[Federal Register Volume 78, Number 132 (Wednesday, July 10, 2013)]
[Notices]
[Pages 41462-41480]
[FR Doc No: 2013-16528]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69931; File No. SR-BATS-2013-038]

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

July 3, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on June 21, 2013, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which filing was amended and replaced in its entirety by
Amendment No. 1 thereto on July 2, 2013, and which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Amendment
No. 1, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange filed a proposal to adopt rules for the qualification,
listing and delisting of companies on the Exchange. Specifically, the
Exchange proposes to adopt rules applicable to the following securities
(all of which are defined below): Equity Index-Linked Securities,
Commodity-Linked Securities,\3\ Fixed Income Index-Linked Securities,
Futures-Linked Securities, Multifactor Index-Linked 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. Specifically,
the proposal would adopt the relevant listing standards of the NASDAQ
Stock Market LLC (``Nasdaq''), as set forth below. The Exchange also
proposes changes to delete certain rule text from Rule 14.11(h),
``Listing Requirements for Securities Not Specified Above (Other
Securities),'' to conform to the current listing standards of Nasdaq
and to delete rule text that would become duplicative at the time the
proposed rule becomes operative.
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    \3\ 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).
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    The text of the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    This Amendment No. 1 to SR-BATS-2013-038 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.
    The Exchange is proposing rules to adopt listing standards for each
of the products enumerated above on the Exchange. Chapter XIV of the
Exchange's Rules sets forth the rules applicable to securities listed
on the Exchange (the ``Listing Rules''). The Exchange is also proposing
to make several non-substantive grammatical and technical changes to
the Listing Rules. The Exchange's Listing Rules govern the
qualification, listing and delisting of Securities on the Exchange.

The Listing Rules also set forth, among other things, definitions,\4\
the Exchange's regulatory authority to list and maintain securities,\5\
general procedures and prerequisites for initial and continued listing
on the Exchange,\6\ and, most significantly to the instant proposed
rule change, ``Other Securities,'' \7\ which govern, without
limitation, listing and qualification rules applicable to Portfolio
Depository Receipts, Index Fund Shares and other types of exchange
traded products. The proposed amendment to Rule 14.11(d), Securities
Linked to the Performance of Indexes and Commodities (Including
Currencies), would add continuing listing standards for Equity Index-
Linked Securities and Commodity-Linked Securities, and initial and
continuing listing standards for 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.
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    \4\ See Section 14.1 of the Exchange's Rules.
    \5\ See Section 14.2 of the Exchange's Rules.
    \6\ See Section 14.3 of the Exchange's Rules.
    \7\ See Section 14.11 of the Exchange's Rules.
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    Proposed new Rule 14.11(e), Trading of Certain Derivative
Securities, would include listing standards for 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. Existing Rule
14.11(e), Selected Equity-linked Debt Securities (``SEEDS''), would be
re-numbered as Rule 14.11(e)(12), and as a result, the Exchange
proposes to re-number the sub-paragraphs and cross-references contained
in such Rule.
    The proposed rule change is intended to define the specific
products (see above) that the Exchange intends to list and trade, and
the listing and qualification requirements for each such product.
    The Exchange also proposes changes to delete certain rule text from
Rule 14.11(h), ``Listing Requirements for Securities Not Specified
Above (Other Securities),'' to conform to the current listing standards
of Nasdaq and to delete rule text that would become duplicative at the
time the proposed rule becomes operative. Specifically, the Exchange
proposes to delete text to conform Rule 14.11(h) to conform such rule
to Nasdaq Rule 5730.
Proposed Changes to Rule 14.11(d)--Linked Securities
Introductory Paragraphs to Rule 14.11(d)
    The proposed amendments to Rule 14.11(d) would state that the
Exchange will consider for listing and trading the Linked Securities
set forth in the introductory paragraphs of the rule. These paragraphs
describe the basis for the payment at maturity of the various
securities, which is the performance of ``Reference Assets,'' as
defined below.
    Specifically:
    Equity Index-Linked Securities are securities that provide for the
payment at maturity of a cash amount 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; or (b) interest rate futures or options or
derivatives on the foregoing in this subparagraph (b); 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.
    Linked Securities may or may not provide for the repayment of the
original principal investment amount. The Exchange may submit a rule
filing pursuant to Section 19(b)(2) of the Act to permit the listing
and trading of Linked Securities that do not otherwise meet the
standards set forth in Rule 14.11(d).
Additional Changes to Rule 14.11(d)
    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.\8\
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    \8\ Current Rule 14.11(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.
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    The Exchange proposes to amend Rule 14.11(d)(2)(D) so that the
Exchange may list Linked Securities that provide for three times
accelerated payment at maturity.\9\ In changing Rule 14.11(d)(2)(D),
the Exchange is conforming its rule to the established listing rules of
other exchanges. This proposed change to Rule 14.11(d)(2)(D) is based,
word-for-word, on Nasdaq

