UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

WASHINGTON, D.C. 20460

							                                              OFFICE OF

				PREVENTION, PESTICIDES

	AND TOXIC SUBSTANCES

Proposed Risk Mitigation Decision for Nine Rodenticides

January 17, 2007

I.	Proposed Decision and Comment Opportunity

This document describes the Environmental Protection Agency’s
(EPA’s) proposed risk mitigation decision for rodenticide bait
products containing the following nine active ingredients: brodifacoum,
bromadiolone, difethialone, chlorophacinone, diphacinone, warfarin, zinc
phosphide, bromethalin, and cholecalciferol.

Based on an evaluation of the ecological risks associated with the use
of rodenticide bait products containing these nine active ingredients,
and consideration of the public health and other important benefits of
the use of rodenticides, EPA anticipates classifying all bait products
containing the active ingredients brodifacoum, bromadiolone, and
difethialone as restricted use pesticides.  To decrease the possibility
of children’s exposure to rodenticide products used in homes, EPA also
anticipates requiring that all rodenticide bait products available for
sale to consumers be sold only in tamper-resistant bait stations with
solid bait blocks as the only permissible bait form.  Finally, EPA is
proposing labeling improvements to mitigate the risks associated with
bait products containing any of these nine rodenticides.

The proposed risk mitigation decision would decrease the possibility of
unreasonable adverse effects to wildlife and children from the use of
rodenticides, but would allow residential and professional users access
to a wide variety of effective and appropriate rodenticide products.
The Agency anticipates that the requirement for tamper-resistant bait
stations may result in a modest price increase for rodenticide products
sold on the consumer market, but has concluded that the benefits from a
reduction in children’s exposure to rodenticide bait products
outweighs the estimated cost increase.  EPA believes that with the
proposed mitigation measures in place, rodenticide products will remain
affordable for economically-disadvantaged populations, and also notes
that there are other effective and affordable methods of rodent control,
such as spring traps and glue boards, in addition to rodenticide
products.

The purpose of this document is to outline the Agency’s rationale for
these proposed decisions and solicit comment.  Comments are specifically
requested on the Agency’s proposed risk mitigation decisions and
impact assessment, and the mitigation proposals put forth by various
stakeholders.  Supporting documents can be found at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  under docket number
EPA-HQ-OPP-2006-0955 (recent documents) or EPA-HQ-OPP-2004-0033 /
EPA-HQ-OPP-2002-0049 (older documents and previous public comments).
Public comments will be accepted for 60-days following publication of a
Federal Register Notice of Availability on January 17, 2007.  During the
comment period, EPA will continue its ongoing consultation with the
Centers for Disease Control and Prevention (CDC), the U.S. Department of
Agriculture (USDA), the U.S. Fish and Wildlife Service (FWS), and the
Department of Housing and Urban Development (HUD).  After the close of
the comment period, the Agency will review and consider all comments
received and issue its final decision.

II.	Ecological Risk Concerns and Proposed Mitigation

	For more information about ecological risk concerns, please see EPA’s
“Comparative Ecological Risk Assessment for Nine Rodenticides”
(Erickson and Urban, 7/04), located in docket number
EPA-HQ-OPP-2006-0955 at   HYPERLINK "http://www.regulations.gov"
www.regulations.gov .

Background

In connection with the Federal Insecticide, Fungicide and Rodenticide
Act (FIFRA) section 4 reregistration requirements, EPA issued
Reregistration Eligibility Decisions (REDs) for the Rodenticide Cluster
and Zinc Phosphide in 1998.  Following the issuance of those REDs, EPA
developed a Comparative Ecological Risk Assessment for Nine Rodenticides
to further evaluate the potential for rodenticide bait products to pose
ecological risks to non-target birds and mammals.  The nine rodenticides
included in the Comparative Ecological Assessment are brodifacoum,
bromadiolone, difethialone, warfarin, chlorophacinone, diphacinone,
bromethalin, cholecalciferol and zinc phosphide.

The nine rodenticide active ingredients can be divided into three
categories: first-generation anticoagulants, which are warfarin,
chlorophacinone, diphacinone; second-generation anticoagulants, which
are brodifacoum, bromadiolone, and difethialone; and non-anticoagulants,
which are bromethalin, cholecalciferol and zinc phosphide.  The
anticoagulants interfere with blood clotting and death results from
hemorrhage, bromethalin is a nerve toxicant that causes respiratory
distress, cholecalciferol causes hypercalcemia (excessive calcium) in
the blood and other body tissues, and zinc phosphide causes liberation
of phosphine gas in the stomach.

All nine rodenticides are used in bait products to control rats and mice
in and around buildings.  Chlorophacinone, diphacinone, and zinc
phosphide also have field uses (e.g. in orchards and rangelands).
Brodifacoum and diphacinone have island conservation uses that are
managed by the FWS.

EPA’s comparative ecological risk assessment concludes that all nine
rodenticide active ingredients pose significant risks to non-target
wildlife when applied as grain-based bait products.  The risks to
wildlife are from primary exposure (direct consumption of rodenticide
bait) for all compounds and secondary exposure (consumption of prey by
predators or scavengers with rodenticide stored in body tissues) from
the anticoagulants.  Secondary exposure to the second-generation
anticoagulants is particularly problematic due to the compounds’ high
toxicity and long persistence in body tissues (liver retention
half-lives of greater than 300 days).  The second-generation
anticoagulants are designed to be toxic in “a single feeding,” but
since time-to-death is several days, the target rodent can feed multiple
times before death, leading to a carcass containing residues that may be
many times the lethal dose.  Additionally, the extended persistence in
the body of second-generation anticoagulants can result in additive
adverse effects from multiple feedings that are separated by days to
weeks.

		EPA’s comparative ecological risk assessment followed multiple lines
of evidence and concluded that the second-generation anticoagulants have
greater potential to adversely affect non-target wildlife, especially
birds, than the first-generation anticoagulants.  These lines of
evidence include acute toxicity, persistence of compounds in body
tissues of primary consumers (i.e., bait eaters), information from
laboratory and pen studies in which poisoned prey are fed to predators
or scavengers in various amounts for one or more days, data from field
trials and operational control programs, and wildlife mortality
incidents.  In some wildlife mortality incident reports, the
relationship between rodenticide exposure and incident outcome is not
established, although in many cases the examining toxicologist concluded
that a rodenticide likely caused or contributed to the mortality.

		Anticoagulants typically do not cause death until 4 to 10 days or more
after a lethal dose is ingested.  However, exposed individuals become
progressively weaker and lethargic due to blood loss, which may
contribute to the animal’s death, even where the proximate cause of
death may be identified as predation, disease, or automobile collision.
Even if a cause-effect relationship with rodenticides has not been
determined for many wildlife mortality incidents, the detection of
rodenticides in a wide variety of non-target wildlife, both birds and
mammals, confirms that exposure to the compounds has occurred.  As
discussed in EPA’s updated ecological incident report, several
monitoring programs have found that major portions of some non-target
animal populations are being exposed to second-generation anticoagulant
rodenticides.  The updated ecological incident report, “Rodenticide
Incidents Update” (Erickson, 11/15/06), may be obtained at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  under docket number
EPA-HQ-OPP-2006-0955.

Incident reports have identified many taxa of non-target animals exposed
to rodenticides, including strict carnivores such as mountain lions,
bobcats, hawks and owls; omnivores such as coyotes, foxes, skunks and
raccoons; and granivores and herbivores such as squirrels and deer.
EPA’s updated rodenticide ecological incident report documents
anticoagulant residues in 27 avian species and 17 mammalian species.
For some species (e.g. bobcats, foxes, great horned owls), carcasses
frequently contain residue of two or more anticoagulants, usually second
generation compounds.  In approximately 50% of those incidents, necropsy
results indicate that it is highly probable that a second-generation
anticoagulant was the cause of the death.

In the United States, only New York (NY State Department of
Environmental Conservation) has been actively tracking wildlife
mortality incidents associated with anticoagulants, but funding limits
analysis and reporting (many dead raptors still await necropsy and
residue analysis).  California (Department of Fish and Game) also has
reported numerous incidents, but currently has no monitoring program.
Analyses for anticoagulants are expensive and funding availability
limits wildlife mortality incident reporting.  There is no reason to
believe that wildlife mortality incidents associated with
second-generation anticoagulants are exclusive to these two states.
Therefore, EPA believes that widespread exposures to second-generation
anticoagulants are occurring wherever rodenticides are being used.
Moreover, residue analyses indicate that exposure is widespread in
non-target populations.  In New York, second-generation anticoagulants
were detected in 48% of 265 (15 species) diurnal raptors and owls
analyzed, including 81% of 53 great horned owls, 58% of 78 red-tailed
hawks, and 45% of 22 Eastern screech-owls.  In California,
second-generation anticoagulants were detected in 71% to 84% of the 106
bobcats, mountain lions, and San Joaquin kit foxes analyzed.

