange liability in Commodity 
Futures Trust Shares (see below for a general discussion of these 
requirements).
    Proposed Rule 14.11(e)(7)(H) states that the Exchange will file 
separate proposals under Section 19(b) of the Act before listing and 
trading separate and distinct Commodity Futures Trust Shares designated 
on different underlying futures contracts.
    Interpretation and Policy .01 to proposed Rule 14.11(e)(7) would 
require members trading in Commodity Futures Trust Shares to provide 
all purchasers of newly issued Commodity Futures Trust Shares a 
prospectus for the series of Commodity Futures Trust Shares.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(7) states 
that transactions in Commodity Futures Trust Shares will occur during 
Regular Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(7) states 
that if the Intraday Indicative Value or the value of the underlying 
futures contract is not being disseminated as required, the Exchange 
may halt trading during the day in which the interruption to the 
dissemination of the Intraday Indicative Value or the value of the 
underlying futures contract occurs. If the interruption to the 
dissemination of the Intraday Indicative Value or the value of

[[Page 53519]]

the underlying futures contract persists past the trading day in which 
it occurred, the Exchange will halt trading no later than the beginning 
of the trading day following the interruption.
    In addition, if the Exchange becomes aware that the net asset value 
with respect to a series of Commodity Futures Trust Shares is not 
disseminated to all market participants at the same time, it will halt 
trading in such series until such time as the net asset value is 
available to all market participants.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(7) states 
that the Exchange's rules governing the trading of equity securities 
apply.
    Interpretation and Policy .05 to proposed Rule 14.11(e)(7) states 
that the Exchange will implement written surveillance procedures for 
Commodity Futures Trust Shares.
    The proposed rule change relating to Commodity Futures Trust Shares 
is based on Nasdaq Rule 5711(g).
8. Partnership Units
    Proposed Rule 14.11(e)(8) governs the listing of Partnership Units. 
Under proposed Rule 14.11(e)(8)(A), the Exchange will consider for 
trading, whether by listing or pursuant to unlisted trading privileges, 
Partnership Units that meet the criteria of proposed Rule 14.11(e)(8).
    Under proposed Rule 14.11(e)(8)(B), the following terms as used in 
the proposed Rule would, unless the context otherwise requires, have 
the following meanings: ``commodity'' is defined in Section 1(a)(4) of 
the CEA; and a Partnership Unit is a security (a) that is issued by a 
partnership that invests in any combination of futures contracts, 
options on futures contracts, forward contracts, commodities and/or 
securities; and (b) that is issued and redeemed daily in specified 
aggregate amounts at net asset value.
    Proposed Rule 14.11(e)(8)(C) states that the Exchange may list and 
trade Partnership Units based on an underlying asset, commodity or 
security. Each issue of a Partnership Unit would be designated as a 
separate series and would be identified by a unique symbol.
    Proposed Rule 14.11(e)(8)(D)(i) states that the Exchange will 
establish a minimum number of Partnership Units required to be 
outstanding at the time of commencement of trading on the Exchange.
    Proposed Rule 14.11(e)(8)(D)(ii) provides that the Exchange will 
consider removal of Partnership Units from listing under any of the 
following circumstances: if
     Following the initial 12-month period from the date of 
commencement of trading of the Partnership Units, (1) the partnership 
has more than 60 days remaining until termination and there are fewer 
than 50 record and/or beneficial holders of the Partnership Units for 
30 or more consecutive trading days; (2) the partnership has fewer than 
50,000 Partnership Units issued and outstanding; or (3) the market 
value of all Partnership Units issued and outstanding is less than 
$1,000,000;
     The value of the underlying benchmark investment, 
commodity or asset is no longer calculated or available on at least a 
15-second delayed basis or the Exchange stops providing a hyperlink on 
its Web site to any such investment, commodity or asset value;
     The Intraday Indicative Value is no longer made available 
on at least a 15- second delayed basis; or
     Such other event shall occur or condition exists which in 
the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    The proposed rule requires that, upon termination of a partnership, 
the Exchange remove from Exchange listing Partnership Units issued in 
connection with such partnership. A partnership will terminate in 
accordance with the provisions of the partnership prospectus.
    Proposed Rule 14.11(e)(8)(D)(iii) requires that the term of the 
partnership be stated in the prospectus. However, such entity may be 
terminated under such earlier circumstances as may be specified in the 
Partnership prospectus.
    Proposed Rule 14.11(e)(8)(D)(iv) adopts the following requirements 
that apply to the general partner of a partnership:
     The general partner of a partnership must be an entity 
having substantial capital and surplus and the experience and 
facilities for handling partnership business. In cases where, for any 
reason, an individual has been appointed as general partner, a 
qualified entity must also be appointed as general partner.
     No change is to be made in the general partner of a listed 
issue without prior notice to and approval of the Exchange.
    Proposed Rule 14.11(e)(8)(D)(v) states that voting rights shall be 
as set forth in the applicable partnership prospectus.
    Proposed Rules 14.11(e)(8)(E) and (F) describe the limitation of 
the Exchange liability and requirements for market makers in 
Partnership Units (see below for a general discussion of these 
requirements).
    Proposed Rule 14.11(e)(8)(G) states that the Exchange will file 
separate proposals under Section 19(b) of the Act before listing and 
trading separate and distinct Partnership Units designated on different 
underlying investments, commodities and/or assets.
    Interpretation and Policy .01 to proposed Rule 14.11(e)(8) states 
that the Exchange requires that members provide to all purchasers of 
newly issued Partnership Units a prospectus for the series of 
Partnership Units.
    The proposed rule change relating to Partnership Units is based on 
Nasdaq Rule 5711(h).
9. Trust Units
    The Exchange proposes to add new Rule 14.11(e)(9) to permit 
trading, either by listing or pursuant to unlisted trading privileges, 
of Trust Units. The proposed rule is based on Nasdaq Rule 5711(i).
    Proposed Rule 14.11(e)(9)(A) states that the provisions in proposed 
Rule 14.11(e)(9) are applicable only to Trust Units. In addition, 
except to the extent inconsistent with this Rule, or unless the context 
otherwise requires, the rules and procedures of the Board of Directors 
shall be applicable to the trading on the Exchange of such securities. 
Trust Units are included within the definition of ``security,'' 
``securities'' and ``derivative securities products'' as such terms are 
used in the Rules of the Exchange.
    Proposed Rule 14.11(e)(9)(B) states that the following terms as 
used in the proposed Rule shall, unless the context otherwise requires, 
have the following meanings:
     The term ``commodity'' is defined in Section 1(a)(4) of 
the CEA.
     A Trust Unit is a security that is issued by a trust or 
other similar entity that is constituted as a commodity pool that holds 
investments comprising or otherwise based on any combination of futures 
contracts, options on futures contracts, forward contracts, swap 
contracts, commodities and/or securities.
    Proposed Rule 14.11(e)(9)(C) states that the Exchange may list and 
trade Trust Units based on an underlying asset, commodity, security or 
portfolio. Each issue of a Trust Unit shall be designated as a separate 
series and shall be identified by a unique symbol.
    Proposed Rule 14.11(e)(9)(D)(i) states that the Exchange will 
establish a minimum number of Trust Units required to be outstanding at 
the time of commencement of trading on the Exchange. The Exchange will 
obtain a representation from the issuer of each series of Trust Units 
that the net asset value per share for the series will be calculated 
daily and will be made available to all market participants at the same 
time.

[[Page 53520]]

    Proposed Rule 14.11(e)(9)(D)(ii)(a) states that the Exchange will 
remove Trust Units from listing under any of the following 
circumstances:
     If following the initial 12-month period following the 
commencement of trading of Trust Units, (A) the trust has more than 60 
days remaining until termination and there are fewer than 50 record 
and/or beneficial holders of Trust Units for 30 or more consecutive 
trading days; (B) the trust has fewer than 50,000 Trust Units issued 
and outstanding; or (C) the market value of all Trust Units issued and 
outstanding is less than $1,000,000; or
     If such other event shall occur or condition exists which 
in the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Proposed Rule 14.11(e)(9)(D)(ii)(b) states that the Exchange will 
halt trading in a series of Trust Units if the circuit breaker 
parameters in Rule 11.18 have been reached. In exercising its 
discretion to halt or suspend trading in a series of Trust Units, the 
Exchange may consider any relevant factors. In particular, if the 
portfolio and net asset value per share are not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the portfolio holdings or net 
asset value per share occurs. If the interruption to the dissemination 
of the portfolio holdings or net asset value per share persists past 
the trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption.
    The proposed rule requires that, upon termination of a trust, the 
Exchange will remove from Exchange listing Trust Units issued in 
connection with such trust. A trust will terminate in accordance with 
the provisions of the prospectus.
    Proposed Rule 14.11(e)(9)(D)(iii) requires that the term of the 
trust be stated in the prospectus. However, such entity may be 
terminated under such earlier circumstances as may be specified in the 
prospectus.
    Proposed Rule 14.11(e)(9)(D)(iv) adopts the following requirements 
applicable to the trustee of a Trust:
     The trustee of a trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Exchange.
    Proposed Rule 14.11(e)(9)(D)(v) states that voting rights shall be 
as set forth in the prospectus.
    Proposed Rules 14.11(e)(9)(E) and (F) describe the requirements for 
market makers and the limitation of the Exchange liability respecting 
Trust Units (see below for a general discussion of these requirements).
    Interpretation and Policy .01 to proposed Rule 14.11(e)(9) states 
that the Exchange requires that members provide to all purchasers of 
newly issued Trust Units a prospectus for the series of Trust Units.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(9) states 
that transactions in Trust Units will occur during Regular Trading 
Hours and both the Pre-Opening and After Hours Trading Sessions.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(9) states 
that the Exchange will file separate proposals under Section 19(b) of 
the Act before listing and trading separate and distinct Trust Units 
designated on different underlying investments, commodities, assets 
and/or portfolios.
10. Managed Trust Securities
    Proposed Rule 14.11(e)(10) establishes listing standards for 
Managed Trust Securities. The proposed rule is based on Nasdaq Rule 
5711(j). Under proposed Rule 14.11(e)(10)(A), the Exchange will 
consider for trading, whether by listing or pursuant to unlisted 
trading privileges, Managed Trust Securities that meet the criteria of 
the proposed Rule. Proposed Rule 14.11(e)(10)(B) states that the 
proposed Rule would apply only to Managed Trust Securities. Managed 
Trust Securities are included within the definition of ``security'' or 
``securities'' as such terms are used in the Rules of the Exchange.
    Proposed Rule 14.11(e)(10)(C)(i) defines the term ``Managed Trust 
Securities'' to mean, unless the context otherwise requires, a security 
that is registered under the Securities Act of 1933, as amended, and 
which (1) is issued by a Trust that (a) is a commodity pool as defined 
in the CEA and regulations thereunder, and that is managed by a 
commodity pool operator registered with the CFTC, and (b) holds long 
and/or short positions in exchange- traded futures contracts and/or 
certain currency forward contracts selected by the Trust's advisor 
consistent with the Trust's investment objectives, which will only 
include, exchange-traded futures contracts involving commodities, 
currencies, stock indices, fixed income indices, interest rates and 
sovereign, private and mortgage or asset backed debt instruments, and/
or forward contracts on specified currencies, each as disclosed in the 
Trust's prospectus as such may be amended from time to time; and (2) is 
issued and redeemed continuously in specified aggregate amounts at the 
next applicable net asset value.
    Proposed Rule 14.11(e)(10)(C) also includes the following 
definitions concerning Managed Trust Securities:
     Under proposed Rule 14.11(e)(10)(C)(ii), the term 
``Disclosed Portfolio'' means the identities and quantities of the 
securities and other assets held by the Trust that will form the basis 
for the Trust's calculation of net asset value at the end of the 
business day.
     Under proposed Rule 14.11(e)(10)(C)(iii), the term 
``Intraday Indicative Value'' is the estimated indicative value of a 
Managed Trust Security based on current information regarding the value 
of the securities and other assets in the Disclosed Portfolio.
     Under proposed Rule 14.11(e)(10)(C)(iv), the term 
``Reporting Authority'' in respect of a particular series of Managed 
Trust Securities means the Exchange, an institution, or a reporting or 
information service designated by the Exchange or by the Trust or the 
exchange that lists a particular series of Managed Trust Securities (if 
the Exchange is trading such series pursuant to unlisted trading 
privileges) as the official source for calculating and reporting 
information relating to such series, including, but not limited to, the 
Intraday Indicative Value; the Disclosed Portfolio; the amount of any 
cash distribution to holders of Managed Trust Securities, net asset 
value, or other information relating to the issuance, redemption or 
trading of Managed Trust Securities. A series of Managed Trust 
Securities may have more than one Reporting Authority, each having 
different functions.
    Proposed Rule 14.11(e)(10)(D) states that the Exchange may trade, 
either by listing or pursuant to unlisted trading privileges, Managed 
Trust Securities based on the underlying portfolio of exchange-traded 
futures and/or certain currency forward contracts described in the 
related prospectus. Each issue of Managed Trust Securities shall be 
designated as a separate trust or series and shall be identified by a 
unique symbol.
    Under proposed Rule 14.11(e)(10)(E)(i), Managed Trust Securities 
will be listed and traded on the Exchange subject to application of the 
following initial listing criteria:

