[Federal Register: September 4, 2008 (Volume 73, Number 172)]
[Notices]
[Page 51672-51676]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04se08-71]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58440; File No. SR-NASDAQ-2008-071]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change Relating to the Generic Listing Standards for Index
Multiple Exchange Traded Fund Shares and Index Inverse Exchange Traded
Fund Shares
August 28, 2008.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on August 20, 2008, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by Nasdaq. The Commission is
publishing this notice and order to solicit comments on the proposed
rule change from interested persons and to approve the proposal on an
accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Nasdaq is filing a proposed rule change to amend Nasdaq Rule
4420(j) to list and trade, or trade pursuant to unlisted trading
privileges (``UTP''), shares of a series of Index Multiple Exchange
Traded Fund Shares (``Multiple Fund Shares'') and Index Inverse
Exchange Traded Fund Shares (``Inverse Fund Shares'') (collectively,
the ``Fund Shares''). The text of the proposed rule change is available
from Nasdaq's Web site at http://nasdaq.cchwallstreet.com, at Nasdaq's
principal office, and at the Commission's Public Reference Room.
Proposed new language is italicized; proposed deletions are in
brackets.\3\
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\3\ Changes are marked to the rule text that appears in the
electronic manual of Nasdaq found at http://
nasdaq.cchwallstreet.com.
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* * * * *
4420. Quantitative Listing Criteria
* * * * *
(a)-(i) No Change.
(j) Index Fund Shares
(1) No Change
(A) No Change
(B)(i) The term ``Index Fund Share'' includes a security issued by
an open-end management investment company that seeks to provide
investment results that either exceed the performance of a specified
domestic equity, international or global equity, or fixed income index
or a combination thereof by a specified multiple or that correspond to
the inverse (opposite) of the performance of a specified domestic
equity, international or global equity, or fixed income index or a
combination thereof by a specified multiple. Such a security is issued
in a specified aggregate number in return for a deposit of a specified
number of shares of stock, a specified portfolio of fixed income
securities or a combination of the above and/or cash as defined in
subparagraph (1)(B)(ii) of this rule with a value equal to the next
determined net asset value. When aggregated in the same specified
minimum number, Index Fund Shares may be redeemed at a holder's request
by such open-end investment company which will pay to the redeeming
holder the stock, fixed income securities or a combination thereof and/
or cash with a value equal to the next determined net asset value.
(ii) In order to achieve the investment result that it seeks to
provide, such an investment company may hold a combination of financial
instruments, including, but not limited to, stock index futures
contracts; options on futures contracts; options on securities and
indices; equity caps, collars and floors; swap agreements; forward
contracts; repurchase agreements and reverse repurchase agreements (the
``Financial Instruments''), but only to the extent and in the amounts
or percentages as set forth in the registration statement for such
Index Fund Shares.
(iii) Any open-end management investment company which issues Index
Fund Shares referenced in this subparagraph (1)(B) that seeks to
provide investment results, before fees and expenses, in an amount that
exceeds -200% of the percentage performance on a given day of a
particular domestic equity, international or global equity or fixed
income securities index or a combination thereof shall not be approved
by the Exchange for listing and trading pursuant to Rule 19b-4(e) under
the Securities Exchange Act of 1934.
(iv) For the initial and continued listing of a series of Index
Fund Shares referenced in the provisions of this subparagraph (1)(B) of
this rule, the following requirements must be adhered to:
Daily public Web site disclosure of portfolio holdings that will
form the basis for the calculation of the net asset value by the issuer
of such series, including, as applicable, the following instruments:
a. The identity and number of shares held of each specific equity
security;
b. The identity and amount held for each specific fixed income
security;
c. The specific types of Financial Instruments and characteristics
of such Financial Instruments; and
d. Cash equivalents and the amount of cash held in the portfolio.
If the Exchange becomes aware that the net asset value related to
an Index Fund Shares included in the provisions of this subparagraph
(1)(B)(ii) of this rule, is not being disseminated to all market
participants at the same time or the daily public Web site disclosure
of portfolio holdings does not occur, the Exchange shall halt trading
in such series of Index Fund Share, as appropriate. The Exchange may
resume trading in such Index Fund Shares only when the net asset value
is disseminated to all market participants at the same time or the
daily public Web site
[[Page 51673]]
disclosure of portfolio holdings occurs, as appropriate.