Additionally, second-generation anticoagulants have been identified as
an environmental issue in many countries, with Canada, the United
Kingdom, France, New Zealand, and the United States focusing on incident
monitoring and research results.  A recent one-day scientific meeting
was held in Montreal, following the November 2006 annual meeting of the
Society of Environmental Toxicology and Chemistry (SETAC), to discuss
the environmental impacts of the second-generation anticoagulants.

EPA’s Risk Mitigation Proposal to Decrease Risks to Wildlife

Based on an evaluation of the ecological risks associated with the use
of bait products containing any of the nine rodenticide active
ingredients, and consideration of the public health and other important
benefits of the use of rodenticide baits, EPA is proposing to classify
all bait products containing the active ingredients brodifacoum,
bromadiolone, and difethialone as restricted use pesticides pursuant to
FIFRA section 3(d).   Classifying bait products containing these
second-generation anticoagulants as restricted use pesticides would
limit their use to certified applicators who have had sufficient
training to know when to use the products and how to use them in order
to limit risks.  This risk mitigation measure would preserve the
availability of the second-generation anticoagulants to meet critical
public health needs in specific situations, but would result in marked
overall reduction in exposure to and adverse effects from those
compounds.

In addition, EPA is proposing to require that all outdoor, above-ground
placements of bait products containing second-generation anticoagulants
be contained in tamper-resistant bait stations, to deny non-target
animals ready access to rodenticide bait.  Most baits are grain-based
and are therefore attractive to many birds and non-target mammals; those
baits with flavor enhancers (e.g. fish flavors) might also attract
carnivores.  Currently, most rodenticide product labels require that
rodenticide baits which are placed outdoors and above ground be
contained in a tamper-resistant bait station if the bait placement would
be within reach of pets, domestic animals, non-target wildlife, or
children under six years-of-age.  According to the wildlife mortality
incident reports, non-target herbivorous wildlife such as deer and
squirrels are in fact being exposed, presumably from unprotected or
inadequately protected outdoor above-ground placements of unprotected
bait.  If these animals are in turn consumed by predators or scavengers
prior to elimination of rodenticide residues, additional animals would
be exposed beyond those exposed from eating the target species.
Therefore, the requirement of a tamper-resistant bait station is
expected to reduce overall non-target wildlife exposures and resulting
adverse effects.

Why “Indoor Use Only” Would Not Be Sufficiently Effective at
Mitigating Risks to Wildlife

EPA is not proposing to limit use of baits containing the
second-generation anticoagulants to indoor use even though such a
limitation has been suggested by some groups as an alternative
mitigation measure to minimize risk to wildlife.  EPA has concluded that
it is important to allow the use of second-generation anticoagulants in
outdoor areas by certified applicators.  There are certain public health
and sanitation situations such as urban alleys and trash collection
areas with many rodent food sources where compounds that can kill as the
result of a single feeding are useful for adequate rodent control.
Additionally, outdoor use is important in perimeter control in
agricultural and food warehouse settings, and in certain wildlife
recovery programs where rodent eradication is crucial.  An
indoor-use-only restriction would preclude adequate control in these
situations.

Additionally, an indoor-use-only limitation would reduce primary
exposures to non-target animals, but would not decrease secondary
exposures.  Because rodents move in and out of indoor spaces, a rodent
exposed to a rodenticide bait indoors may be preyed upon or die
outdoors, which may result in secondary exposures.  Since EPA has, for
many years, registered rodenticides for use “in and around” human
structures, residential users may not consistently comply with an
indoor-use only limitation.  Since rodents do come in from the outdoors,
baiting around the home, garage, patio, woodpile, and other similar
outdoor areas is often an effective way to target unwanted rodents.
However, baiting “around” structures may result in primary as well
as secondary exposures since many non-target animals such as small
seed-eating birds, opossums, raccoons, skunks, and deer frequently occur
around buildings.  By making bait products containing second-generation
anticoagulants restricted use pesticides, only certified applicators
would be allowed to make outdoor bait placements, which would decrease
the likelihood of misapplication.  EPA’s proposed risk mitigation
would still allow residential users to bait “in and around” their
structures with rodenticide products containing active ingredients that
are less likely to harm non-target wildlife, and, pursuant to another
mitigation measure discussed below, in tamper-resistant bait stations.

Sublethal Effects

There is ongoing research into the effects of sublethal doses of
anticoagulants on non-target wildlife and the consequences of the highly
persistent second-generation anticoagulants to bioaccumulate from repeat
exposures to one or more compounds.  Whether single or repeat sublethal
exposures cause adverse effects, such as impacts on reproduction or
behavior, are questions which are yet to be answered.  As EPA’s
proposed mitigation measures are targeted at reducing non-target
wildlife exposures to rodenticides, they are expected to reduce the
extent and severity of any sublethal effects in non-target wildlife.

Endangered Species

	Several reported incidents have involved endangered species, including
San Joaquin kit foxes, Northern spotted owls, and bald eagles.

	California incident records contain evidence of exposure and mortality
of endangered kit foxes in California.  Anticoagulant residues were
detected in 27 of 32 kit fox carcasses, and many showed signs of
extensive hemorrhage upon necropsy.  Brodifacoum was detected in all 27
carcasses, and several had residues of two or more anticoagulants.

The FWS issued a biological opinion on eight of the rodenticides in
1993.  The opinion does not include difethialone, which was first
registered in 1995.  The jeopardy determinations for the individual
compounds primarily recommend prohibiting use in habitat occupied by
listed species and requiring tamper-resistant bait stations for outdoor
placements for some uses.  The jeopardy determinations can be found in
EPA’s “Comparative Ecological Risk Assessment for Nine
Rodenticides” (Erickson and Urban, 7/2004), available under docket
number EPA-HQ-OPP-2006-0955 at www.regulations.gov.

In 2005, EPA and FWS entered an informal consultation phase for all nine
rodenticides.  Since rodenticide use is widespread and secondary
exposure issues with these compounds are complex and include migratory
species, the Federally-defined action area may be extensive.  EPA and
FWS will be working together to determine an appropriate plan of action
for the rodenticides.  Meanwhile, the mitigation measures proposed in
this document should have the beneficial effect of reducing non-target
wildlife exposures to rodenticides, and thus limiting the scope of the
endangered species risk assessment work, particularly for the
second-generation anticoagulants.

III.		Children’s Exposure and Proposed Mitigation

Background

	EPA issued REDs for the Rodenticide Cluster and Zinc Phosphide in 1998.
 In those REDs, the Agency expressed concern about reported exposures of
children to rodenticides.  The REDs articulated the Agency’s
determination that rodenticide bait products (other than those used
exclusively at agricultural sites) were eligible for reregistration only
if certain measures were adopted to reduce risks of harm to children.
Among these mitigation measures, EPA specified two interim measures:
changing product formulations to incorporate a bittering agent and an
indicator dye.  The bittering agents were expected to make the baits
less palatable to children, and the indicator dyes were expected to show
whether a child had come into contact with a rodenticide product by
leaving a stain on a child’s mouth or hands.  These interim measures
were intended to reduce risks while new technologies for preventing
exposure were assessed by a stakeholder group.

In 1999, EPA formed the Rodenticide Stakeholders Workgroup (RSW) as a

subcommittee under the federally-chartered advisory body, the Pesticide
Program Dialogue Committee (PPDC), to consider the risks to children of
accidental rodenticide exposure and potential measures to reduce such
exposures.  The RSW membership was drawn from a broad range of
stakeholders and government representatives, including EPA, CDC, USDA,
the medical community, the rodenticide industry, public interest groups,
and members of the general public.  The RSW met five times in 1999, and
ultimately issued a report recommending that EPA drop the indicator dye
requirement due to the lack of suitable dye, and drop the bittering
agent requirement due to its potential adverse effect on the efficacy of
rodenticide baits.  The report recommended that EPA allow manufacturers
to include the bittering agents on a voluntary basis.  The Agency
adopted the RSW’s recommendations, and in November 2001, EPA issued a
Federal Register notice announcing that it was amending the two
rodenticide REDs to allow reregistration of rodenticide bait products
without requiring the incorporation of a bittering agent and indicator
dye.