Rule 5710(d).\10\ Both the Exchanges Rule 14.11(d)(2)(D) and Nasdaq
Rule 5710(d) state that pursuant to Rule 19b-4(e) under the Act \11\ a
loss or negative payment at maturity of a Linked Security may be
accelerated by a multiple of the performance of an underlying asset
(known as the ``acceleration provision''). However, in Rule
14.11(d)(2)(D) the Exchange sets the multiple for the acceleration
provision at ``twice''; whereas Nasdaq sets the acceleration provision
multiple at ``three times''.\12\ Other than changing one word--from
``twice'' to ``three times''--in the Exchange's acceleration provision
in Rule 14.11(d)(2)(D), no other change is proposed or made to such
sub-paragraph and such provision, as amended, would apply to all Linked
Securities.
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    \9\ The proposal is applicable only to non-option products.
    \10\ The Exchange notes that the proposal is also consistent
with NYSE Arca (``Arca'') Equities Rule 5.2(j)(6)(A)(d) and Section
703.22(B)(6) of the New York Stock Exchange Listed Company Manual.
    \11\ 17 CFR 240.19b-4(e).
    \12\ See Nasdaq Rule 5710(d). See also Securities Exchange Act
Release No. 68721 (January 24, 2013), 78 FR 6379 (January 30, 2013)
(SR-NASDAQ-2013-008) (notice of filing and immediate effectiveness
of rule change to amend Rule 5710 to allow three times (3x) the
performance of the underlying Reference Asset).
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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).\13\ Further, the Exchange is proposing 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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    \13\ See supra note 3.
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Listing Standards for Linked Securities
    Proposed Rule 14.11(d)(2)(K) would adopt listing standards for the
various Linked Securities, as described below.
Equity Index-Linked Securities
Initial Listing Criteria
    Proposed Rule 14.11(d)(2)(K)(i)(a) would set forth the initial
listing criteria for Equity Index-Linked Securities found in current
Rule 14.11(d)(2)(G), which would be deleted and replaced in proposed
Rule 14.11(d)(2)(K)(i)(a). Specifically:
    In the case of an Equity Index-Linked Security, each underlying
index is required to have at least ten (10) component securities. In
addition, the index or indexes to which the security is linked shall
either: (1) Have been reviewed and approved for the trading of 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 comprehensive surveillance
sharing agreements for non-U.S. stocks, continue to be satisfied, or
(2) the index or indexes meet the following criteria:
     Each component security has a minimum market value of at
least $75 million, except that for each of the lowest weighted
component securities in the index that in the aggregate account for no
more than 10% of the weight of the index, the market value can be at
least $50 million;
     each component security shall have trading volume in each
of the last six months of not less than 1,000,000 shares, except that
for each of the lowest weighted component securities in the index that
in the aggregate account for no more than 10% of the weight of the
index, the trading volume shall be at least 500,000 shares in each of
the last six months;
     indexes based upon the equal-dollar or modified equal-
dollar weighting method will be rebalanced at least semiannually;
     in the case of a capitalization-weighted or modified
capitalization- weighted index, the lesser of the five highest weighted
component securities in the index or the highest weighted component
securities in the index that in the aggregate represent at least 30% of
the total number of component securities in the index, each have an
average monthly trading volume of at least 2,000,000 shares over the
previous six months;
     no underlying component security will represent more than
25% of the weight of the index, and the five highest weighted component
securities in the index do not in the aggregate account for more than
50% of the weight of the index (60% for an index consisting of fewer
than 25 component securities);
     90% of the index's numerical value and at least 80% of the
total number of component securities will meet the then current
criteria for standardized option trading on a national securities
exchange or a national securities association, provided, however, that
an index will not be subject to this requirement if (i) no underlying
component security represents more than 10% of the dollar weight of the
index and (ii) the index has a minimum of 20 components; and
     all component securities shall be either (i) securities
(other than securities of a foreign issuer and American Depository
Receipts (``ADRs'')) that are (a) issued by a 1934 Act reporting
company or by an investment company registered under the Investment
Company Act of 1940 that, in each case, has securities listed on a
national securities exchange and (b) an ``NMS stock'' (as defined in
Rule 600 of Regulation NMS under the Act), or (ii) securities of a
foreign issuer or ADRs, provided that securities of a foreign issuer
(including when they underlie ADRs) whose primary trading market
outside the United States is not a member of the Intermarket
Surveillance Group (``ISG'') or a party to a comprehensive surveillance
sharing agreement with the Exchange will not in the aggregate represent
more than 20% of the dollar weight of the index.
Continued Listing Criteria
