[Federal Register Volume 78, Number 229 (Wednesday, November 27, 2013)]
[Notices]
[Pages 70992-71000]
[FR Doc No: 2013-28415]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70910; File No. SR-NYSEMKT-2013-91]

Self-Regulatory Organizations; NYSE MKT LLC; Notice of Filing of
Proposed Rule Change to Establish an Institutional Liquidity Program on
a One-Year Pilot Basis

November 21, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on November 7, 2013, NYSE MKT LLC (``NYSE MKT'' 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 the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 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

    The Exchange proposes a one-year pilot program that would add new
Rule 107D--Equities to establish an Institutional Liquidity Program
(``Program'' or ``proposed rule change'') to attract buying and selling
interest in greater size to the Exchange for Exchange-listed or traded
securities (including but not limited to Exchange-listed securities and
securities traded pursuant to unlisted trading privileges) by
facilitating interactions between institutional customers (and others
with block trading interest) and providers of liquidity exceeding
minimum size requirements. The text of the proposed rule change is
available on the Exchange's Web site at www.nyse.com, at the principal
office of the Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The Exchange is proposing a one-year pilot program that would add
new NYSE MKT Rule 107D--Equities to establish an Institutional
Liquidity Program to attract buying and selling interest in greater
size to the Exchange for Exchange-listed and traded securities by
facilitating interactions between institutional customers and others
with block trading interest (collectively, ``Institutional Interest'')
and providers of liquidity to service this type of order flow.\4\ The
Program offers a targeted size discovery mechanism that would enable
consumers and suppliers of such liquidity to execute trades larger than
the average size currently occurring on the Exchange or in most dark
pools.
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    \4\ The Exchange will submit a separate proposal to amend its
Price List in connection with the proposed Institutional Liquidity
Program. Under that proposal, the Exchange expects to initially
charge member organizations a fee for executions of their ILOs
against OLOs and in turn would initially provide a credit or free
executions to member organizations for executions of their OLOs
against the ILOs of other member organizations. The Exchange expects
to charge both member organizations a fee for an execution of an ILO
against another ILO. The fees and credits for member organizations
submitting orders to the Program will be determined based on
experience with the Program in the first several months.
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    As set forth in more detail below, the Program at its core would
depend on the interaction between two new proposed order types, the
``Institutional Liquidity Order'' (``ILO'') and the ``Oversize
Liquidity Order'' (``OLO''). In summary terms, ILOs would express non-
displayed Institutional Interest (5,000 or more shares with $50,000 or
more market value), and OLOs would express liquidity of at least 500
shares \5\ seeking to interact with an ILO. The presence of OLOs in
Exchange systems would be reflected in a new liquidity indicator, the
Liquidity Identifier (``LI''), to be disseminated through the
Consolidated Quotation System (``CQS''). The Program is a targeted size
discovery mechanism designed to attract Institutional Interest through
a balanced set of requirements and incentives. The Exchange believes
that the size requirements, described more fully below, will stimulate
the expression of Institutional Interest in Exchange systems, and will
ensure that liquidity suppliers seeking to interact with such interest
commit meaningful size to the effort, thereby reducing the incidence of
``pinging'' or probing orders. The dissemination of LIs, in effect,
requires oversize liquidity suppliers and Institutional Interest to
communicate the fact, but not the details, of their trading interest
and is designed to stimulate further the expression of both types of
interest. The Program's minimum size requirements on OLOs and optional
use of Minimum Triggering Volume (``MTV'') restrictions with ILOs, as
described below, will reduce the incentives of using such order
anticipation strategies. The Exchange believes that the incentives
offered by the Program, in particular the balanced and limited
segmentation of Institutional Interest and the Program's incorporation
of price-size-time priority, have the potential to enhance the
discovery of size on the Exchange, to thereby reduce the transaction
costs of investors, and, more broadly, to offer a competitive response
to serious market structure concerns held by both the Exchange and the
Commission.
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    \5\ As noted below, OLOs may have a minimum size of 300 shares
for securities with an Average Daily Volume of less than one million
shares. The 500 (or 300) minimum size requirement of OLOs
significantly betters the dark pool average trade size of 210 shares
in January 2013. Rosenblatt Securities, Trading Talk, dated March
25, 2013.
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    In particular, the Program has the potential to address three such
concerns. First, the Exchange has expressed increasing concern about
the migration of orders entered by investors who are less informed as
to short term price movements toward dark venues and away from the
public markets. At the same time, increasingly small orders entered by
technology-enabled, short-term liquidity suppliers have become
concentrated on exchanges.\6\ Similarly,

the Commission has remained sharply focused on the potential
degradation of prices and price discovery as a result of the growth of
non-displayed venues and the isolation of displayed liquidity.\7\ The
size discovery mechanism and incentives of the ILP have the potential
to address this development by attracting the trading interest of
investors back to the Exchange. Second and related, the investor orders
that have been diverted to dark pools and broker internalization venues
are, in an important sense, isolated from the displayed liquidity
elsewhere in the market system. That is, unless a displayed limit order
is both superior in price and a protected quote at the top of an
exchange book, the likelihood that an investor order in a dark pool or
internalization venue would interact with it is negligible. The danger,
of course, is two-fold: the isolated order may be denied a price
improved execution, and, more systemically important, the displayed
limit order may receive no execution at all, undermining the critical
incentive to display limit orders.\8\ In contrast, liquidity attracted
to the Exchange pursuant to the Program, while segmented in a balanced
and limited way, would be integrated into the priority rules of the
Exchange and would interact according to those rules with displayed
limit orders on the Exchange.\9\ Finally, the Exchange and the
Commission have pointedly noted the selective pre-trade transparency of
dark pools and the inadequacy of dark pool transaction reporting.\10\
As discussed below, the ILP would bring enhanced pre-trade transparency
to the trading interest attracted to the Program through a new
liquidity indicator, as well as the more robust post-trade transparency
of exchanges.
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    \6\ See Testimony of Joseph Mecane, EVP & Head of U.S. Equities,
NYSE Euronext before the Subcommittee on Securities, Insurance and
Investment of the Senate Committee on Banking, Housing and Urban
Affairs (December 18, 2012) (``Exchanges find themselves competing
more directly with Alternative Trading Systems (ATSs or dark pools)
and broker internalization, which are able to employ different
practices than exchanges with far less oversight and disclosure.
Some of this competition is through cost, some through order
handling practices, and much of it is through client segmentation
whereby non-exchange venues are able to incentivize their own or
third party liquidity provisions based on the nature of the person
they are trading against. As a result of this advantage, large
broker-dealers continue to move more order flow into their own
private trading venues for a ``first look'' before routing on to the
lit public markets. Since the implementation of Reg. NMS, we've seen
two markets evolve--the lit public, regulated and accessible market
versus the dark, selective and private non-transparent market.'');
Securities Exchange Act Release No. 61358 (January 14, 2010), 75 FR
3594, 3613 (January 21, 2010) (``Equity Market Structure Concept
Release'') (``It appears that a significant percentage of the orders
of long-term investors are executed either in dark pools or at OTC
market makers, while a large percentage of the trading volume in
displayed trading centers is attributable to proprietary firms
executing short-term trading strategies.'').
    \7\ See Securities Exchange Act Release No. 60997 (Nov. 13,
2009), 74 FR 61208, 61233 (Nov. 23, 2009) (``Dark Pool Release'')
(``Increasing the volume of order flow routed to public quoting
markets could reward market participants for displaying their
trading interest, thus leading to an increase in the display of
trading interest. Such a result would be consistent with the
Commission's emphasis on the need to encourage displayed liquidity--
a critical reference point for investors. Moreover, increasing the
volume of order flow directed to public quotations could increase
the incentives for markets to compete by displaying the quotations
that would attract such order flow.''); Securities Exchange Act
Release No. 42450 (Feb. 23, 2000), 65 FR 10577, 10578 (Feb. 28,
2000) (``Fragmentation Concept Release) (``These order flow
arrangements may discourage quote competition by isolating investor
order flow from investor limit orders and dealer quotes displayed in
other market centers. Even when wholesale and internalizing broker-
dealers execute trades at prices better than the national best bid
and offer (``NBBO''), these superior transaction prices are often in
part determined by formulas dependent on the NBBO.''); see also
Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR
37496, 37499 (June 29, 2005) (``Reg. NMS Adopting Release'') (``The
importance of competition among orders has long been recognized.
Indeed, when Congress mandated the establishment of an NMS, it well
stated this basic principle: `Investors must be assured that they
are participants in a system which maximizes the opportunities for
the most willing seller to meet the most willing buyer.' To the
extent that competition among orders is lessened, the quality of
price discovery for all sizes of orders can be compromised.'');
Fragmentation Concept Release at 10580 (``[T]he existence of
multiple market centers competing for order flow in the same
security may isolate orders and hence reduce the opportunity for
interaction of all buying and selling interest in that security.
This may reduce competition on price, which is one of the most
important benefits of greater interaction of buying and selling
interest in an individual security.'').
    \8\ See Dark Pool Release at 61211; see also Reg. NMS Adopting
Release at 37527 (``The Commission believes, however, that the long-
term strength of the NMS as a whole is best promoted by fostering
greater depth and liquidity, and it follows from this that the
Commission should examine the extent to which it can encourage the
limit orders that provide this depth and liquidity to the market at
the best prices.''); Securities Exchange Act Release No. 37619A
(September 6, 1996), 61 FR 48290, 48293 (September 12, 1996)
(``Order Handling Rules Release'') (``[T]he display of customer
limit orders advances the national market system goal of the public
availability of quotation information, as well as fair competition,
market efficiency, best execution, and disintermediation.'').
    \9\ Additionally, the Exchange believes that the Program will
address complaints from buy-side firms about a lack of transparency
around the rules and operations of ATSs. Unlike the Exchange's
extensive rule filing requirements, ATSs are only required to file
an initial operation report on Form ATS and an amendment on Form ATS
when implementing a material change to the operation of the ATS or
when any information on Form ATS is inaccurate. See 17 CFR Sec.
242.301(b)(2). The Exchange environment, however, offers buy-side
firms the desired regulatory and operational transparency while also
minimizing the transaction costs associated with the trading of
block-sized trading interest.
    \10\ See Dark Pool Release at 61219 (``The public, however, does
not have access to this valuable information concerning the best
prices and sizes for NMS stocks. Rather, dark pools transmit this
information only to selected market participants. In this regard,
actionable IOIs can create a two-tiered level of access to
information about the best prices and sizes for NMS stocks that
undermines the Exchange Act objectives for a national market system.
The consolidated quotation data is intended to provide a single
source of information on the best prices for a listed security
across all markets, rather than force the public to obtain data from
many different exchanges and other markets to learn the best prices.
This objective is not met when dark pools or other trading venues
disseminate information that is functionally quite similar to
quotations, yet is not included in the consolidated quotation data.
. . . The lack of information concerning the ATS on which trades are
executed makes it difficult, if not impossible, for the public to
assess ATS trading in real-time, and to reliably identify the volume
of executions in particular stocks on individual ATSs. The
Commission preliminarily believes that the current level of post-
trade transparency for ATSs is inadequate.'').
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Definitions
    The Exchange proposes to adopt the following definitions under
proposed NYSE MKT Rule 107D(a)--Equities.
Institutional Liquidity Order
    First, the term ``Institutional Liquidity Order'' is defined as a
limit order for Exchange-listed or traded securities (including but not
limited to Exchange-listed securities and securities traded pursuant to
unlisted trading privileges) of 5,000 or more shares with a market
value of at least $50,000,\11\ or a child order of a recorded
instruction that meets such size requirements.\12\ An ILO, whether it
constitutes a child order or an entire order, must be one establishing,
increasing, liquidating, or decreasing a position in the subject
security and may not be part of an expression of two-sided interest on
the part of the account originating the order. An ILO, or the recorded
parent order instruction from which it is derived, must satisfy the
size requirement above independently, and size may not be aggregated
across multiple member