Since 2001, many rodenticide registrants have voluntarily incorporated a
bittering agent into rodenticide products.  The Agency maintains,
however, that there are some situations involving severe pest pressure
and/or substantial competing food sources when products without a
bittering agent may be required.  EPA’s decision not to require
inclusion of bittering agents in all rodenticides provides flexibility
for such situations.

In November 2004, West Harlem Environmental Action and the Natural
Resources Defense Council filed suit in the District Court for the
Southern District of New York, challenging EPA’s 2001 reversal of its
1998 determination that rodenticide bait products posed an unreasonable
risk of harm to children unless they contained a bittering agent and an
indicator dye.  In August 2005, the District Court upheld EPA’s 2001
determination that an indicator dye should not be required.  But the
court reversed EPA’s decision to rescind the bittering agent
requirement, and remanded the decision to EPA “for further
consideration consistent with this opinion.”

The court’s decision in 2005 has given focus to the Agency’s ongoing
efforts to determine how best to reduce exposure and risks to children
from rodenticide products.  EPA has observed that since 1993, the
American Association of Poison Control Centers (AAPCC) has reported
approximately 12,000 to 15,000 annual rodenticide exposures to children
6 years old or younger.  The AAPCC data fortunately shows that only a
small number of exposed children experience medical symptoms or suffer
adverse health effects as a result of their exposure.  Nonetheless, the
Agency believes that the number of exposure incidents is unacceptably
high because of the social costs associated with treating children who
might have been exposed, and the emotional toll of suspected exposure
incidents.  For more information about human incident data, please refer
to the following EPA documents, available at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  under docket number
EPA-HQ-OPP-2006-0955: “Updated Review of Poison Control Center Data
for Residential Exposures to Rodenticides” (Blondell, 3/22/99);
“Updated Review of Rodenticide Incident Reports Primarily Concerning
Children” (Blondell, 6/3/99); and “Updated Review of Rodenticide
Incident Reports Primarily Concerning Children” (Hawkins and Allender,
1/09/07).

EPA is concerned about children’s exposures to rodenticides, and
believes that a bittering agent is an inadequate means to address the
problem because the substance can only be tasted after the bait already
is in a child’s mouth.  The frequency of children’s exposure to
rodenticides has remained relatively constant over recent years, despite
the fact that the percentage of rodenticide bait products on the market
containing bittering agents has increased substantially.  This result is
not surprising given that bittering agents do not prevent the initial
exposure, but at most would decrease the amount of rodenticide bait a
child would consume by rendering the bait less palatable.

EPA’s Risk Mitigation Proposal to Decrease Children’s Exposure to
Rodenticides

EPA believes that the large number of children exposed to rodenticide
bait products is too high, and that more stringent requirements are
needed.  Rodenticide product labels currently direct users to apply
rodenticide bait products in locations inaccessible to children, and if
that is not possible, to place bait in a tamper-resistant bait station.
However, the high number of children exposed to rodenticide bait
products indicates that these label instructions are not sufficiently
effective in keeping rodenticide bait products inaccessible to children.
 Because a large portion of the rodenticide baits used in the home
environment are consumer products applied by residential users, EPA
believes that a major cause of the child exposure incidents is
residential users’ failure to adequately comply with label directions
to apply rodenticide bait products in locations inaccessible to children
or in  tamper-resistant bait stations.

For this reason, the Agency is proposing a requirement that any
rodenticide bait product available for sale to a consumer must be sold
in a tamper-resistant bait station, with solid bait blocks as the only
permissible bait.  Under this proposal, tamper-resistant bait stations
would be sold pre-loaded with bait blocks, and could be packaged for
sale with additional bait block refills.  Solid bait blocks would be the
only form of rodenticide bait approved for use in tamper-resistant bait
stations for the consumer market.  Pellets, grain baits, seed baits, and
other types of loose rodenticide bait products would not be permissible
for consumer products because of the potential for loose bait to be
scattered or shaken from a bait station, and the potential for a rodent
to move the bait outside of the bait station.

In 1994, EPA articulated the performance features required for indoor
and outdoor bait stations to be considered to be “tamper-resistant.”
 The following eight criteria for tamper-resistant bait stations were
set forth in Pesticide Registration (PR) Notice 94-7:

Resistant to destruction or weakening by elements of typical
non-catastrophic weather (e.g., snow, rain, extremes of temperature and
humidity, direct sunshine, etc.);

Strong enough to prohibit entry or destruction by dogs and by children
under six years of age using their hands, their feet, or objects
commonly found in the use environment (e.g., sticks, stones, broken
glass, etc. – stations stronger than “tamper-resistant” are needed
in areas frequented by hoofed livestock, raccoons, bears, other
potentially destructive animals, or in areas prone to vandalism);

Capable of being locked or sealed so that children and non-target
animals cannot gain access through the opening or procedures used to
fill the bait compartment(s);

Equipped with rodent entrances which a) readily allow target animals
access to baits, b) deny such access to other animals larger than adults
of the target species, and c) discourage entry by birds.  Means for
achieving these ends might include use of baffles, mazes, or small
entrances;

Capable of being anchored securely to resist efforts to move the station
or to displace its contents, or equipped with a mechanism which
virtually prevents bait from being shaken out of the station after it
has been moved;

Equipped with internal structures for containing baits and minimizing
spillage and tracking of bait outside of the station or into readily
accessible parts of the station;

Made of a design and color that is not especially attractive to
children; and

Capable of displaying precautionary statements in a prominent location.

The Agency believes that the tamper-resistant criteria from PR Notice
94-7 remain appropriate for rodenticide bait products, except that EPA
is proposing to make Criterion 5 optional for bait stations designed for
use in and around homes.  The Agency believes that rodenticide bait
stations for use in and around homes would not need to be anchored
because, under the mitigation proposal, rodenticide bait stations used
by consumers would only be permitted to contain active ingredients
formulated in bait blocks that could not be shaken out of the bait
station.  Loose bait that could be shaken out of a bait station would no
longer be permissible for use by consumers in residential settings.
Moreover, EPA believes that most consumers would be unlikely to comply
with instructions to anchor or affix a bait station to indoor floor
surfaces due to the potential for damage to those surfaces.

EPA expects that its proposal to require tamper-resistant bait stations
for all consumer rodenticide bait products with uses in and around homes
would dramatically decrease the number of children who are exposed to
rodenticide products each year.  The Agency believes that most exposure
incidents are due to inadequate protection of baits applied in areas
accessible to children.  Non-professional users often apply rodenticide
baits in open containers or in ready-to-use, nonprotective cardboard
packaging.  Most rodenticide bait products currently on the consumer
market are packaged in thin cardboard trays with pop-up lids or in
“place packs” (plastic, cellophane, or paper packets containing
bait).  EPA believes that these types of packaging may contribute
significantly to the high number of exposures to children reported each
year to the AAPCC.  By removing these products from the consumer market,
EPA’s mitigation proposal should significantly decrease the number of
rodenticide exposures to children.

Antidote Issue

Vitamin K is an antidote to treat exposure to first-generation or
second-generation anticoagulant rodenticides.  There are no true
antidotes for the non-anticoagulant rodenticides (bromethalin,
cholecalciferol, and zinc phosphide), but there are effective medical
treatments designed to lessen absorption and/or to address symptoms.

It has been suggested by some groups that the proposed regulatory
measures to prohibit the sale of second-generation anticoagulant
products on the consumer market in order to mitigate ecological risks
would result in greater risks to children because consumers would be
forced to buy rodenticides for which there are no antidotes.  The Agency
disagrees with this assertion for three reasons.  First, there are
antidotes for the three first-generation anticoagulants
(chlorophacinone, diphacinone, and warfarin), and the Agency believes
that these active ingredients are appropriate for use in consumer
products.  Second, if antidote treatment is necessary following exposure
to a first-generation anticoagulant, a single dose of Vitamin K is often
sufficient, whereas antidote therapy following exposure to a
second-generation anticoagulant may require repeated doses of Vitamin K
(due to the fact that the second-generation anticoagulants are more
toxic and persistent than the first-generation anticoagulants).  Third,
the Agency believes that the vast majority of exposures to children will
be prevented if the proposed requirement for tamper-resistant bait
stations is implemented.

V.	Label Improvement Measures

Independent of the mitigation measures discussed above, EPA is currently
considering specific labeling improvements to make rodenticide labels
clearer and more understandable.  In particular, the Agency is focused
on labeling changes that would provide clearer direction to consumers on
how to use rodenticide products in order to minimize potential exposure
to children, wildlife, and pets.  The Agency has concluded, however,
that labeling enhancements alone would not mitigate the risks to
children and wildlife to a sufficient degree.

