Self-Regulatory Organizations; American Stock Exchange LLC; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Listing and Trading of Units of the United States Natural Gas Fund, LP, 19987-19988 [E7-7486]

Download as PDF Federal Register / Vol. 72, No. 76 / Friday, April 20, 2007 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55632; File No. SR–Amex– 2006–112] Self-Regulatory Organizations; American Stock Exchange LLC; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Listing and Trading of Units of the United States Natural Gas Fund, LP April 13, 2007. I. Introduction On December 1, 2006, the American Stock Exchange LLC (‘‘Amex’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposal to list and trade units (a ‘‘Unit’’ or collectively, the ‘‘Units’’) of the United States Natural Gas Fund, LP (‘‘USNG’’) pursuant to Amex Rules 1500 et seq. On February 14, 2007, the Exchange submitted Amendment No. 1 to the proposed rule change. The proposed rule change, as modified by Amendment No. 1, was published for comment in the Federal Register on March 7, 2007 for a 15-day comment period.3 The Commission received no comments regarding the proposal. This order approves the proposed rule change, as modified by Amendment No. 1. sroberts on PROD1PC70 with NOTICES II. Description of the Proposal The Exchange proposes to list and trade the Units issued by USNG pursuant to Amex Rules 1500 et seq. The Units represent ownership of a fractional undivided beneficial interest in the net assets of USNG.4 The net assets of USNG will consist of investments in futures contracts based on natural gas, crude oil, heating oil, gasoline, and other petroleum-based fuels traded on the New York Mercantile Exchange (‘‘NYMEX’’), Intercontinental Exchange (‘‘ICE Futures’’) or other U.S. and foreign exchanges (collectively, ‘‘Futures Contracts’’). USNG may also invest in other natural gas-related investments such as cash-settled options on Futures Contracts, forward contracts for natural gas, and over-the-counter transactions that are based on the price of natural gas, oil and other petroleum-based fuels, 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 55372 (February 28, 2007), 72 FR 10267. 4 USNG is a commodity pool that will issue Units that may be purchased and sold on the Exchange. 2 17 VerDate Aug<31>2005 18:52 Apr 19, 2007 Jkt 211001 Futures Contracts and indices based on the foregoing (collectively, ‘‘Other Natural Gas Related Investments’’). Futures Contracts and Other Natural Gas Related Investments collectively are referred to as ‘‘Natural Gas Interests.’’ USNG will invest in Natural Gas Interests to the fullest extent possible without being leveraged or unable to satisfy its current or potential margin or collateral obligations. In pursuing this objective, the primary focus of USNG’s investment manager, Victoria Bay Asset Management, LLC (‘‘General Partner’’), will be the investment in Futures Contracts and the management of its investments in short-term obligations of the United States, cash equivalents, and cash for margining purposes and as collateral. The investment objective of USNG is for changes in percentage terms of a Unit’s net asset value (‘‘NAV’’) to reflect the changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana as measured by the natural gas futures contract traded on the NYMEX (the ‘‘Benchmark Futures Contract’’). The Benchmark Futures Contract employed is the near month expiration contract, except when the near month contract is within two (2) weeks of expiration, in which case the Benchmark Futures Contract is the next expiration month.5 The General Partner will attempt to place USNG’s trades in Natural Gas Interests and otherwise manage USNG’s investments so that ‘‘A’’ will be within plus/minus 10 percent of ‘‘B,’’ where: • A is the average daily change in USNG’s NAV for any period of 30 successive valuation days, i.e., any day as of which USNG calculates its NAV; and • B is the average daily change in the price of the Benchmark Futures Contract over the same period. USNG will be subject to the criteria in Amex Rule 1502 for initial and continued listing of the Units. The Amex stated that it will require a minimum of 100,000 Units to be outstanding at the start of trading and expects that the initial price of a Unit will be $50.00.6 The Exchange represented that it prohibits the initial and/or continued listing of any security that is not in compliance with Rule 5 The Benchmark Futures Contracts will be changed or ‘‘rolled’’ from the near month contract to expire over to the next month to expire over a four (4) day period. 6 USNG expects that the initial Authorized Purchaser will purchase the initial Basket of 100,000 Units at the initial offering price per Unit of $50.00. On the date of the public offering and thereafter, USNG will continuously issue Units in Baskets of 100,000 Units to Authorized Purchasers at NAV. PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 19987 10A–3 under the Act.7 Further, the Exchange stated that it will file a proposed rule change with the Commission pursuant to Rule 19b–4 under the Act seeking approval to continue trading the Units and, unless approved, the Exchange will commence delisting the Units if more than a temporary disruption exists in connection with the pricing of the Benchmark Futures Contract or the calculation or dissemination of the NAV is more than temporarily disrupted, or the NAV is not disseminated to all market participants at the same time. Amex Rule 1503 relating to certain specialist prohibitions will address potential conflicts of interest in connection with acting as a specialist in the Units. Specifically, Rule 1503 provides that the prohibitions in Amex Rule 175(c) apply to a specialist in the Units so that the specialist or affiliated person may not act or function as a market-maker in an underlying asset, related futures contract or option or any other related derivative. An affiliated person of the specialist consistent with Amex Rule 193 may