(C) [(B)] Reporting Authority. The term ``Reporting Authority'' in
respect of a particular series of Index Fund Shares means Nasdaq, a
wholly-owned subsidiary of Nasdaq, or an institution or reporting
service designated by Nasdaq or its subsidiary as the official source
for calculating and reporting information relating to such series,
including, but not limited to, any current index or portfolio value;
the current value of the portfolio of any securities required to be
deposited in connection with issuance of Index Fund Shares; the amount
of any dividend equivalent payment or cash distribution to holders of
Index Fund Shares, net asset value, and other information relating to
the issuance, redemption or trading of Index Fund Shares.
Nothing in this paragraph shall imply that an institution or
reporting service that is the source for calculating and reporting
information relating to Index Fund Shares must be designated by Nasdaq;
the term ``Reporting Authority'' shall not refer to an institution or
reporting service not so designated.
(D) [(C)] US Component Stock. The term ``US Component Stock'' shall
mean an equity security that is registered under Sections 12(b) or
12(g) of the Act, or an American Depository Receipt, the underlying
equity security of which is registered under Sections 12(b) or 12(g) of
the Act.
(E) [(D)] Non-US Component Stock. The term ``Non-US Component
Stock'' shall mean an equity security that (a) is not registered under
Sections 12(b) or 12(g) of the Act, (b) is issued by an entity that is
not organized, domiciled or incorporated in the United States, and (c)
is issued by an entity that is an operating company (including Real
Estate Investment Trusts (REITs) and income trusts, but excluding
investment trusts, unit trusts, mutual funds, and derivatives).
(2)-(10) No Change
(k)-(o) No Change.
* * * * *
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, Nasdaq included statements
concerning the purpose of, and basis for, the proposed rule change. The
text of these statements may be examined at the places specified in
Item III below, and is set forth in Sections A, B, and C below.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq Rule 4420(j) provides standards for listing Index Fund
Shares (``IFSs'') on the Exchange. Nasdaq proposes to amend the
definition of ``Index Fund Share'' set forth in proposed Nasdaq Rule
4420(j)(1)(B) to permit the listing and trading, or trading pursuant to
UTP, of Fund Shares and to properly reflect the fact that domestic
equity, international or global equity, or fixed income securities
indexes or a combination thereof may be used as the underlying
performance benchmark for Fund Shares. Accordingly, this proposal would
enable the Exchange to list and trade Multiple Fund Shares and certain
Inverse Fund Shares pursuant to Rule 19b-4(e) of the Act.\4\ The
Exchange also notes that the Commission has approved the original
listing and trading of Fund Shares on the American Stock Exchange LLC
(``Amex'').\5\
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\4\ 17 CFR 240.19b-4(e).
\5\ See Securities Exchange Act Release No. 57660 (April 14,
2008), 73 FR 21391(April 21, 2008) (SR-Amex-2007-131).
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Generic Listing Standards
Nasdaq Rule 4420(j) provides standards for listing IFSs, which are
securities issued by an open-end management investment company (open-
end mutual fund) based on a portfolio of securities that seeks to
provide investment results that correspond generally to the price and
yield performance or total return performance of a specified foreign or
domestic securities index or fixed income index. Pursuant to Nasdaq
Rule 4420(j)(1)(A), IFSs must be issued in a specified aggregate
minimum number in return for a deposit of specified securities and/or a
cash amount, with a value equal to the next determined net asset value
(``NAV''). When aggregated in the same specified minimum number, IFSs
must be redeemed by the issuer for the securities and/or cash, with a
value equal to the next determined NAV. Consistent with Nasdaq Rule
4420(j)(9)(A)(ii), the NAV is calculated once a day after the close of
the regular trading day.