EPA has received a stewardship proposal from the Rodenticide Registrants
Task Force (RRTF), which articulates the industry’s suggestions for
rodenticide labeling improvements.  (The RRTF’s stewardship proposal
may be found in docket number EPA-HQ-OPP-2006-0955 at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov .)  After the Agency
reviews the public comments received on the proposed risk mitigation
measures described in this document and reaches a final decision on
those risk mitigation measures, EPA will then complete its evaluation of
the proposed label improvement measures and determine the specific
labeling changes that will be required.

VI.	Impacts of EPA’s Mitigation Proposal

For more detailed information about the potential impacts of EPA’s
proposed risk mitigation for rodenticide bait products, please see
EPA’s “Impact Assessment for Proposed Rodenticide Mitigation,”
(Chiri et al., 9/20/06), located in the rodenticide docket
(EPA-HQ-OPP-2006-0955) on the internet at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov .

Impacts of Proposed Restricted Use Classification to Address Ecological
Risks

	As described in Section II of this document, EPA is proposing to
classify all rodenticide bait products containing the active ingredients
brodifacoum, bromadiolone, and difethialone as restricted use pesticides
under FIFRA section 3(d).  The intended beneficial impact of the
proposed mitigation would be a significant reduction in the risk of
secondary exposures to wildlife, a reduction in primary risks to
non-target animals (especially small birds) where small amounts of
second generation anticoagulants can be lethal, and a decrease in the
number of wildlife incidents caused by rodenticide exposure, as
described in Section II.

	EPA has concluded that requiring rodenticide bait products containing
second-generation anticoagulants to be classified as restricted use
pesticides should not have an adverse impact on residential users in
terms of significantly increased costs or decreased effectiveness.  EPA
believes costs to residential users will not increase unduly because
such users will still be able to purchase rodenticide baits (in bait
stations) containing first-generation anticoagulant and
non-anticoagulant active ingredients.  The Agency believes that
consumers’ selection of rodenticide products is primarily driven by
trade names and not by the active ingredients contained in the baits.
As public health pesticides, all rodenticide products must demonstrate
basic efficacy prior to registration.  Therefore, EPA further believes
that the replacement of second-generation anticoagulants with
first-generation anticoagulants will not significantly affect
residential users’ capability to control commensal rodents because the
first-generation anticoagulants are sufficiently efficacious for typical
residential settings.

For those residential settings where second-generation anticoagulants
provide a distinct advantage, these products would still be available
from certified applicators.  Although hiring certified applicators is
significantly more expensive than purchasing consumer use products, EPA
believes that the vast majority of the residential settings that would
require the use of second-generation anticoagulants are high-occupancy
buildings that are already likely to be relying on professional pest
control companies, which can provide certified applicators with little,
if any, increase in cost.  EPA anticipates that any cost increase that
might result from this risk mitigation measure would be outweighed by
the anticipated reductions in exposures to non-target animals.

Resistance to the first-generation anticoagulants has been reported in
the past, and recently there have been some reports of resistance to the
second-generation anticoagulants.  Integrated Pest Management (IPM)
experts have demonstrated that this resistance can be controlled by
withdrawing the rodenticides for at least thirty days, by alternatively
using bait and non-bait techniques, or by alternating between
rodenticides with different modes of action.  EPA’s proposed risk
mitigation leaves a variety of compounds available for rodent control.
The topics of resistance, resistance management, and Integrated Pest
Management techniques are discussed in detail in “Analysis of
Rodenticide Bait Use” (Chiri et al., 1/23/06), which may be found in
docket number EPA-HQ-OPP-2006-0955 at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov .

Impacts of Proposed Requirement for Tamper-Resistant Bait Stations for
All Outdoor, Above-Ground Placements of Bait Products Containing
Second-Generation Anticoagulants to Address Ecological Risks

EPA is proposing to require that all outdoor, above-ground placements of
bait products containing second-generation anticoagulants be contained
in tamper-resistant bait stations, to prevent access to rodenticide bait
by non-target animals.  The intended beneficial impact of this proposed
mitigation measure would be a reduction in primary risks to non-target
animals (especially small birds) where small amounts of second
generation anticoagulants can be lethal, and a decrease in the number of
wildlife incidents caused by rodenticide exposure, as described in
Section II.

EPA anticipates that this mitigation measure will not result in an
increased cost for rodent control performed by certified applicators
(the only permissible applicators of second-generation anticoagulants,
under this mitigation proposal) because EPA believes that certified
applicators have, and likely are already using, tamper-resistant bait
stations in many situations.  Requiring the use of tamper-resistant bait
stations in all situations, rather than leaving the decision to the
applicator’s discretion, should not result in a cost increase to
certified applicators or those using the services of a certified
applicator.

Impacts of Proposed Requirement for Tamper-Resistant Bait Stations to
Address Children’s Exposure to Rodenticides

	EPA is proposing to require that all consumer-use rodenticide bait
products labeled for use in and around residences be available only in
tamper-resistant bait stations containing active ingredients formulated
in bait blocks.

An anticipated adverse impact of the proposed risk mitigation is
increased cost for rodent control for consumers who choose rodenticide
baits, because EPA believes that rodenticide manufacturers are likely to
pass onto consumers the additional cost to develop and produce
tamper-resistant bait stations.  The Agency estimates that the increased
cost to consumers who continue to use rodenticide products would be
between $0.50 and $10.01 per household per year for mouse control, and
between $2.34 and $46.84 per household per year for rat control.  EPA
has concluded that this small potential cost increase will not impede
the public’s access to rodent control tools because residential users
who are unable or unwilling to buy rodenticide baits will be able to use
other affordable alternative methods, such as snap traps and glue
boards.  Below is a table of estimated costs per household for different
types of rodent control methods.  These cost estimates are discussed in
more detail in EPA’s “Impact Assessment for Proposed Rodenticide
Mitigation,” (Chiri et al., 9/20/06), located in the rodenticide
docket (EPA-HQ-OPP-2006-0955) on the internet at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov .

Rodent Control Options	Mice	Rats

	Cost per household per year	Cost per household per year

Current cost of rodenticide	$0.60 - $2.40	$1.20 - $4.80

Bait station plus rodenticide bait block (EPA’s current risk
mitigation proposal)	$1.10 - $12.41	$3.54 - $51.64

Snap Trap/Glue Trap 	$0.28 - $5.58	$0.56 - $11.24

Pest Control Operator	$254.00 - $254.00	$254.00 - $254.00

The intended beneficial impact of the proposed mitigation would be a
significant reduction in the number of incidents of rodenticide exposure
to children, which would result in both health and social benefits, as
described in Section III.

New York State Health Department data from 1990-1997 show that
African-American and Latino children and children living below the
poverty level are disproportionately exposed to rodenticides.
Fifty-seven percent of children hospitalized for rodenticide exposure in
New York during those years were African-American, although only 16% of
New York State’s population in 1990 was African-American; 26% of
hospitalized children were Latino, while Latinos comprised only 12% of
the State’s population in 1990; and 17.5% of the children hospitalized
for rodenticide exposure were below the poverty level, while children
living below the poverty level comprised only 13% of the State’s
population in 1990.  These data are further discussed in EPA’s
“Updated Review of Rodenticide Incident Reports Primarily Concerning
Children” (Blondell, 6/3/99), available at   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  under docket number
EPA-HQ-OPP-2006-0955.  EPA’s proposed risk mitigation measures would
significantly reduce the likelihood of rodenticide exposure to children,
including those populations of children who may be disproportionately at
risk for exposure.

EPA has concluded that the expected reduction in children’s exposure
to rodenticide bait products outweighs the estimated cost increase due
to the requirement for tamper-resistant bait stations.

Integrated Pest Management (IPM) Necessary for Effective Rodent Control

EPA believes that the proposed risk mitigation measures will not affect
the ability of residential users or professional pest control operators
to control rodents, because fully effective rodent control products
would remain available and affordable.  In most situations, it is not
possible to control commensal rodents with rodenticides alone.  In
addition to trapping or baiting, rodent control requires sanitation,
rodent-proofing, and removal of rodent harborage.  Without habitat
modification to make areas less attractive to commensal rodents, even
eradication will not prevent new populations from recolonizing the
habitat.  The term Integrated Pest Management (IPM) is used to describe
multi-faceted approaches for pest control.  For urban pest control,
including rodent control, IPM has been defined as “the coordinated use
of pest and environmental information with available pest suppression
methods to prevent unacceptable levels of pest damage by the most
economical means and with the least possible hazard to people, property,
and the environment.”  EPA’s document “Analysis of Rodenticide
Bait Use” (Chiri et al., 1/23/06) details IPM programs in three
cities, as well as alternate means of rodent control which may be used
in an IPM program.  The document may be found in docket number
EPA-HQ-OPP-2006-0955 at   HYPERLINK "http://www.regulations.gov"
www.regulations.gov .  For additional information about IPM, please
refer to   HYPERLINK "http://www.epa.gov/pesticides/factsheets/ipm.htm"
www.epa.gov/pesticides/factsheets/ipm.htm .