[[Page 53521]]

     The Exchange will establish a minimum number of Managed 
Trust Securities required to be outstanding at the time of commencement 
of trading on the Exchange.
     The Exchange will obtain a representation from the issuer 
of each series of Managed Trust Securities that the net asset value per 
share for the series will be calculated daily and that the net asset 
value and the Disclosed Portfolio will be made available to all market 
participants at the same time.
    Under proposed Rule 14.11(e)(10)(E)(ii), each series of Managed 
Trust Securities will be listed and traded on the Exchange subject to 
application of the following continued listing criteria:
     The Intraday Indicative Value for Managed Trust Securities 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during Regular Trading Hours.
     The Disclosed Portfolio will be disseminated at least once 
daily and will be made available to all market participants at the same 
time.
     The Reporting Authority that provides the Disclosed 
Portfolio must implement and maintain, or be subject to, procedures 
designed to prevent the use and dissemination of material non-public 
information regarding the actual components of the portfolio.
    Under proposed Rule 14.11(e)(10)(E)(ii)(c), the Exchange will 
consider the suspension of trading in or removal from listing of a 
series of Managed Trust Securities under any of the following 
circumstances: if
     Following the initial 12-month period beginning upon the 
commencement of trading of the Managed Trust Securities: (A) The Trust 
has fewer than 50,000 Managed Trust Securities issued and outstanding; 
(B) the market value of all Managed Trust Securities issued and 
outstanding is less than $1,000,000; or (C) there are fewer than 50 
record and/or beneficial holders of Managed Trust Securities for 30 
consecutive trading days;
     The Intraday Indicative Value for the Trust is no longer 
calculated or available or the Disclosed Portfolio is not made 
available to all market participants at the same time;
     The Trust issuing the Managed Trust Securities has failed 
to file any filings required by the Securities and Exchange Commission 
or if the Exchange is aware that the Trust is not in compliance with 
the conditions of any exemptive order or no-action relief granted by 
the Securities and Exchange Commission to the Trust with respect to the 
series of Managed Trust Securities; or
     Such other event shall occur or condition exists which in 
the opinion of the Exchange makes further dealings on the Exchange 
inadvisable.
    Proposed Rule 14.11(e)(10)(E)(ii)(d) states that, if the Intraday 
Indicative Value of a series of Managed Trust Securities is not being 
disseminated as required, the Exchange may halt trading during the day 
in which the interruption to the dissemination of the Intraday 
Indicative Value occurs. If the interruption to the dissemination of 
the Intraday Indicative Value persists past the trading day in which it 
occurred, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption. If a series of Managed 
Trust Securities is trading on the Exchange pursuant to unlisted 
trading privileges, the Exchange will halt trading in that series as 
specified in Rule 11.18. In addition, if the Exchange becomes aware 
that the net asset value or the Disclosed Portfolio with respect to a 
series of Managed Trust Securities is not disseminated to all market 
participants at the same time, it will halt trading in such series 
until such time as the net asset value or the Disclosed Portfolio is 
available to all market participants.
    Proposed Rule 14.11(e)(10)(E)(ii)(e) states that upon termination 
of a Trust, the Exchange requires that Managed Trust Securities issued 
in connection with such Trust be removed from Exchange listing. A Trust 
will terminate in accordance with the provisions of the Trust 
prospectus.
    Proposed Rule 14.11(e)(10)(E)(iii) states that the term of the 
Trust shall be stated in the prospectus. However, a Trust may be 
terminated under such earlier circumstances as may be specified in the 
Trust prospectus.
    Proposed Rule 14.11(e)(10)(E)(iv) establishes the following 
requirements applicable to the trustee of a Trust:
     The trustee of a Trust must be a trust company or banking 
institution having substantial capital and surplus and the experience 
and facilities for handling corporate trust business. In cases where, 
for any reason, an individual has been appointed as trustee, a 
qualified trust company or banking institution must be appointed co-
trustee.
     No change is to be made in the trustee of a listed issue 
without prior notice to and approval of the Exchange.
    Proposed Rule 14.11(e)(10)(E)(v) states that voting rights shall be 
as set forth in the applicable Trust prospectus.
    Proposed Rules 14.11(e)(10)(F) and (G) describe the regulatory 
requirements for registered market makers in Managed Trust Securities, 
and the limitation of the Exchange liability respecting Managed Trust 
Securities (see below for a general discussion of these requirements).
    Proposed Rule 14.11(e)(10)(H) states that the Exchange will file 
separate proposals under Section 19(b) of the Act before listing and 
trading separate and distinct Managed Trust Securities.
    In addition to the above, the Interpretations and Policies to 
proposed Rule 14.11(e)(10) include the following provisions:
    Interpretation and Policy .01 to proposed Rule 14.11(e)(10) states 
that the Exchange requires that members provide all purchasers of newly 
issued Managed Trust Securities a prospectus for the series of Managed 
Trust Securities.
    Interpretation and Policy .02 to proposed Rule 14.11(e)(10) states 
that transactions in Managed Trust Securities will occur during Regular 
Trading Hours and both the Pre-Opening and After Hours Trading 
Sessions.
    Interpretation and Policy .03 to proposed Rule 14.11(e)(10) states 
that the Exchange's rules governing the trading of equity securities 
apply.
    Interpretation and Policy .04 to proposed Rule 14.11(e)(10) states 
that the Exchange will implement written surveillance procedures for 
Managed Trust Securities.
    Interpretation and Policy .05 to proposed Rule 14.11(e)(10) states 
that if the Trust's advisor is affiliated with a broker-dealer, the 
broker-dealer shall erect a ``fire wall'' around the personnel who have 
access to information concerning changes and adjustments to the 
Disclosed Portfolio. Personnel who make decisions on the Trust's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material, non-public information regarding 
the applicable Trust portfolio.
11. Currency Warrants
    Proposed Rule 14.11(e)(11) governs the listing of Currency 
Warrants. The proposed rule change relating to Currency Warrants is 
based on Nasdaq Rule 5711(k). The listing of Currency Warrant issues is 
considered on a case- by-case basis. Currency Warrant issues will be 
evaluated for listing against the following criteria.
    Proposed Rule 14.11(e)(11)(A)(i) requires the warrant issuer to 
have a minimum tangible net worth in excess of $250,000,000 and 
otherwise to exceed substantially the earnings requirements

[[Page 53522]]

set forth in Rule 14.8(b)(2).\23\ In the alternative, the warrant 
issuer will be expected to have a minimum tangible net worth of 
$150,000,000 and otherwise to exceed substantially the earnings 
requirements set forth in Rule 14.8(b)(2), and not to have issued 
warrants where the original issue price of all the issuer's currency 
warrant offerings (combined with currency warrant offerings of the 
issuer's affiliates) listed on a national securities exchange or traded 
through the facilities of the Exchange exceeds 25% of the warrant 
issuer's net worth.
---------------------------------------------------------------------------

    \23\ Rule 14.8(b)(2) sets forth initial listing standards for 
primary equity securities.
---------------------------------------------------------------------------

    Proposed Rule 14.11(e)(11)(A)(ii) states that the term must be one 
to five years from date of issuance.
    Proposed Rule 14.11(e)(11)(A)(iii) requires that there must be a 
minimum public distribution of 1,000,000 warrants together with a 
minimum of 400 public holders, and an aggregate market value of 
$4,000,000. In the alternative, there must be a minimum public 
distribution of 2,000,000 warrants together with a minimum number of 
public warrant holders determined on a case by case basis, an aggregate 
market value of $12,000,000 and an initial warrant price of $6.
    Under proposed Rule 14.11(e)(11)(A)(iv), the warrants will be cash 
settled in U.S. dollars.
    Under proposed Rule 14.11(e)(11)(A)(v), all currency warrants must 
include in their terms provisions specifying the time by which all 
exercise notices must be submitted, and that all unexercised warrants 
that are in the money will be automatically exercised on their 
expiration date or on or promptly following the date on which such 
warrants are delisted by the Exchange (if such warrant issue has not 
been listed on another organized securities market in the United 
States).
    Under proposed Rule 14.11(e)(11)(B), the Exchange will file 
separate proposals under Section 19(b) of the Act before listing and 
trading separate and distinct Currency Warrants.
    Proposed Rule 14.11(e)(11)(C) describes regulatory matters 
applicable to Currency Warrants. Specifically:
     No member shall accept an order from a customer to 
purchase or sell a Currency Warrant unless the customer's account has 
been approved for options trading pursuant to Rule 26.2.
     The provisions of Rule 26.4 apply to recommendations in 
Currency Warrants and the term ``option'' as used therein shall be 
deemed for purposes of this Rule to include such warrants.
     Any account in which a member exercises discretion to 
trade in Currency Warrants is subject to the provisions of Rule 26.5 
with respect to such trading. For purposes of the proposed Rule, the 
terms, ``option'' and ``options contract'' as used in Rule 26.5 shall 
be deemed to include Currency Warrants.
     Rule 26.3 applies to all customer accounts of a member in 
which transactions in Currency Warrants are effected. The term 
``option'' as used in Chapter XI, Section 8 shall be deemed to include 
Currency Warrants.
     Rule 26.17 applies to all public customer complaints 
received by a member regarding Currency Warrants. The term ``option'' 
as used in Rule 26.17 shall be deemed to include such warrants.
     Members participating in Currency Warrants shall be bound 
to comply with the Communications and Disclosures rule of the Financial 
Industry Regulatory Authority (``FINRA''), as applicable, as though 
such rule were part of these Rules.
    Under proposed Rule 14.11(e)(11)(D), trading on the Exchange in any 
Currency Warrant will be halted whenever the Exchange deems such action 
appropriate in the interests of a fair and orderly market or to protect 
investors. Trading in Currency Warrants that have been the subject of a 
halt or suspension by the Exchange may resume if the Exchange 
determines that the conditions which led to the halt or suspension are 
no longer present, or that the interests of a fair and orderly market 
are best served by a resumption of trading.
    Proposed Rule 14.11(e)(11)(E) governs reporting of warrant 
positions. Proposed Rule 14.11(e)(11)(E)(i) would require each member 
to file with the Exchange a report with respect to each account in 
which the member has an interest, each account of a partner, officer, 
director, or employee of such member, and each customer account that 
has established an aggregate position (whether long or short) of 
100,000 warrants covering the same underlying currency, combining for 
purposes of the proposed Rule: (a) Long positions in put warrants and 
short positions in call warrants, and (b) short positions in put 
warrants with long positions in call warrants. The report shall be in 
such form as may be prescribed by the Exchange and shall be filed no 
later than the close of business on the next day following the day on 
which the transaction or transactions requiring the filing of such 
report occurred.
    Proposed Rule 14.11(e)(11)(E)(ii) states that whenever a report 
shall be required to be filed with respect to an account pursuant to 
the proposed Rule, the member filing the same must file with the 
Exchange such additional periodic reports with respect to such account 
as the Exchange may from time to time require.
    Proposed Rule 14.11(e)(11)(E)(iii) states that all reports required 
by the proposed Rule shall be filed with the Exchange in such manner 
and form as prescribed by the Exchange.

