[Federal Register Volume 78, Number 168 (Thursday, August 29, 2013)]
[Notices]
[Pages 53509-53535]
[FR Doc No: 2013-21036]

Vol. 78

Thursday,

No. 168

August 29, 2013

Part II

Securities and Exchange Commission

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

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

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SECURITIES AND EXCHANGE COMMISSION

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

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

August 23, 2013.

I. Introduction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

    \23\ Rule 14.8(b)(2) sets forth initial listing standards for
primary equity securities.
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    Proposed Rule 14.11(e)(11)(A)(ii) states that the term must be one
to five years from date of issuance.
    Proposed Rule 14.11(e)(11)(A)(iii) requires that there must be a
minimum public distribution of 1,000,000 warrants together with a
minimum of 400 public holders, and an aggregate market value of
$4,000,000. In the alternative, there must be a minimum public
distribution of 2,000,000 warrants together with a minimum number of
public warrant holders determined on a case by case basis, an aggregate
market value of $12,000,000 and an initial warrant price of $6.
    Under proposed Rule 14.11(e)(11)(A)(iv), the warrants will be cash
settled in U.S. dollars.
    Under proposed Rule 14.11(e)(11)(A)(v), all currency warrants must
include in their terms provisions specifying the time by which all
exercise notices must be submitted, and that all unexercised warrants
that are in the money will be automatically exercised on their
expiration date or on or promptly following the date on which such
warrants are delisted by the Exchange (if such warrant issue has not
been listed on another organized securities market in the United
States).
    Under proposed Rule 14.11(e)(11)(B), the Exchange will file
separate proposals under Section 19(b) of the Act before listing and
trading separate and distinct Currency Warrants.
    Proposed Rule 14.11(e)(11)(C) describes regulatory matters
applicable to Currency Warrants. Specifically:
     No member shall accept an order from a customer to
purchase or sell a Currency Warrant unless the customer's account has
been approved for options trading pursuant to Rule 26.2.
     The provisions of Rule 26.4 apply to recommendations in
Currency Warrants and the term ``option'' as used therein shall be
deemed for purposes of this Rule to include such warrants.
     Any account in which a member exercises discretion to
trade in Currency Warrants is subject to the provisions of Rule 26.5
with respect to such trading. For purposes of the proposed Rule, the
terms, ``option'' and ``options contract'' as used in Rule 26.5 shall
be deemed to include Currency Warrants.
     Rule 26.3 applies to all customer accounts of a member in
which transactions in Currency Warrants are effected. The term
``option'' as used in Chapter XI, Section 8 shall be deemed to include
Currency Warrants.
     Rule 26.17 applies to all public customer complaints
received by a member regarding Currency Warrants. The term ``option''
as used in Rule 26.17 shall be deemed to include such warrants.
     Members participating in Currency Warrants shall be bound
to comply with the Communications and Disclosures rule of the Financial
Industry Regulatory Authority (``FINRA''), as applicable, as though
such rule were part of these Rules.
    Under proposed Rule 14.11(e)(11)(D), trading on the Exchange in any
Currency Warrant will be halted whenever the Exchange deems such action
appropriate in the interests of a fair and orderly market or to protect
investors. Trading in Currency Warrants that have been the subject of a
halt or suspension by the Exchange may resume if the Exchange
determines that the conditions which led to the halt or suspension are
no longer present, or that the interests of a fair and orderly market
are best served by a resumption of trading.
    Proposed Rule 14.11(e)(11)(E) governs reporting of warrant
positions. Proposed Rule 14.11(e)(11)(E)(i) would require each member
to file with the Exchange a report with respect to each account in
which the member has an interest, each account of a partner, officer,
director, or employee of such member, and each customer account that
has established an aggregate position (whether long or short) of
100,000 warrants covering the same underlying currency, combining for
purposes of the proposed Rule: (a) Long positions in put warrants and
short positions in call warrants, and (b) short positions in put
warrants with long positions in call warrants. The report shall be in
such form as may be prescribed by the Exchange and shall be filed no
later than the close of business on the next day following the day on
which the transaction or transactions requiring the filing of such
report occurred.
    Proposed Rule 14.11(e)(11)(E)(ii) states that whenever a report
shall be required to be filed with respect to an account pursuant to
the proposed Rule, the member filing the same must file with the
Exchange such additional periodic reports with respect to such account
as the Exchange may from time to time require.
    Proposed Rule 14.11(e)(11)(E)(iii) states that all reports required
by the proposed Rule shall be filed with the Exchange in such manner
and form as prescribed by the Exchange.