The CDC, as part of the Department of Health and Human Services,
monitors diseases and disease-causing agents and advises the public on
disease control and prevention.   The CDC and EPA’s Office of
Pesticide Programs work closely to develop risk mitigation measures on
public health pesticides.  EPA has consulted with CDC on the risk
mitigation measures for rodenticides described in this document, and
will continue this consultation as EPA develops its final risk
mitigation decision on the rodenticides.

EPA has developed partnerships with the CDC and the Department of
Housing and Urban Development (HUD) to promote IPM in low-income housing
and other setting where pest pressures are significant.  Activities
carried out under these partnerships include:

issuance of a HUD order that strongly encourages the use of IPM for pest
control in low income housing;

development of HUD guidance and fact sheets on IPM in multi-family
housing;

collaboration with CDC on “Rodent Control Academies” developed to
provide basic training on IPM or rodent control and foster greater
cooperation among city agencies in strategic approaches to rodent
control;

integration of IPM into training courses offered by federally funded
entities including the National Center for Healthy Housing and the
National Environmental Health Association;

funding research for assessing health outcomes associated with IPM
interventions; and

funding IPM demonstration projects in multi-family housing and other
sites with significant pest pressures.

The CDC maintains a website to advise the public about rodent control at
   HYPERLINK "http://www.cdc.gov/rodents/"  http://www.cdc.gov/rodents/
.  This website provides excellent advice about urban and surburban
commensal rodent control.  The CDC also provides public health
continuing education and has a program, titled “Managing Rodents and
Mosquitoes through Integrated Pest Management,” available on webcast
at   HYPERLINK "http://www2.cdc.gov/phtn/ipm/default.asp"
http://www2.cdc.gov/phtn/ipm/default.asp .

Debra Edwards, Ph.D., Director

Special Review and Reregistration Division

 As an alternative to restricted use classification, the Rodenticide
Registrant’s Task Force (RRTF) has proposed a label statement
restricting to certified applicators (or those working under their
supervision) the outdoor use of rodenticide bait products containing the
nine active ingredients covered in this proposal.  The Agency has
concluded that it is not appropriate to include on the label of a
non-restricted use product any language suggesting that use is limited
to certified applicators.  EPA believes that “for use only by” label
statements such as the one proposed by the RRTF are not enforceable and
create no obligations on sellers or enforcement agencies.  For
additional information on this issue, please refer to the “For Use
Only By” issue paper, prepared by the EPA Office of Pesticide
Programs’ Labeling Committee, which is available on the EPA website at
  HYPERLINK
"http://www.epa.gov/pesticides/regulating/labels/projects.html"
www.epa.gov/pesticides/regulating/labels/projects.html .

 The RSW also considered tamper-resistant bait stations, but because
there were no ready-to-use bait stations on the market that that
appeared to meet EPA’s criteria for tamper-resistance, the RSW
recommended against requiring tamper-resistant bait stations.

 Under this mitigation proposal, bait block refills would not be
available for sale unless packaged together with at least one bait
station.

 The criteria in PR Notice 94-7 apply to bait stations that are sold
separately from rodenticide bait products and to bait stations that
applicators might construct for their personal use so as to make bait
placements that are compliant with label requirements.

 Frantz, S.C.  1996.  Integrated pest management in New York State.  IPM
Practitioner.  18(2):8-10.

 PAGE

 PAGE   1


[Federal Register Volume 79, Number 151 (Wednesday, August 6, 2014)]
[Notices]
[Pages 45852-45857]
[FR Doc No: 2014-18533]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72728; File No. SR-NASDAQ-2014-059]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Order
Granting Approval of Proposed Rule Change, as Modified by Amendment No.
1 Thereto, Relating to the Listing and Trading of the Shares of the
Global X Commodities ETF of Global X Funds

July 31, 2014.

I. Introduction

    On May 28, 2014, The NASDAQ Stock Market LLC (``Exchange'' or
``Nasdaq'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade shares
(``Shares'') of Global X Commodities Strategy ETF (``Fund'') under
Nasdaq Rule 5735. The proposed rule change was published for comment in
the Federal Register on June 16, 2014.\3\ On June 27, 2014, the
Exchange filed Amendment No. 1 to the proposed rule change.\4\ The
Commission received no comments on the proposal. This order grants
approval of the proposed rule change, as modified by Amendment No. 1
thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 72357 (June 10,
2014), 79 FR 34376 (``Notice'').
    \4\ In Amendment No. 1, the Exchange clarified which subsections
of Nasdaq Rule 5711 are specifically applicable to pooled investment
vehicles that invest primarily in commodities and commodity-linked
instruments. See infra note 10. Because Amendment No. 1 is technical
in nature, the Commission believes that Amendment No. 1 is not
subject to notice and comment.
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II. Description of the Proposal

    Nasdaq proposes to list and trade Shares of the Fund under Nasdaq
Rule 5735, which governs the listing and trading of Managed Fund Shares
on the Exchange. The Shares will be offered by Global X Funds
(``Trust''), which was established as a Delaware statutory trust on
March 6, 2008.\5\ The Trust is registered with the Commission as an
investment company and has filed a registration statement on Form N-1A
(``Registration Statement'') with the Commission.\6\ Global X
Management Company LLC will be the investment adviser (``Adviser'') and
administrator (``Administrator'') to the Fund. The Fund and the Adviser
will contract with an investment sub-adviser (``Sub-Adviser'') to
provide day-to-day portfolio management of the Fund.\7\ SEI Investments
Distribution Company will be the principal underwriter and distributor
of the Fund's Shares, and Brown Brothers Harriman (``Custodian'') will
act as the custodian and transfer agent to the Fund.
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    \5\ According to the Exchange, the Trust will obtain from the
Commission an order granting certain exemptive relief under the
Investment Company Act of 1940 (``1940 Act'') (File No. 812-14241).
In compliance with Nasdaq Rule 5735(b)(5), which applies to Managed
Fund Shares based on an international or global portfolio, the
Trust's application for exemptive relief under the 1940 Act states
that the Fund will comply with the federal securities laws in
accepting securities for deposits and satisfying redemptions with
redemption securities, including that the securities accepted for
deposits and the securities used to satisfy redemption requests are
sold in transactions that would be exempt from registration under
the Securities Act of 1933.
    \6\ See Registration Statement on Form N-1A for the Trust dated
May 23, 2014 (File No. 811-22209).
    \7\ The Exchange represents that the Adviser is not registered
as a broker-dealer and is not affiliated with a broker-dealer. In
the event (a) the Adviser registers as a broker-dealer or becomes
newly affiliated with a broker-dealer; or (b) the Sub-Adviser, any
new adviser or new sub-adviser is a registered broker-dealer or
becomes affiliated with a broker-dealer, such Adviser, Sub-Adviser,
or new adviser or sub-adviser, as the case may be, will implement a
fire wall with respect to its relevant personnel or such broker-
dealer affiliate, as applicable, regarding access to information
concerning the composition of and changes to the portfolio and will
be subject to procedures designed to prevent the use and
dissemination of material, non-public information regarding the
portfolio.
---------------------------------------------------------------------------

    The Exchange has made the following representations and statements
in describing the Fund and its investment strategy, including other
portfolio holdings and investment restrictions.\8\
---------------------------------------------------------------------------

    \8\ The Commission notes that additional information regarding
the Fund, the Trust, and the Shares, including investment
strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions, and taxes,
among other things, can be found in the Notice and the Registration
Statement, as applicable. See Notice, supra note 3, and Registration
Statement, supra note 6 and accompanying text, respectively.
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A. Investment Strategy