C. General Provisions

    To the extent not specifically addressed in the respective proposed 
rules, the following general provisions apply to all of the proposed 
rules and subject securities affected by the proposed rules (the 
``securities''):
1. Trading Rules
    The Exchange 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. The securities will 
trade on the Exchange during Regular Trading Hours, as well as during 
the Pre-Opening Session and the After Hours Trading Session. The 
Exchange has appropriate rules to facilitate transactions in the 
securities during all trading sessions. The minimum price increment for 
quoting and entry of orders in equity securities traded on the Exchange 
is $0.01, with the exception of securities that are priced less than 
$1.00 for which the minimum price increment for order entry is 
$0.0001.\24\
---------------------------------------------------------------------------

    \24\ See, e.g., Rule 11.11. Regulation NMS Rule 612, Minimum 
Pricing Increment, provides:
    a. No national securities exchange, national securities 
association, alternative trading system, vendor, or broker or dealer 
shall display, rank, or accept from any person a bid or offer, an 
order, or an indication of interest in any NMS stock priced in an 
increment smaller than $0.01 if that bid or offer, order, or 
indication of interest is priced equal to or greater than $1.00 per 
share.
    b. No national securities exchange, national securities 
association, alternative trading system, vendor, or broker or dealer 
shall display, rank, or accept from any person a bid or offer, an 
order, or an indication of interest in any NMS stock priced in an 
increment smaller than $0.0001 if that bid or offer, order, or 
indication of interest is priced less than $1.00 per share.
    c. The Commission, by order, may exempt from the provisions of 
this section, either unconditionally or on specified terms and 
conditions, any person, security, quotation, or order, or any class 
or classes of persons, securities, quotations, or orders, if the 
Commission determines that such exemption is necessary or 
appropriate in the public interest, and is consistent with the 
protection of investors.
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2. Information Circular
    Prior to the commencement of trading, the Exchange will inform its 
members in an Information Circular of the special characteristics and 
risks

[[Page 53523]]

associated with trading the securities. Specifically, the Information 
Circular will discuss the following: (1) The procedures for purchases 
and redemptions of the securities (and/or that the securities are not 
individually redeemable); (2) Exchange Rule 3.7, which imposes 
suitability obligations on the Exchange members with respect to 
recommending transactions in the securities 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 securities prior to or concurrently with the 
confirmation of a transaction; and (5) trading information.
    In addition, the Information Circular will advise members, prior to 
the commencement of trading, of the prospectus delivery requirements 
applicable to the securities. Members purchasing securities 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 the 
securities are subject to various fees and expenses described in the 
registration statement. If applicable, the Information Circular will 
also reference that the CFTC has regulatory jurisdiction over the 
trading of futures contracts.
    The Information Circular also will disclose the trading hours of 
the securities and, if applicable, the Net Asset Value (``NAV'') 
calculation time for the securities. The Information Circular will 
disclose that information about the securities and the corresponding 
indexes, if applicable, will be publicly available on the Web site for 
the securities. The Information Circular will also reference, if 
applicable, the fact that there is no regulated source of last-sale 
information regarding physical commodities, and that the Commission has 
no jurisdiction over the trading of physical commodities or futures 
contracts on which the value of the securities may be based.
    The Information Circular also will reference the risks involved in 
trading the securities during the Pre-Opening and After Hours Trading 
Sessions when an updated Intraday Indicative Value will not be 
calculated or publicly disseminate and, if applicable, the risks 
involved in trading the securities during Regular Trading Hours when 
the Intraday Indicative Value may be static or based in part on the 
fluctuation of currency exchange rates when the underlying markets have 
closed prior to the close of the Exchange's Regular Trading Hours.
3. Limitation of Exchange Liability
    Neither the Exchange, any agent of the Exchange, nor the Reporting 
Authority (if applicable), shall have any liability for damages, 
claims, losses or expenses caused by any errors, omissions, or delays 
in calculating or disseminating any applicable underlying index or 
asset value; the current value of the applicable positions or interests 
required to be deposited to a Trust, if applicable, in connection with 
issuance of the securities; net asset value; or any other information 
relating to the purchase, redemption, or trading of the securities, 
resulting from any negligent act or omission by the Exchange, any agent 
of the Exchange, or the Reporting Authority (if applicable), or any 
act, condition or cause beyond the reasonable control of the Exchange, 
any agent of the Exchange, or the Reporting Authority (if applicable), 
including, but not limited to, an act of God; fire; flood; 
extraordinary weather conditions; war; insurrection; riot; strike; 
accident; action of government; communications or power failure; 
equipment or software malfunction; or any error, omission or delay in 
the reports of transactions in the applicable positions or interests.
4. Market Maker Accounts
    A registered market maker in the securities described below must 
file with the Exchange, in a manner prescribed by the Exchange, and 
keep current a list identifying all accounts for trading in:
     In the case of Commodity-Based Trust Shares, the 
applicable underlying commodity, related commodity futures or options 
on commodity futures, or any other related commodity derivatives, which 
the registered market maker may have or over which it may exercise 
investment discretion (the ``Underlying Commodities'');
     In the case of Currency Trust Shares, the applicable 
underlying non-U.S. currency, options, futures or options on futures on 
such currency, or any other derivatives based on such currency, which 
the registered market maker may have or over which it may exercise 
investment discretion (the ``Underlying Currencies'');
     In the case of Commodity Index Trust Shares, the 
applicable physical commodities included in, or options, futures or 
options on futures on, an index underlying an issue of Commodity Index 
Trust Shares or any other derivatives based on such index or based on 
any commodity included in such index, which the registered market maker 
may have or over which it may exercise investment discretion (the 
``Underlying Commodity Index Assets'');
     In the case of Commodity Futures Trust Shares, the 
applicable underlying commodity, related futures or options on futures, 
or any other related derivatives, which the registered market maker may 
have or over which it may exercise investment discretion (the 
``Underlying Commodity Futures'');
     In the case of Partnership Units, the applicable 
underlying asset or commodity, related futures or options on futures, 
or any other related derivatives, which the registered market maker may 
have or over which it may exercise investment discretion (the 
``Underlying Partnership Unit Assets'');
     In the case of Trust Units, the applicable underlying 
commodity, related commodity futures or options on commodity futures, 
or any other related commodity derivatives, which the registered market 
maker may have or over which it may exercise investment discretion (the 
``Underlying Trust Unit Assets''); and
     In the case of Managed Trust Securities, the underlying 
commodity or applicable currency, related futures or options on 
futures, or any other related derivatives, which a registered market 
maker may have or over which it may exercise investment discretion (the 
``Underlying Managed Trust Assets'').
    No registered market maker in the above mentioned securities shall 
trade in the respective Underlying Commodities, Underlying Currencies, 
Underlying Commodity Index Assets, Underlying Commodity Futures, 
Underlying Partnership Unit Assets, Underlying Trust Unit Assets, and/
or the Underlying Managed Trust Assets (collectively, the ``Underlying 
Assets'') in an account in which a market maker, directly or 
indirectly, controls trading activities, or has a direct interest in 
the profits or losses thereof, which has not been reported to the 
Exchange.
    In addition to the existing obligations under Exchange rules 
regarding the production of books and records (see, e.g., Rule 4.2), a 
registered market maker in the above mentioned securities is required 
to make available to the Exchange such books, records or other 
information pertaining to transactions by such entity or registered or 
non-registered employee affiliated with such entity for its or their 
own accounts for trading the applicable Underlying Assets as may be 
requested by the Exchange.

[[Page 53524]]

5. Surveillance
    The Exchange states that its surveillance procedures are adequate 
to address any concerns about the trading of the securities on the 
Exchange. Trading of the securities on the Exchange will be subject to 
the Exchange's surveillance procedures during all trading sessions in 
order to deter and detect violations of Exchange rules and the 
applicable federal securities laws. Trading of the securities on the 
Exchange will be subject to the Exchange's surveillance procedures for 
derivative products. The Exchange may obtain information via the ISG 
from other exchanges who are members or affiliates of the ISG or any 
other exchanges with which the Exchange has comprehensive surveillance 
sharing agreements.\25\
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    \25\ For a list of the current members and affiliate members of 
ISG, see www.isgportal.com.
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    In addition, to the extent that a fund invests in futures 
contracts, not more than 10% of the weight of such futures contracts in 
the aggregate shall consist of components whose principal trading 
market is not a member of ISG or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement. The 
Exchange has a general policy prohibiting the distribution of material, 
non-public information by its employees.
    As a general matter, the Exchange has regulatory jurisdiction over 
its members and their associated persons, which includes any person or 
entity controlling a member, as well as a subsidiary or affiliate of a 
member that is in the securities business. A subsidiary or affiliate of 
a member that does business only in commodities or futures contracts 
would not be subject to the Exchange jurisdiction, but the Exchange 
could obtain information regarding the activities of such subsidiary or 
affiliate through surveillance sharing agreements with regulatory 
organizations of which such subsidiary or affiliate is a member.
6. Trading Halts
    With respect to trading halts, in addition to the halt requirements 
in the proposed rules, the Exchange may consider all relevant factors 
in exercising its discretion to halt or suspend trading in the 
securities. Trading in the securities may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the securities inadvisable. These may include: (1) The 
extent to which trading in the underlying asset or assets is not 
occurring; or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. In addition, trading in the securities will be subject to 
trading halts caused by extraordinary market volatility pursuant to the 
Exchange's ``circuit breaker'' Rule 11.18(d) or by the halt or 
suspension of the trading of the current underlying asset or assets.
    If the applicable Intraday Indicative Value, value of the 
underlying index, or the value of the underlying asset or assets (e.g., 
securities, commodities, currencies, futures contracts, or other 
assets) is not being disseminated as required, the Exchange may halt 
trading during the day in which such interruption to the dissemination 
occurs. If the interruption to the dissemination of the applicable 
Intraday Indicative Value, value of the underlying index, or the value 
of the underlying asset or assets persists past the trading day in 
which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption. In addition, 
if the Exchange becomes aware that the net asset value with respect to 
a series of the securities is not disseminated to all market 
participants at the same time, it will halt trading in such series 
until such time as the net asset value is available to all market 
participants.
7. Suitability
    Currently, Exchange Rule 3.7 governs Recommendations to Customers 
(Suitability). Prior to the commencement of trading of any inverse, 
leveraged, or inverse leveraged securities, the Exchange will inform 
its members of the suitability requirements of Exchange Rule 3.7 in an 
Information Circular. Specifically, members will be reminded in the 
Information Circular that, in recommending transactions in these 
securities, they must have a reasonable basis to believe that (1) the 
recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's other securities holdings, financial 
situation and needs, and (2) the customer can evaluate the risks of the 
recommended transaction and is financially able to bear the risks of an 
investment in the securities.
    In addition, FINRA has implemented increased sales practice and 
customer margin requirements for FINRA members applicable to inverse, 
leveraged, and inverse leveraged securities and options on such 
securities, as described in FINRA Regulatory Notices 09-31 (June 2009), 
09-53 (August 2009) and 09-65 (November 2009) (``FINRA Regulatory 
Notices''). Members that carry customer accounts will be required to 
follow the FINRA guidance set forth in the FINRA Regulatory Notices. 
The Information Circular will reference the FINRA Regulatory Notices 
regarding sales practice and customer margin requirements for FINRA 
members applicable to inverse, leveraged, and inverse leveraged 
securities and options on such securities.
    The Exchange notes that, for such inverse, leveraged, and inverse 
leveraged securities, the corresponding funds seek leveraged, inverse, 
or leveraged inverse returns on a daily basis, and do not seek to 
achieve their stated investment objective over a period of time greater 
than one day because compounding prevents the funds from perfectly 
achieving such results. Accordingly, results over periods of time 
greater than one day typically will not be a leveraged multiple 
(+200%), the inverse (-100%) or a leveraged inverse multiple (-200%) of 
the period return of the applicable benchmark and may differ 
significantly from these multiples. The Exchange's Information 
Circular, as well as the applicable registration statement, will 
provide information regarding the suitability of an investment in such 
securities.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as amended, is consistent with the requirements of Section 6 of 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\26\ In particular, the Commission finds 
that the proposed rule change, as amended, is consistent with the 
requirements of Section 6(b)(5) of the Act,\27\ which requires, among 
other things, that rules of a national securities exchange be 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, 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 notes that it 
has previously approved substantively identical listing standards

[[Page 53525]]

for the listing and trading of the Subject Securities on Nasdaq.\28\
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    \26\ In approving this proposed 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).
    \27\ 15 U.S.C. 78f(b)(5).
    \28\ See Nasdaq Rules 5710(d); 5710(k)(i)-(iv); Commentary .01 
to Rule 5710; 5711(a)-(k); and 5730. The Exchange has represented 
that there are no material substantive differences between the 
proposed rules and the Nasdaq Rules on which they are based.
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A. Generic Listing Standards