The proposed revisions to Nasdaq Rule 4420(j) would allow the
listing and trading of Multiple Fund Shares and Inverse Fund Shares
that sought to provide investment results, before fees and expenses, in
an amount not exceeding -200% of the underlying benchmark index
pursuant to Rule 19b-4(e) under the Act,\6\ where the other applicable
generic listing standards for IFSs are satisfied. In connection with
Inverse Funds that seek to provide investment results, before fees and
expenses, in an amount that exceeds -200% of the underlying benchmark
index, the Exchange's proposal would continue to require specific
Commission approval pursuant to Section 19(b)(2) of the Act.\7\ In
particular, Nasdaq Rule 4420(j)(1)(B)(iii) would expressly prohibit
Inverse Funds that seek to provide investment results, before fees and
expenses, in an amount that exceeds -200% of the underlying benchmark
index, from being approved by the Exchange for listing and trading
pursuant to Rule 19b-4(e) under the Act.\8\
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\6\ 17 CFR 240.19b-4(e).
\7\ 15 U.S.C. 78s(b)(2).
\8\ 17 CFR 240.19b-4(e).
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Current Nasdaq Rule 4420(j)(1)(A)(i), in pertinent part, defines
the term ``Index Fund Share'' as based on a specified foreign or
domestic stock index. In conjunction with the current proposal, the
Exchange proposes to amend this definition to include domestic equity,
international or global equity, or fixed income securities indexes and
combinations thereof as permissible underlying performance benchmarks.
The Exchange states that the proposed revision is consistent with
Nasdaq Rule 4420(j) reflecting the fact that domestic equity,
international or global equity, or fixed income securities indexes or a
combination thereof may be used as the underlying performance benchmark
for IFSs, including Fund Shares.
The Exchange believes that adopting generic listing and trading
standards for Fund Shares based on domestic equity, international or
global equity and/or fixed income securities indexes and applying Rule
19b-4(e) should fulfill the intended objective of that Rule by allowing
those IFSs that satisfy the proposed standards to commence trading,
without the need for individualized Commission approval. The proposed
rules have the potential to reduce the time frame for bringing Fund
Shares to market, thereby reducing the burdens on issuers and other
market participants.\9\
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\9\ The Exchange submits that the failure of a particular Fund
Share portfolio to comply with the proposed generic listing and
trading standards under Rule 19b-4(e) would not, however, preclude
the Exchange from submitting a separate filing pursuant to Section
19(b)(2) requesting Commission approval to list and trade a
particular Fund Share.
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The Commission has approved generic standards providing for the
listing and trading of derivative
[[Page 51674]]
products pursuant to Rule 19b-4(e) based on indexes previously approved
by the Commission under Section 19(b)(2) of the Act \10\ and also notes
that the generic listing standards provide for indexes that have been
approved by the Commission in connection with the listing of Portfolio
Depository Receipts, Index Fund Shares or Index-Linked Securities. The
Exchange believes that the application of that standard to Fund Shares
is appropriate because the underlying securities index will have been
subject to detailed and specific Commission review in the context of
the approval of listing of other derivatives.
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\10\ 15 U.S.C. 78s(b)(2). See Securities Exchange Act Release
No. 54765 (November 16, 2006), 71 FR 67668 (November 22, 2006) (SR-
Nasdaq-2006-009) (Commodity-Linked Securities).
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The Exchange notes that existing Nasdaq Rule 4420(j)(9)(B) provides
continued listing standards for all IFSs. For example, where the value
of the underlying index or portfolio of securities on which the IFS is
based is no longer calculated or available, or in the event that the
IFS chooses to substitute a new index or portfolio for the existing
index or portfolio, the Exchange would commence delisting proceedings
if the new index or portfolio does not meet the requirements of and
listing standards set forth in Nasdaq Rule 4420(j). If an IFS chose to
substitute an index that did not meet any of the generic listing
standards for listing of IFSs pursuant to Rule 19b-4(e) of the Act,\11\
then for continued listing and trading, approval by the Commission of a
separate filing pursuant to Section 19(b)(2) of the Act \12\ to list
and trade that IFS is required. In addition, the Exchange further notes
that existing Nasdaq Rule 4420(j)(9)(A)(ii) provides that, prior to
approving an IFS for listing, the Exchange will obtain a representation
from the issuer that the NAV per share will be calculated daily and
made available to all market participants at the same time.
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\11\ 17 CFR 240.19b-4(e).
\12\ 15 U.S.C. 78s(b)(2).