    According to the Exchange, the Fund will be an actively managed ETF
that will seek to achieve a total return that exceeds that of the
Credit Suisse Composite Commodities Index (``Benchmark''),\9\
consistent with

prudent investment management. The Exchange represents that the
Benchmark is a monthly rebalancing, long-only, fully collateralized
futures index that offers multi-sector exposure to energy, industrial
metals, precious metals, and agricultural commodities. It is a total
return index that measures the hypothetical returns on an
uncollateralized investment in certain futures contracts, plus the
interest that could be earned on the funds committed to a
collateralized investment in such contracts. In general, the Fund will
pursue its objective by seeking to invest in commodity-linked futures--
in similar weightings to the Benchmark--and in other commodity-linked
instruments. The Fund's investments in commodity-linked futures and
other commodity-linked instruments will be backed by an actively
managed, low-volatility portfolio of fixed income instruments.
Specifically with respect to the commodity-linked futures and other
commodity-linked instruments holdings, the Fund will indirectly invest
in exchange-traded futures contracts and exchange-traded commodity-
linked instruments \10\ (collectively, ``Commodities'') through a
wholly-owned subsidiary controlled by the Fund and organized under the
laws of the Cayman Islands (``Subsidiary'').\11\ The Fund will not be
an ``index tracking'' ETF and will not be required to invest in all of
the components of the Benchmark. The Fund will generally seek to hold
through the Subsidiary similar instruments to those included in the
Benchmark and seek to gain exposure to commodities included in the
Benchmark. The Exchange states that the Fund will invest in Commodities
only through the Subsidiary.
---------------------------------------------------------------------------

    \9\ The Exchange represents that the Benchmark is developed,
maintained, and sponsored by Credit Suisse International (``CS''),
which is not a U.S. registered broker-dealer, but is affiliated with
a broker-dealer and, with respect to such broker-dealer affiliate,
has implemented a fire wall and procedures designed to prevent the
illicit use and dissemination of material, non-public information
regarding the Benchmark. The Fund will not be sponsored, endorsed,
sold, or promoted by CS. CS's only relationship to the Fund will be
the licensing of certain service marks and service names of CS and
of the Benchmark, which will be determined, composed, and calculated
by CS without regard to the Adviser, the Sub-Adviser, or the Fund.
CS will have no obligation to take the needs of the Adviser, the
Sub-Adviser, or the Fund into consideration in determining,
composing, or calculating the Benchmark.
    \10\ Exchange-traded commodity-linked instruments include: (1)
exchange-traded funds (``ETFs'') that provide exposure to
commodities as would be listed under Nasdaq Rules 5705 and 5735; and
(2) pooled investment vehicles that invest primarily in commodities
and commodity-linked instruments as would be listed under Nasdaq
Rules 5710 and 5711(b), (d), (f), (g), (h), (i), and (j). Such
pooled investment vehicles are commonly referred to as ``exchange-
traded funds,'' but they are not registered as investment companies
because of the nature of their underlying investments. See infra
note 16 (providing additional information and descriptions about
ETFs, in general, and ETFs to be held by the Fund, in particular).
    \11\ The Exchange represents that, as a result of the
instruments that will be indirectly held by the Fund, the Adviser
will register as a commodity pool operator (as defined in Section
1a(11) of the Commodity Exchange Act) and will also be a member of
the National Futures Association (``NFA''). The Exchange represents
that the Sub-Adviser will register as a commodity pool operator or
commodity trading adviser, as required by the Commodity Futures
Trading Commission (``CFTC'') regulations and that the Fund and the
Subsidiary will be subject to regulation by the CFTC and NFA and
additional disclosure, reporting, and recordkeeping rules imposed
upon commodity pools.
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B. Principal Investments of the Fund

    The Fund will be an actively managed ETF that will seek to achieve
a total return that exceeds that of the Benchmark. The Exchange states
that under normal market conditions,\12\ the Fund will invest in
Commodities through the Subsidiary. The Fund's investment in the
Subsidiary may not exceed 25% of the Fund's total assets. The remainder
of the Fund's assets will be invested in: (1) Short-term, investment
grade fixed income securities that include U.S. government and agency
securities,\13\ corporate debt obligations, and repurchase agreements;
\14\ (2) money market instruments; \15\ (3) ETFs (other than those that
are commodity-linked instruments) \16\ and other investment companies
registered under the 1940 Act, including exchange-traded closed-end
funds, that provide exposure to commodities, equity securities, and
fixed income securities to the extent permitted under the 1940 Act and
any applicable exemptive relief; (4) certain bank instruments; \17\ and
(5) cash and other cash equivalents. In addition, the Fund may enter
into foreign currency transactions on a spot (i.e., cash) basis.
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    \12\ The Exchange states that the term ``under normal market
conditions'' includes, but is not limited to, the absence of extreme
volatility or trading halts in the fixed income markets, futures
markets, or the financial markets generally; operational issues
causing dissemination of inaccurate market information; or force
majeure type events such as systems failure, natural or man-made
disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption, or any similar intervening circumstance.
    \13\ These securities will include securities that are issued or
guaranteed by the U.S. Treasury, by various agencies of the U.S.
government, or by various instrumentalities that have been
established or sponsored by the U.S. government. U.S. Treasury
obligations are backed by the ``full faith and credit'' of the U.S.
government. Securities issued or guaranteed by federal agencies and
U.S. government-sponsored instrumentalities may or may not be backed
by the full faith and credit of the U.S. government.
    \14\ The Exchange states that the Fund intends to enter into
repurchase agreements only with financial institutions and dealers
believed by the Adviser to present minimal credit risks in
accordance with criteria approved by the Trust's Board of Trustees
(``Board''). The Adviser will review and monitor the
creditworthiness of such institutions and will monitor the value of
the collateral at the time the transaction is entered into and at
all times during the term of the repurchase agreement.
    \15\ Money market instruments will include: short-term, high-
quality securities issued or guaranteed by non-U.S. governments,
agencies, and instrumentalities; non-convertible corporate debt
securities with remaining maturities of not more than 397 days that
satisfy ratings requirements under Rule 2a-7 under the 1940 Act;
money market mutual funds; and deposits and other obligations of
U.S. and non-U.S. banks and financial institutions. In addition, the
Fund may invest in commercial paper, which are short-term unsecured
promissory notes. The Fund may invest in commercial paper only if it
has received the highest rating from at least one nationally
recognized statistical rating organization or, if unrated, has been
judged by the Adviser to be of comparable quality.
    \16\ See supra note 10 and accompanying text. In general, an ETF
is an investment company registered under the 1940 Act that holds a
portfolio of securities. Many ETFs are designed to track the
performance of a securities index, including industry, sector,
country, and region indexes. The Exchange represents that the ETFs
included in the Fund will be listed and traded in the U.S. on
registered exchanges. According to the Exchange, the Fund may invest
in the securities of ETFs in excess of the limits imposed under the
1940 Act pursuant to exemptive orders obtained by other ETFs and
their sponsors from the Commission. In addition, the Fund may invest
in the securities of certain other investment companies in excess of
the limits imposed under the 1940 Act pursuant to an exemptive order
obtained by the Trust and the Adviser from the Commission. See
Investment Company Act Release No. 30454 (Apr. 9, 2013) (File No.
812-14079). The ETFs in which the Fund may invest include Index Fund
Shares (as described in Nasdaq Rule 5705), Portfolio Depository
Receipts (as described in Nasdaq Rule 5705), and Managed Fund Shares
(as described in Nasdaq Rule 5735). While the Fund and the
Subsidiary may invest in inverse commodity-linked instruments, the
Fund and the Subsidiary will not invest in leveraged or inverse
leveraged (e.g., 2X or -3X) commodity-linked instruments.
    \17\ The Fund may invest in certificates of deposit issued
against funds deposited in a bank or savings and loan association.
In addition, the Fund may invest in bankers' acceptances, which are
short-term credit instruments used to finance commercial
transactions. The Fund also may invest in bank time deposits, which
are monies kept on deposit with banks or savings and loan
associations for a stated period of time at a fixed rate of
interest.
---------------------------------------------------------------------------

    The Exchange represents that the Fund will use the fixed income
securities as investments and to collateralize the Subsidiary's
commodity exposure on a day-to-day basis.