    Rule 19b-4(e) under the Act \29\ provides that the listing and 
trading of a new derivative securities product by a self-regulatory 
organization (``SRO'') shall not be deemed a proposed rule change, 
pursuant to Section (c)(1) of Rule 19b-4,\30\ if the Commission has 
approved, pursuant to Section 19(b) of the Act,\31\ the SRO's trading 
rules, procedures, and listing standards for the product class that 
would include the new derivatives securities product, and the SRO has a 
surveillance program for the product class. The Exchange is proposing 
to: (i) Amend the continued generic listing standards for Equity Index-
Linked Securities and Commodity-Linked Securities under amended Rule 
14.11(d); (ii) adopt initial and continued generic listing standards 
for Fixed Income-Linked Securities, Futures-Linked Securities, and 
Multifactor Index-Linked Securities under amended Rule 14.11(d); (iii) 
adopt generic listing standards for Index-Linked Exchangeable Notes 
under proposed Rule 14.11(e)(1); and (iv) adopt generic listing 
standards for Currency Trust Shares under proposed Rule 14.11(e)(5), 
pursuant to which the Exchange will be able to list and trade such 
securities without Commission approval of each individual product under 
Rule 19b-4(e).\32\ Accordingly, any securities that the Exchange lists 
and/or trades pursuant to BATS Rules 14.11(d), 14.11(e) and 14.11(h), 
as proposed, must satisfy the standards set forth therein.\33\
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    \29\ 17 CFR 240.19b-4(e)
    \30\ 17 CFR 240.19b-4(c)(1).
    \31\ 15 U.S.C. 78s(b).
    \32\ 17 CFR 240.19b-4(e).
    \33\ Under the proposal, the failure of a particular product or 
index to comply with the proposed generic listing standards under 
Rule 19b-4(e) for Linked Securities or Currency Trust Shares would 
not preclude the Exchange from submitting a separate filing pursuant 
to Section 19(b)(2) of the Act, requesting Commission approval to 
list and trade a particular series of Linked Securities or Currency 
Trust Shares. See introductory paragraphs to Rule 14.11(d)(2) and 
proposed Rule 14.11(e)(5)(H) (providing that BATS may submit a rule 
filing pursuant to Section 19(b)(2) of the Act to permit the listing 
and trading of Linked Securities or Currency Trust Shares, 
respectively, that do not otherwise meet the generic listing 
standards set forth in the relevant rules applicable to them).
---------------------------------------------------------------------------

1. Equity Index-Linked Securities and Commodity Linked Securities
    The Commission has previously approved, pursuant to Section 19(b) 
of the Act and in accordance with Rule 19b-4(e) thereunder, the 
adoption of generic initial and continued listing standards for the 
listing and trading of Equity Index-Linked Securities and Commodity-
Linked Securities on the Exchange, so that securities that satisfy such 
proposed generic listing standards for Equity Index-Linked Securities 
and Commodity-Linked Securities may commence trading on the Exchange 
without public comment and Commission approval.\34\ The Commission 
notes that it has previously approved the same generic listing 
standards for Equity Index-Linked Securities and Commodity-Linked 
Securities for Nasdaq.\35\ The Commission believes that, because the 
proposed continued listing requirements under proposed Rules 
14.11(d)(2)(K)(i)(b) and 14.11(d)(2)(K)(ii)(b) for Equity Index-Linked 
Securities and Commodity-Linked Securities, respectively,\36\ are 
substantively identical to those of Nasdaq and present no unique or 
novel regulatory issues, such proposed requirements are reasonably 
designed to protect investors and the public interest. Specifically, 
and as further discussed above, under the proposed continued listing 
standards, BATS would commence delisting or removal proceedings of a 
series of Equity Index-Linked Securities or Commodity-Linked Securities 
if: (i) The initial listing criteria are not continuously maintained 
(subject to certain exceptions in the case of Equity Index-Linked 
Securities as described above); (ii) the aggregate market value or 
principal amount publicly held is less than $400,000; (iii) the value 
of the index or Reference Asset is no longer available or being 
disseminated; or (iv) if circumstances exist which make further 
dealings in the securities on BATS inadvisable. The Commission believes 
that the proposed continued listing standards are adequately designed 
to ensure transparency of key values and information regarding the 
securities and will help ensure a minimum level of liquidity for such 
securities to allow for the maintenance of fair and orderly markets.
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    \34\ See Securities Exchange Act Release Nos. 54167 (July 18, 
2009), 71 FR 42145 (July 25, 2006) (SR-Nasdaq-2006-002) (approving 
generic listing standards for Equity Index-Linked Securities on 
Nasdaq) and 56910 (December 5, 2007), 72 FR 70628 (December 12, 
2007) (SR-Nasdaq-2007-071) (approving generic listing standards for 
Commodity-Linked Securities).
    \35\ See Securities Exchange Act Release No. 66648 (March 23, 
2012), 77 FR 19428 (March 30, 2012) (Nasdaq-2012-013) (approving 
generic listing standards for Equity Index-Linked Securities and 
Commodity-Linked Securities).
    \36\ See supra note 5.
---------------------------------------------------------------------------

2. Fixed Income Index-Linked Securities, Futures Linked Securities, and 
Multifactor Index-Linked Securities
    In addition, the Commission has previously approved the adoption of 
generic initial and continued listing standards for Fixed-Income Index-
Linked Securities, Futures-Linked Securities, and Multifactor Index-
Linked Securities, each of which are specific types of ``Index-Linked 
Securities,'' on Nasdaq.\37\ Consistent with its previous orders, the 
Commission believes that the generic listing standards proposed by the 
Exchange for Fixed-Income Index-Linked Securities, Futures-Linked 
Securities, and Multifactor Index-Linked Securities should fulfill the 
intended objective of Rule 19b-4(e) by allowing those Additional Linked 
Securities that satisfy the generic listing standards to commence 
trading without public comment and Commission approval.\38\ The 
Exchange's ability to rely on Rule 19b-4(e) to list and trade 
Additional Linked Securities that meet the applicable requirements and 
minimum standards should reduce the time frame for bringing these 
securities to market and thereby reduce the burdens on issuers and 
other market participants, while also promoting competition and making 
such securities available to investors more quickly. In addition, the 
Commission believes the Exchange's proposal to list and trade the 
Additional Linked Securities will provide an additional avenue for 
investors to achieve desired investment objectives through the purchase 
of Index-Linked Securities, and will benefit investors by increasing 
competition among markets that trade Index-Linked Securities.
---------------------------------------------------------------------------

    \37\ See supra note 35.
    \38\ The Commission notes that the failure of a particular 
Additional Linked Security issue to satisfy the proposed generic 
initial listing standards pursuant to Rule 19b-4(e), however, would 
not preclude the Exchange from submitting a separate filing pursuant 
to Section 19(b)(2), requesting Commission approval to list and 
trade a particular Linked Security. See supra note 33.
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Fixed Income-
Linked Securities, Futures-Linked Securities, and Multifactor Index-
Linked Securities pursuant to Rule 19b-

[[Page 53526]]

4(e) on the Exchange. Such Additional Linked Securities listed under 
the proposed standards will be subject to the full panoply of BATS 
rules and procedures that govern the trading of Linked Securities, and 
also the rules and procedures that govern the trading of equity 
securities on the Exchange including, among others, rules and 
procedures governing trading halts, surveillance procedures, 
disclosures to members, customer suitability requirements, and market 
maker obligations. In addition, the Additional Linked Securities will 
be subject to the asset/equity requirements and tangible net worth 
requirements applicable to Linked Securities, as well as the minimum 
holder and distribution requirements, principal/market value 
requirements, and term thresholds for Linked Securities.\39\ In 
addition, as set forth more fully above, the proposed listing criteria 
for Fixed Income-Linked Securities include additional requirements 
relating to relative weighting, outstanding principal, market 
capitalization and diversification. These requirements are designed to 
ensure that the trading markets for index components underlying the 
Linked Securities are adequately capitalized and sufficiently liquid, 
and that no one component dominates the index. Further, the proposed 
listing criteria for Futures Linked Securities require, subject to 
certain limited exceptions, that the pricing information for components 
be derived from an ISG member market or its affiliate, or a market with 
which BATS has a comprehensive surveillance sharing agreement. The 
Commission believes that these requirements should significantly 
minimize the potential for manipulation.
---------------------------------------------------------------------------

    \39\ See Rules 14.11(d)(2)(E) and (F), supra note 12.
---------------------------------------------------------------------------

    The Exchange's proposed requirements for Multifactor Index-Linked 
Securities are linked to criteria for other types of Linked Securities 
set forth in Rule 14.11(d)(2)(K), including the proposed standards 
applicable to Fixed Income-Linked Securities and Futures-Linked 
Securities. Accordingly, any underlying Reference Asset for a 
Multifactor-Index Linked Security would have to satisfy the criteria 
set out in the Exchange's rules for Reference Assets underlying other 
Linked Securities.
    The generic listing standards permit listing of Additional Linked 
Securities if the Commission previously approved the underlying index 
for trading in connection with another derivative product. The 
Commission believes that if it has previously determined that such 
index and its components were sufficiently transparent, then the 
Exchange may rely on this finding, provided that the conditions set 
forth in the Commission's approval order continue to be satisfied.
    The Commission believes that the proposed continued listing 
requirements for the Additional Linked Securities are reasonably 
designed to protect investors and the public interest. Under the 
proposed continued listing standards, BATS would commence delisting or 
removal proceedings of a series of Fixed Income Index-Linked 
Securities, Futures-Linked Securities, or Multifactor Index-Linked 
Securities if: (i) The initial listing criteria are not continuously 
maintained; (ii) the aggregate market value or principal amount 
publicly held is less than $400,000; (iii) the value of the Reference 
Asset is no longer available or being disseminated; or (iv) if 
circumstances exist which make further dealings in the securities on 
BATS inadvisable. The Commission believes that the proposed continued 
listing standards are adequate to ensure transparency of key values and 
information regarding the Additional Linked Securities. The Commission 
further believes that the continued listing standards will help ensure 
a minimum level of liquidity exists for such securities to allow for 
the maintenance of fair and orderly markets. In addition, the Exchange 
will have flexibility to delist a series of such securities if 
circumstances warrant such action.
b. Dissemination of Information
    The Additional Linked Securities will be subject to the Reference 
Asset information dissemination requirements applicable to all Linked 
Securities.\40\ The proposed listing requirements for Additional Linked 
Securities also require that: (i) In the case of Fixed Income-Linked 
Securities, the Reference Asset must be widely disseminated to the 
public at least once per business day; and (ii) in the case of Futures-
Linked Securities and Multifactor Index-Linked Securities, the 
Reference Asset must be, and, if the security is periodically 
redeemable, the Intraday Indicative Value of the security also must be, 
widely disseminated at least every 15 seconds during the Regular Market 
Session. In addition, the Additional Linked Securities will be subject 
to the trading halts requirements applicable to all Linked Securities, 
which provide that BATS may halt trading during the day on which an 
interruption to the dissemination of the Intraday Indicative Value (if 
required to be disseminated) or the index or Reference Asset value 
occurs, and that BATS will halt trading no later than the beginning of 
trading following the trading day when the interruption began if such 
interruption persists at that time.\41\ The Commission believes that 
the proposed rules are reasonably designed to promote the timely and 
fair disclosure of useful information that may be necessary to price 
the Additional Linked Securities appropriately, and to prevent trading 
when a reasonable degree of transparency cannot be assured.
---------------------------------------------------------------------------

    \40\ See proposed Rule 14.11(d)(2)(G)(ii) (formerly Rule 
14.11(d)(2)(i)(ii)), which provides that, subject to certain 
exceptions, the current value of the index or Reference Asset of a 
Linked Securities must be widely disseminated at least every 15 
seconds during the Exchange's regular market session.
    \41\ See proposed Rule 14.11(d)(2)(H) (formerly Rule 
14.11(d)(2)(J)).
---------------------------------------------------------------------------

c. Surveillance
    The Additional Linked Securities will be subject to the 
surveillance procedure requirements applicable to Linked 
Securities.\42\ In addition, the Exchange has represented that trading 
of the Additional Linked Securities on BATS will be subject to the 
Exchange's surveillance procedures for derivative products, and that 
the Exchange's surveillance procedures applicable to derivative 
products are adequate to address any concerns about the trading of the 
Linked Securities on BATS.\43\ Further, the proposed listing criteria 
for Futures Linked Securities require, subject to certain limited 
exceptions, that the pricing information for components be derived from 
an ISG member market or its affiliate, or a market with which BATS has 
a comprehensive surveillance sharing agreement.
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    \42\ See proposed Rule 14.11(d)(2)(K) (formerly Rule 
14.11(d)(2)(I)), which provides that BATS will enter into adequate 
comprehensive surveillance sharing agreements for non-U.S. 
securities, as applicable.
    \43\ See Notice, supra note 4, 78 FR at 41478.
---------------------------------------------------------------------------

d. Additional Provisions
    The Additional Linked Securities will be subject to the requirement 
that issuers comply with Rule 10A-3 under the Act.\44\ In addition, the 
Additional Linked Securities will be subject to the index calculation 
and ``firewall'' requirements applicable to all Linked Securities.\45\ 
The Commission believes