    Rule 14.11(d)(2)(K)(i)(b) would adopt continued listing criteria
for Equity Index-Linked Securities. Specifically, 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 standards set forth above 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.
    In connection with an Equity Index-Linked Security that is based on
an index that has been reviewed and approved for the trading of 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, the Exchange will commence delisting or
removal proceedings (unless the Commission has approved the continued
trading of the subject Equity Index-Linked Security) if an underlying
index or indexes fails to satisfy the maintenance standards or
conditions for such index or indexes 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 \14\
and both the Pre-Opening \15\ and After Hours Trading Sessions; \16\ or
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    \14\ 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.
    \15\ 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.
    \16\ 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. Equity-Linked Indexes will be rebalanced at least
annually.
    The proposed rule change relating to Equity-Linked Securities is
based on Nasdaq Rule 5710(k)(i).
Commodity-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(ii) would adopt the initial listing
criteria (found in current Rule 14.11(d)(2)(H), which would be deleted
and replaced in proposed Rule 14.11(d)(2)(K)(ii)(a)) and continued
listing criteria for Commodity-Linked Securities, as set forth below.
Initial Listing Criteria
    The Reference Asset must meet one of the following criteria:
     The Reference Asset to which the security is linked shall
have been reviewed and approved for the trading of Commodity-Related
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 each component of a Reference
Asset other than a Currency must be derived from a market which is an
ISG member or affiliate or with which the Exchange has a comprehensive
surveillance sharing agreement. Notwithstanding the previous sentence,
pricing information for gold and silver may be derived from the London
Bullion Market Association. The pricing information for each component
of a Reference Asset that is a Currency must be either: (A) The
generally accepted spot price for the currency exchange rate in
question; or (B) derived from a market of which (i) is an ISG member or
affiliate or with which the Exchange has a comprehensive surveillance
sharing agreement and (ii) is the pricing source for a currency
component of a Reference Asset that has previously been approved by the
Commission. A Reference Asset may include components representing not
more than 10% of the dollar weight of such Reference Asset for which
the pricing information is derived from markets that do not meet the
requirements of subparagraph (2) of the proposed rule, provided,
however, that no single component subject to this exception exceeds 7%
of the dollar weight of the Reference Asset. The term ``Currency,'' as
used in the proposed rule, means one or more currencies, or currency
options, futures, or other currency derivatives, Commodity-Related
Securities if their underlying Commodities are currencies or currency
derivatives, or a basket or index of any of the foregoing.
Continued Listing Standards
    Proposed Rule 14.11(d)(2)(K)(ii)(b) would establish continued
listing criteria for Commodity-Linked Securities. Specifically, the
Exchange will commence delisting or removal proceedings if any of the
initial listing criteria described above are not continuously
maintained. Additionally, 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 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).
Fixed Income Index-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(iii) would set forth the listing
criteria for Fixed Income Index-Linked Securities.
Initial Listing Standards
    Proposed Rule 14.11(d)(2)(k)(iii)(a) states that either 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
Securities Exchange Act of 1934 and rules thereunder and the conditions
set forth in the Commission's approval order, continue to be satisfied
or 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.
Continued Listing Standards
    Proposed Rule 14.11(d)(2)(K)(iii)(c) would provide 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 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.
    The proposed rule change relating to Fixed-Income Linked Securities
is based on Nasdaq Rule 5710(k)(iii).
Futures-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(iv) would establish listing standards
for Futures-Linked Securities.
Initial Listing Standards
    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 (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.
Continued Listing Standards
    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.
    The proposed rule change relating to Futures-Linked Securities is
based on Nasdaq Rule 5710(k)(iv).
Multifactor Index-Linked Securities
    Proposed Rule 14.11(d)(2)(K)(v) would govern the listing standards
for Multifactor Index-Linked Securities.
Initial Listing Standards
    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 to one of the initial listing standards set forth
above, proposed Rule 14.11(d)(2)(K)(v)(b) would state 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.
Continued Listing Criteria
    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.
    The proposed rule change relating to Multifactor Index-Linked
Securities is based on Nasdaq Rule 5710(k)(v).