C. Investments of the Subsidiary

    The Exchange represents that, under normal market conditions,\18\
the Subsidiary is expected to invest in futures contracts in
proportional weights and allocations that are similar to the Benchmark,
as well as in other exchange-traded commodity-linked

instruments.\19\ The Subsidiary will have the same investment objective
as the Fund; however, unlike the Fund, the Subsidiary may invest
without limitation in Commodities. As indicated above, the Benchmark
will include, and the Subsidiary will have holdings in, futures
contracts that consist of only long positions in Commodities.
Therefore, the Fund, through the Subsidiary, will benefit if a security
or instrument increases in value. Conversely, the Fund, through the
Subsidiary, will be adversely impacted if a security or instrument
declines in value. The Fund, through the Subsidiary, may have a higher
or lower exposure to any sector or component within the Benchmark at
any time.
---------------------------------------------------------------------------

    \18\ See supra note 12.
    \19\ According to the Exchange, the Benchmark will include, and
the Subsidiary will have holdings in, futures contracts that consist
of only long positions in Commodities. Additional information
regarding the Benchmark, including the specific commodities
underlying the futures contracts included in the Benchmark as of May
23, 2014, can be found in a table in the Notice. See Notice, supra
note 3, 79 FR 34376, 34378. The table contained in the Notice also
provides each instrument's trading hours, exchange, and ticker
symbol. See id. The Exchange notes that the table is subject to
change. As stated above, the Subsidiary will not in all cases invest
in the futures contracts included in the Benchmark. The Fund,
through the Subsidiary, may have a higher or lower exposure to any
sector or component within the Benchmark at any time.
---------------------------------------------------------------------------

    The Exchange states that the Subsidiary will be advised by the Sub-
Adviser \20\ and that the Fund's investment in the Subsidiary is
intended to provide the Fund with exposure to commodity markets within
the limits of current federal income tax laws applicable to investment
companies, such as the Fund. These federal income tax laws limit the
ability of investment companies to invest directly in the derivative
instruments. The Subsidiary's investments will provide the Fund with
exposure to both domestic and international markets.\21\
---------------------------------------------------------------------------

    \20\ The Exchange states that the Subsidiary will not be
registered under the 1940 Act and will not be directly subject to
its investor protections, except as noted in the Registration
Statement. However, the Subsidiary will be wholly-owned and
controlled by the Fund. Therefore, the Exchange represents that the
Fund's ownership and control of the Subsidiary will prevent the
Subsidiary from taking action contrary to the interests of the Fund
or its shareholders. The Board will have oversight responsibility
for the investment activities of the Fund, including its expected
investment in the Subsidiary, and the Fund's role as the sole
shareholder of the Subsidiary. The Subsidiary will also enter into
separate contracts for the provision of custody, transfer agency,
and accounting agent services with the same or with affiliates of
the same service providers that provide those services to the Fund.
    \21\ The Exchange represents that not more than 10% of the
weight (to be calculated as the value of the contract divided by the
total absolute notional value of the Subsidiary's futures contracts)
of the futures contracts held by the Subsidiary in the aggregate
shall consist of instruments whose principal trading market is not a
member of the Intermarket Surveillance Group (``ISG'') or is a
market with which the Exchange does not have a comprehensive
surveillance sharing agreement. The Exchange further represents that
all commodity-linked instruments in which the Subsidiary invests
will be traded on ISG member markets.
---------------------------------------------------------------------------

D. Investment Restrictions

    The Fund intends to qualify for and to elect to be treated as a
separate regulated investment company under Subchapter M of the
Internal Revenue Code. In addition, while the Fund will be permitted to
borrow as permitted under the 1940 Act, the Fund's investments will not
be used to seek performance that is the multiple or inverse multiple
(i.e., 2X and -3X) of the Fund's Benchmark.
    The Fund may not invest more than 25% of the value of its total
assets in securities of issuers in any one industry or group of
industries. This restriction will not apply to obligations issued or
guaranteed by the U.S. government or its agencies or instrumentalities
or to securities of other investment companies.
    The Subsidiary's shares will be offered only to the Fund, and the
Fund will not sell shares of the Subsidiary to other investors. The
Fund (other than shares of the Subsidiary) and the Subsidiary will not
invest in any non-U.S. equity securities. The Fund will not purchase
securities of open-end or closed-end investment companies except in
compliance with the 1940 Act or any applicable exemptive relief.
    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including securities deemed illiquid by the Adviser.\22\ The Fund will
monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.
---------------------------------------------------------------------------

    \22\ In reaching liquidity decisions, the Adviser may consider
the following factors: the frequency of trades and quotes for the
security; the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer).
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    The Fund will not invest directly in Commodities. The Fund expects
to primarily gain exposure to these investments by investing in the
Subsidiary. In addition, the Fund and the Subsidiary will not invest in
options contracts, swaps, or forward investments.
    Additional information regarding the Trust, Fund, and Shares,
including investment strategies and restrictions, risks, creation and
redemption procedures, fees, portfolio holdings, disclosure policies,
distributions and taxes, calculation of net asset value per share
(``NAV''), availability of information, trading rules and halts, and
surveillance procedures, among other things, can be found in the Notice
and the Registration Statement, as applicable.\23\
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    \23\ See Notice, supra note 3; see also Registration Statement,
supra note 6.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\24\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Exchange
Act,\25\ which requires, among other things, that the Exchange's rules
be designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest. The Commission notes that the Fund
and the Shares must comply with the requirements of Nasdaq Rule 5735 to
be listed and traded on the Exchange.
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    \24\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \25\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Exchange Act,\26\ which sets forth Congress' finding that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for and transactions in securities. Quotation and last-sale
information for the Shares will be available via Nasdaq proprietary
quote

and trade services, as well as in accordance with the Unlisted Trading
Privileges and the Consolidated Tape Association plans for the Shares.
In addition, the Intraday Indicative Value,\27\ as defined in Rule
5735(c)(3), will be available on the NASDAQ OMX Information LLC
proprietary index data service \28\ and will be updated and widely
disseminated by one or more major market data vendors and broadly
displayed at least every 15 seconds during the Regular Market
Session.\29\ On each business day, before commencement of trading in
Shares in the Regular Market Session on the Exchange, the Fund will
disclose on its Web site the identities and quantities of the portfolio
of securities, Commodities, and other assets held by the Fund and the
Subsidiary (the ``Disclosed Portfolio,'' as defined in Nasdaq Rule
5735(c)(2)) that will form the basis for the Fund's calculation of NAV
at the end of the business day.\30\ In addition, the Custodian, through
the National Securities Clearing Corporation, will make available on
each business day, prior to the opening of business of the Exchange,
the list of the names and quantities of the instruments composing the
creation basket, as well as the estimated cash component (if any), for
that day. The Fund's NAV will be determined as of the close of trading
(normally 4:00 p.m., Eastern Time (``E.T.'')) on each day the New York
Stock Exchange (``NYSE'') is open for business.\31\ Information
regarding market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day on
brokers' computer screens and other electronic services. The previous
day's closing price and trading volume information for the Shares will
be published daily in the financial section of newspapers. Intra-day
executable price quotations on the securities and other assets held by
the Fund and the Subsidiary will be available from major broker-dealer
firms or on the exchange on which they are traded, as applicable.
Intra-day price information on the securities and other assets held by
the Fund and the Subsidiary will also be available through subscription
services, such as Bloomberg and Thomson Reuters. Specifically, pricing
information for Commodities, ETFs (other than Commodities), and closed-
end funds will be available on the exchanges on which they are traded
and through subscription services. Pricing information for fixed income
securities and money market instruments will be available through
subscription services and broker-dealer firms. Additionally, the Trade
Reporting and Compliance Engine (``TRACE'') of the Financial Industry
Regulatory Authority (``FINRA'') will be a source of price information
for certain fixed income securities held by the Fund. Information
relating to the Benchmark, including its constituents, weightings, and
changes to its constituents will be available on the Web site of CS.
The Fund's Web site (www.globalxfunds.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund and additional data relating to NAV and
other applicable quantitative information.
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    \26\ 15 U.S.C. 78k(a)(1)(C)(iii).
    \27\ According to the Exchange, the Intraday Indicative Value
will reflect an estimated intraday value of the Fund's portfolio
(including the Subsidiary's portfolio) and will be based upon the
current value of the components of the Disclosed Portfolio.
    \28\ The NASDAQ OMX Global Index Data Service (``GIDS'') is a
data feed service that provides real-time updates, daily summary
messages, and access to widely followed indexes and Intraday
Indicative Values for ETFs.
    \29\ Regular Market Session means the trading session from 9:30
a.m. until 4:00 p.m. or 4:15 p.m. See Nasdaq Rule 4120(b)(4)(D).
    \30\ On a daily basis, the Fund will disclose on the Fund's Web
site the following information regarding each portfolio holding, as
applicable to the type of holding: ticker symbol, CUSIP number, or
other identifier, if any; a description of the holding (including
the type of holding), the identity of the security, commodity, or
other asset or instrument underlying the holding, if any; quantity
held (as measured by, for example, par value, notional value, or
number of shares, contracts, or units); maturity date, if any;
coupon rate, if any; effective date, if any; market value of the
holding; and percentage weighting of the holding in the Fund's
portfolio. The Web site and information will be publicly available
at no charge.
    \31\ The NAV of the Fund will be calculated by dividing the
value of the net assets of such Fund (i.e., the value of its total
assets, less total liabilities) by the total number of outstanding
Shares, generally rounded to the nearest cent. According to the
Exchange, the Fund's and the Subsidiary's investments will be
generally valued using market valuations. If available, debt
securities and money market instruments with maturities of more than
60 days will typically be priced based on valuations provided by
independent third-party pricing agents. Such values will generally
reflect the last reported sales price if the security is actively
traded. The third-party pricing agents may also value debt
securities at an evaluated bid price by employing methodologies that
utilize actual market transactions, broker-supplied valuations, or
other methodologies designed to identify the market value for such
securities. Debt obligations with remaining maturities of 60 days or
less may be valued on the basis of amortized cost, which
approximates market value. If such prices are not available, the
security will be valued based on values supplied by independent
brokers or by fair value pricing. Futures contracts will be valued
at the settlement price established each day by the board or
exchange on which they are traded. Redeemable securities issued by
U.S. registered open-end investment companies will be valued at the
investment company's applicable NAV, with the exception of ETFs,
which will be priced as described below. In the case of shares of
funds that are not traded on an exchange, a market valuation means
such fund's published NAV per share. Equity securities (including
exchange-traded commodity-linked instruments, other ETFs, and
closed-end funds) listed on a securities exchange, market, or
automated quotation system for which quotations are readily
available (except for securities traded on the Exchange) will be
valued at the last reported sale price on the primary exchange or
market on which they are traded on the valuation date (or at
approximately 4:00 p.m., E.T. if a security's primary exchange is
normally open at that time). If it is not possible to determine the
last reported sale price on the relevant exchange or market on the
valuation date, the value of the security will be taken to be the
most recent mean between the bid and asked prices on such exchange
or market on the valuation date. Absent both bid and asked prices on
such exchange, the bid price may be used. For securities traded on
the Exchange, the Exchange's official closing price will be used. If
such prices are not available, the security will be valued based on
values supplied by independent brokers or by fair value pricing, as
described below. The prices for foreign instruments will be reported
in local currency and converted to U.S. dollars using currency
exchange rates. Exchange rates will be provided daily by recognized
independent pricing agents.
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    The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Exchange will obtain a representation from the issuer of
the Shares that the NAV per Share will be calculated daily and that the
NAV and the Disclosed Portfolio will be made available to all market
participants at the same time. Nasdaq will halt trading in the Shares
under the conditions specified in Nasdaq Rules 4120 and 4121, including
the trading pauses under Nasdaq Rules 4120(a)(11) and (12). Trading may
be halted because of market conditions or for reasons that, in the view
of the Exchange, make trading in the Shares inadvisable.\32\ Trading in
the Shares also will be subject to Nasdaq Rule 5735(d)(2)(D), which
sets forth additional circumstances under which Shares of the Fund may
be halted. The Exchange represents that it has a general policy
prohibiting the distribution of material, non-public information by its
employees. In addition, the Exchange represents that the Adviser is not
registered as a broker-dealer and is not affiliated with a broker-
dealer.\33\ 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 Shares.
---------------------------------------------------------------------------

