

[Federal Register: June 11, 2007 (Volume 72, Number 111)]
[Notices]               
[Page 32153-32156]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11jn07-93]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55861; File No. SR-NASDAQ-2007-054]

 
Self-Regulatory Organizations; the NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change To Trade the Shares of the iShares GSCI Commodity-Indexed 
Trust Pursuant to Unlisted Trading Privileges

June 5, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 18, 2007, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
This order provides notice of the proposed rule change and approves the 
proposed rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Nasdaq proposes to trade shares of the iShares GSCI Commodity-
Indexed Trust (the ``Trust'') pursuant to unlisted trading privileges 
(``UTP''). The text of the proposed rule change is available at Nasdaq, 
the Commission's Public Reference Room, and nasdaq.complinet.com.

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 III below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    Pursuant to Nasdaq Rule 4630, which permits the Exchange to approve 
for

[[Page 32154]]

UTP trading a ``commodity-related security'' that is issued by a trust, 
partnership, commodity pool, or similar entity that invests in any 
combination of commodities, futures contracts, options on futures 
contracts, forward contracts, commodity swaps, or other related 
derivatives, the Exchange proposes to trade pursuant to UTP the shares 
of the Trust (the ``Shares'').\3\ The Shares are currently trading on 
Nasdaq on a three-month pilot basis,\4\ and approval of this proposed 
rule change would allow the Shares to continue to trade after the 
expiration of the pilot. The Commission previously approved a proposal 
to list and trade the Shares on the New York Stock Exchange LLC 
(``NYSE'').\5\
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    \3\ E-mail from John Yetter, Deputy General Counsel, Nasdaq, to 
Edward Cho, Special Counsel, Division of Market Regulation, 
Commission, dated May 31, 2007 (confirming the Nasdaq rule governing 
the UTP trading of the Shares).
    \4\ See Securities Exchange Act Release No. 55386 (March 2, 
2007), 72 FR 10801 (March 9, 2007) (SR-NASDAQ-2007-016) (approving 
the trading of 16 commodity-related securities, including the 
Shares, pursuant to UTP for a pilot period of three months beginning 
on March 5, 2007) (``Pilot Order'').
    \5\ See Securities Exchange Act Release Nos. 53659 (April 17, 
2006), 71 FR 21074 (April 24, 2006) (SR-NYSE-2006-17) (``NYSE 
Proposal'') and 54013 (June 16, 2006), 71 FR 36372 (June 26, 2006) 
(``NYSE Approval Order'').
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    The Shares represent fractional undivided beneficial interests in 
the net assets of the Trust. Substantially all of the assets of the 
Trust consist of its holdings of the limited liability company 
interests of a commodity pool (``Investing Pool Interests''), which are 
the only securities in which the Trust may invest. The commodity pool, 
iShares GSCI Commodity-Indexed Investing Pool LLC (``Investing Pool''), 
holds long positions in futures contracts on the GSCI Excess Return 
Index (``GSCI-ER''), called ``CERFs,'' which are listed on the Chicago 
Mercantile Exchange (``CME'') and posts margin in the form of cash or 
short-term securities to collateralize these futures positions. The 
GSCI-ER is calculated based on the same commodities included in the 
Goldman Sachs Commodity Index (``GSCI''), which is a production-
weighted index of the prices of a diversified group of futures 
contracts on physical commodities. The GSCI is administered, 