organizations \13\ to satisfy the above size requirement.\14\
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    \11\ The Exchange notes that the size requirement is similar to
other SEC and exchange rules defining block-sized trading interest.
See 17 CFR Sec.  240.10b-18(a)(5)(ii) (including in the definition
of block a quantity of stock that is at least 5,000 shares and has a
purchase price of at least $50,000); CBOE Stock Exchange Rule 52.11
(permitting the cross of two original orders at the established bid
or offer irrespective of existing interest so long as the cross
transaction is (i) for at least 5,000 shares, (ii) is for a
principal amount of at least $100,000, and (iii) is greater in size
than any single public customer order resting on the CBSX Book at
the proposed cross price).
    \12\ If an ILO represents a child order of a recorded parent
order instruction, the Program does not require that the recorded
parent order instruction be fully executed in the Program. The
recorded parent order instruction may be executed in the Program, on
the Exchange outside of the Program, or at other venues, as long as
the recorded parent order instruction and the ILO meet the Program's
requirements.
    \13\ The term ``member organization'' is defined in NYSE MKT
Rule 2(b)--Equities and includes Floor brokers acting as agents.
    \14\ In other words, a size-eligible recorded parent order
instruction, from which child orders are derived, must be held by a
single member organization. A member organization may not rely on
the representation from a non-member that the non-member holds a
recorded parent order instruction sufficient to meet the size
requirements of the Program. But if a single member organization has
a size-eligible recorded parent order instruction, the member
organization may send child orders to other member organizations to
be submitted into the Program as ILOs. Member organizations
receiving such size ineligible child orders may rely on the member
organization holding the recorded parent order instruction with
respect to the size eligibility of the recorded parent order
instruction from which the child order is derived.
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    An ILO, or recorded parent order instruction, that meets the
minimum size requirement and receives a partial execution that reduces
its size to below the minimum size requirement will not become size
ineligible. Even though a member organization receives a partial
execution, and then later cancels the remaining unexecuted ILO or
parent order instruction, the member organization has satisfied the
size requirement as long as its intent at the time of execution was to
fill the 5,000 share ILO or recorded parent order instruction.\15\ If a
member organization no longer intends to seek a position that satisfies
the above size requirements, the member organization must take
appropriate steps to ensure that it cancels any unexecuted ILOs in the
Program.
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    \15\ A member organization may partially cancel an ILO; however,
an ILO, or recorded parent order instruction, will become size
ineligible if the size of the ILO or recorded parent order
instruction is reduced to below the minimum size requirement because
of a partial cancellation. A partially cancelled ILO will maintain
its time priority.
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    An ILO may be designated Immediate-or-Cancel, or entered as a
Reserve Order, in which case the order or any residual unexecuted
portion will remain executable against contra-side interest in
accordance with this Rule. An ILO may be designated with an MTV
requirement that must be met before the order is executed. The MTV will
be an optional parameter designating a minimum amount of shares of a
security for which the ILO will attempt to execute if there is
sufficient contra-side OLO and/or ILO interest available at the ILO's
limit price or better. Depending on its designation, an ILO will
consider the volume on the Exchange book and/or away markets in order
to satisfy its MTV requirement.\16\ If the MTV requirement cannot be
met by contra-side OLO and/or ILO interest, the ILO so designated will
not participate in an execution, and may be cancelled or rest non-
displayed on the Exchange book, pursuant to Rule 107D(c)--Equities.
However, an ILO will execute even though the execution size is less
than the MTV provided the MTV was met by available contra-side interest
at the time the ILO attempted to execute. An execution between an ILO
and an OLO or between two ILOs cannot trade through, but may trade at,
a protected quotation, and cannot trade through or trade at displayed
liquidity on the Exchange.
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    \16\ As explained below, an ILO may be designated as Type 1 or
Type 2. A Type 1-designated ILO will consider volume on the Exchange
book in order to satisfy its MTV requirement. A Type 2-designated
ILO will consider volume on the Exchange book and away markets in
order to satisfy its MTV requirement.
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    Under the Program, a member organization submitting ILOs must
maintain policies and procedures reasonably designed to ensure that the
above requirements are satisfied and maintain records sufficient to
reconstruct in a time-sequenced manner all orders routed to the
Exchange as an ILO, including how recorded parent order instructions
that meet the minimum size requirement relate to child order ILOs. For
example, if a member organization is sending ILOs for its own account,
it must have written policies and procedures that reflect how it
documents that it has a recorded parent order that meets the above
requirements. In addition, a member organization may presume that an
account's intent to establish, increase, liquidate, or decrease a
position is bona fide absent concrete indications to the contrary.
Where circumstances indicate that an account does not intend to
establish the required position, member organizations should make
reasonable inquiry and follow up appropriately. For instance, the
following circumstances may indicate that an account does not intend to
establish, increase, liquidate, or decrease a position consistent with
the Program:
     The account attempts to enter contemporaneous orders in
the same security on both sides of the market;
     The account enters a pattern of orders and cancellations
apparently designed to implement a market-making or spread-trading
strategy; or
     The account enters a pattern of cancellations that
consistently produces positions of a size that are less than the size
requirements of the Program.
    Member organizations receiving size ineligible child orders may
rely on the member organization holding the recorded parent order
instruction with respect to the size eligibility of the recorded parent
order instruction from which the child order is derived. The member
organization receiving the child order will not be responsible for the
failure of the recorded parent order instruction to meet the
requirements of the Program absent circumstances indicating the
reliance was unreasonable. For example, if a member organization
receiving the child orders knew that its customer member organization
primarily engaged in a pattern and practice of trading the same
security on both sides of the market, it would not be reasonable to
assume that size ineligible child orders received from such member
organization would comply with the Program's rules, unless they had
information that such trading did not follow the customer member
organization's general trading strategy. The Exchange, with FINRA, will
review activity indicative of non-compliance with the Program's rules.
The Exchange will exclude non-compliant member organizations when
necessary to ensure a proper functioning of the Program.
Oversize Liquidity Order
    Second, the term ``Oversize Liquidity Order'' is defined as a non-
displayed limit order for Exchange-listed or traded securities
(including but not limited to Exchange-listed securities and securities
traded pursuant to unlisted trading privileges) with a minimum size of
500 shares.\17\ An OLO that meets the minimum size requirement and
receives a partial execution that reduces its size to below the
applicable minimum size requirements will still be eligible to interact
with incoming ILOs. An OLO will become size ineligible if the size of
the OLO is reduced below the minimum size requirement because of a
partial cancellation. An OLO may be priced at, inside, or outside the
PBBO, or as non-displayed Primary Pegging Interest pursuant to Rule
13--Equities. OLOs will be ranked according to price-size-time
priority. OLOs may interact only with ILOs.
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    \17\ OLOs may have a minimum size of 300 shares for securities
with an Average Daily Volume of less than one million shares.
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    As discussed below, OLOs and ILOs will be ranked and allocated
according to price then size then time of entry into Exchange systems
\18\ and therefore