C. General Provisions

    To the extent not specifically addressed in the respective proposed
rules, the following general provisions apply to all of the proposed
rules and subject securities affected by the proposed rules (the
``securities''):
1. Trading Rules
    The Exchange deems the securities to be equity securities, thus
rendering trading in the securities subject to the Exchange's existing
rules governing the trading of equity securities. The securities will
trade on the Exchange during Regular Trading Hours, as well as during
the Pre-Opening Session and the After Hours Trading Session. The
Exchange has appropriate rules to facilitate transactions in the
securities during all trading sessions. The minimum price increment for
quoting and entry of orders in equity securities traded on the Exchange
is $0.01, with the exception of securities that are priced less than
$1.00 for which the minimum price increment for order entry is
$0.0001.\24\
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    \24\ See, e.g., Rule 11.11. Regulation NMS Rule 612, Minimum
Pricing Increment, provides:
    a. No national securities exchange, national securities
association, alternative trading system, vendor, or broker or dealer
shall display, rank, or accept from any person a bid or offer, an
order, or an indication of interest in any NMS stock priced in an
increment smaller than $0.01 if that bid or offer, order, or
indication of interest is priced equal to or greater than $1.00 per
share.
    b. No national securities exchange, national securities
association, alternative trading system, vendor, or broker or dealer
shall display, rank, or accept from any person a bid or offer, an
order, or an indication of interest in any NMS stock priced in an
increment smaller than $0.0001 if that bid or offer, order, or
indication of interest is priced less than $1.00 per share.
    c. The Commission, by order, may exempt from the provisions of
this section, either unconditionally or on specified terms and
conditions, any person, security, quotation, or order, or any class
or classes of persons, securities, quotations, or orders, if the
Commission determines that such exemption is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.
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2. Information Circular
    Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks

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

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

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule
change, as amended, is consistent with the requirements of Section 6 of
the Act and the rules and regulations thereunder applicable to a
national securities exchange.\26\ In particular, the Commission finds
that the proposed rule change, as amended, is consistent with the
requirements of Section 6(b)(5) of the Act,\27\ which requires, among
other things, that rules of a national securities exchange be designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The Commission notes that it
has previously approved substantively identical listing standards