calculated, and published by Goldman, Sachs & Co. (the ``Index 
Sponsor''), a subsidiary of The Goldman Sachs Group Inc.
    The Trust's objective is for the performance of the Shares to 
correspond generally to the performance of the GSCI Total Return Index 
(``Index'') before payment of the Trust's and the Investing Pool's 
expenses and liabilities. The Index is intended to reflect the 
performance of a diversified group of commodities. The Trust and 
Investing Pool are each commodity pools, as defined in the Commodity 
Exchange Act and the applicable regulations of the Commodity Futures 
Trading Commission.
    Descriptions of the Shares, the Investing Pool, the futures 
contracts, the Index, the GSCI-ER, the GSCI, and the fees and expenses 
of the Trustee are set forth in the NYSE Proposal. To summarize, 
issuances of Shares are made only in baskets of 50,000 Shares or 
multiples thereof (``Baskets''). The Trust issues and redeems the 
Shares on a continuous basis, by or through participants that have 
entered into participant agreements (each, an ``Authorized 
Participant'') with Barclays Global Investors International, Inc. (the 
``Sponsor'') and Barclays Global Investors, N.A. (the ``Trustee'').
    Baskets are issued only in exchange for an amount of CERFs and cash 
(or, at the discretion of the Trustee, Short-Term Securities \6\ in 
lieu of cash) equal to the Basket Amount (as defined herein) for the 
business day on which the creation order was received by the Trustee. 
The ``Basket Amount'' for a business day has a per-Share value equal to 
the Net Asset Value (``NAV'') of the Trust as of such day. However, 
orders received by the Trustee after 2:40 p.m. Eastern Time (``ET'') 
are treated as received on the next following business day. The Trustee 
notifies the Authorized Participants of the Basket Amount on each 
business day. Baskets are then separable upon issuance into the Shares 
that are traded on Nasdaq on a UTP basis.
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    \6\ ``Short-Term Securities'' means U.S. Treasury securities or 
other short-term securities and similar securities, in each case 
that are eligible as margin deposits under the rules of CME.
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    The Shares are not individually redeemable but are redeemable only 
in Baskets. To redeem, an Authorized Participant is required to 
accumulate enough Shares to constitute a Basket (i.e., 50,000 Shares). 
An Authorized Participant that wishes to redeem a Basket receives an 
amount of CERFs and cash (or, at the discretion of the Trustee, Short-
Term Securities in lieu of cash) equal to the Basket Amount on the 
business day the redemption request is received by the Trustee, in 
exchange for each Basket surrendered. However, redemption requests 
received by the Trustee after 2:40 p.m. ET (or, on any day on which CME 
is scheduled to close early, after the close of trading of CERFs on CME 
on such day), are treated as received on the next following business 
day. The operation of the Trust and creation and redemption process are 
described in more detail in the NYSE Proposal.
    On each business day on which NYSE is open for regular trading, as 
soon as practicable after the close of regular trading of the Shares on 
NYSE (normally, 4:15 p.m. ET), the Trustee determines the NAV as of 
that time. The calculation methodology for the NAV is described in more 
detail in the NYSE Proposal.
    The NAV for the Shares on each business day on which NYSE is open 
for regular trading is distributed to all market participants at the 
same time. The NAV is distributed through major market data vendors and 
is published online at http://www.ishares.com. The Trust updates the 