without regard to whether the size entered is an odd lot, round lot or
part of round lot. Executions between an ILO and an OLO will take into
account displayed liquidity available at the same price on the Exchange
book, such that displayed liquidity will have priority over equally
priced ILOs and OLOs. OLOs and ILOs priced inside the PBBO will have
priority over inferior-priced displayed interest, but OLOs and ILOs may
not be priced in sub-penny increments. Consequently, OLOs and ILOs may
only be priced inside the PBBO when the spread is greater than $0.01.
Finally, ILOs may be designated as Type 1 or Type 2 (explained below).
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    \18\ As noted below, the Commission has previously found the
integration of price-size-time priority into an SRO-sponsored
execution venue that also offered price-time priority to be
consistent with the Act. See Securities Exchange Act Release No.
43863 (January 19, 2001), 66 FR 8020, 8038 (January 26, 2001)
(``SuperMontage Approval Order'') (approving Nasdaq's proposal to
give market participants that enter non-directed orders three
options as to how their orders will interact with quotes/orders in
Nasdaq: price-time; price-size-time; and price-time that accounts
for ECN access fees).
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Program
    Third, the term ``Program'' would be defined as the Institutional
Liquidity Program as described in Rule 107D--Equities.
Liquidity Identifier
    Under proposed NYSE MKT Rule 107D(b)--Equities, the Exchange
proposes to disseminate an identifier initially through an Exchange
proprietary data feed, and as soon as practicable, the Exchange would
disseminate the identifier through the CQS when an OLO or ILO resides
in Exchange systems. The LI will reflect the symbol for the particular
security, but will not include the price, side (buy or sell), or size
of the OLO or ILO interest.
Institutional Liquidity Order Designations
    Under proposed NYSE MKT Rule 107D(c)--Equities, a member
organization can designate how an ILO would interact with available
contra-side interest as follows. As proposed, a Type 1-designated ILO
will interact, at each price level, first with displayed interest in
Exchange systems, then available contra-side OLOs and/or ILOs in size-
time priority, and then with any remaining non-displayed interest in
Exchange systems, except a Type 1-designated ILO will not trade through
a protected quotation. Any remaining portion of the ILO will be
cancelled if designated as a Regulation NMS-compliant Immediate or
Cancel Order pursuant to Rule 13--Equities, or if designated as a
Reserve Order, rest on the Exchange book and be available to interact
with other incoming contra-side OLOs, ILOs, and other available
interest in Exchange systems but will not trade through a protected
quotation. Accordingly, a Type 1-designated ILO may interact with other
interest in Exchange systems, but will not route to other markets.\19\
A Type 2-designated ILO will interact, at each price level, first with
displayed interest in Exchange systems, then available contra-side OLOs
and/or ILOs in size-time priority, and then with any remaining non-
displayed interest in Exchange systems and will route to away markets
as necessary to avoid trading through a protected quotation. Any
remaining portion of the ILO will be cancelled if designated as an
Exchange Immediate or Cancel Order pursuant to Rule 13--Equities, or if
designated as a Reserve Order, rest on the Exchange book and be
available to interact with other incoming contra-side OLOs, ILOs, and
other available interest in Exchange systems. Accordingly, a Type 2-
designated ILO may interact with other interest in Exchange systems,
and may route to away markets. A non-displayed, Type 2-designated ILO
resting on the Exchange book will route to away markets as necessary to
avoid trading through a protected quotation.
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    \19\ As discussed below, the Type 1 designation creates multiple
and substantial possibilities for ILOs to be matched with displayed
limit orders on the Exchange. In addition to enhancing the execution
opportunities for Institutional Interest, therefore, the Type 1
designation directly supports the all-important incentive to display
limit orders.
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Priority and Order Allocation
    Under proposed NYSE MKT Rule 107D(d)--Equities, the Exchange
proposes that competing OLOs and ILOs will be ranked and allocated
according to price, then size, then time of entry into Exchange
systems. The size priority of OLOs and ILOs will be based upon their
initial size at time of entry; however, any partial cancels of OLOs or
ILOs will reduce their original size for priority purposes by an equal
amount. As such, when an ILO or OLO is partially cancelled, its size
priority will be redetermined based on its new size; however, the ILO
or OLO will maintain its time priority. Displayed liquidity will have
priority over equally priced ILOs and OLOs. An incoming ILO will
execute first against displayed interest, then against contra-side ILOs
and OLOs, and finally against any non-displayed interest in Exchange
systems. Any remaining unexecuted ILO interest will remain available to
interact with other incoming OLOs and/or ILOs if such interest is at an
eligible price unless the order is designated IOC. The following
examples illustrate this proposed method:

    Example 1--
    PBBO for security ABC is $9.99-$10.05
    OLO 1 is entered to buy ABC at $10.00 for 5,000
    OLO 2 is then entered to buy ABC at $10.00 for 5,000
    OLO 3 is then entered to buy ABC at $10.00 for 4,000

    An incoming Type 1 ILO to sell ABC for 10,000 executes first
against OLO 1's bid for 5,000, because it is the largest best-priced
bid entered first in time, then against OLO 2's bid for 5,000, because
it is the next largest best-priced bid. OLO 3 is not filled because the
entire size of the ILO to sell 10,000 is depleted.
    Assume the same facts as above. An incoming Type 1 ILO to sell ABC
for 13,800 with an MTV of 10,000 will execute first against OLO 1's bid
for 5,000, because it is the largest best-priced bid entered first in
time, then against OLO 2's bid for 5,000, because it is the next
largest best-priced bid. OLO 3 then receives an execution for 3,800 of
its 4,000, at which point the entire size of the ILO to sell 13,800 is
depleted. Note that the MTV requirement is met by the aggregate level
of contra-side interest, even though no individual OLO satisfied the
ILO's MTV requirement. Additionally, OLO 3 will still be available to
interact with an incoming ILO since its original quantity was above the
minimum size requirements.
    Assume the same facts above, except that OLO 2's bid to buy ABC at
$10.00 is for 2,000. An incoming Type 1 ILO to sell 10,000 executes
first against OLO 1's bid for 5,000, because it is the largest best-
priced bid, then against OLO 3's bid for 4,000, because it is the next
largest best-priced bid. OLO 2 then receives an execution for 1,000 of
its 2,000, at which point the entire size of the ILO to sell 10,000 is
depleted.
    Additionally, assume the same facts above, except that OLO 3's bid
to buy 4,000 is priced at $10.01 and there is also an additional OLO
entered to buy at $10.00 for 4,000 (OLO 4). An incoming Type 1 ILO to
sell 11,000 executes first against OLO 3's bid for 4,000, because it is
the best-priced bid. OLO 1 then receives an execution for 5,000,
because it is the largest next-best-priced bid, and was entered ahead
of OLO 2. OLO 2 then receives an execution for 2,000, leaving 3,000
unexecuted shares, at which point the entire size of the ILO is
depleted. Next, another incoming Type 1 ILO to sell 3,000 executes
against OLO 2 for 3,000 since its original quantity was 5,000, which is
greater than the size of OLO 4 at 4,000. Using this same example,
assume prior to the second ILO arriving, a partial cancel was sent in
for OLO 2 to reduce its quantity by 2,000. The second arriving ILO
would execute against OLO 4, since by partially

canceling 2,000, OLO 2 would have its original quantity decremented to
3,000, making OLO 4 larger.
    Finally, assume the same facts above, except that after OLO 3 is
entered, ILO 1 is entered to buy ABC at $10.00 for 10,000 with an MTV
of 5,000. An incoming Type 1 ILO to sell 15,000 executes first against
ILO 1 because it is the largest best-priced bid and the number of
shares available exceeds ILO 1's MTV of 5,000. OLO 1 then receives an
execution for 5,000, because it is the next largest best-priced bid,
and was entered ahead of OLO 2, at which point the entire size of the
ILO to sell 15,000 is depleted.

    Example 2--
    PBBO for security ABC is $10.00-10.05
    O1 is a limit order and the Exchange Best Bid at $10.00 for
1,000
    OLO 1 is entered to buy ABC at $10.01 for 5,000
    OLO 2 is then entered to buy ABC at $10.00 for 5,000

    An incoming Type 1 ILO to sell ABC for 6,000 executes first against
OLO 1 because it is the best-priced bid, then against O1's bid for
1,000. O1 receives priority over OLO 2 because O1 is a displayed order
on the Exchange. OLO 2 remains available to interact with incoming
ILOs.

