[Federal Register Volume 72, Number 98 (Tuesday, May 22, 2007)]
[Notices]
[Pages 28739-28741]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-9740]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55761; File No. SR-NASDAQ-2007-045]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing and Order Granting Accelerated Approval of Proposed 
Rule Change and Amendment No. 1 Thereto To Trade the United States Oil 
Fund, LP Pursuant to Unlisted Trading Privileges

May 15, 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 April 30, 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. 
On May 1, 2007, Nasdaq submitted Amendment No. 1 to the proposed rule 
change. This order provides notice of the proposed rule change as 
modified by Amendment No. 1 and approves the proposed rule change as 
amended 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, pursuant to unlisted trading privileged 
(``UTP''), units (``Units'') of the United States Oil Fund, LP 
(``USOF'' or ``Partnership''). The text of the proposed rule change is 
available at Nasdaq, the Commission's Public Reference Room, and http://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
    Nasdaq proposes to trade pursuant to UTP the Units, which represent 
ownership of a fractional undivided interest in the net assets of 
USOF.\3\ The Units are currently trading on Nasdaq on a three-month 
pilot basis.\4\ Approval of this filing will allow the Units to 
continue to trade after the expiration of the pilot. The investment 
objective of USOF is for its net asset value (``NAV'') \5\ to reflect 
the performance of the spot price of West Texas Intermediate light, 
sweet crude oil delivered to Cushing, Oklahoma (the ``WTI light, sweet 
crude oil''), as represented by the performance of the price of the 
``Benchmark Oil Futures Contract,'' less the expense of operation of 
USOF. The ``Benchmark Oil Futures Contract'' is the near-month (i.e., 
spot month) futures contract for delivery of WTI light, sweet crude oil 
traded on the New York Mercantile Exchange (``NYMEX'').\6\ The 
Commission previously approved the original listing and trading of the 
Units by the American Stock Exchange LLC (``Amex'').\7\
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    \3\ USOF, a Delaware limited partnership, is a commodity pool. 
USOF is not an investment company as defined in Section 3(a) of the 
Investment Company Act of 1940. The offering of the Units of the 
Partnership is registered with the Commission under the Securities 
Act of 1933.
    \4\ See Securities Exchange Act Release No. 55386 (March 2, 
2007), 72 FR 10801 (March 9, 2007) (SR-NASDAQ-2007-016).
    \5\ NAV is the total assets, less total liabilities, of USOF 
determined on the basis of generally accepted accounting principles. 
NAV per Unit is the NAV of USOF divided by the number of outstanding 
Units.
    \6\ USOF will primarily purchase WTI light, sweet crude Oil 
Futures Contracts traded on the NYMEX, but may also purchase Oil 
Futures Contracts on other exchanges, including the Intercontinental 
Exchange, which operates its futures business through ICE Futures 
(``ICE Futures'') and the Singapore Oil Exchange.
    \7\ See Securities Exchange Act Release No. 53582 (March 31, 
2006), 71 FR 17510 (April 6, 2006) (SR-Amex-2005-127) (``Amex 
Order'').
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    Issuances of the Units of USOF are made only in baskets of 100,000 
Units or multiples thereof (``Basket''). A basket would be issued in 
exchange for Treasuries and/or cash in an amount equal to the NAV per 
Unit times 100,000 Units (``Basket Amount''). An Authorized Purchaser 
\8\ that wishes to purchase a Basket must transfer the Basket Amount to 
the Administrator (``Deposit Amount''). An Authorized Purchaser that 
wishes to redeem a Basket would receive an amount of Treasuries and 
cash in exchange for each Basket surrendered in an amount equal to the 
NAV per Basket (``Redemption Amount'').
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    \8\ An ``Authorized Purchaser'' is a person who, at the time of 
submitting to the general partner of USOF an order to create or 
redeem one or more Baskets, (i) is a registered broker-dealer or 
other market participant, such as a bank or other financial 
institution that is exempt from broker-dealer registration; (ii) is 
a Depository Trust Company Participant; and (iii) has in effect a 
valid Authorized Purchaser Agreement.
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    On each business day, the administrator for USOF makes available, 
prior to 9:30 a.m. Eastern Time (``ET''), the estimated Basket Amount 
for the creation of a Basket based on the prior day's NAV. According to 
the Amex Order, Amex disseminates at least every 15 seconds from 9:30 
a.m. to 4:15 p.m., via the facilities of the Consolidated Tape 
Association (``CTA''), an amount representing, on a per-Unit basis, the 
current indicative value of the Basket Amount (``Indicative Partnership 
Value'').\9\ Shortly after 4 p.m. ET, the administrator determines the 
NAV for USOF as described below. At or about 4 p.m. ET on each business 
day, the administrator determines the Actual Basket Amount for orders 
placed by Authorized Purchasers received before 12 p.m. ET that day.
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    \9\ The Indicative Partnership Value is calculated based on the 
Treasuries and cash required for creations and redemptions (i.e., 
NAV per Unit x 100,000) adjusted to reflect the price changes of the 
current Benchmark Oil Futures Contract.
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    Quotations for and last-sale information regarding USOF is 
disseminated through the Consolidated Quotation System. The daily 
settlement prices for the NYMEX-traded oil futures contracts held by 
USOF are publicly available on the NYMEX Web site at http://www.nymex.com. Nasdaq's Web site at http://www.nasdaq.com will include 
a hyperlink to the NYMEX Web site for the purpose of disclosing futures 
contract pricing. According to the Amex Order, last-sale information 
for the Benchmark Oil Futures Contract is updated and disseminated at 
least every 15 seconds by one or more major market data vendors during 
the time the Units trade. However, from 2:30 p.m. ET to the opening of 
NYMEX ACCESS at 3:15 p.m. ET, the pricing for the Benchmark Oil Futures 
Contract is not updated.