Regulatory Requirements for Registered Market Makers in Linked
Securities
    Interpretation and Policy .01 to proposed Rule 14.11(d)(2)(K) would
establish certain regulatory requirements for registered Market Makers
in Linked Securities. Specifically, 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. No
registered Market Maker in Linked Securities would be permitted to
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 \17\ the registered
Market Maker in Linked Securities would 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.
---------------------------------------------------------------------------

    \17\ See, e.g., Exchange Rule 4.2.
---------------------------------------------------------------------------

    The proposed rule change relating to regulatory requirements for
registered Market Makers in Linked Securities is based on Nasdaq Rule
5710, Commentary .01.
Proposed 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 would set forth listing standards
for the securities described below.
Index-Linked Exchangeable Notes
    Proposed Rule 14.11(e)(1) would adopt listing standards for Index-
Linked Exchangeable Notes.
Description
    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. Each Index-
Linked Exchangeable Note is intended to provide investors with an
instrument that closely tracks the underlying index. Notwithstanding
that the notes are linked to an index, they will trade as a single
security.
Initial Listing Standards
    Index-Linked Exchangeable Notes will be considered for listing and
trading by the Exchange pursuant to Rule 19b-4(e) under the Act,\18\
provided:
---------------------------------------------------------------------------

    \18\ 17 CFR 240.19b-4(e).
---------------------------------------------------------------------------