    Example 3--
    PBBO for security ABC is $10.00-10.05
    O1 is a limit order and is the Exchange Best Bid quoted at
$10.00 for 1,000
    O2 is a limit order to buy and is dark at $10.00 for 4,000
    O3 is a limit order to buy and is displayable at $9.99 for 2,000
    OLO 1 is entered to buy ABC at $10.00 for 4,000
    OLO 2 is then entered to buy ABC at $9.99 for 4,000
    There is a 100 share away market Bid at $10.00

    An incoming Type 2 ILO to sell ABC for 12,000 executes first
against O1, the Exchange Best Bid, for 1,000 at $10.00 because it is
the best-priced displayed liquidity, then against OLO 1 for 4,000
because it is the best-priced bid in the Program and liquidity in the
Program has priority over nondisplayed liquidity, then against O2 for
4,000 because it is the best-priced nondisplayed liquidity. The ILO
then sweeps to $9.99, first routing 100 shares to the away market bid
at $10.00. At $9.99, the ILO executes first against O3 for 2,000
because it is the best-priced displayed liquidity, then against OLO 2
for 900 because it is the best-priced bid in the Program.
Implementation
    The Exchange proposes that all Exchange-listed or traded securities
(including but not limited to Exchange-listed securities and securities
traded pursuant to unlisted trading privileges) will be eligible for
inclusion in the Institutional Liquidity Program. In order to provide
for an efficient implementation, the Institutional Liquidity Program
will initially cover only a certain specified list of Exchange-listed
or traded securities, as announced by the Exchange via a Trader Update.
The Exchange anticipates that the securities included within the
Institutional Liquidity Program will be expanded periodically based on
experience with the Program.\20\
---------------------------------------------------------------------------

    \20\ The Exchange will announce any such expansions via a Trader
Update.
---------------------------------------------------------------------------

The Program Would Assist Investors in Facing the Challenge of Seeking
Counterparties While Minimizing Transaction Costs
    The Commission has consistently recognized the challenges faced by
large investors seeking to interact with counterparties without
adversely impacting the price of the stock they seek to trade.\21\ The
Commission has noted the difficult trade-off that size traders face in
deciding how much of their trading interest to reveal--prematurely
revealing trading interest can produce market impact and increased
transaction costs, while concealing trading interest reduces
opportunities to trade--and the ``perennial challenge'' that investors,
brokers, and markets face in ``finding effective and innovative ways to
trade in large sizes with minimized transaction costs.'' \22\
---------------------------------------------------------------------------

    \21\ See Fragmentation Concept Release at 10581 (``Consequently,
large investors often seek ways to interact with order flow and
participate in price competition without submitting a limit order
that would display the full extent of their trading interest to the
market.'').
    \22\ Equity Market Structure Concept Release at 3612 (``Market
participants that need to trade in large size, such as institutional
investors, always have faced a difficult trading dilemma. On the one
hand, if they prematurely reveal the full extent of their large
trading interest to the market, then market prices are likely to run
away from them (a price rise for those seeking to buy and a price
decline for those seeking to sell), which would greatly increase
their transaction costs and reduce their overall investment returns.
On the other hand, if an institutional investor that wants to trade
in large size does nothing, then it will not trade at all. Finding
effective and innovative ways to trade in large size with minimized
transaction costs is a perennial challenge for institutional
investors, the brokers that represent their orders in the
marketplace, and the trading centers that seek to execute their
orders.'').
---------------------------------------------------------------------------

    Non-displayed liquidity in general, and dark pools in particular,
have been viewed as useful tools to address those challenges. The
Commission noted specifically in 2009, however, that dark pools differ
starkly in their contribution to size discovery. While block crossing
networks were producing at that time average trade sizes as large as
50,000 shares, most dark pools were executing trades with average sizes
comparable to those on exchanges.\23\ According to current data from
Rosenblatt Securities, institutional block trading venues such as
Liquidnet continue to produce large average trade sizes of almost
44,000 shares; on the other hand, dark pool average trade size
generally declined from 443 shares in March 2009 to 210 shares in
January 2013.\24\ Additionally, a recent white paper from the SEC
highlights similar facts and found that ``The five ATSs with average
order sizes exceeding 1,000 shares collectively comprise 2.94% of ATS
dollar volume and 3.01% of ATS share volume.\25\ It is essential to
keep firmly in mind the apparently limited contribution most non-
displayed venues provide in the discovery of size.
---------------------------------------------------------------------------

    \23\ See Dark Pool Release at 61209 (``Most dark pools, though
they may handle large orders, primarily execute trades with small
sizes that are more comparable to the average size of trades in the
public markets, which was less than 300 shares in August 2009.'').
    \24\ Rosenblatt Securities, Trading Talk, dated March 25, 2013.
    \25\ See Alternative Trading Systems: Description of ATS Trading
in National Market System Stocks. October 2013. SEC ATS White Paper.
---------------------------------------------------------------------------

    Moreover, it is equally important to consider the side effects of
the diversion of a large percentage of investor order flow away from
displayed markets.\26\ The Commission has squarely raised the question
in the Equity Market Structure Concept Release of whether the growth of
non-displayed liquidity has begun to degrade the public price discovery
process by widening spreads, reducing depth, and increasing short term
volatility.\27\ The Commission noted then that the percentage of volume
between non-displayed trading centers and

displayed centers had remained relatively constant between 70% and
80%.\28\
---------------------------------------------------------------------------

    \26\ The Commission has recognized the migration of non-
displayed liquidity away from the Exchange toward dark pools. See
Equity Market Structure Concept Release at 3612 (``One consequence
of the decline in market share of the NYSE floor in recent years is
that this historically large undisplayed liquidity pool in NYSE-
listed stocks appears to have largely migrated to other types of
venues. As discussed [] above, a recent form of undisplayed
liquidity is the dark pool--an ATS that does not display quotations
in the consolidated quotation data.'').
    \27\ See Equity Market Structure Concept Release at 3613
(``Comment is requested on whether the trading volume of undisplayed
liquidity has reached a sufficiently significant level that it has
detracted from the quality of public price discovery and execution
quality. For example, has the level of undisplayed liquidity led to
increased spreads, reduced depth, or increased short-term volatility
in the displayed trading centers? If so, has such harm to public
price discovery led to a general worsening of execution quality for
investors in undisplayed markets that execute trades with reference
to prices in the displayed markets?'').
    \28\ See id. (``In this regard, it appears that the overall
percentage of trading volume between undisplayed trading centers and
displayed trading centers has remained fairly steady for many years
between 70% and 80%.''). The Commission estimated that 25.4% of
share volume in NMS stocks was executed in undisplayed trading
centers in September 2009. Id. at n. 85.
---------------------------------------------------------------------------

    There are important indicators that this perceived static
distribution of lit and dark liquidity is no longer in line with the
facts, particularly when accounting for the growth in off-exchange
volume. For example, the number of securities with greater than 40% TRF
share has more than doubled in the past year to over 56.3% of total
stocks.\29\ As the chart below shows, over 70% of executions occurring
in dark venues is executed at the NBBO or with less than $0.001 in
price improvement or $0.10 per round lot. The Exchange believes that
these and other data points raise serious questions about the value
liquidity in non-displayed venues is providing to the market.
---------------------------------------------------------------------------

    \29\ Calculation based on Consolidated Tape data as of October
2013.
[GRAPHIC] [TIFF OMITTED] TN27NO13.020

    The Exchange also believes that the data strongly indicate emerging
threats to the public price discovery process. The Program has the
potential to leverage competition to address, in a limited way, these
important concerns.
Exchange Interaction Between Displayed and Non-Displayed Liquidity
    In considering the potential of the Program to address the possible
degradation of the public price discovery process, it is worth
underscoring the following basic point: The priority rules of the
Exchange (and exchanges generally) offer a higher level of interaction
between displayed and non-displayed liquidity than dark pools and
broker internalization venues.\30\ Consider, by way of illustration, an
example where the PBBO was 10.01 by 10.03 with a displayed limit order
one penny above the PBO at 10.04. An incoming discretionary limit order
to buy with a displayed price of 10.02 and a discretionary price of
10.05 would not only interact with the interest at the PBO but would
also interact with the displayed limit order one penny above the PBO at
10.04, once again supporting the display incentive. In contrast, there
is no reason to expect that a non-displayed investor order residing in
a dark pool would be matched with any displayed limit order or
otherwise contribute in any way to the fundamentally important
incentive to display. Similarly, consider a Floor broker who finds a
counterparty of a size trade two pennies below the PBBO, while there is
a public limit order one penny below the PBBO in the book. Prior to the
Floor broker completing the trade, the Exchange would protect the PBBO,
the same way a dark pool would be required to respect the PBBO;
however, the Exchange takes the additional step of protecting the
displayed orders away from the PBBO but priced better than the manual
trade. Therefore, in the above example, the public limit order one
penny below the PBBO also would be protected by the Exchange, and the
incentive to display thereby strengthened.
---------------------------------------------------------------------------