[[Page 53527]]

that the ``firewall'' restrictions applicable to Linked Securities are 
designed to prevent the use and dissemination of material, non-public 
information regarding an underlying index and prevent conflicts of 
interest with respect to personnel of a broker-dealer maintaining an 
index underlying such securities. BATS has also represented that it has 
a general policy prohibiting the distribution of material, non-public 
information by its employees.\46\ The Commission believes that these 
requirements, taken together, should help to minimize the potential for 
manipulation and allow for the maintenance of a fair and orderly market 
in the Additional Linked Securities.
---------------------------------------------------------------------------

    \44\ 17 CFR 240.10A-3. See Rule 14.11(d)(2)(F).
    \45\ See proposed Rule 14.11(d)(2)(G)(i) (formerly Rule 
14.11(d)(2)(I)(i)), which requires that if an index is maintained by 
a broker-dealer, the broker-dealer must erect a ``firewall'' around 
the personnel who have access to information concerning changes and 
adjustments to the index and that the index must be calculated by a 
third party who is not a broker-dealer.
    \46\ See Notice, supra note 4, 78 FR at 41478.
---------------------------------------------------------------------------

    Proposed Interpretations and Policies .01(b) to Rule 14.11(d)(2)(K) 
would impose additional reporting requirements, trading restrictions 
and books and records obligations on members acting as registered 
market makers in Linked Securities. The Commission believes that such 
restrictions, reporting and record-keeping requirements are reasonably 
designed to promote a fair and orderly market for Linked Securities and 
will assist the Exchange in identifying situations potentially 
susceptible to manipulation.
    In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Additional Linked Securities, 
the Exchange will inform its members in an Information Circular of the 
special characteristics and risks associated with trading the 
Additional Linked Securities.\47\ The Commission believes that the 
Exchange's proposal should ensure that its members have information 
that will allow them to be adequately apprised of the terms, 
characteristics, and risks of trading the Additional Linked Securities.
---------------------------------------------------------------------------

    \47\ See id. at 41477.
---------------------------------------------------------------------------

    As discussed above, the Exchange proposes to make certain technical 
revisions so that the Additional Linked Securities are included in the 
provisions of Rule 14.11(d) that apply to all Linked Securities. The 
Commission finds that the technical revisions to BATS Rule 14.11(d) are 
reasonable and promote transparency and consistent application of 
certain rules imposed with respect to types of Linked Securities.
    The Commission notes that the proposed generic listing standards 
for Fixed Income Index-Linked Securities, Futures-Linked Securities, 
and Multifactor Index-Linked Securities are substantively identical to 
those previously approved by the Commission for the listing and trading 
of Fixed Income Index-Linked Securities, Futures Linked Securities and 
Multifactor Index-Linked Securities on Nasdaq.\48\ As such, the 
Commission believes that the proposed generic listing standards present 
no unique or novel regulatory issues and, for the reasons discussed 
above, are reasonably designed to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \48\ See Nasdaq Rule 5710(k)(iii), (k)(iv) and Commentary .01.
---------------------------------------------------------------------------

3. Index-Linked Exchangeable Notes
    As discussed above, the Commission has previously approved the 
adoption of generic listing standards for various classes of new 
derivative securities products to be listed and traded pursuant to Rule 
19b-4(e).\49\ In addition, the Commission has previously approved the 
adoption of generic initial and continued listing standards for Index-
Linked Exchangeable Notes on Nasdaq.\50\ Consistent with its previous 
orders, the Commission believes that the generic listing standards 
proposed by the Exchange for Index-Linked Exchangeable Notes should 
fulfill the intended objective of Rule 19b-4(e) by allowing those 
Index-Linked Exchangeable Notes that satisfy the generic listing 
standards to commence trading without public comment and Commission 
approval. The Exchange's ability to rely on Rule 19b-4(e) to list and 
trade Index-Linked Exchangeable Notes that meet the applicable 
requirements and minimum standards should reduce the time frame for 
bringing these securities to market and thereby reduce the burdens on 
issuers and other market participants, while also promoting competition 
and making such securities available to investors more quickly. In 
addition, the Commission believes the Exchange's proposal to list and 
trade Index-Linked Exchangeable Notes will provide an additional avenue 
for investors to achieve desired investment objectives through the 
purchase of index-linked exchangeable debt securities, and will benefit 
investors by increasing competition among markets that trade index-
linked exchangeable debt.
---------------------------------------------------------------------------

    \49\ See supra note 34.
    \50\ See supra note 35 (approving generic listing standards for 
Index-Linked Exchangeable Notes).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Index-Linked 
Exchangeable Notes pursuant to Rule 19b-4(e). Index-Linked Exchangeable 
Notes listed under the standards will be subject to the full panoply of 
BATS rules and procedures that currently govern the trading of equity 
securities on the Exchange including, among others, rules and 
procedures governing trading halts, surveillance procedures, 
disclosures to members, customer suitability requirements, and market 
maker obligations.
    The Commission is satisfied with the Exchange's development of 
specific listing and delisting criteria for Index-Linked Exchangeable 
Notes. As described more fully above, the proposed listing criteria 
include minimum tangible net worth and earnings requirements for 
issuers. These criteria are, in part, intended to ensure that the 
issuer has enough assets to meet its obligations under the terms of the 
note and should help to reduce systematic risk. The proposed listing 
criteria also include minimum holder and distribution requirements, 
which should serve to establish a minimum level of liquidity for each 
series of Index-Linked Exchangeable Notes to allow for maintenance of 
fair and orderly markets.
    The proposed initial listing criteria also contain minimum 
requirements for the indices the Index-Linked Exchangeable Notes can be 
linked to, and the underlying components of those indices. The 
Exchange's proposed requirements for indices underlying Index-Linked 
Exchangeable Notes are linked to other approved criteria for index-
related products. Accordingly, any underlying index would have to 
follow the criteria adopted by the Exchange and already in the 
Exchange's rules for that index, including the criteria for component 
stocks. These requirements will generally contain, among other things, 
minimum market capitalization, trading volume, and concentration 
requirements that are designed to reduce manipulation concerns and 
ensure a minimum level of liquidity for component securities. 
Accordingly, the Commission believes that these criteria should serve 
to ensure that the underlying stocks of underlying indices of Index-
Linked Exchangeable Notes are well capitalized and actively traded, and 
should thus significantly minimize the potential for manipulation.
    The Commission believes that the proposed continued listing 
requirements for Index-Linked Exchangeable Notes are reasonably 
designed to protect investors and the public interest. As further 
discussed above, under the proposed continued listing standards, 
beginning 12 months after the initial issuance of a series of

[[Page 53528]]

Index-Linked Exchangeable Notes, BATS would consider suspension of 
trading in or removal of listing of such series if: (i) The series has 
fewer than 50,000 notes issued and outstanding; (ii) the outstanding 
market value of the series held is less than $1,000,000; or (iii) if 
circumstances exist which make further dealings in the securities on 
the Exchange inadvisable. The Commission believes that the continued 
listing standards will help ensure a minimum level of liquidity exists 
for such securities to allow for the maintenance of fair and orderly 
markets. In addition, the Exchange will have flexibility to delist a 
series if circumstances warrant such action.
b. Dissemination of Information
    The proposed rule requires that an estimate of the value of a note 
for each series of Index-Linked Exchangeable Notes will be calculated 
and widely disseminated at least every 15 seconds, and that the value 
of any underlying index will also be publicly disseminated to 
investors, on a real time basis, every 15 seconds.\51\ In addition, the 
Exchange has represented that it may halt trading during the day on 
which an interruption to the dissemination of either of these values 
occurs, and that BATS will halt trading no later than the beginning of 
trading following the trading day when the interruption began if such 
interruption persists at that time.\52\ The Commission believes that 
the proposed rules are reasonably designed to promote the timely and 
fair disclosure of useful information that may be necessary to price 
the Index-Linked Exchangeable Notes appropriately, and to prevent 
trading when a reasonable degree of transparency cannot be assured.
---------------------------------------------------------------------------

    \51\ Proposed rules 14.11(e)(1)(F) and (G).
    \52\ See Notice, supra note 4, 78 FR at 41478.
---------------------------------------------------------------------------

c. Surveillance
    The Exchange has represented that trading of the Index-Linked 
Exchangeable Notes on BATS will be subject to the Exchange's 
surveillance procedures for derivative products, and that the 
Exchange's surveillance procedures applicable to derivative products 
are adequate to address any concerns about the trading of the Index-
Linked Exchangeable Notes on BATS.\53\
---------------------------------------------------------------------------

    \53\ See id.
---------------------------------------------------------------------------

d. Additional Provisions
    The Commission notes that the proposed listing criteria requires 
that if the underlying index is maintained by a broker-dealer, the 
index must be calculated by a third party who is not a broker-dealer, 
and the broker-dealer is required to erect firewalls around its 
personnel who have access to information concerning changes in and 
adjustments to the index.\54\ BATS also has represented that it has a 
general policy prohibiting the distribution of material, non-public 
information by its employees.\55\ The Commission believes that such 
firewalls and information barrier policies and procedures are adequate 
to prevent the misuse of material, non-public information regarding 
changes to the underlying index, and to address the unauthorized 
transfer and misuse of material, non-public information.
---------------------------------------------------------------------------

    \54\ See proposed Rule 14.11(e)(1) (which requires that an 
Issuer Index comply with the requirements of one of the following: 
(A) The procedures and criteria set forth in BATS Options Rules 
29.6(b) and (c), or (B) the criteria set forth in Rules 
14.11(e)(12)(B)(iii) and (iv), the index concentration limits set 
forth in BATS Options Rule 29.6, and BATS Options Rule 29.6(b)(12) 
insofar as it relates to BATS Options Rule 29.6(b)(6).
    \55\ See Notice, supra note 4, 78 FR at 41478.
---------------------------------------------------------------------------

    In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Index-Linked Exchangeable Notes, 
the Exchange will inform its members in an Information Circular of the 
special characteristics and risks associated with trading the Index-
Linked Exchangeable Notes.\56\ The Commission believes that the 
Exchange's proposal should ensure that investors have information that 
will allow them to be adequately apprised of the terms, 
characteristics, and risks of trading the Index-Linked Exchangeable 
Notes.
---------------------------------------------------------------------------

    \56\ See id. at 41477.
---------------------------------------------------------------------------

    The Commission notes that the proposed generic listing standards 
for Index-Linked Exchangeable Notes are substantively identical to 
those previously approved by the Commission for the listing and trading 
of Index-Linked Exchangeable Notes on Nasdaq.\57\ As such, the 
Commission believes that the proposed generic listing standards present 
no unique or novel regulatory issues and, for the reasons discussed 
above, are reasonably designed to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \57\ See Nasdaq Rule 5711(a).
---------------------------------------------------------------------------

4. Currency Trust Shares
    As discussed above, the Commission has previously approved the 
adoption of generic listing standards for various classes of new 
derivative securities products to be listed and traded pursuant to Rule 
19b-4(e).\58\ In addition, the Commission has previously approved 
generic listing standards for the listing and trading of Currency Trust 
Shares pursuant to Rule 19b-4(e) on Nasdaq.\59\ The Commission believes 
that proposed generic listing standards for Currency Trust Shares 
should fulfill the intended objective of Rule 19b-4(e) and allow 
securities that satisfy the proposed generic listing standards to 
commence trading without public comment and Commission approval.\60\ 
The Exchange's ability to rely on Rule 19b-4(e) to list and trade 
Currency Trust Shares that meet the applicable requirements and minimum 
standards should reduce the time frame for bringing these securities to 
market and thereby reduce the burdens on issuers and other market 
participants, while also promoting competition and making such 
securities available to investors more quickly. In addition, the 
Commission believes the Exchange's proposal to list and trade Currency 
Trust Shares will provide an additional avenue for investors to achieve 
desired investment objectives through the purchase of Currency Trust 
Shares, and will benefit investors by increasing competition among 
markets that trade Currency Trust Shares.
---------------------------------------------------------------------------

    \58\ See supra note 34.
    \59\ See supra note 35 (approving generic listing standards for 
Currency Trust Shares).
    \60\ The Commission notes that the failure of a particular 
product or index to comply with the proposed generic listing 
standards under Rule 19b-4(e), however, would not preclude the 
Exchange from submitting a separate filing pursuant to Section 
19(b)(2) of the Act, requesting Commission approval to list and 
trade a particular series of Currency Trust Shares. See supra note 
33.
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the proposal contains adequate rules and 
procedures to govern the listing and trading of Currency Trust Shares 
pursuant to Rule 19b-4(e) on the Exchange. The Currency Trust Shares 
listed and traded under the proposed listing standards will be subject 
to the full panoply of BATS rules and procedures that govern the 
trading equity securities on the Exchange including, among others, 
rules and procedures governing trading halts, surveillance procedures, 
disclosures to members, customer suitability requirements, and market 
maker obligations.
    For the Exchange to approve an issue of Currency Trust Shares for 
listing under the generic listing standards, a minimum of 100,000 
Currency Trust Shares must be outstanding at the commencement of 
trading. This requirement should serve to ensure a minimum level of 
liquidity for each series of Currency Trust Shares, to allow for the 
maintenance of fair and orderly markets and reduce the potential for 
manipulation.