NAV as soon as practicable after each subsequent NAV is calculated.
    The Web site for the Trust (http://www.ishares.com), which is 

publicly accessible at no charge, contains the following information: 
(1) The prior business day's NAV and the reported closing price; (2) 
the midpoint of the bid-ask price in relation to the NAV as of the time 
the NAV is calculated (the ``Bid-Ask Price''); \7\ (3) calculation of 
the premium or discount of such price against such NAV; (4) data in 
chart form displaying the frequency distribution of discounts and 
premiums of the Bid-Ask Price against the NAV, within appropriate 
ranges for each of the four previous calendar quarters; (5) the 
prospectus; (6) the holdings of the Trust, including CERFs, cash, and 
Treasury securities; (7) the Basket Amount; and (8) other applicable 
quantitative information. Nasdaq, on its Web site at http://www.nasdaq.com
, includes a hyperlink to the Trust's Web site.

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    \7\ The Bid-Ask Price of the Shares is determined using the 
highest bid and lowest offer as of the time of calculation of the 
NAV.
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    As described above, the NAV for the Trust is calculated and 
disseminated daily. According to the NYSE Proposal, NYSE disseminates 
from 9:30 a.m. to 4:15 p.m. ET daily by means of CTA/CQ High Speed 
Lines information with respect to the Indicative Trust Value (``ITV''), 
recent NAV, and Shares outstanding.
    In order to provide updated information relating to the Trust for 
use by investors, professionals, and other persons, NYSE disseminates 
through the facilities of CTA an updated ITV on a per-Share basis. The 
ITV is disseminated at least every 15 seconds from 9:30 a.m. to 4:15 
p.m. ET. The ITV is calculated based on the cash and collateral in a 
Basket Amount, divided by 50,000, and adjusted to reflect the market 
value of the Index commodities

[[Page 32155]]

through investments held by the Investing Pool, i.e., CERFs. The ITV 
will not reflect price changes to the price of an underlying commodity 
between the close of trading of the futures contract at the relevant 
futures exchange and the close of trading on Nasdaq. Accordingly, the 
value of a Share may be influenced by non-concurrent trading hours 
between Nasdaq and the various futures exchanges on which the futures 
contracts based on the Index commodities are traded.
    When the market for futures trading for each of the Index 
commodities is open, the ITV can be expected to closely approximate the 
value per Share of the Basket Amount. However, during Nasdaq trading 
hours when the futures contracts have ceased trading, spreads and 
resulting premiums or discounts may widen and, therefore, may increase 
the difference between the price of the Shares and the NAV of the 
Shares. ITV on a per-Share basis should not be viewed as a real-time 
update of the NAV, which is calculated only once a day.
    Nasdaq deems the Shares to be equity securities, thus rendering 
trading in the Shares subject to Nasdaq's existing rules governing the 
trading of equity securities, including Nasdaq Rule 4630. The Shares 
will trade on Nasdaq from 9:30 a.m. until 4:15 p.m. ET.
    Nasdaq will halt trading in the Shares under the conditions 
specified in Nasdaq Rules 4120 (Trading Halts) and 4121 (Market 
Closings). The conditions for a halt include a regulatory halt by the 
original listing market. UTP trading in the Shares will also be 
governed by provisions of Nasdaq Rule 4120 relating to temporary 
interruptions in the calculation or wide dissemination of the ITV or 
the value of the Index. Additionally, Nasdaq may cease trading the 
Shares if other unusual conditions or circumstances exist which, in the 
opinion of Nasdaq, make further dealings on Nasdaq detrimental to the 
maintenance of a fair and orderly market. Nasdaq will also follow any 
procedures with respect to trading halts as set forth in Nasdaq Rule 
4120(c). Finally, Nasdaq will stop trading the Shares if the original 
listing market delists them.
    Nasdaq believes that its surveillance procedures are adequate to 
address any concerns about the trading of the Shares on Nasdaq. Trading 
of the Shares through Nasdaq facilities is currently subject to NASD's 
surveillance procedures for equity securities, in general, and ETFs, in 
particular.\8\ Nasdaq is able to obtain information regarding trading 
in the Shares and the underlying futures contracts through its members 
in connection with the proprietary or customer trades that such members 
effect on any relevant market. In addition, Nasdaq may obtain trading 
information via the Intermarket Surveillance Group (``ISG'') from other 
exchanges that are members or affiliate members of ISG, including the 
Chicago Board of Trade, and Nasdaq has Information Sharing Agreements 
in place with the New York Mercantile Exchange, the Kansas City Board 
of Trade, ICE Futures, and the London Metal Exchange. If at any time 
the Index Sponsor includes in the Index a contract traded on any other 
market, which results in more than 10% of the cumulative weight of the 
Index not being subject to comprehensive surveillance-sharing 
arrangements (i.e., the relevant exchange is not a member or affiliate 
member of ISG or Nasdaq does not have a pre-existing comprehensive 
surveillance-sharing agreement with it), then, prior to the inclusion 
of such contract in the Index, Nasdaq would (1) enter into adequate 
information sharing arrangements with such other market, and (2) 
contact the Commission to discuss measures that may be appropriate 
under the circumstances. Nasdaq has issued and would continue to issue 
an Information Circular to inform its members of the special 
characteristics and risks associated with trading the Shares, among 
other things.
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    \8\ NASD surveils trading pursuant to a regulatory services 
agreement. Nasdaq is responsible for NASD's performance under this 
regulatory services agreement.
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2. Statutory Basis
    The proposal is consistent with Section 6(b) of the Act,\9\ in 
general, and Section 6(b)(5) of the Act,\10\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. In addition, the proposal is consistent with Rule 12f-
5 under the Act \11\ because Nasdaq 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.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purpose of the Act.