    \32\ These reasons may include: (1) The extent to which trading
is not occurring in the securities, Commodities, or other assets
constituting the Disclosed Portfolio of the Fund and the Subsidiary;
or (2) whether other unusual conditions or circumstances detrimental
to the maintenance of a fair and orderly market are present. With
respect to trading halts, the Exchange states that it may consider
all relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.
    \33\ See supra note 7. The Exchange further represents, among
other things, that in the event the Sub-Adviser is or becomes a
registered broker-dealer or becomes affiliated with a broker-dealer,
such Sub-Adviser will implement a fire wall with respect to its
relevant personnel or such broker-dealer affiliate, as applicable,
regarding access to information concerning the composition of and
changes to the portfolio and will be subject to procedures designed
to prevent the use and dissemination of material, non-public
information regarding the portfolio. See id. The Exchange states
that an investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (``Advisers
Act''). As a result, the Adviser and the Sub-Adviser and their
related personnel are subject to the provisions of Rule 204A-1 under
the Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
---------------------------------------------------------------------------

    The Exchange represents that trading in the Shares will be subject
to existing trading surveillances, administered by both Nasdaq and
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities
laws.\34\ The Exchange further represents that these procedures are
adequate to properly monitor Exchange trading of the Shares in all
trading sessions and to deter and detect violations of Exchange rules
and applicable federal securities laws. The Exchange states that FINRA,
on behalf of the Exchange, will communicate as needed regarding trading
in the Shares and in the exchange-traded securities, commodity-linked
instruments, and futures contracts held by the Fund and the Subsidiary
with other markets and other entities that are members of the ISG and
that FINRA may obtain trading information regarding trading in the
Shares and in the exchange-traded securities, commodity-linked
instruments, and futures contracts held by the Fund and the Subsidiary
from such markets and other entities. In addition, the Exchange may
obtain information regarding trading in the Shares and in the exchange-
traded securities, commodity-linked instruments, and futures contracts
held by the Fund and the Subsidiary from markets and other entities
that are members of ISG, which includes securities and futures
exchanges, or with which the Exchange has in place a comprehensive
surveillance sharing agreement. The Exchange states that FINRA, on
behalf of the Exchange, will be able to access, as needed, trade
information for certain fixed income securities held by the Fund
reported to FINRA's TRACE.
---------------------------------------------------------------------------

    \34\ The Exchange states that FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement and that the
Exchange is responsible for FINRA's performance under this
regulatory services agreement.
---------------------------------------------------------------------------

    The Exchange represents that the Exchange deems the Shares to be
equity securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made representations,
including:
    (1) The Shares will be subject to Rule 5735, which sets forth the
initial and continued listing criteria applicable to Managed Fund
Shares.
    (2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading
surveillances, administered by both Nasdaq and also FINRA on behalf of
the Exchange, which are designed to detect violations of Exchange rules
and applicable federal securities laws, and that these procedures are
adequate to properly monitor Exchange trading of the Shares in all
trading sessions and to deter and detect violations of Exchange rules
and applicable federal securities laws.
    (4) 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 Shares. Specifically, the
Information Circular will discuss the following: (a) The procedures for
purchases and redemptions of Shares in Creation Units (and that Shares
are not individually redeemable); (b) Nasdaq Rule 2111A, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (c) how and by whom
information regarding the Intraday Indicative Value and the Disclosed
Portfolio is disseminated; (d) the risks involved in trading the Shares
during the Pre-Market and Post-Market Sessions when an updated Intraday
Indicative Value will not be calculated or publicly disseminated; (e)
the requirement that members deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (f) trading information.
    (5) For initial and continued listing, the Fund and the Subsidiary
must be in compliance with Rule 10A-3 under the Act.\35\
---------------------------------------------------------------------------

    \35\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) The Fund's investments will be consistent with its respective
investment objective. While the Fund and the Subsidiary may invest in
inverse commodity-linked instruments, the Fund and the Subsidiary will
not invest in leveraged or inverse leveraged (e.g., 2X or -3X)
commodity-linked instruments.
    (7) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including securities deemed illiquid by the Adviser, in accordance with
Commission guidance.
    (8) Not more than 10% of the weight (to be calculated as the value
of the contract divided by the total absolute notional value of the
Subsidiary's futures contracts) of the futures contracts held by the
Subsidiary in the aggregate shall consist of instruments 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.
    (9) All commodity-linked instruments in which the Subsidiary
invests will be traded on ISG member markets. Commodity-linked
instruments include: (a) Exchange-traded funds (``ETFs'') that provide
exposure to commodities as would be listed under Nasdaq Rules 5705 and
5735; and (b) pooled investment vehicles that invest primarily in
commodities and commodity-linked instruments as would be listed under
Nasdaq Rules 5710 and 5711(b), (d), (f), (g), (h), (i), and (j).
    (10) The Fund and the Subsidiary will not invest in options
contracts, swaps, or forward investments. In addition, the Fund will
not invest directly in Commodities.
    (11) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.
This approval order is based on all of the Exchange's representations,
including those set forth above and in the Notice, and the Exchange's
description of the Fund.

    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1 thereto, is consistent with
Section 6(b)(5) of the Act \36\ and the rules and regulations
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\37\ that the proposed rule change (SR-NASDAQ-2014-059), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \37\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18533 Filed 8-5-14; 8:45 am]
BILLING CODE 8011-01-P