[[Page 53529]]

    As further discussed above, beginning 12 months after the initial 
issuance of a series of Currency Trust Shares, the Exchange may 
consider suspending trading in, or removing from listing, such series 
if: (i) The trust has more than 60 days remaining until termination and 
there are fewer than 50 record and/or beneficial holders of Currency 
Trust Shares for 30 or more consecutive trading days; (ii) the trust 
has fewer than 50,000 Currency Trust Shares issued and outstanding; 
(iii) the market value of all Currency Trust Shares issued and 
outstanding is less than $1,000,000; (iv) the Intraday Indicative Value 
of the Currency Trust Shares or the value of the underlying currency is 
no longer calculated or being disseminated on at least a 15-second 
delayed basis; or (iv) if circumstances exist which make further 
dealings in the securities on BATS inadvisable. The Commission believes 
that the proposed continued listing standards are adequate to ensure 
transparency of key values and information regarding the Currency Trust 
Shares, and will help ensure a minimum level of liquidity exists for 
such securities to allow for the maintenance of fair and orderly 
markets. In addition, the Exchange will have flexibility to delist a 
series if circumstances warrant such action.
b. Dissemination of Information
    For Currency Trust Shares to be approved for listing on the 
Exchange, or for trading pursuant to unlisted trading privileges, under 
the generic listing standards, each issue must satisfy the following 
requirements: (i) The value of the underlying non-U.S. currency, 
currencies, or currency index, as the case may be, must be disseminated 
by one or more major market data vendors on at least a 15-second 
delayed basis; and (ii) the Intraday Indicative Value must be 
calculated and widely disseminated by BATS or one or more major market 
data vendors on at least a 15-second basis during the Regular Market 
Session. In addition, if either the Intraday Indicative Value or the 
value of the underlying non-U.S. currency, currencies, or currency 
index, as the case may be, is not being disseminated as required, the 
Exchange may halt trading during the day on which such interruption 
first occurs, and if such interruption persists past the trading day in 
which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption. Further, if 
the Exchange becomes aware that the net asset value applicable to a 
series of Currency Trust Shares is not being disseminated to all market 
participants at the same time, it will halt trading in such series 
until such time as the net asset value is available to all market 
participants. The proposed generic listing standards seek to ensure a 
minimum level of transparency with respect key values of the underlying 
currency assets, and establish events that would trigger a trading halt 
in Currency Trust Shares when the availability of such key information 
related to Currency Trust Shares becomes impaired. The Commission 
believes that the proposed rules are reasonably designed to promote the 
timely and fair disclosure of useful information that may be necessary 
to price the Currency Trust Shares appropriately, and to prevent 
trading when a reasonable degree of transparency cannot be assured.
c. Surveillance
    For an issue of Currency Trust Shares to be approved for listing or 
trading pursuant to unlisted trading provision under the generic 
listing standards, BATS must implement written surveillance procedures 
applicable to Currency Trust Shares. The Exchange has represented that 
trading of Currency Trust Shares on BATS will be subject to the 
Exchange's surveillance procedures for derivative products, and that 
the Exchange's surveillance procedures applicable to derivative 
products are adequate to address any concerns about the trading of the 
Currency Trust Shares on BATS.\61\
---------------------------------------------------------------------------

    \61\ See Notice, supra note 4, 78 FR at 41478.
---------------------------------------------------------------------------

d. Other Provisions
    BATS has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. In 
addition, Currency Trust Shares approved for listing and trading, or 
trading pursuant to unlisted trading privileges, pursuant to the 
generic listing standards will be subject to certain firewall 
requirements. These requirements provide that, if the value of a 
Currency Trust Share is based in whole or in part on an index that is 
maintained by a broker-dealer, the broker-dealer shall erect a 
``firewall'' around the personnel responsible for the maintenance of 
the underlying index or who have access to information concerning 
changes and adjustments to the index, and the index shall be calculated 
by a third party who is not a broker-dealer. Furthermore, any advisory 
committee, supervisory board, or similar entity that advises an index 
licensor or administrator or that makes decisions regarding the index 
or portfolio composition, methodology, and related matters must 
implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the applicable index or portfolio. The Commission believes 
that the proposed ``firewall'' restrictions applicable to Currency 
Trust Shares are designed to prevent the use and dissemination of 
material, non-public information regarding an underlying index and 
prevent conflicts of interest with respect to personnel of a broker-
dealer maintaining an index underlying such securities. BATS has also 
represented that it has a general policy prohibiting the distribution 
of material, non-public information by its employees.\62\
---------------------------------------------------------------------------

    \62\ See id.
---------------------------------------------------------------------------

    The proposed rules contain additional reporting requirements, 
trading restrictions and books and records obligations on members 
acting as registered market makers in Currency Trust Shares. The 
Commission believes that such restrictions, reporting and record-
keeping requirements are reasonably designed to promote a fair and 
orderly market for Currency Trust Shares and will assist the Exchange 
in identifying situations potentially susceptible to manipulation.
    The proposed rules prescribe prospectus delivery requirements for 
purchasers of each newly issued series of Currency Trust Shares. 
Further, the Exchange has represented that prior to the commencement of 
trading in a series of Currency Trust Shares, the Exchange will inform 
its members in an Information Circular of the special characteristics 
and risks associated with trading the Additional Linked Securities.\63\ 
The Commission believes that the Exchange's proposal should ensure that 
investors have information that will allow them to be adequately 
apprised of the terms, characteristics, and risks of trading the 
Currency Trust Shares.
---------------------------------------------------------------------------

    \63\ See id.
---------------------------------------------------------------------------

    The Commission notes that the proposed generic listing standards 
for Currency Trust Shares are substantively identical to those 
previously approved by the Commission for the listing and trading of 
Currency Trust Shares on Nasdaq.\64\ As such, the Commission believes 
that the proposed generic listing standards present no unique or novel 
regulatory issues and, for the reasons discussed above, are reasonably

[[Page 53530]]

designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \64\ See Nasdaq Rule 5711(e).
---------------------------------------------------------------------------

B. Non-Generic Listing Standards

    The Exchange is proposing to adopt non-generic listing standards 
for Trust Certificates, Equity Gold Shares, Commodity-Based Trust 
Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, Trust Units, Managed Trust Securities, and Currency 
Warrants. BATS would be required to file a separate proposed rule 
change pursuant to Section 19(b) of the Act for each series of such 
securities BATS seeks to list and/or trade on the Exchange.
1. Trust Certificates
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Trust Certificates are 
consistent with the Act. The Commission believes the Exchange's 
proposal to list and trade Trust Certificates will benefit investors by 
increasing competition among markets that trade Trust Certificates. The 
Commission notes that it has previously approved the adoption of 
listing standards for Trust Certificates on Nasdaq.\65\
---------------------------------------------------------------------------

    \65\ See supra note 35 (approving listing standards for Trust 
Certificates).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Trust 
Certificates. Prior to listing and/or trading on the Exchange, BATS 
must file a separate proposed rule change pursuant to Section 19(b) of 
the Act for each series of Trust Certificates. All such Trust 
Certificates listed and/or traded under proposed Rule 14.11(e)(3) will 
be subject to the full panoply of BATS rules and procedures that 
currently govern the trading of equity securities on the Exchange 
including, among others, rules and procedures governing trading halts, 
surveillance procedures, disclosures to members, customer suitability 
requirements, and market maker obligations.
    The Commission believes that the proposed criteria under proposed 
Rule 14.11(e)(3) and in particular, the continued listing requirements 
under proposed Interpretation and Policy .01 thereto, are reasonably 
designed to protect investors and the public interest. Specifically, 
the Exchange must commence delisting or removal proceedings with 
respect to an issue of Trust Certificates if: (i) The aggregate market 
value or the principal amount publicly held is less than $400,000; (ii) 
the value of the index or composite value of the indexes is no longer 
calculated or widely disseminated as required; or (iii) such other 
event shall occur or condition exists which, in the opinion of the 
Exchange, makes further dealings in Trust Certificates on the Exchange 
inadvisable. The Commission believes that the proposed continued 
listing standards are adequate to ensure transparency of key values and 
information regarding the Trust Certificates, and will help ensure a 
minimum level of liquidity exists for such securities to allow for the 
maintenance of fair and orderly markets. In addition, the Exchange will 
have flexibility to delist a series if circumstances warrant such 
action.
b. Dissemination of Information
    The Exchange has represented that it may halt trading during the 
day on which an interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying index or assets occurs, 
and that BATS will halt trading no later than the beginning of trading 
following the trading day when the interruption began if such 
interruption persists at that time.\66\ In addition, the Exchange has 
represented that if it becomes aware that the net asset value 
applicable to a series of Trust Certificates is not being disseminated 
to all market participants at the same time, it will halt trading in 
such series until such time as the net asset value is available to all 
market participants.\67\ The Commission believes that the proposal is 
reasonably designed to promote the timely and fair disclosure of useful 
information that may be necessary to price the Trust Certificates 
appropriately, and to prevent trading when a reasonable degree of 
transparency cannot be assured.
---------------------------------------------------------------------------

    \66\ See Notice, supra note 4, 78 FR at 41478.
    \67\ See id.
---------------------------------------------------------------------------

c. Surveillance
    Pursuant to the proposed rules, BATS will implement written 
surveillance procedures applicable to Trust Certificates. The Exchange 
has represented that trading of Trust Certificates on BATS will be 
subject to the Exchange's surveillance procedures for derivative 
products, and that the Exchange's surveillance procedures applicable to 
derivative products are adequate to address any concerns about the 
trading of the Trust Certificates on BATS.\68\
---------------------------------------------------------------------------

    \68\ See id.
---------------------------------------------------------------------------

d. Other Provisions
    BATS has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\69\ 
In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Trust Certificates, the Exchange 
will inform its members in an Information Circular of the special 
characteristics and risks associated with trading the Trust 
Certificates.\70\
---------------------------------------------------------------------------

    \69\ See id.
    \70\ See id. at 41477.
---------------------------------------------------------------------------

    The Commission notes that the Exchange's proposed listing standards 
for Trust Certificates are substantively identical to the listing 
standards for Trust Certificates on Nasdaq.\71\ As such, the Commission 
believes that the proposed listing standards present no unique or novel 
regulatory issues and, for the reasons discussed above, are reasonably 
designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \71\ See Nasdaq Rule 5711(c).
---------------------------------------------------------------------------

2. Commodity-Based Trust Shares, Equity Gold Shares, Commodity Index 
Trust Shares, Commodity Futures Trust Shares, Partnership Units, and 
Trust Units
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units are consistent with 
the Act. The Commission believes the Exchange's proposal to list and 
trade Commodity-Based Trust Shares, Equity Gold Shares, Commodity Index 
Trust Shares, Commodity Futures Trust Shares, Partnership Units, and 
Trust Units will benefit investors by increasing competition among 
markets that trade such products. The Commission notes that it has 
previously approved the adoption of listing standards for Commodity-
Based Trust Shares, Equity Gold Shares, Commodity Index Trust Shares, 
Commodity Futures Trust Shares, Partnership Units, and Trust Units on 
Nasdaq.\72\
---------------------------------------------------------------------------

    \72\ See supra note 35.
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Commodity-
Based Trust Shares, Equity Gold Shares,\73\

[[Page 53531]]

Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, and Trust Units on the Exchange. Prior to listing 
and/or trading on the Exchange, BATS must file a separate proposed rule 
change pursuant to Section 19(b) of the Act for each series of 
Commodity-Based Trust Shares, Equity Gold Shares, Commodity Index Trust 
Shares, Commodity Futures Trust Shares, Partnership Units, and Trust 
Units. All such securities listed and/or traded will be subject to the 
full panoply of the Exchange's rules and procedures that currently 
govern the trading of equity securities on the Exchange including, 
among others, rules and procedures governing trading halts, 
surveillance procedures, disclosures to members, customer suitability 
requirements, and market maker obligations. For the initial listing of 
each series of Commodity-Based Trust Shares, Equity Gold Shares, 
Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, and Trust Units, the Exchange must establish a 
minimum number of such securities required to be outstanding at the 
commencement of trading on the Exchange. In addition, for the initial 
listing of Trust Units, BATS must obtain a representation from the 
issuer of a series of Trust Units that the net asset value per share 
for the series will be calculated daily and will be made available to 
all market participants at the same time.
---------------------------------------------------------------------------