    \30\ The Commission, in the Regulation NMS Adopting Release,
expressed concern regarding the display incentives of limit orders
below the top of book. See NMS Adopting Release at 37527 (``The
Commission believes, however, that the long-term strength of the NMS
as a whole is best promoted by fostering greater depth and
liquidity, and it follows from this that the Commission should
examine the extent to which it can encourage the limit orders that
provide this depth and liquidity to the market at the best
prices.'')
---------------------------------------------------------------------------

    Unlike a dark pool or internalization venue, the Program's ILOs
would bolster the display incentive. Example 3, as described above,
demonstrates such support. As stated in the above example, the PBBO for
the security is $10.00 by $10.05 with OLOs within the program to buy at
both $10.00 and $9.99. Furthermore, there is displayed interest on the
book at $10.00 and $9.99. After the incoming ILO to sell executes
against all interest priced at the PBB ($10.00), the ILO then interacts
with a displayed limit order priced one penny away from the PBB. Having
received an execution, the market participant who placed the limit
order has been rewarded and incentivized to display in the future.
The Program's Use of Minimum Size Requirements Encourages the Price
Discovery Mechanism by Lowering the Benefits of Certain Order
Anticipation Strategies
    As part of the Equity Market Structure Concept Release, the
Commission questioned whether the use of ``pinging'' orders by all or
some traders to assess non-displayed liquidity should be prohibited or
restricted.\31\ However,

in raising the issue, the Commission noted a distinction between the
use of pinging orders as the normal search for liquidity versus using
pinging to detect and trade in front of large trading interest.\32\
While some directional strategies contribute to the quality of price
discovery in a stock,\33\ order anticipation strategies which seek to
trade ahead of large buyers or sellers in an attempt to capture price
movement in the direction of the large trade interest do not enhance
the price discovery process, detract from market quality, and harm
institutional investors. The Program limits the deleterious effects
that order anticipation strategies may have on the quality of price
discovery by imposing minimum size requirements on OLOs and permitting
ILOs to be entered with MTV restrictions, as discussed above. These
size requirements are designed to shift the economics of order
anticipation strategies by ensuring that users of ILOs are given a
meaningful opportunity to interact with contra-side interest prior to
its own interest being revealed and by increasing the costs to those
using order anticipation strategies, through the use of a minimum size
requirement, prior to learning about the existence of large contra-side
interest.
---------------------------------------------------------------------------

    \31\ See Equity Market Structure Concept Release at 3607. A
``pinging'' order is an immediate-or-cancel order that can be used
to search for and access all types of non-displayed liquidity,
including dark pools and non-displayed order types at exchanges and
ECNs.
    \32\ Id. at n. 70.
    \33\ See id. at 3608 (``Some `directional' strategies may be as
straightforward as concluding that a stock price temporarily has
moved away from its `fundamental value' and establishing a position
in anticipation that the price will return to such value. These
speculative strategies often may contribute to the quality of price
discovery in a stock.'')
---------------------------------------------------------------------------

2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the
Act,\34\ in general, and furthers the objectives of Section
6(b)(5),\35\ 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 and, in general, to protect
investors and the public interest. The Exchange believes that the
proposed rule change is consistent with these principles because it
would increase competition among execution venues, encourage additional
liquidity, and make available additional liquidity to Institutional
Interest.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b).
    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposal arises out of the competition between the Exchange and
non-exchange venues for block trading interest and the growth of
institutional trading on less-regulated and less-transparent execution
venues. As the Commission has previously noted, broker-dealers acting
as over-the-counter market makers and block positioners provide
liquidity directly to Institutional Interest.\36\ The Program has the
potential to attract additional institutional and block trading
interest to the Exchange environment, and thereby improve transparency
of access arrangements, priority and allocation, and fees as compared
to internalizing non-exchange venues. Specifically, the ILO and OLO
order types give members handling Institutional Interest tools to limit
their interactions to counterparties who have committed to provide
oversize liquidity, and thereby to better control information about
their institutional customers' trading interest. If successful, the
Program would at the same time add to the information in the
consolidated quotation data by including the Oversize Liquidity
Indicator in CQS. The ILO and OLO order types, the inclusion of the LI
in the CQS, and the Program's priority rules rewarding size have the
potential to stimulate price competition within an exchange environment
for institutional-sized orders, to increase size interactions, reduce
market impact, and reduce the trading costs of institutional investors.
---------------------------------------------------------------------------

    \36\ See Dark Pool Release at 61209.
---------------------------------------------------------------------------

    The Exchange understands that Section 6(b)(5) of the Act prohibits
an exchange from establishing rules that treat market participants in
an unfairly discriminatory manner. However, Section 6(b)(5) of the Act
does not prohibit exchange members or other broker-dealers from
discriminating, so long as their activities are otherwise consistent
with the federal securities laws. Nor does Section 6(b)(5) of the Act
require exchanges to preclude discrimination by broker-dealers. Broker-
dealers commonly differentiate between customers based on the nature
and profitability of their business. The Program will simply replicate
these trading dynamics that already exist in the OTC markets and will
present another competitive venue for institutional and block order
flow execution.
    The differentiation proposed herein by the Exchange is not designed
to permit unfair discrimination, but instead to promote a competitive
process around block trading interest such that Institutional Interest
would receive additional liquidity options than they receive in the
current market. The Exchange believes that the transparency and
competitiveness of an exchange-sponsored program such as the
Institutional Liquidity Program would enhance the liquidity available
to institutional investors and thereby reduce their trading costs. As
the Commission has previously recognized, institutional investors seek
to trade efficiently in large sizes without having a significant impact
on market prices.\37\ And the ability to interact with significant
amounts of liquidity is crucial to Institutional Interest looking to
effect transactions while reducing market impact and transaction costs.
As such, with the knowledge that contra-side interest must satisfy
minimum size requirements and the ability of ILOs to remain non-
displayed within the Program, Institutional Interest would be more
willing to send their orders to a public market.
---------------------------------------------------------------------------

    \37\ See Dark Pool Release at 61212 (``The Commission recognizes
that some trading venues, such as block crossing networks, may use
actionable IOIs as part of a trading mechanism that offers
significant size discovery benefits (that is, finding contra-side
trading interest for large size without affecting prices). These
benefits may be particularly valuable for institutional investors
that need to trade efficiently in sizes much larger than those that
are typically available in the public quoting markets.'').
---------------------------------------------------------------------------

    Additionally, the Exchange believes that the Program will promote
just and equitable principles of trade and remove impediments to and
perfect the mechanism of a free and open market and a national market
system because it will create additional competition for institutional
and block order flow, attract institutional and block order flow to the
exchange environment, and ensure that Institutional Interest benefit
from a larger pool of liquidity and potentially receive better prices
than they currently receive through bilateral internalization
agreements. As a result, the Program is designed to provide a relative
enhancement of the incentive to display than currently exists. The
Exchange also notes that the LI will be disseminated through the
consolidated public market data stream, and thus be widely viewable by
market participants, and as such, would increase the amount of pricing
information available to the marketplace. Therefore, the Program is
reasonably designed to increase market transparency, thus removing
impediments to and perfecting the mechanism of a free and open market
and a national market system.
    The Exchange believes that the Program will remove impediments to
and perfect the mechanism of a free and open market and a national
market

system by incentivizing the display of public limit orders and
promoting the price discovery mechanism. The increasing concentration
of ``toxic,'' or highly informed, high frequency order flow, and the
corresponding diversion of more benign flow to off-exchange venues, are
evident today, and have been acknowledged with concern by the
Commission.\38\ The Exchange's recent competitive initiatives seek to
arrest and reverse this unsettling dynamic by attracting a more diverse
population of buyers and sellers to the public markets.\39\ The current
proposal to establish an Institutional Liquidity Program reflects a
continuation of these efforts.
---------------------------------------------------------------------------

    \38\ See Securities Exchange Act Release No. 61358 (January 14,
2010), 75 FR 3594, 3613 (January 21, 2010) (``Equity Market
Structure Concept Release'') (``It appears that a significant
percentage of the orders of long-term investors are executed either
in dark pools or at OTC market makers, while a large percentage of
the trading volume in displayed trading centers is attributable to
proprietary firms executing short-term trading strategies.'').
    \39\ See Securities Exchange Act Release No. 67347 (July 3,
2012), 77 FR 40673 (July 10, 2012) (``By creating additional
competition for retail order flow, the Program is reasonably
designed to attract retail order flow to the exchange environment,
while helping to ensure that retail investors benefit from the
better price that liquidity providers are willing to give their
orders.'').
---------------------------------------------------------------------------