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The Exchange proposes to add Nasdaq Rule 4420(j)(1)(B)(iv) to
provide for the halt of trading for Fund Shares if the Exchange becomes
aware that the open-end investment company fails to properly
disseminate the appropriate NAV to market participants at the same
time. In addition, the proposed rule would also require a halt to
trading if the open-end investment company issuing the Fund Shares
failed to provide daily public Web site disclosure of its portfolio
holdings. In particular, proposed Nasdaq Rule 4420(j)(1)(B)(iv)
provides that the Exchange will halt trading in a series of Multiple
Fund Shares and/or Inverse Fund Shares if the Exchange becomes aware
that the open-end investment company issuing the Fund Shares fails to
disseminate the appropriate NAV to all market participants at the same
time and/or fails to provide daily public Web site disclosure of its
portfolio holdings.
The investment objective associated with the Fund Shares must be
expected to achieve investment results, before fees and expenses, by a
specified multiple (Multiple Fund Shares) or inversely up to -200%
(Inverse Fund Shares) of the underlying performance benchmark domestic
equity, international or global equity and/or fixed income indexes, as
applicable. Fund Shares differ from traditional exchange-traded fund
shares in that they do not merely correspond to the performance of a
given securities index, but rather attempt to match a multiple or
inverse of such underlying index performance.
In order to achieve investment results that provide either a
positive multiple or inverse of the benchmark index, Fund Shares may
hold a combination of financial instruments, including, but not limited
to: Stock index futures contracts; options on futures; options on
securities and indices; equity caps, collars and floors; swap
agreements; forward contracts; repurchase agreements; and reverse
repurchase agreements (the ``Financial Instruments''). Normally, 100%
of the value of the underlying portfolios for the Inverse Fund Shares
will be devoted to Financial Instruments and money market instruments,
including U.S. government securities and repurchase agreements (the
``Money Market Instruments''). The underlying portfolios for Multiple
Fund Shares may consist of a combination of securities, Financial
Instruments and Money Market Instruments.
Limitation on Leverage
In connection with Inverse Funds that seek to provide investment
results, before fees and expenses, in an amount that exceeds -200% of
the underlying benchmark index, the Exchange's proposal would continue
to require specific Commission approval pursuant to Section 19(b)(2) of
the Act.\13\ In particular, Nasdaq Rule 4420(j)(1)(B)(iii) would
expressly prohibit Inverse Funds that seek to provide investment
results, before fees and expenses, in an amount that exceeds -200% of
the underlying benchmark index, from being approved by the Exchange for
listing and trading pursuant to Rule 19b-4(e) under the Act.\14\
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\13\ 15 U.S.C. 78s(b)(2).
\14\ 17 CFR 240.19b-4(e).
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In connection with Multiple Fund Shares, Nasdaq Rule 4420(j)(1)(B)
does not provide a similar limitation on leverage. Instead, the
proposal would permit the underlying registered management investment
company or fund to seek to provide investment results, before fees and
expenses, that correspond to any multiple, without limitation, of the
percentage performance on a given day of a particular domestic equity,
international or global equity, or fixed income securities indexes or a
combination thereof.
Availability of Information About Fund Shares and Underlying Indexes
Proposed Nasdaq Rule 4420(j)(1)(B)(iv) provides that the portfolio
composition of a Fund will be disclosed on a public Web site. Web site
disclosure of portfolio holdings that will form the basis for the
calculation of the NAV by the issuer of a series of Fund Shares will be
made daily and will include, as applicable, the identity and number of
shares held of each specific equity security, the identity and amount
held of each fixed income security, the specific types of Financial
Instruments and characteristics of such instruments, cash equivalents
and amount of cash held in the portfolio of a fund. This public Web
site disclosure of the portfolio composition of a Fund, that will form
the basis for the calculation of the NAV, will coincide with the
disclosure of the same information to ``Authorized Participants.'' \15\
Investors will have access to the current portfolio composition of a
Fund through the Fund's Web site and/or at the Exchange's Web site at
http://www.nasdaqomx.com.
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\15\ Authorized Participants are the only persons that may place
orders to create and redeem Creation Units. Authorized Participants
must be registered broker-dealers or other securities market
participants, such as banks and other financial institutions that
are exempt from registration as broker-dealers to engage in
securities transactions, who are participants in DTC. The format of
the disclosure of portfolio holdings to Authorized Participants may
differ from the format of the public Web site disclosure.