    \73\ The proposed listing rules for Equity Gold Shares provide 
that the provisions set forth in proposed Rule 14.11(e)(4) 
(Commodity-Based Trust Shares) will apply to Equity Gold Shares. 
Thus, all of the listing requirements applicable to Commodity-Based 
Trust Shares will also apply to Equity Gold Shares.
---------------------------------------------------------------------------

    As further discussed above, the Exchange may consider suspending 
trading in, or removing from listing, a series of Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index Trust Shares, Commodity 
Futures Trust Shares, Partnership Units, or Trust Units if there are 
fewer than 50 record and/or or beneficial holders of such series for 30 
or more consecutive trading days. In addition, with respect to 
Commodity-Based Trust Shares, Equity Gold Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units, the Exchange may 
consider suspending trading in, or removing from listing, a series if 
there are fewer than 50,000 such securities issued and outstanding or 
if the market value of all such securities issued and outstanding is 
less than $1,000,000. The Exchange may also consider suspending trading 
in, or removing from listing, a series of Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, or Partnership Units if the value of the underlying 
benchmark is no longer calculated or available on at least a 15-second 
delayed basis from an unaffiliated source, or the Intraday Indicative 
Value is no longer made available on at least a 15-second delayed 
basis. In the case of Commodity Index Trust Shares and Commodity 
Futures Trust Shares, the Exchange may further consider suspending 
trading in, or removing from listing, a series if the net asset value 
for such series is no longer disseminated to all market participants at 
the same time. Finally, the Exchange may consider suspending trading 
in, or removing from listing, such securities if such other event shall 
occur or condition exists which in the opinion of BATS makes further 
dealings on the Exchange inadvisable.
    The Commission believes that the proposed initial and continued 
listing standards are adequate to ensure transparency of key values and 
information regarding the Commodity-Based Trust Shares, Equity Gold 
Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, and Trust Units, and will help ensure a minimum 
level of liquidity exists for such securities to minimize the potential 
for manipulation and allow for the maintenance of fair and orderly 
markets. In addition, the Exchange will have flexibility to delist a 
series if circumstances warrant such action.
b. Dissemination of Information
    The Exchange has represented that it may halt trading during the 
day on which an interruption to the dissemination of the Intraday 
Indicative Value or the value of the underlying index or assets occurs, 
and that BATS will halt trading no later than the beginning of trading 
following the trading day when the interruption began if such 
interruption persists at that time.\74\ In addition, the Exchange has 
represented that if it becomes aware that the net asset value 
applicable to a series of Commodity-Based Trust Shares, Equity Gold 
Shares, Commodity Index Trust Shares, Commodity Futures Trust Shares, 
Partnership Units, or Trust Units is not being disseminated to all 
market participants at the same time, it will halt trading in such 
series until such time as the net asset value is available to all 
market participants.\75\ The Commission believes that the proposal is 
reasonably designed to promote the timely and fair disclosure of useful 
information that may be necessary to price the Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index Trust Shares, Commodity 
Futures Trust Shares, Partnership Units, and Trust Units appropriately, 
to prevent trading when a reasonable degree of transparency cannot be 
assured, and to maintain a fair and orderly market for such securities.
---------------------------------------------------------------------------

    \74\ See Notice, supra note 4, 78 FR at 41478. A similar 
requirement is contained in the proposed rules relating to Currency 
Trust Shares, Commodity Futures Trust Shares, and Trust Units.
    \75\ See id. A similar requirement is contained in the proposed 
rules relating to Currency Trust Shares, Commodity Futures Trust 
Shares, and Trust Units.
---------------------------------------------------------------------------

c. Surveillance
    The Exchange has represented that trading of Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index Trust Shares, Commodity 
Futures Trust Shares, Partnership Units, and Trust Units on BATS will 
be subject to the Exchange's surveillance procedures for derivative 
products, and that the Exchange's surveillance procedures applicable to 
derivative products are adequate to address any concerns about the 
trading of the Trust Certificates on BATS.\76\ In addition, the 
proposed rules require BATS to implement written surveillance 
procedures for Commodity Futures Trust Shares.
---------------------------------------------------------------------------

    \76\ See id.
---------------------------------------------------------------------------

d. Other Provisions
    The proposed rules impose additional reporting requirements, 
trading restrictions and books and records obligations on members 
acting as registered market makers in Commodity-Based Trust Shares, 
Equity Gold Shares, Commodity Index Trust Shares, Commodity Futures 
Trust Shares, Partnership Units, and Trust Units. The Commission 
believes that such restrictions, reporting and record-keeping 
requirements are reasonably designed to promote a fair and orderly 
market for Commodity-Based Trust Shares, Equity Gold Shares, Commodity 
Index Trust Shares, Commodity Futures Trust Shares, Partnership Units, 
and Trust Units, and will assist the Exchange in identifying situations 
potentially susceptible to manipulation.
    BATS has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. In 
addition, the proposed rules prescribe prospectus delivery requirements 
for purchasers of each newly issued series of Commodity-Based Trust 
Shares, Equity Gold Shares, Commodity Index Trust Shares, Commodity 
Futures Trust Shares, Partnership Units and Trust Units. Further, the 
Exchange has represented that prior to the commencement of trading in a 
series of Commodity-Based Trust Shares, Equity

[[Page 53532]]

Gold Shares, Commodity Index Trust Shares, Commodity Futures Trust 
Shares, Partnership Units, and Trust Units, the Exchange will inform 
its members in an Information Circular of the special characteristics 
and risks associated with trading such securities.\77\
---------------------------------------------------------------------------

    \77\ See id. at 41477.
---------------------------------------------------------------------------

    The Commission notes that the Exchange's proposed listing standards 
for Commodity-Based Trust Shares, Equity Gold Shares, Commodity Index 
Trust Shares, Commodity Futures Trust Shares, Partnership Units, and 
Trust Units are substantively identical to the listing standards for 
such securities on Nasdaq.\78\ As such, the Commission believes that 
the proposed listing standards for these securities present no unique 
or novel regulatory issues and, for the reasons discussed above, are 
reasonably designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \78\ See Nasdaq Rules 5711(d) (Commodity-Based Trust Shares), 
5711(c) (Equity Gold Shares), 5711(e) (Currency Trust Shares), 
5711(f) (Commodity Index Trust Shares), 5711(g) (Commodity Futures 
Trust Shares), 5711(h) (Partnership Units), and 5711(i) (Trust 
Units).
---------------------------------------------------------------------------

3. Managed Trust Securities
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Managed Trust Securities are 
consistent with the Act. The Commission believes the Exchange's 
proposal to list and trade Managed Trust Securities will benefit 
investors by increasing competition among markets that trade Managed 
Trust Securities. The Commission notes that it has previously approved 
the adoption of listing standards for Managed Trust Securities on 
Nasdaq.\79\
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    \79\ See supra note 35 (approving listing standards for Managed 
Trust Securities).
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Managed Trust 
Securities. Prior to listing and/or trading on the Exchange, BATS must 
file a separate proposed rule change pursuant to Section 19(b) of the 
Act for each series of Managed Trust Securities. All Managed Trust 
Securities listed and/or traded on BATS will be subject to the full 
panoply of BATS rules and procedures that currently govern the trading 
of equity securities on the Exchange including, among others, rules and 
procedures governing trading halts, surveillance procedures, 
disclosures to members, customer suitability requirements, and market 
maker obligations. For the initial listing of each series of Managed 
Trust Securities, the Exchange must establish a minimum number of 
Managed Trust Securities required to be outstanding at the commencement 
of trading. In addition, the Exchange must obtain a representation from 
the issuer of Managed Trust Securities that the NAV per share will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.
    For continued listing of each series of Managed Trust Securities, 
the Intraday Indicative Value must be widely disseminated by one or 
more major market data vendors at least every 15 seconds during Regular 
Trading Hours.\80\ Further, the Disclosed Portfolio must be 
disseminated at least once daily and made available to all market 
participants at the same time. The Exchange may also consider the 
suspension of trading in, or removal from listing of, a series of 
Managed Trust Securities if: (i) Following the initial 12-month period 
after commencement of trading on the Exchange of a series of Managed 
Trust Securities, (A) the trust has fewer than 50,000 securities issued 
and outstanding, (B) the market value of all securities issued and 
outstanding is less than $1,000,000, or there are fewer than 50 
beneficial holders of such series for 30 or more consecutive trading 
days; (ii) the Intraday Indicative Value is no longer calculated or 
available or the Disclosed Portfolio is not made available to all 
market participants at the same time; (iii) the trust has failed to 
file any filings required by the Commission or if the Exchange becomes 
aware that the trust is not in compliance with the conditions of any 
exemptive order or no-action relief granted by the Commission to the 
trust with respect to the series of Managed Trust Securities; or (iv) 
such other event shall occur or condition exists which in the opinion 
of the Exchange makes further dealings on the Exchange inadvisable.
---------------------------------------------------------------------------

    \80\ The rules of other national securities exchanges governing 
the listing and trading of Managed Trust Securities differs in that 
the rules of other listing exchanges require that the Intraday 
Indicative Value for such securities be widely disseminated by one 
or more major market data vendors at least every 15 seconds while 
Managed Fund Securities trade on those exchanges. See NYSE Arca 
Equities Rule 8.600(d)(2)(A); Nasdaq Rule 5711(j)(v)(B)(1). The 
Commission understands that Intraday Indicative Values for Managed 
Trust Securities are calculated and disseminated only during Regular 
Trading Hours, and therefore the Commission finds that the BATS 
continued listing criterion, as proposed to be amended, is more 
consistent with the calculation and dissemination of Intraday 
Indicative Values for Managed Trust Securities that may trade beyond 
Regular Trading Hours on the Exchange.
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    The Commission believes that the proposed initial and continued 
listing and trading standards for Managed Trust Securities are adequate 
to ensure transparency of key values and information regarding the 
securities, and will help ensure a minimum level of liquidity exists 
for such securities to allow for the maintenance of fair and orderly 
markets. In addition, the Exchange will have flexibility to delist a 
series if circumstances warrant such action.
b. Dissemination of Information
    The Commission finds that the Exchange's proposed rules with 
respect to trading halts should help ensure the availability of key 
values and information relating to Managed Trust Securities and to 
prevent trading when a reasonable degree of transparency cannot be 
assured. Under the proposal, if the Intraday Indicative Value is not 
being disseminated as required, the Exchange may halt trading during 
the day in which the interruption to the dissemination of the Intraday 
Indicative Value occurs. If the interruption of such value persists 
past the trading day in which it occurred, the Exchange must halt 
trading no later than the beginning of the trading day following the 
interruption.\81\ In addition, if the Exchange becomes aware that the 
NAV or Disclosed Portfolio related to a series of Managed Trust 
Securities is not being disseminated to all market participants at the 
same time, the Exchange will halt trading in such series of Managed 
Trust Securities until such time as the NAV or the Disclosed Portfolio 
is available to all market participants.
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    \81\ If a series of Managed Trust Securities is trading on the 
Exchange pursuant to unlisted trading privileges, the Exchange will 
halt trading in that series, as specified in BATS Rule 11.8, as 
applicable. See BATS Rule 11.8 (setting forth rules regarding 
trading halts for certain derivative securities products).
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c. Surveillance
    Pursuant to the proposed rules, BATS will implement written 
surveillance procedures applicable to Managed Trust Securities. The 
Exchange has represented that trading of Managed Trust Securities on 
BATS will be subject to the Exchange's surveillance procedures for 
derivative products, and that the Exchange's surveillance procedures 
applicable to derivative products are adequate to address any concerns 
about the trading of the Managed Trust Securities on BATS.\82\
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    \82\ See Notice, supra note 4, 78 FR at 41478.