[[Page 28740]]

    The Web site for USOF (http://www.unitedstatesoilfund.com), which 
is publicly accessible at no charge and to which Nasdaq will provide a 
hyperlink on its Web site (http://www.nasdaq.com), will include the 
following information: (1) The prior business day's NAV and the 
reported closing price; (2) the mid-point of the bid-ask price in 
relation to the NAV as of the time the NAV is calculated (``Bid-Ask 
Price''); (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 and the most recent periodic reports filed 
with the Commission or required by the Commodity Futures Trading 
Commission; (6) USOF's daily portfolio holdings; and (7) other 
applicable quantitative information. In addition, according to the Amex 
Order, Amex disseminates for USOF on a daily basis by means of CTA/CQ 
High Speed Lines information with respect to the Indicative Partnership 
Value, recent NAV, Units outstanding, the estimated Basket Amount, and 
the Deposit Amount.
    Nasdaq would halt trading in the Units under the conditions 
specified in Nasdaq Rules 4120 and 4121. The conditions for a halt 
include a regulatory halt by the listing market. UTP trading in the 
Units will also be governed by provisions of Nasdaq Rule 4120 relating 
to temporary interruptions in the calculation or wide dissemination of 
the Indicative Partnership Value (which is comparable to the IIV or 
IOPV of an ETF) or the value of the underlying Benchmark Oil Futures 
Contract. Additionally, Nasdaq may cease trading the Units 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 would stop trading the Units if the listing market 
delists them.
    Nasdaq deems the Units to be equity securities, thus rendering 
trading in the Units subject to its existing rules governing the 
trading of equity securities, including Rule 4630, which governs 
trading of Commodity-Related Securities. The trading hours for the 
Units will be 9:30 a.m. to 4:15 p.m. ET.
    Nasdaq believes that its surveillance procedures are adequate to 
address any concerns about the trading of the Units on Nasdaq. Trading 
of the Units through Nasdaq facilities is currently subject to NASD's 
surveillance procedures for equity securities in general and ETFs in 
particular.\10\
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    \10\ 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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    Nasdaq is able to obtain information regarding trading in the Units 
and the underlying Oil 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 who are members or affiliates of the ISG, including the 
Chicago Board of Trade. Finally, Nasdaq is party to Information Sharing 
Agreements with NYMEX and ICE Futures for the purpose of providing 
information in connection with trading in or related to oil futures 
contracts traded on those markets. To the extent that USOF invests in 
oil interests traded on other exchanges, Nasdaq would enter into 
information sharing agreements, acceptable to the Commission staff, 
with those particular exchanges.\11\ Nasdaq has issued an Information 
Circular to inform its members of the special characteristics and risks 
associated with trading the Units.
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    \11\ In such event, Nasdaq would file a proposed rule change 
pursuant to Rule 19b-4 of the Act, indicating such surveillance 
arrangements.
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2. Statutory Basis
    Nasdaq believes that the proposal is consistent with Section 6(b) 
of the Act,\12\ in general, and Section 6(b)(5) of the Act,\13\ in 
particular, in that it is designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, remove impediments to a free and open market and a 
national market system, and, in general, to protect investors and the 
public interest. In addition, Nasdaq believes that the proposal is 
consistent with Rule 12f 5 under the Act \14\ because it deems the 
Units to be equity securities, thus rendering trading in the Units 
subject to Nasdaq's existing rules governing the trading of equity 
securities.
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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Nasdaq does not believe that the proposed rule change will impose 
any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.