     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).
    Index-Linked Exchangeable Notes will be treated as equity
instruments.
    Under proposed Rule 14.11(e)(1)(F) the Intraday Indicative Value of
the subject Index-Linked Exchangeable Notes 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. 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. For the avoidance of doubt,
proposed Rule 14.11(e)(1)(F) also includes a definition of ``Intraday
Indicative Value'' that is specific to the proposed rule, i.e., for
purposes of 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)
would ensure that the value of an Index-Linked Exchangeable Note and
its underlying index are publicly available on a real time basis. This
will provide investors with up-to-date information on the value of the
note and the Third Party Index or Issuer Index. Accordingly, Index-
Linked Exchangeable Notes

should allow investors to: (i) Respond quickly to market changes
through intra-day trading opportunities; (ii) engage in hedging
strategies; and (iii) reduce transaction costs for trading a group or
index of securities.
Continued Listing Standards
    Beginning twelve 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 change relating to Index-Linked Exchangeable
Notes is based on Nasdaq Rule 5711(a).
Equity Gold Shares
Description
    Proposed Rule 14.11(e)(2) would apply to Equity Gold Shares that
represent units of fractional undivided beneficial interest in, and
ownership of, the Equity Gold Trust. 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'' shall also apply to Equity Gold Shares.
Applicability
    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 would be applicable
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 would also apply to Equity Gold Shares.
    The proposed rule change relating to Equity Gold Shares is based on
Nasdaq Rule 5711(b).
Trust Certificates
    Proposed Rule 14.11(e)(3) would govern the listing standards
applicable to Trust Certificates. The Exchange will consider for
trading, whether by listing or pursuant to unlisted trading privileges,
Trust Certificates.
Description
    Trust Certificates represent an interest in a special purpose trust
(the ``Trust'') created pursuant to a trust agreement. The Trust will
only issue Trust Certificates. Trust Certificates 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
``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.
Continued Listing Standards
    Proposed Interpretation and Policy .01 to proposed Rule 14.11(e)(3)
would state 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.
Other Provisions
    Proposed Interpretation and Policy .02 to Rule 14.11(e)(3) would
provide 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 Interpretation and Policy .03 to Rule 14.11(e)(3) would
provide 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. No change is to be made in the trustee of a listed issue
without prior notice to and approval of the Exchange.
    Proposed Interpretation and Policy .04 to Rule 14.11(e)(3) would
provide that voting rights will be as set forth in the applicable Trust
prospectus.
    Proposed Interpretation and Policy .05 to Rule 14.11(e)(3) would
provide that the Exchange will implement written surveillance
procedures for Trust Certificates.
    Proposed Interpretation and Policy .06 to Rule 14.11(e)(3) would
provide 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) would
provide 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) would
provide 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'') in order to exercise such
rights.
    Proposed Interpretation and Policy .09 to Rule 14.11(e)(3) would
provide 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) would
provide 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) would
provide that the Trust Certificates may be subject to early termination
or call features.
    The proposed rule change relating to Trust Certificates is based on
Nasdaq Rule 5711(c).
Commodity-Based Trust Shares
    Proposed Rule 14.11(e)(4) would permit the listing and trading, or
trading pursuant to unlisted trading privileges, of Commodity-Based
Trust Shares on the Exchange. Proposed Rule 14.11(e)(4) would be
applicable 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.
Description
    ``Commodity-Based Trust Shares,'' as defined in proposed Rule
14.11(e)(4)(C)(i), means a security (a) that is issued by a Trust that
holds a specified commodity deposited with the Trust; (b) that 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) that,
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.
    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.
Initial Listing Standards
    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.
Continued Listing Standards
    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 \19\ is no longer made
available on at least a 15-second delayed basis; or
---------------------------------------------------------------------------