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

    Rule 19b-4(e) under the Act \29\ provides that the listing and
trading of a new derivative securities product by a self-regulatory
organization (``SRO'') shall not be deemed a proposed rule change,
pursuant to Section (c)(1) of Rule 19b-4,\30\ if the Commission has
approved, pursuant to Section 19(b) of the Act,\31\ the SRO's trading
rules, procedures, and listing standards for the product class that
would include the new derivatives securities product, and the SRO has a
surveillance program for the product class. The Exchange is proposing
to: (i) Amend the continued generic listing standards for Equity Index-
Linked Securities and Commodity-Linked Securities under amended Rule
14.11(d); (ii) adopt initial and continued generic listing standards
for Fixed Income-Linked Securities, Futures-Linked Securities, and
Multifactor Index-Linked Securities under amended Rule 14.11(d); (iii)
adopt generic listing standards for Index-Linked Exchangeable Notes
under proposed Rule 14.11(e)(1); and (iv) adopt generic listing
standards for Currency Trust Shares under proposed Rule 14.11(e)(5),
pursuant to which the Exchange will be able to list and trade such
securities without Commission approval of each individual product under
Rule 19b-4(e).\32\ Accordingly, any securities that the Exchange lists
and/or trades pursuant to BATS Rules 14.11(d), 14.11(e) and 14.11(h),
as proposed, must satisfy the standards set forth therein.\33\
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    \29\ 17 CFR 240.19b-4(e)
    \30\ 17 CFR 240.19b-4(c)(1).
    \31\ 15 U.S.C. 78s(b).
    \32\ 17 CFR 240.19b-4(e).
    \33\ Under the proposal, the failure of a particular product or
index to comply with the proposed generic listing standards under
Rule 19b-4(e) for Linked Securities or Currency Trust Shares would
not preclude the Exchange from submitting a separate filing pursuant
to Section 19(b)(2) of the Act, requesting Commission approval to
list and trade a particular series of Linked Securities or Currency
Trust Shares. See introductory paragraphs to Rule 14.11(d)(2) and
proposed Rule 14.11(e)(5)(H) (providing that BATS may submit a rule
filing pursuant to Section 19(b)(2) of the Act to permit the listing
and trading of Linked Securities or Currency Trust Shares,
respectively, that do not otherwise meet the generic listing
standards set forth in the relevant rules applicable to them).
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1. Equity Index-Linked Securities and Commodity Linked Securities
    The Commission has previously approved, pursuant to Section 19(b)
of the Act and in accordance with Rule 19b-4(e) thereunder, the
adoption of generic initial and continued listing standards for the
listing and trading of Equity Index-Linked Securities and Commodity-
Linked Securities on the Exchange, so that securities that satisfy such
proposed generic listing standards for Equity Index-Linked Securities
and Commodity-Linked Securities may commence trading on the Exchange
without public comment and Commission approval.\34\ The Commission
notes that it has previously approved the same generic listing
standards for Equity Index-Linked Securities and Commodity-Linked
Securities for Nasdaq.\35\ The Commission believes that, because the
proposed continued listing requirements under proposed Rules
14.11(d)(2)(K)(i)(b) and 14.11(d)(2)(K)(ii)(b) for Equity Index-Linked
Securities and Commodity-Linked Securities, respectively,\36\ are
substantively identical to those of Nasdaq and present no unique or
novel regulatory issues, such proposed requirements are reasonably
designed to protect investors and the public interest. Specifically,
and as further discussed above, under the proposed continued listing
standards, BATS would commence delisting or removal proceedings of a
series of Equity Index-Linked Securities or Commodity-Linked Securities
if: (i) The initial listing criteria are not continuously maintained
(subject to certain exceptions in the case of Equity Index-Linked
Securities as described above); (ii) the aggregate market value or
principal amount publicly held is less than $400,000; (iii) the value
of the index or Reference Asset is no longer available or being
disseminated; or (iv) if circumstances exist which make further
dealings in the securities on BATS inadvisable. The Commission believes
that the proposed continued listing standards are adequately designed
to ensure transparency of key values and information regarding the
securities and will help ensure a minimum level of liquidity for such
securities to allow for the maintenance of fair and orderly markets.
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    \34\ See Securities Exchange Act Release Nos. 54167 (July 18,
2009), 71 FR 42145 (July 25, 2006) (SR-Nasdaq-2006-002) (approving
generic listing standards for Equity Index-Linked Securities on
Nasdaq) and 56910 (December 5, 2007), 72 FR 70628 (December 12,
2007) (SR-Nasdaq-2007-071) (approving generic listing standards for
Commodity-Linked Securities).
    \35\ See Securities Exchange Act Release No. 66648 (March 23,
2012), 77 FR 19428 (March 30, 2012) (Nasdaq-2012-013) (approving
generic listing standards for Equity Index-Linked Securities and
Commodity-Linked Securities).
    \36\ See supra note 5.
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2. Fixed Income Index-Linked Securities, Futures Linked Securities, and
Multifactor Index-Linked Securities
    In addition, the Commission has previously approved the adoption of
generic initial and continued listing standards for Fixed-Income Index-
Linked Securities, Futures-Linked Securities, and Multifactor Index-
Linked Securities, each of which are specific types of ``Index-Linked
Securities,'' on Nasdaq.\37\ Consistent with its previous orders, the
Commission believes that the generic listing standards proposed by the
Exchange for Fixed-Income Index-Linked Securities, Futures-Linked
Securities, and Multifactor Index-Linked Securities should fulfill the
intended objective of Rule 19b-4(e) by allowing those Additional Linked
Securities that satisfy the generic listing standards to commence
trading without public comment and Commission approval.\38\ The
Exchange's ability to rely on Rule 19b-4(e) to list and trade
Additional Linked Securities that meet the applicable requirements and
minimum standards should reduce the time frame for bringing these
securities to market and thereby reduce the burdens on issuers and
other market participants, while also promoting competition and making
such securities available to investors more quickly. In addition, the
Commission believes the Exchange's proposal to list and trade the
Additional Linked Securities will provide an additional avenue for
investors to achieve desired investment objectives through the purchase
of Index-Linked Securities, and will benefit investors by increasing
competition among markets that trade Index-Linked Securities.
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    \37\ See supra note 35.
    \38\ The Commission notes that the failure of a particular
Additional Linked Security issue to satisfy the proposed generic
initial listing standards pursuant to Rule 19b-4(e), however, would
not preclude the Exchange from submitting a separate filing pursuant
to Section 19(b)(2), requesting Commission approval to list and
trade a particular Linked Security. See supra note 33.
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a. Listing and Trading Rules
    The Commission finds that the Exchange's proposal contains adequate
rules and procedures to govern the listing and trading of Fixed Income-
Linked Securities, Futures-Linked Securities, and Multifactor Index-
Linked Securities pursuant to Rule 19b-