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

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml.
); or     Send an e-mail to rule-comments@sec.gov. Please include 

File Number SR-NASDAQ-2007-054 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2007-054. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, 

all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for inspection 
and copying in the Commission's Public Reference Room. Copies of such 
filing also will be available for inspection and copying at the 
principal offices of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying

[[Page 32156]]

information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NASDAQ-2007-054 and should be submitted on or before 
July 2, 2007.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities 
exchange.\12\ In particular, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act,\13\ which 
requires that an exchange have rules designed, among other things, 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 believes that this proposal should benefit 
investors by increasing competition among markets that trade the 
Shares.
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    \12\ In approving this rule change, the Commission notes that it 
has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\14\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\15\ The Commission notes that the Shares are currently 
trading on Nasdaq pursuant to UTP on a pilot basis and that it 
previously approved the listing and trading of the Shares on NYSE.\16\ 
The Commission also finds that the proposal is consistent with Rule 
12f-5 under the Act,\17\ which provides that an exchange shall not 
extend UTP to a security unless the exchange has in effect a rule or 
rules providing for transactions in the class or type of security to 
which the exchange extends UTP. The Exchange has represented that it 
meets this requirement because it 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.
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    \14\ 15 U.S.C. 78l(f).
    \15\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \16\ See supra notes 4 and 5.
    \17\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\18\ 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. Quotations for and last-sale information regarding the 
Shares are publicly available on the Web sites of the Trust, Nasdaq, 
and NYSE. The Web site for the Trust also disseminates information 
about the prior business day's NAV and the reporting closing price, the 
midpoint of the Bid-Ask Price in relation to the NAV as of the time the 
NAV is calculated, discount and premium information of the Bid-Ask 
Price against the NAV, the prospectus, the various holdings of the 
Trust, the Basket Amount, and other applicable information. During 
regular trading hours, major market data vendors disseminate at least 
every 15 seconds the values of the GSCI, GSCI-ER, and Index.\19\ In 
addition, NYSE disseminates through the facilities of CTA an updated 
ITV on a per-Share basis at least every 15 seconds during the trading 
day. The Trustee calculates and simultaneously disseminates once each 
business day to all market participants the NAV per Share. Also, 
futures quotes and last-sale information for the commodities underlying 
the Index and the CERFs are widely disseminated through a variety of 
market data vendors.\20\
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    \18\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \19\ See NYSE Proposal, 71 FR at 21084.
    \20\ See id.
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    The Commission notes that, if the Shares should be delisted by the 
original listing exchange, the Exchange would no longer have authority 
to trade the Shares pursuant to this order.
    In support of this proposal, the Exchange has represented that its 
surveillance procedures are adequate to address any concerns associated 
with the trading of the Shares on Nasdaq on a UTP basis. This approval 
order is conditioned on the Exchange's adherence to this 
representation. In the Pilot Order,\21\ the Commission noted that 
exchanges that trade commodity-related securities generally have in 
place surveillance agreements with markets that trade the underlying 
securities. In its proposal to establish the pilot trading period, the 
Exchange represented that it was in the process of completing these 
surveillance arrangements and expected to do so ``in the near future.'' 
The Exchange recently provided the Commission with evidence that it has 
completed these surveillance arrangements.
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    \21\ See infra note 4.
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    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. As noted above, the Commission previously found that 
the listing and trading of the Shares on NYSE is consistent with the 
Act and approved the trading of the Shares on Nasdaq pursuant to UTP on 
a pilot basis. The Commission presently is not aware of any regulatory 
issue that should cause it to revisit that finding or would preclude 
the continued trading of the Shares on the Exchange pursuant to UTP. 
Therefore, accelerating approval of this proposal should benefit 
investors by continuing, without undue delay, competition in the market 
for such Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NASDAQ-2007-054) be, and it 
hereby is, approved on an accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-11182 Filed 6-8-07; 8:45 am]

BILLING CODE 8010-01-P