    Further, the Exchange believes that the Program will remove
impediments to and perfect the mechanism of a free and open market and
a national market system by promoting order interaction. Specifically,
the functionality of ILOs in the Program provides publicly displayed
liquidity in general, particularly publicly displayed limit orders
below the top of book, the potential to interact with Institutional
Interest, thus incentivizing the display of public limit orders in such
a way that dark pools do not.
    The Exchange believes that the price-size priority of OLOs and ILOs
within the Program proposed herein is consistent with the Act. The
priority is meant to reward liquidity providers willing to display
greater size, an incentive that the Commission has previously
approved.\40\ Requiring that orders within the Program be executed
based on price-time priority would undermine the effectiveness of the
Program because it would reduce the willingness of investors to reveal
large trading interest. By placing a premium on size, the Program
incentivizes large investors to move away from dark pools and back
towards displayed public markets.
---------------------------------------------------------------------------

    \40\ See SuperMontage Approval Order at 8038 (``The Commission
also concludes that the NASD's algorithm based on price/size/time
priority is consistent with the statute.'').
---------------------------------------------------------------------------

    The Exchange believes that the Program is designed to protect
investors and the public interest because the Program has the potential
to lower volatility in a given security by increasing liquidity and
depth at, inside, and outside the PBBO. The Commission has previously
acknowledged the relationship between transaction costs, short-term
price volatility, and temporary imbalances in trading interest.\41\
Additionally, investors are more likely than professional traders to be
on the wrong side of short-term price swings.\42\ The increased
liquidity made available through the Program will decrease the
temporary imbalances in trading interest due to a large incoming order,
reducing short-term price volatility and investor trading costs.
---------------------------------------------------------------------------

    \41\ See Dark Pool Release at 61209, n. 4 (``Another type of
implicit transaction cost reflected in the price of a security is
short-term price volatility caused by temporary imbalances in
trading interest. For example, a significant implicit cost for large
investors (who often represent the consolidated investments of many
individuals) is the price impact that their large trades can have on
the market.'')
    \42\ See id.
---------------------------------------------------------------------------

    Further, the Exchange believes the Program is designed to protect
investors and the public interest because the Program has the potential
to increase price improvement and size improvement opportunities for
institutional investors. Because of the priority provided to equally-
priced displayed interest outside the Program, member organizations
must submit OLOs and ILOs priced within the PBBO in order to receive
priority or else risk receiving a partial or no fill. Additionally, the
size priority applied to OLOs or ILOs similarly incentivizes member
organizations to submit large orders into the Program, offering size
improvement opportunities to institutional investors.
    Finally, the Exchange proposes that the Commission approve the
proposed rule for a pilot period of twelve months from the date of
implementation, which will occur no later than 90 days after Commission
approval of Rule 107D--Equities. The Program will expire on [Date will
be determined upon adoption of Rule 107D--Equities]. The Exchange
believes that this pilot period is of sufficient length to permit both
the Exchange and the Commission to assess the impact of the rule change
described herein. During the pilot period, the Exchange will submit
certain data, periodically as required by the Commission, including:
Summary statistics on the operation of the Program along with the
meaning of the summary statistics; raw data relating to the operation
of the Program; reports and data monitoring the Program's participants
along with their activity; and the Exchange's assessment of the impact
of the Program.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange 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. The Exchange believes that
the proposed rule change will increase competition among execution
venues and encourage additional liquidity. The Exchange notes that a
significant percentage of the orders of institutional investors are
executed over-the-counter. The Exchange believes that it is appropriate
to create a financial incentive to bring more institutional order flow
to a public market.
    Additionally, as previously stated, the differentiation proposed
herein by the Exchange is not designed to permit unfair discrimination,
but instead to promote a competitive process around block trading such
that Institutional Interest would receive better prices and greater
access to liquidity than they currently do through bilateral
internalization arrangements. The Exchange believes that the
transparency and competitiveness of operating a program such as the
Institutional Liquidity Program on an exchange market would result in
better prices for Institutional Interest while reducing their market
impact.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEMKT-2013-91 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR- NYSEMKT-2013-91. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing will also 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 publicly available. All
submissions should refer to File Number SR- NYSEMKT-2013-91 and should
be submitted on or before December 18, 2013.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority. \43\
---------------------------------------------------------------------------

    \43\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-28415 Filed 11-26-13; 8:45 am]
BILLING CODE 8011-01-P


<EPA REGISTRATION DIVISION COMPANY NOTICE OF FILING FOR PESTICIDE PETITIONS PUBLISHED IN THE FEDERAL REGISTER  (1XX/2008)

<EPA Registration Division contact: Kimberly Nesci<PHONE_NUMBER> >

<INSTRUCTIONS:  Please utilize this outline in preparing the pesticide petition.  In cases where the outline element does not apply, please insert “NA-Remove” and maintain the outline. Please do not change the margins, font, or format in your pesticide petition. Simply replace the instructions that appear in green and brackets, i.e., “[insert company name],” with the information specific to your action.>

<[IR-4 and Nichino America, Inc.]>

<[Pesticide Petition #xxxxxx]>

<	EPA has received a pesticide petition ([PP # xxxxxxx]) from Nichino America, Inc. 4550 New Linden Hill Road Suite 501 Wilmington, DE 19808,  proposing, pursuant to section 408(d) of the Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. 346a(d), to amend 40 CFR part 180.566 by establishing a tolerance for residues of fenpyroximate and its z- isomer in or on the raw agricultural commodities:  low-growing berries (Subgroup 13-07G), at 1.0 parts per million (ppm).  EPA has determined that the petition contains data or information regarding the elements set forth in section 408 (d)(2) of  FDDCA; however, EPA has not fully evaluated the sufficiency of the submitted data at this time or whether the data supports granting of the petition. Additional data may be needed before EPA rules on the petition.

>

<A. Residue Chemistry>

<	1. Plant metabolism. The metabolism of fenpyroximate and z-isomer has been studied in cotton, apples, grapes, and citrus and is well understood. The major residue in plants is fenpyroximate and z-isomer, with very low levels of several degradates. Metabolism in plants involves hydrolysis of the ester and methyleneamino ether links, N-demethylation, oxidation, and conjugation of the polar metabolites.

	2. Analytical method. Based upon the metabolism of fenpyroximate in plants and the toxicology of the parent and metabolites, quantification of the parent, fenpyroximate and the z-isomer, combined as fenpyroximate is sufficient to determine toxic residues in plants. As a result an enforcement method has been developed which involves extraction of fenpyroximate from crops with acetone, filtration, partitioning and cleanup, and analysis by gas chromatography using a nitrogen/phosphorous detector. The method has undergone independent laboratory validation as required by PR Notice 88-5 and 96-1.

>

<	3. Magnitude of residues. Magnitude of residues in crops-

Field residue trials meeting EPA study requirements have been conducted at the maximum label rate for strawberries.  Results from these trials demonstrate that the highest fenpyroximate and z-isomer residues found will not exceed the proposed tolerances when the product is applied following the proposed use directions.

	4. Magnitude of the residue in animals   “NA-Remove”>

<B. Toxicological Profile>

<Acute toxicity.   “NA-Remove”>

<	2. Genotoxicity. “NA-Remove”>

<	3. Reproductive and developmental toxicity. “NA-Remove”>

<	4. Subchronic toxicity. “NA-Remove”>

<	5. Chronic toxicity. “NA-Remove”>

1.  An extensive battery of toxicology studies has been conducted with fenpyroximate.  EPA has evaluated the available toxicity data and considered its validity, completeness, and reliability as well as the relationship of the results of the studies to human risk  The nature of the toxic effects caused by fenpyroximate is discussed in Unit III.A. of the Final Rule on Fenpyroximate Pesticide Tolerance published in the Federal Register on April 10, 2001 (66 FR 18561) (FRL-6773-2).   An assessment of toxic effects caused by fenpyroximate including the toxicological endpoints of concern is also discussed in Unit III.A. and Unit III B. of the Federal Register dated June 10, 2004   (FRL-7362-9) (89 FR 32457).

<	6. Animal metabolism. The qualitative nature of the residues of fenpyroximate and its z-isomer, in animals is adequately understood. Fenpyroximate was not metabolized to volatiles to any significant degree.  The majority of either benzyl or pyrazole labels (approximately 70 % to 92 %) is excreted in the feces. Urinary excretion accounts for less (approximately 9 % to 18 %) of the label.  Thus, feces and urine are the major routes of excretion for fenpyroximate.  Tissue did not accumulate fenpyroximate or its metabolites to any great extent.  The greatest levels of label were in liver, kidneys, adrenals, and fat (to a lesser degree).  In blood, nearly all of the label is in the plasma.

	7. Metabolite toxicology. No toxicologically significant metabolites were detected in plant or animal metabolism studies for cotton, apples, or or grapes.

8. Endocrine disruption. Chronic, lifespan, and multigenerational bioassays in mammals and acute and subchronic studies on aquatic organisms and wildlife did not reveal any endocrine effects for fenpyroximate.  Any endocrine related effects would have been detected in this comprehensive series of required tests.  The probability of any such effect due to agricultural uses of fenpyroximate is negligible.