    \19\ 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.
Other Provisions
    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 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)(4)(E)(iv) would apply the following
requirements 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)(4)(E)(v) states that voting rights shall be
as set forth in the applicable 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.
    The proposed rule change relating to Commodity-Based Trust Shares
is based on Nasdaq Rule 5711(d).
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. Proposed Rule
14.11(e)(5) would be applicable 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.
Description
    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.
Initial Listing Standards
    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.
Continued Listing Standards
    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;
     if 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;
     if 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;
     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.
    Upon termination of a Trust, the Exchange would require that
Currency 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.
Other
    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.
Trading Halts
    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.
    The proposed rule change relating to Currency Trust Shares is based
on Nasdaq Rule 5711(e).
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). 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.
Description
    Proposed Rule 14.11(e)(6)(C) defines the term ``Commodity Index
Trust Shares'' to mean, as used in these proposed Rules (unless the
context otherwise requires), a security that (i) is issued by a Trust
that (a) is a commodity pool as defined in the Commodity Exchange Act
and regulations thereunder, and that is managed by a commodity pool
operator registered with the Commodity Futures Trading Commission; 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 Commodity Exchange Act.
    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.
Initial Listing Standards
    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.
Continued Listing Standards
    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 twelve-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.
    Upon termination of a Trust, the Exchange would require that
Commodity Index 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)(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.
    The proposed rule change relating to Commodity Index Trust Shares
is based on Nasdaq Rule 5711(f).

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.
Description
    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 Commodity Exchange Act
and regulations thereunder, and that is managed by a commodity pool
operator registered with the Commodity Futures Trading Commission, 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 Commodity Exchange Act. The term
``commodity'' is defined in Section 1(a)(4) of the Commodity Exchange
Act.
Designation of an Underlying Commodity Futures Contract
    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.
Initial Listing Standards
    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.
Continued Listing Standards
    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 twelve-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.
    Upon termination of a Trust, the Exchange requires that Commodity
Futures Trust Shares 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)(7)(E)(iii) states that the stated term of
the Trust shall be as 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).
Partnership Units
    Proposed Rule 14.11(e)(8) would govern 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).
Description
    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:
    Proposed Rule 14.11(e)(8)(B)(i) states that the term ``commodity''
is defined in Section 1(a)(4) of the Commodity Exchange Act.
    Proposed Rule 14.11(e)(8)(B)(ii) defines a Partnership Unit for
purposes of the proposed Rule as 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.
Initial Listing Standards
    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.
Continued Listing Standards
    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 twelve 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;
     if 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;
     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.
    Upon termination of a partnership, the Exchange requires that
Partnership Units issued in connection with such partnership be removed
from Exchange listing. A partnership will terminate in accordance with
the provisions of the partnership prospectus.
    Proposed Rule 14.11(e)(8)(D)(iii) provides that the stated term of
the partnership shall be as 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) would adopt 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).
Trust Units
    The Exchange proposes to add new Rule 14.11(e)(9) in order to
permit trading, either by listing or pursuant to unlisted trading
privileges, of Trust Units.
    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.
Description
    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 Commodity Exchange Act.
     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.
Initial Listing Standards
    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.
Continued Listing Standards
    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 twelve 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.
Trading Halts
    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.
    Upon termination of a trust, the Exchange would require that Trust
Units issued in connection with such trust be removed from Exchange
listing. A trust will terminate in accordance with the provisions of
the prospectus.
    Proposed Rule 14.11(e)(9)(D)(iii) provides that the stated term of
the trust shall be as 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) would adopt 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.
    The proposed rule change relating to Trust Units is based on Nasdaq
Rule 5711(i).
Managed Trust Securities
    Proposed Rule 14.11(e)(10) would adopt listing standards for
Managed Trust Securities. 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.
Description
    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 (a) is issued by a Trust that (1) is a commodity pool as defined
in the Commodity Exchange Act and regulations thereunder, and that is
managed by a commodity pool operator registered with the Commodity
Futures Trading Commission, and (2) 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 (b) 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:
     Disclosed Portfolio. 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.
     Intraday Indicative Value. 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.
     Reporting Authority. 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.

Initial Listing Standards
    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.
Continued Listing Standards
    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 twelve-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;
     if 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;
     if 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
     if such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
Trading Halts
    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 as 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) would state 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)(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 nonpublic information regarding
the applicable Trust portfolio.
    The proposed rule change relating to Managed Trust Securities is
based on Nasdaq Rule 5711(j).
Currency Warrants
    Proposed Rule 14.11(e)(11) would govern the listing of Currency
Warrants.