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

    Written comments on the proposed rule change were neither solicited 
nor received.

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 [email protected]. Please include 
File Number SR-NASDAQ-2007-045 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-2007-045. 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 office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NASDAQ-2007-045 and should be submitted on or before 
June 12, 2007.

[[Page 28741]]

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

    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.\15\ In 
particular, the Commission finds that the proposed rule change is 
consistent with Section 6(b)(5) of the Act,\16\ 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 Units.
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    \15\ In approving this rule change, the Commission notes that it 
has considered the proposal's impact on efficiency, competition, and 
capital formation. See 15 U.S.C. 78c(f).
    \16\ 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,\17\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\18\ The Commission notes that it previously approved the 
listing and trading of the Units on Amex.\19\ The Commission also finds 
that the proposal is consistent with Rule 12f-5 under the Act,\20\ 
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 Units to be equity securities, thus 
rendering trading in the Units subject to the Exchange's existing rules 
governing the trading of equity securities.
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    \17\ 15 U.S.C. 78l(f).
    \18\ 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.
    \19\ See Amex Order, supra note 7.
    \20\ 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,\21\ 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.
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    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    In support of this proposal, the Exchange represents that its 
surveillance procedures are adequate to properly monitor the trading of 
the Units on the Exchange. In addition, the Exchange represents that it 
is party to Information Sharing Agreements with NYMEX and ICE Futures 
for the purpose of providing information in connection with trading in 
or related to oil futures contracts traded on those markets, and that, 
to the extent that USOF invests in oil interests traded on other 
exchanges, the Exchange would enter into information sharing 
agreements, acceptable to the Commission staff, with those particular 
exchanges. This approval order is conditioned on the Exchange's 
adherence to these representations.
    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 previously, the Commission previously found 
that the listing and trading of the Units by Amex is consistent with 
the Act. In addition, the Commission previously found that the trading 
of the Units by Nasdaq pursuant to UTP on a three-month pilot basis was 
consistent with the Act. The Commission presently is not aware of any 
regulatory issue that should cause it to revisit these earlier findings 
or would preclude the trading of the Units on the Exchange pursuant to 
UTP. Therefore, accelerating approval of this proposed rule change 
should benefit investors by creating, without undue delay, additional 
competition in the market for the Units. For these reasons, the 
Commission finds good cause to approve the amended proposal on an 
accelerated basis.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NASDAQ-2007-045), as 
modified by Amendment No. 1, be, and it hereby is, approved on an 
accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. E7-9740 Filed 5-21-07; 8:45 am]
BILLING CODE 8010-01-P