>

<C. Aggregate Exposure>

using LifeLine™ version 4.3.  Residue estimates for water consumption were based on PRZM3/EXAMs and SCIGROW models and exposure assessments using LifeLineTM version 4.3.

	i. Food. The acute dietary exposure was based on the following assumptions: residues at tolerance levels, 100% crop treated, and DEEM™ (ver. 7.76) default processing factors for all registered/proposed commodities (Tier 1).  A processing factor of 0.11 was used for juice based on processing study data.  The acute dietary aPAD (acute population adjusted dose) was set at 0.05 mg/kg/day for females aged 13-50 years old based on a developmental toxicity study in rats that had an oral NOEL of 5 mg/kg/day.  The chronic dietary exposure was based on the following assumptions:  Residues at tolerance levels, 100% crop treated, and using UDDA survey data where available.  A processing factor of 0.11 was used for juice based on processing study data. The chronic dietary cPAD (chronic Population Adjusted Dose) was determined to be 0.01 mg/kg/day for the general population, based on an oral NOAEL of 0.97 mg/kg/day in the two-year rat chronic/oncogenicity study.  The resultant safety factor used to establish the cPAD was 100.  There was not likely any evidence of carcinogenicity.

	ii. Drinking water. The residue of concern in drinking water was determined to be fenpyroximate and its z-isomer.  There are no established maximum contaminant levels or health advisory levels for residues of fenpyroximate in drinking water.  In the absence of comprehensive water monitoring data, the Agency uses the FQPA Index Reservoir Screening Tool or the Pesticide Root ZoneModel/Exposure Analysis Modeling System (PRZM/EXAMS) to produce estimates of pesticide concentrations in an index resevoir.   The SCI-GROW model is used to predict pesticide concentrations in shallow ground water. For a screening-level assessment for surface water EPA will use FIRST (a tier 1 model) before using PRZM/EXAMS (a tier 2 model). The FIRST model is a subset of the PRZM/EXAMS model that uses a specific high-end runoff scenario for pesticides. Both FIRST and PRZM/EXAMS incorporate an index reservoir environment, and both models include a percent crop area factor as an adjustment to account for the maximum percent crop coverage within a watershed or drainage basin.

None of these models include consideration of the impact processing (mixing, dilution, or treatment) of raw water for distribution as drinking water would likely have on the removal of pesticides from the source water. The primary use of these models by the Agency at this stage is to provide a screen for sorting out pesticides for which it is unlikely that drinking water concentrations would exceed human health levels of concern.

The estimated drinking water concentrations (EDWCs) in surface water were determined using the Tier II PRZM (Pesticide Root Zone Model) and EXAMS (Exposure Analysis Modeling System (PE4-PL, version 01).  PRZM is used to simulate pesticide transport as a result of runoff and erosion and spray drift from an agricultural field and EXAMS estimates environmental fate and transport of pesticides in surface water.  The EPA estimated that based on the maximum use pattern of two applications to Georgia pecans for the acute and the chronic and long-term estimates.  The acute EDWCs are 12.9 ppb, and for chronic 1.8 ppb.  In ground water, using Tier I SCI-GROW, the acute level and chronic level is 0.059 ppb. Concentrations in actual drinking water would be much lower than the levels predicted in the hypothetical, small, stagnant farm pond model since drinking water derived from surface water would normally be treated before consumption. Based on these analyses, the contribution of water to the dietary risk estimate is negligible. Therefore, based on the dietary and drinking water assessments, aggregate exposure to residues of fenpyroximate and its z-isomer in food and water can be considered to be negligible.

 >

<	2. Non-dietary exposure.  The term residential exposure is used in this document to refer to non-occupational, non-dietary exposure (e.g. for lawn and garden pest control, indoor pest control, termiticides, and flea and tick control on pets). Fenpyroximate is not registered for use on any sites that would result in residential exposure.

>

<D. Cumulative Effects

Fenpyroximate is a mitochondrial electron transport inhibitor acting at Site I, which is similar to pyridaben, but quite different than other established acaricides.  All relevant toxicological data has been provided to the EPA.  A determination has not been made that fenpyroximate has a common mechanism of toxicity with other substances.  Fenpyroximate does not appear to produce a common toxic metabolite with other substances. Therefore, for the purposes of this notice of filing, there should be no consideration of cumulative risk that would require assessment.

>

<E. Safety Determination>

<	1. U.S. population.

 i. Acute risk.  Using the conservative assumptions discussed above, based on the completeness and reliability of the toxicity data, it is concluded that aggregate exposure to the proposed uses of fenpyroximate are estimated at 0.00873 mg/kg/day and will utilize at most 12.5 % of the acute reference dose of females (13-49).  This estimate is likely to be much less, as more realistic data and models are developed.  Drinking water and other water consumption (EDWC of 12.9 ppb) scenarios were included in the dietary risk assessment modeling.

>

ii. Chronic Risk.  Based on the toxicology data base and available information on anticipated residues, the chronic dietary exposure to the U.S. Population (total) was estimated as 0.00196 mg/kg/day and was 19.6 % of the estimated chronic population adjusted dose (cPAD). Drinking water and other potential water consumption scenarios (EDWC of 1.8 ppb) were included in the dietary risk assessment modeling. Based on these assessments, it can be concluded that there is reasonable certainty of no harm to the U.S. Population or any population subgroup from exposure to fenpyroximate .

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non-occupational exposure routes and has concluded aggregate exposure is not expected to exceed 100% of the chronic reference dose, and consequently, has determined there is a reasonable certainty that no harm will occur to infants and children from aggregate exposure to residues of fenpyroximate.

>

<F. International Tolerances>

<Canada, Codex, and Mexico do not have maximum residue limits for residues of fenpyroximate in/on the proposed crops.  Therefore, harmonization is not an issue.

>

 PAGE

 PAGE   5


[Federal Register: August 2, 2007 (Volume 72, Number 148)]
[Notices]
[Page 42447-42449]
[DOCID:fr02au07-136]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. IC-27916; 812-13358]

HealthShares, Inc., et al.; Notice of Application

July 27, 2007.
AGENCY: Securities and Exchange Commission (``Commission'').

ACTION: Notice of application to amend a prior order under section 6(c)
of the Investment Company Act of 1940 (``Act'') for an exemption from
sections 2(a)(32), 5(a)(1), 22(d), and 24(d) of the Act and rule 22c-1
under the Act, and under sections 6(c) and 17(b) of the Act for an
exemption from sections 17(a)(1) and (a)(2) of the Act.

-----------------------------------------------------------------------

    Summary of Application: Applicants request an order to amend a
prior order that permits: (a) Open-end management investment companies,
whose series are based on certain equity securities indices created by
an affiliate of the investment adviser, to issue shares redeemable only
in large aggregations; (b) secondary market transactions in the shares
of the series to occur at negotiated prices; (c) dealers to sell shares
to purchasers in the secondary market unaccompanied by a prospectus
when prospectus delivery is not required by the Securities Act of 1933
(``Securities Act''); and (d) certain affiliated persons of the series
to deposit securities into, and receive securities from, the series in
connection with the purchase and redemption of aggregations of the
series' shares (``Prior Order'').\1\ Applicants seek to amend the Prior
Order in order to offer additional series that would hold equity and
fixed income securities and to provide that certain representations and
undertakings contained in the Prior Order shall not apply to a series
where an entity that creates, compiles, sponsors, or maintains an
underlying index is not an affiliated person, or an affiliated person
of an affiliated person, of the series, its investment adviser,
distributor, promoter, or any sub-adviser to the series. In addition,
the order would delete a condition related to future relief in the
Prior Order.
---------------------------------------------------------------------------

    \1\ HealthShares, Inc., et al., Investment Company Act Release
Nos. 27553 (November 16, 2006) (notice) and 27594 (December 7, 2006)
(order).
---------------------------------------------------------------------------

    Applicants: HealthShares, Inc., XShares Advisors LLC (formerly, X-
Shares Advisors, LLC) (the ``Advisor''), XShares Group LLC (formerly,
Ferghana-Wellspring LLC) and TDAX Funds, Inc.
    Filing Dates: The application was filed on January 19, 2007 and
amended on June 4, 2007 and on July 20, 2007. Applicants have agreed to
file an amendment during the notice period, the substance of which is
reflected in this notice.
    Hearing or Notification of Hearing: An order granting the requested
relief will be issued unless the Commission orders a hearing.
Interested persons may request a hearing by writing to the Commission's
Secretary and serving applicants with a copy of the request, personally
or by mail. Hearing requests should be received by the Commission by
5:30 p.m. on August 17, 2007, and should be accompanied by proof of
service on applicants, in the form of an affidavit or, for lawyers, a
certificate of service. Hearing requests should state the nature of the
writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request
notification by writing to the Commission's Secretary.

ADDRESSES: Secretary, U.S. Securities and Exchange Commission, 100 F

Street, NE., Washington, DC 20549-1090. Applicants: Attn. Anthony F.
Dudzinski, Esq., 420 Lexington Avenue, Suite 2550, New York, NY 10170;
and Michael R. Rosella, Esq., Paul, Hastings, Janofsky & Walker LLP,
Park Avenue Tower, 75 East 55th Street, First Floor, New York, NY
10022.