Under proposed Rule 14.11(e)(11)(A), 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:
Initial Listing Standards
    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).\20\ 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.
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    \20\ 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.
Regulatory Matters
    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.
     Suitability. The provisions of Rule 26.4 shall 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.
     Discretionary Accounts. Any account in which a Member
exercises discretion to trade in Currency Warrants shall be 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.
     Supervision of Accounts. Rule 26.3 shall apply 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.
     Public Customer Complaints. Rule 26.17 shall apply 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.
     Communications with Public Customers. Members
participating in Currency Warrants shall be bound to comply with the
Communications and Disclosures rule of FINRA, as applicable, as though
such rule were part of these Rules.
Trading Halts or Suspensions
    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.
Reporting of Warrant Positions
    Proposed Rule 14.11(e)(11)(E) would govern 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.
    The proposed rule change relating to Currency Warrants is based on
Nasdaq Rule 5711(k).
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''):
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.\21\
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    \21\ 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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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 will also 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 will also 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.
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.
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.
Surveillance
    The Exchange believes 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.\22\
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    \22\ 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.
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.
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.
2. Statutory Basis
    The proposed rule change, as amended, is consistent with section
6(b) of the Act,\23\ in general, and furthers the

objectives of section 6(b)(5),\24\ particular, in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, and to remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest. The Exchange further believes that the proposal, as amended
by this Amendment No. 1, remains consistent the Act because this
Amendment No. 1 does not propose to make any substantive changes to the
proposal as originally filed.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
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    Specifically, the Exchange believes that the proposed rule change
should enhance depth and liquidity, and should promote narrower markets
in the subject securities. Furthermore, the Exchange's listing
requirements as proposed herein are at least as stringent as those of
any other national securities exchange and, consequently, the proposed
rule change is consistent with the protection of investors and the
public interest.
    Additionally, the proposal is designed to prevent fraudulent and
manipulative acts and practices, as all of the proposed new products
are subject to existing Exchange trading rules, together with specific
requirements for registered market makers, books and record production,
surveillance procedures, suitability and prospectus requirements, and
requisite the Exchange approvals, all set forth above. With respect to
the proposed changes to Rule 14.11(h), the proposal is designed to
avoid duplication within the Exchange's rules.
    The proposal is intended to ensure that investors receive up-to-
date information on the value of certain underlying securities and
indices in the products in which they invest, and protect investors and
the public interest, enabling investors to: (i) Respond quickly to
market changes through intra-day trading opportunities; (ii) engage in
hedging strategies; and (iii) reduce transaction costs for trading a
group or index of securities.
    The proposal is also designed to promote just and equitable
principles of trade by way of initial and continued listing standards
which, if not maintained, will result in the discontinuation of trading
in the affected products. These requirements, together with the
applicable the Exchange equity trading rules (which apply to the
proposed products), ensure that no investor would have an unfair
advantage over another respecting the trading of the subject products.
On the contrary, all investors will have the same access to, and use
of, information concerning the specific products and trading in the
specific products, all to the benefit of public customers and the
marketplace as a whole.
    Furthermore, the proposal is designed to remove impediments to and
perfect the mechanism of a free and open market and a national market
system by adopting listing standards that will lead ultimately to the
trading of the proposed new products on the Exchange, just as they are
currently traded on other exchanges. The Exchange believes that
individuals and entities permitted to make markets on the Exchange in
the proposed new products should enhance competition within the
mechanism of a free and open market and a national market system, and
customers and other investors in the national market system should
benefit from more depth and liquidity in the market for the proposed
new products.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, the current
variances between the Exchange's listing rules and the listing rules of
other exchanges limit competition in that there are certain products
that the Exchange cannot list while other exchanges can list such
products. Thus, approval of the proposed rule change will promote