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Trading Halts
Existing trading halt requirements for IFSs will apply to Fund
Shares. Nasdaq will halt trading in Fund Shares under the conditions
specified in Nasdaq Rules 4120 and 4121, as well as subject to proposed
Nasdaq Rule 4420(j)(1)(B)(iv). The conditions for a halt include a
regulatory halt by the listing market. UTP trading in Fund
[[Page 51675]]
Shares will also be governed by provisions of Nasdaq Rule 4120(b)
relating to temporary interruptions in the calculation or wide
dissemination of the calculation of the estimated NAV (``Intraday
Indicative Value''), which is updated regularly during the trading day,
among other values.
If Nasdaq becomes aware that the NAV or the identities and
quantities of the portfolio of securities and other assets (the
``Disclosed Portfolio'') with respect to a Fund Share is not
disseminated to all market participants at the same time, it will halt
trading in such series until such time as the NAV or the Disclosed
Portfolio is available to all market participants.
In the case of the Financial Instruments held by a Multiple or
Inverse Fund, the Exchange represents that a notification procedure
will be implemented so that timely notice from the investment adviser
of such Multiple or Inverse Fund is received by the Exchange when a
particular Financial Instrument is in default or shortly to be in
default. The Exchange will then determine on a case-by-case basis
whether a default of a particular Financial Instrument justifies a
trading halt of the Multiple and/or Inverse Fund Shares.
Additionally, Nasdaq may cease trading Fund Shares if other unusual
conditions or circumstances exist which, in the opinion of Nasdaq, make
further dealings on Nasdaq detrimental to the maintenance of a fair and
orderly market. Nasdaq will also follow any procedures with respect to
trading halts as set forth in Nasdaq Rule 4120(c). Finally, Nasdaq will
stop trading Fund Shares if the listing market delists them.
Suitability
Prior to commencement of trading, the Exchange will issue an
Information Circular to its members and member organizations providing
guidance with regard to member firm compliance responsibilities
(including suitability obligations) when effecting transactions in the
Fund Shares and highlighting the special risks and characteristics of
Funds Shares as well as applicable Exchange rules.
Specifically, the Information Circular will discuss the following:
(1) The procedures for purchases and redemptions of Fund Shares in
Baskets (and that Fund Shares are not individually redeemable); (2)
Nasdaq Rule 2310, which imposes suitability obligations on Nasdaq
members with respect to recommending transactions in Fund Shares to
customers; (3) how information regarding the Intraday Indicative Value
is disseminated; (4) the requirement that members deliver a prospectus
to investors purchasing newly issued Fund Shares prior to or
concurrently with the confirmation of a transaction; (5) the risks
involved in trading Fund Shares during the Pre-Market and Post-Market
Sessions when an updated Intraday Indicative Value will not be
calculated or publicly disseminated; and (6) trading information.
The Exchange notes that investors purchasing Fund Shares directly
from a Fund will receive a prospectus. Members purchasing Fund Shares
from a Fund for resale to investors will deliver a prospectus to such
investors. The Information Circular will also discuss any exemptive,
no-action and interpretive relief granted by the Commission from any
rules under the Act.
In addition, the Information Circular will reference that Fund
Shares are subject to various fees and expenses described in the
Registration Statement. The Information Circular will also disclose the
trading hours of the Fund Shares of the Funds and that the NAV for the
Fund Shares will be calculated after 4 p.m. (Eastern Time) each trading
day.
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (including exchange-traded
funds) to monitor trading in Fund Shares. The Exchange represents that
such procedures are adequate to address any concerns about the trading
of Fund Shares on Nasdaq. Trading of Fund Shares through Nasdaq will be
subject to FINRA's surveillance procedures for equity securities in
general and ETFs in particular.\16\ The Exchange may obtain information
via the Intermarket Surveillance Group (``ISG'') from other exchanges
who are members or affiliate members of the ISG.\17\
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\16\ FINRA surveils trading on Nasdaq pursuant to a regulatory
services agreement. Nasdaq is responsible for FINRA's performance
under this regulatory services agreement.