FOR FURTHER INFORMATION CONTACT: Deepak T. Pai, Senior Counsel, at
(202) 551-6876 or Mary Kay Frech, Branch Chief, at<PHONE_NUMBER>
(Division of Investment Management, Office of Investment Company
Regulation).

SUPPLEMENTARY INFORMATION: The following is a summary of the
application. The complete application may be obtained for a fee at the
Commission's Public Reference Branch, 100 F. Street, NE., Washington,
DC 20549-0102 (tel.<PHONE_NUMBER>).

Applicants' Representations

    1. HealthShares, Inc. is an open-end management investment company
organized as a Maryland corporation and is comprised of multiple series
(the ``Initial Funds''). TDAX Funds, Inc. (the ``Company'') is an open-
end management investment company organized as a Maryland corporation
that is comprised of five (5) series of underlying ``lifecycle''
portfolios (each a ``New Fund'' and together, the ``New Funds''). The
Advisor, which is registered as an investment adviser under the
Investment Advisers Act of 1940 (the ``Advisers Act''), serves as the
investment adviser to the Initial Funds and will serve as investment
adviser to the New Funds. The Advisor expects to enter into sub-
advisory agreements with Amerivest Investment Management, LLC and BNY
Investment Advisors (collectively, ``Sub-Advisors'') to serve as sub-
advisers to the New Funds. Each Sub-Advisor is registered as an
investment adviser under the Advisers Act. Neither Sub-Advisor is an
affiliated person, or an affiliated person of an affiliated person, of
the Advisor or Zacks Investment Research Inc. (``Zacks''), the creator
of the Underlying Indexes (as defined below). ALPS Distributors, Inc.
(the ``Distributor''), a broker-dealer registered under the Securities
Exchange Act of 1934 (the ``Exchange Act''), will serve as the
principal underwriter and distributor for the New Funds.
    2. The applicants are currently permitted to offer the Initial
Funds based on equity securities indices developed by an affiliated
person of the Advisor in reliance on the Prior Order. Applicants seek
to amend the Prior Order to permit the offering of the New Funds, as
well as series that may be created in the future that are advised by
the Advisor or an entity controlled by or under common control with the
Advisor and that comply with the terms and conditions of the Prior
Order, as modified by the requested relief (the ``Future Funds,''
together with the Initial Funds and the New Funds, the ``Funds''). The
New Funds would operate in a manner identical to the Initial Funds that
are subject to the Prior Order, except as described in the application.
    3. The investment objective of each New Fund is to track the
performance, before fees and expenses, of a particular underlying index
(``Underlying Index'') by investing in a portfolio of securities
generally consisting of the component securities (``Component
Securities'') of the Underlying Index.\2\ Each Underlying Index is a
``lifestyle'' index that rebalances allocations among asset classes
over time in an attempt to maximize capital appreciation at a target
date. No entity that creates, compiles, sponsors, or maintains an
Underlying Index is or will be an affiliated person, as defined in
section 2(a)(3) of the Act, or an affiliated person of an affiliated
person, of the Company, the Advisor, the Distributor, promoter, or any
sub-adviser to a New Fund.
---------------------------------------------------------------------------

    \2\ The Underlying Indices for the New Funds are the Zacks 2010
Lifecycle Index, Zacks 2020 Lifecycle Index, Zacks 2030 Lifecycle
Index, Zacks 2040 Lifecycle Index, and Zacks In-Target Lifecycle
Index.
---------------------------------------------------------------------------

    4. The applicants represent that the Component Securities of each
Underlying Index include equity securities of U.S. and international
companies (including common stocks and real estate investment trusts),
American Depository Receipts based on equity securities of
international companies, and fixed-income securities (including bonds,
treasury bills and notes, mortgage real estate investment trusts, U.S.
government agency mortgage pass-through securities, cash equivalents or
short-term money market instruments). The fixed income securities
included in the Component Securities will be investment grade fixed
income securities and will not include corporate mortgage-backed
securities, asset-backed securities, high yield bonds, or Rule 144A
securities.\3\ Each New Fund will attempt to track its Underlying Index
by investing at least 90%, and typically substantially all, of its
assets in the securities that make up the Underlying Index, holding
each security in approximately the same proportion as its weighting in
the Underlying Index.\4\ Each New Fund also may invest up to 10% of its
assets in futures contracts, options on futures contracts, options, as
well as swaps on securities of companies in the Underlying Index.
Applicants expect that the returns of each New Fund should be highly
correlated with the returns of its Underlying Index, expecting that the
correlation coefficient between each New Fund and its Underlying Index
will exceed 95% over extended periods.
---------------------------------------------------------------------------

    \3\ If an underlying index of a Future Fund includes restricted
securities eligible for resale pursuant to rule 144A under the
Securities Act (``Rule 144A securities''), applicants acknowledge
that in accepting deposit securities (``Deposit Securities'') and
satisfying redemptions with securities that are Rule 144A
securities, the Future Funds will comply with the conditions of rule
144A. The prospectus for a Future Fund would also state that an
authorized participant that is not a ``Qualified Institutional
Buyer,'' as defined in rule 144A under the Securities Act, will not
be able to receive, as part of a redemption, restricted securities
eligible for resale under rule 144A.
    \4\ The New Funds may seek to track the performance of any U.S.
government agency mortgage pass-through securities included in an
Underlying Index by investing in ``to-be announced'' (``TBA'')
transactions on such securities. A TBA transaction is a method of
trading mortgage-backed securities where the buyer and seller agree
upon general trade parameters such as agency, settlement date, par
amount and price. The actual pools delivered are determined two days
prior to settlement date. A New Fund may designate the mortgage
pass-through TBAs to be included in the Deposit Securities and will
accept ``cash in lieu'' of delivery of the designated mortgage pass-
through TBAs. The amount of substituted cash in the case of TBA
transactions will be equivalent to the value of the TBA transaction
listed as a Deposit Security.
---------------------------------------------------------------------------

    5. The Prior Order relates to Funds that track indices created by
an affiliated person of the Advisor. Because such Funds could introduce
potential conflicts of interest, the Prior Order contains certain
representations and undertakings relating to the transparency of the
methodology for those underlying indices, and the establishment of
certain policies and procedures to limit communication between index
personnel and employees of the Advisor and any sub-adviser. Applicants
assert that these conflicts of interest do not exist where the index
creator is not an affiliated person, or an affiliated person of an
affiliated person, of an exchange-traded fund or its investment adviser
or any sub-adviser, such as in the case of the New Funds. Applicants
therefore seek to amend the Prior Order to provide that the relevant
representations and undertakings shall not apply to a Fund where an
entity that creates, compiles, sponsors, or maintains the underlying
index is not an affiliated person, as defined in section 2(a)(3) of the
Act, or an affiliated person of an affiliated person, of the Fund, the
Advisor, the Distributor, promoter or any sub-adviser to a Fund.

    6. Applicants state that the New Funds will operate in a manner
identical to the operation of the Initial Funds in the Prior Order,
except as specifically noted by applicants (and summarized in this
notice), and will comply with all of the terms, provisions and
conditions of the Prior Order, as amended by the present application.
Applicants believe that the requested relief continues to meet the
necessary exemptive standards.
    7. Applicants also seek to amend the Prior Order to modify the
terms under which the applicants, in the future, may offer Future Funds
based on other equity or fixed income indices. The Prior Order is
currently subject to a condition that does not permit applicants to
register the shares of any Future Fund by means of filing a post-
effective amendment to a Fund's registration statement or by any other
means, unless applicants have requested and received with respect to
such Future Fund, either exemptive relief from the Commission or a no-
action letter from the Division of Investment Management of the
Commission, or if the Future Fund could be listed on a national
securities exchange (``Exchange'') without the need for a filing
pursuant to rule 19b-4 under the Exchange Act.
    8. The order would amend the Prior Order to delete this condition.
Any Future Funds will (a) be advised by the Advisor or an entity
controlled by or under common control with the Advisor; and (b) comply
with the terms and conditions of the Prior Order, as amended by any
order issued in connection with the present application.
    9. Applicants believe that the modification of the future relief
available under the Prior Order would be consistent with sections 6(c)
and 17(b) of the Act and that granting the requested relief will
facilitate the timely creation of Future Funds and the commencement of
secondary market trading of such Future Funds by removing the need to
seek additional exemptive relief. Applicants submit that the terms and
conditions of the Prior Order, as amended by the requested order, are
appropriate for the Funds and would remain appropriate for Future
Funds. Applicants also submit that tying exemptive relief under the Act
to the ability of a Future Fund to be listed on an Exchange without the
need for a rule 19b-4 filing under the Exchange Act is not necessary to
meet the standards under sections 6(c) and 17(b) of the Act.

Applicants' Condition

    Applicants agree that any amended order granting the requested
relief will be subject to the same conditions as those imposed by the
Prior Order, except for condition 1 to the Prior Order, which will be
deleted.

    For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
 [FR Doc. E7-15021 Filed 8-1-07; 8:45 am]

BILLING CODE 8010-01-P