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[[Page 53533]]

d. Other Provisions
    BATS has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\83\ 
In addition, the proposed rules require that: (i) If the trust's 
advisor is affiliated with a broker-dealer, the broker-dealer must 
erect a ``firewall'' around the personnel who have access to 
information concerning changes and adjustments to the Disclosed 
Portfolio; (ii) personnel who make decisions on the trust's portfolio 
composition must be subject to procedures designed to prevent the use 
and dissemination of material, non-public information regarding the 
applicable trust portfolio; and (iii) the Reporting Authority that 
provides the Disclosed Portfolio implement and maintain, or be subject 
to, procedures designed to prevent the use and dissemination of 
material, non-public information regarding the actual components of the 
portfolio. The Commission believes that the proposed ``firewall'' 
restrictions applicable to Managed Trust Securities are reasonably 
designed to prevent the use and dissemination of material, non-public 
information regarding the Disclosed Portfolio, prevent conflicts of 
interest with respect to personnel of a broker-dealer maintaining the 
Disclosed Portfolio and to promote fair and orderly markets.
---------------------------------------------------------------------------

    \83\ See id.
---------------------------------------------------------------------------

    The proposed rules prescribe prospectus delivery requirements for 
purchasers of each newly issued series of Managed Trust Securities. In 
addition, the Exchange has represented that prior to the commencement 
of trading in a series of Managed Trust Securities, the Exchange will 
inform its members in an Information Circular of the special 
characteristics and risks associated with trading the Managed Trust 
Securities.\84\
---------------------------------------------------------------------------

    \84\ See id.
---------------------------------------------------------------------------

    The proposed rules impose additional reporting requirements, 
trading restrictions and books and records obligations on registered 
market makers in Managed Trust Securities. The Commission believes that 
such restrictions, reporting and record-keeping requirements are 
reasonably designed to promote a fair and orderly market for Managed 
Trust Securities, and will assist the Exchange in identifying 
situations potentially susceptible to manipulation.
    The Commission notes that the Exchange's proposed listing standards 
for Managed Trust Securities are substantively identical to the listing 
standards for Managed Trust Securities on Nasdaq.\85\ As such, the 
Commission believes that the proposed listing standards present no 
unique or novel regulatory issues and, for the reasons discussed above, 
are reasonably designed to protect investors and the public interest.
---------------------------------------------------------------------------

    \85\ See Nasdaq Rule 5711(j).
---------------------------------------------------------------------------

4. Currency Warrants
    The Commission finds that the Exchange's proposed rules and 
procedures for the listing and trading of Currency Warrants are 
consistent with the Act. The Commission believes the Exchange's 
proposal to list and trade Currency Warrants will benefit investors by 
increasing competition among markets that trade Currency Warrants. The 
Commission notes that it has approved the adoption of listing standards 
and related rules for Currency Warrants on Nasdaq.\86\
---------------------------------------------------------------------------

    \86\ See supra note 35. See also NOM Rules, Chapter XI, Sections 
7, 8, 9, 10 and 24.
---------------------------------------------------------------------------

a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate 
rules and procedures to govern the listing and trading of Currency 
Warrants. Prior to listing and/or trading on the Exchange, BATS must 
file a separate proposed rule change pursuant to Section 19(b) of the 
Act for each series of Currency Warrants, and the listing of Currency 
Warrants will be considered on a case-by-case basis. The Exchange has 
represented that Currency Warrants are deemed to be equity securities, 
thus rendering trading in Currency Warrants subject to the Exchange's 
existing rules governing the trading of equity securities.\87\
---------------------------------------------------------------------------

    \87\ See Notice, supra note 4, 78 FR at 41478.
---------------------------------------------------------------------------

    The Commission is satisfied with the Exchange's development of 
specific listing criteria for Currency Warrants. As described more 
fully above, the proposed listing criteria include minimum tangible net 
worth and earnings requirements for issuers. These criteria are, in 
part, intended to ensure that the issuer has enough assets to meet its 
obligations under the terms of the warrant and should help to reduce 
systemic risk. The proposed listing criteria also include minimum 
holder, distribution and market value requirements, which should serve 
to establish a minimum level of liquidity for each series of Currency 
Warrants to allow for maintenance of fair and orderly markets.
b. Dissemination of Information
    The proposed rules provide that trading on BATS in any Currency 
Warrant shall be halted whenever BATS deems such action appropriate in 
the interests of a fair and orderly market or to protect investors. 
Trading in Currency Warrants that have been the subject of a halt or 
suspension by BATS may resume if BATS determines that the conditions 
which led to the halt or suspension are no longer present, or that the 
interests of a fair and orderly market are best served by a resumption 
of trading. In addition, the Exchange has represented that it may halt 
trading in a series of Currency Warrants during the day on which an 
interruption to the dissemination of the Intraday Indicative Value or 
the value of the underlying currency occurs, and that BATS will halt 
trading no later than the beginning of trading following the trading 
day when the interruption began if such interruption persists at that 
time.\88\ The Commission believes that the proposal is reasonably 
designed to promote the timely and fair disclosure of useful 
information that may be necessary to price the Currency Warrants 
appropriately, and to prevent trading when a reasonable degree of 
transparency cannot be assured.
---------------------------------------------------------------------------

    \88\ See id.
---------------------------------------------------------------------------

c. Surveillance
    The Exchange has represented that trading of Currency Warrants on 
BATS will be subject to the Exchange's surveillance procedures for 
derivative products, and that the Exchange's surveillance procedures 
applicable to derivative products are adequate to address any concerns 
about the trading of the Currency Warrants on BATS.\89\
---------------------------------------------------------------------------

    \89\ See id.
---------------------------------------------------------------------------

d. Other Provisions
    Due to their derivative and leveraged nature, and the fact that 
they are a wasting asset, many of the risks of trading in warrants are 
similar to the risks of trading standardized options. Accordingly, the 
Exchange has proposed to apply its options customer protection rules to 
Currency Warrants. In particular, the Commission notes that Currency 
Warrants will only be sold to options-approved accounts in accordance 
with BATS Rule 26.2. In addition, the Exchange will apply the options 
rules for suitability, discretionary accounts, supervision of accounts 
and public customer complaints to transactions in Currency Warrants, 
and that members participating in Currency Warrants shall be bound to 
comply with the Communications and Disclosures rule of FINRA.

[[Page 53534]]

    The proposed rules establish reporting requirements for members 
holding large positions in Currency Warrants. The Commission believes 
that such reporting requirements are reasonably designed to promote a 
fair and orderly market for Currency Warrants, and will assist the 
Exchange in identifying situations potentially susceptible to 
manipulation.
    BATS has represented that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\90\ 
In addition, the Exchange has represented that prior to the 
commencement of trading in a series of Currency Warrants, the Exchange 
will inform its members in an Information Circular of the special 
characteristics and risks associated with trading the Currency 
Warrants.\91\
---------------------------------------------------------------------------

    \90\ See id.
    \91\ See id. at 41477.
---------------------------------------------------------------------------

    The Commission notes that the Exchange's proposed listing standards 
and regulatory requirements relating to Currency Warrants are 
substantively identical to the listing standards and regulatory 
requirements for Currency Warrants listed and traded on Nasdaq.\92\ As 
such, the Commission believes that the proposed listing standards 
present no unique or novel regulatory issues and, for the reasons 
discussed above, are reasonably designed to protect investors and the 
public interest.
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    \92\ See Nasdaq Rule 5711(k).
---------------------------------------------------------------------------

C. Additional Representations

    As discussed above, the Exchange has represented that the Subject 
Securities are deemed to be equity securities, thus rendering trading 
in the Subject Securities subject to the Exchange's existing rules 
governing the trading of equity securities. In support of this 
proposal, the Exchange has made representations, including:
    (1) The Exchange has appropriate rules to facilitate transactions 
in the Subject Securities during all trading sessions.
    (2) The Exchange's surveillance procedures applicable to derivative 
products are adequate to address any concerns about the trading of the 
Subject Securities on BATS. The Exchange may obtain information via the 
ISG from other exchanges who are members or affiliates of the ISG or 
any other exchanges with which the Exchange has comprehensive 
surveillance sharing agreements.
    (3) The Exchange has a general policy prohibiting the distribution 
of material, non-public information by its employees.
    (4) To the extent a Subject Security holds investments in futures 
contracts, not more than 10% of the weight of such futures contracts in 
the aggregate shall consist of components whose principal trading 
market is not a member of ISG or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement.
    (5) Prior to the commencement of trading, the Exchange will inform 
its members in an Information Circular of the special characteristics 
and risks associated with trading the Subject Securities. Specifically, 
the Information Circular will discuss the following: (a) The risks 
involved in trading the Subject Securities during the Opening Process 
and Post-Market Sessions when an updated Intraday Indicative Value will 
not be calculated or publicly disseminated and, if applicable, the 
risks involved in trading the Subject Securities during the Regular 
Market Session when the Intraday Indicative Value may be static or 
based in part on the fluctuation of currency exchange rates when the 
underlying markets have closed prior to the close of the Exchange's 
Regular Market Session; (b) the procedures for purchases and 
redemptions of the Subject Securities (and/or that the Subject 
Securities are not individually redeemable); (c) BATS Rule 3.7, which 
imposes suitability obligations on members with respect to recommending 
transactions in the securities to customers; (d) how information 
regarding the Intraday Indicative Value is disseminated; (e) the 
requirement that members deliver a prospectus to investors purchasing 
newly issued Subject Securities prior to or concurrently with the 
confirmation of a transaction; and (f) trading information.
    (6) BATS may consider all relevant factors in exercising its 
discretion to halt or suspend trading in the Subject Securities. 
Trading in the Subject Securities may be halted because of market 
conditions or for reasons that, in the view of BATS, make trading in 
the securities inadvisable. These may include: (a) The extent to which 
trading in the underlying asset or assets is not occurring; or (b) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.\93\
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    \93\ In addition, trading in the Subject Securities will be 
subject to trading halts caused by extraordinary market volatility 
pursuant to the Exchange's ``circuit breaker'' Rule 11.8(d) or by 
the halt or suspension of the trading of the current underlying 
asset or assets. If the applicable Intraday Indicative Value, value 
of the underlying index, or the value of the underlying asset or 
assets (e.g., securities, commodities, currencies, futures 
contracts, or other assets) is not being disseminated as required, 
BATS may halt trading during the day in which such interruption to 
the dissemination occurs. If the interruption to the dissemination 
of the applicable Intraday Indicative Value, value of the underlying 
index, or the value of the underlying asset or assets persists past 
the trading day in which it occurred, BATS will halt trading no 
later than the beginning of the trading day following the 
interruption. In addition, if BATS becomes aware that the net asset 
value with respect to a series of the Subject Securities is not 
disseminated to all market participants at the same time, it will 
halt trading in such series until such time as the net asset value 
is available to all market participants.
---------------------------------------------------------------------------

    (7) Prior to the commencement of trading of any inverse, leveraged, 
or inverse leveraged Subject Securities, BATS will inform its members 
of the suitability requirements of BATS Rule 3.7 in the Information 
Circular.\94\ The Information Circular will also reference, among other 
things, the FINRA Regulatory Notices regarding sales practice and 
customer margin requirements for FINRA members applicable to leveraged 
exchange-traded products and options thereon. Members that carry 
customer accounts will be required to follow the FINRA guidance set 
forth in the FINRA Regulatory Notices.
---------------------------------------------------------------------------

    \94\ Specifically, members will be reminded in the Information 
Circular that, in recommending transactions in these securities, 
they must have a reasonable basis to believe that (1) the 
recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's investment objectives, financial 
situation, needs, and any other information known by such member, 
and (2) the customer can evaluate the special characteristics, and 
is able to bear the financial risks, of an investment in the 
securities. In connection with the suitability obligation, the 
Information Circular will also provide that members must make 
reasonable efforts to obtain the following information: (1) The 
customer's financial status; (2) the customer's tax status; (3) the 
customer's investment objectives; and (4) such other information 
used or considered to be reasonable by such member or registered 
representative in making recommendations to the customer. See Rule 
3.7.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's 
representations. The Commission again notes that the proposed listing 
standards for the Subject Securities are substantively identical to 
previously approved listing standards for the corresponding products on 
Nasdaq.\95\
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    \95\ See supra notes 28, 35, 48, 57, 64, 71, 78, 85, and 92.

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[[Page 53535]]

    The Commission believes that the proposal should help to facilitate 
the listing and trading of additional types of exchange-traded products 
that should enhance competition among market participants, to the 
benefit of investors and the marketplace. In addition, the Commission 
believes that the listing and trading criteria for the Subject 
Securities set forth in amended Rule 14.11(d) and proposed Rule 
14.11(e) are reasonably designed to protect investors and the public 
interest, as discussed herein. For the foregoing reasons, the 
Commission finds that the proposed rule change, as amended, is 
consistent with the Act and the rules and regulations thereunder 
applicable to a national securities exchange, and, in particular, with 
Section 6(b)(5) of the Act.\96\
---------------------------------------------------------------------------

    \96\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\97\ that the proposed rule change (SR-BATS-2013-038), as modified 
by Amendment No. 1 thereto, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \97\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\98\
---------------------------------------------------------------------------

    \98\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2013-21036 Filed 8-28-13; 8:45 am]
BILLING CODE 8011-01-P