4(e) on the Exchange. Such Additional Linked Securities listed under
the proposed standards will be subject to the full panoply of BATS
rules and procedures that govern the trading of Linked Securities, and
also the rules and procedures that govern the trading of equity
securities on the Exchange including, among others, rules and
procedures governing trading halts, surveillance procedures,
disclosures to members, customer suitability requirements, and market
maker obligations. In addition, the Additional Linked Securities will
be subject to the asset/equity requirements and tangible net worth
requirements applicable to Linked Securities, as well as the minimum
holder and distribution requirements, principal/market value
requirements, and term thresholds for Linked Securities.\39\ In
addition, as set forth more fully above, the proposed listing criteria
for Fixed Income-Linked Securities include additional requirements
relating to relative weighting, outstanding principal, market
capitalization and diversification. These requirements are designed to
ensure that the trading markets for index components underlying the
Linked Securities are adequately capitalized and sufficiently liquid,
and that no one component dominates the index. Further, the proposed
listing criteria for Futures Linked Securities require, subject to
certain limited exceptions, that the pricing information for components
be derived from an ISG member market or its affiliate, or a market with
which BATS has a comprehensive surveillance sharing agreement. The
Commission believes that these requirements should significantly
minimize the potential for manipulation.
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    \39\ See Rules 14.11(d)(2)(E) and (F), supra note 12.
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    The Exchange's proposed requirements for Multifactor Index-Linked
Securities are linked to criteria for other types of Linked Securities
set forth in Rule 14.11(d)(2)(K), including the proposed standards
applicable to Fixed Income-Linked Securities and Futures-Linked
Securities. Accordingly, any underlying Reference Asset for a
Multifactor-Index Linked Security would have to satisfy the criteria
set out in the Exchange's rules for Reference Assets underlying other
Linked Securities.
    The generic listing standards permit listing of Additional Linked
Securities if the Commission previously approved the underlying index
for trading in connection with another derivative product. The
Commission believes that if it has previously determined that such
index and its components were sufficiently transparent, then the
Exchange may rely on this finding, provided that the conditions set
forth in the Commission's approval order continue to be satisfied.
    The Commission believes that the proposed continued listing
requirements for the Additional Linked Securities are reasonably
designed to protect investors and the public interest. Under the
proposed continued listing standards, BATS would commence delisting or
removal proceedings of a series of Fixed Income Index-Linked
Securities, Futures-Linked Securities, or Multifactor Index-Linked
Securities if: (i) The initial listing criteria are not continuously
maintained; (ii) the aggregate market value or principal amount
publicly held is less than $400,000; (iii) the value of the Reference
Asset is no longer available or being disseminated; or (iv) if
circumstances exist which make further dealings in the securities on
BATS inadvisable. The Commission believes that the proposed continued
listing standards are adequate to ensure transparency of key values and
information regarding the Additional Linked Securities. The Commission
further believes that the continued listing standards will help ensure
a minimum level of liquidity exists for such securities to allow for
the maintenance of fair and orderly markets. In addition, the Exchange
will have flexibility to delist a series of such securities if
circumstances warrant such action.
b. Dissemination of Information
    The Additional Linked Securities will be subject to the Reference
Asset information dissemination requirements applicable to all Linked
Securities.\40\ The proposed listing requirements for Additional Linked
Securities also require that: (i) In the case of Fixed Income-Linked