\17\ For a list of the current members and affiliate members of
ISG, see www.isgportal.com.
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2. Statutory Basis
Nasdaq believes that the proposal is consistent with Section 6(b)
of the Act \18\ in general and Section 6(b)(5) of the Act \19\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The Exchange believes that the
proposed rules will facilitate the listing and trading of Fund Shares
and will enhance competition among market participants, to the benefit
of investors and the marketplace. In addition, the listing and trading
criteria set forth in the proposed rules are intended to protect
investors and the public interest.
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\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
Nasdaq does not believe that the proposed rule change will impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
Written comments were neither solicited nor received.
III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (www.sec.gov/
rules/sro.shtml); or
Send an e-mail to rule-comments@sec.gov. Please include
File Number SR-NASDAQ-2008-071 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2008-071. This
file number should be included on the subject line if e-mail is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the
[[Page 51676]]
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for inspection and copying in the Commission's Public
Reference Room, 100 F Street, NE., Washington, DC 20549, on official
business days between the hours of 10 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NASDAQ-2008-071 and should be submitted on or before
September 25, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\20\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\21\ which
requires that the rules of an exchange be designed, among other things,
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
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\20\ In approving this rule change, the Commission notes that it
has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
\21\ 15 U.S.C. 78f(b)(5).
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Pursuant to Section 19(b) of the Act \22\ and Rule 19b-4
thereunder,\23\ the listing and trading of a new derivative securities
product is a proposed rule change that must be filed with and approved
by the Commission. Rule 19b-4(e) under the Act \24\ further provides
that the listing and trading of a new derivative securities product by
an exchange will not be deemed a proposed rule change pursuant to Rule
19b-4(c)(1) under the Act \25\ if the Commission has approved, pursuant
to Section 19(b) of the Act, the exchange's trading rules, procedures,
and listing standards for the product class that would include the new
derivative securities product, and the exchange has a surveillance
program for the product class.
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\22\ 15 U.S.C. 78s(b)(1).
\23\ 17 CFR 240.19b-4.
\24\ 17 CFR 240.19b-4(e).
\25\ 17 CFR 240.19b-4(c)(1).
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The Commission believes that the Exchange's adoption of listing and
trading standards for Index Fund Shares that meet the requirements of
Nasdaq Rule 4420(j) should fulfill the intended objective of Rule 19b-
4(e) by allowing such Index Fund Shares to commence trading on the
Exchange without the need for individualized Commission approval.
Accordingly, the proposed rule should allow the Exchange to bring these
securities to market without delay, thereby reducing the burdens on
issuers and other market participants while promoting competition.
The Commission finds that the Exchange's proposal contains adequate
rules and procedures to govern the trading and listing pursuant to Rule
19b-4(e) of Inverse Fund Shares and Multiple Fund Shares listed
pursuant to Rule 19b-4(e) on the Exchange. Among other things, the
proposal would require daily public Web site disclosure of a fund's
portfolio holdings and dissemination of its NAV to all market
participants at the same time, or else the Exchange would be obligated
to halt trading in the fund's shares. In addition, Fund Shares listed
and/or traded under the proposed ``generic'' standards would be subject
to existing Nasdaq rules that govern the continued listing and trading
of Index Fund Shares.
The Commission finds good cause for approving this proposal before
the 30th day after the publication of notice thereof in the Federal
Register. The Commission notes that it has recently approved a similar
proposal of another exchange,\26\ and Nasdaq's proposal does not raise
any novel regulatory issues. Accordingly, the Commission believes that
accelerating approval of this proposal is appropriate and will enable
the Exchange to amend its rules to reflect the standards for listing
and trading Inverse and Multiple Fund Shares, thereby conforming
Nasdaq's rules to those of other exchanges without delay.
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\26\ See Securities Exchange Act Release No. 57660 (April 14,
2008), 73 FR 21391 (April 21, 2008) (SR-Amex-2007-131). The
Commission notes that it received no comments on the Amex's
proposal.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\27\ that the proposed rule change (SR-NASDAQ-2008-071) be, and it
hereby is, approved on an accelerated basis.
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\27\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-20517 Filed 9-3-08; 8:45 am]
BILLING CODE 8010-01-P