be afforded an exemption to act in a market making capacity, other than as a specialist in the Units on another market center, in the underlying asset, related futures or options or any other related derivative. In particular, Amex Rule 1503 provides that an approved person of an equity specialist that has established and obtained Exchange approval for procedures restricting the flow of material, non-public market information between itself and the specialist member organization, and any member, officer, or employee associated therewith, may act in a market making capacity, other than as a specialist in the Units on another market center, in the underlying asset or commodity, related futures or options on futures, or any other related derivatives. Amex Rule 1504 will also ensure that specialists handling the Units provide the Exchange with all the necessary information relating to their trading in physical assets or commodities, related futures contracts and options thereon or any other derivative. As a general matter, the Exchange has regulatory jurisdiction over its members, member organizations and approved persons of a member organization. The Exchange also has regulatory jurisdiction over any person or entity controlling a member organization as well as a subsidiary or affiliate of a member organization that is in the securities business. A subsidiary or affiliate of a member organization that does business only in commodities 7 See E:\FR\FM\20APN1.SGM 17 CFR 240.10A–3. 20APN1 19988 Federal Register / Vol. 72, No. 76 / Friday, April 20, 2007 / Notices or futures contracts would not be subject to Exchange jurisdiction, but the Exchange could obtain information regarding the activities of such subsidiary or affiliate through surveillance sharing agreements with regulatory organizations of which such subsidiary or affiliate is a member. sroberts on PROD1PC70 with NOTICES III. Discussion and Commission Findings After careful consideration, 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 8 and, in particular, the requirements of Section 6 of the Act.9 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,10 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to 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 further believes that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the Act,11 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 transaction in securities. Amex represented that quotation for and lastsale information regarding the futures contracts held by USNG, including the future contracts underlying the Benchmark Index are widely disseminated through a variety of market data vendors worldwide, including Bloomberg and Reuters. In addition, the Exchange further represented that real-time futures data is available by subscription from Reuters and Bloomberg. The NAV of the Units is available at the Web site of the Exchange. The Commission believes that Amex’s proposal is reasonable designed to promote transparency in the pricing of the Units, and to prevent trading when a reasonable degree of transparency cannot be assured. The 8 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 9 15 U.S.C. 78f. 10 15 U.S.C. 78f(b)(5). 11 15 U.S.C. 78k–1(a)(1)(C)(iii). VerDate Aug<31>2005 18:52 Apr 19, 2007 Jkt 211001 proposal also appears reasonably designed to prevent the misuse of information by specialists. In support of this proposal, the Exchange has made the following representations: (1) The Exchange represented that it currently has in place an Information Sharing Agreement with the NYMEX and ICE Futures for the purpose of providing information in connection with trading in or related to futures contracts traded on the NYMEX and ICE Futures, respectively. To the extent that USNG invests in Natural Gas Interests traded on other exchanges, the Amex represented that it will seek to enter into Information Sharing arrangements with those particular exchanges. (2) Amex would distribute an information circular to Exchange members and member organizations, prior to the commencement of trading providing guidance with regard to member firm compliance responsibilities (including suitability recommendations) when handling transaction in the Units. In addition, investors purchasing Units directly from USNG (by delivery of the Deposit Amount) would receive a prospectus from USNG. Amex members purchasing Units from USNG for resale to investors would deliver a prospectus to such investors. (3) Amex submits that its surveillance procedures are adequate to deter and detect violations of Exchange rules relating to the trading of the Units. The surveillance procedures for the Units will be similar to those used for units of the United States Oil Fund, LP as well as other commodity-based trusts, trust issued receipts and exchange-traded funds. In addition, the surveillance procedures will incorporate and rely upon existing Amex surveillance procedures governing options and equities. (4) Amex represents that it prohibits the initial and/or continued listing of any security that is not in compliance with Rule 10A–3 under the Act.12 This order is conditioned on Amex’s adherence to these representations. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,13 that the proposed rule change (SR–Amex–2006– 112), as modified by Amendment No. 1, be, and is hereby approved. 12 See 13 15 PO 00000 17 CFR 240.10A–3. U.S.C. 78s(b)(2). Frm 00113 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Market Regulation, pursuant to delegated authority.14 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–7486 Filed 4–19–07; 8:45 am] BILLING CODE 8010–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–55636; File No. SR–Amex– 2007–32] Self-Regulatory Organizations; American Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Shorten the Minimum Required Time Periods Required Between Tape Indications and Openings or Reopenings April 16, 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 March 30, 2007, the American Stock Exchange LLC (‘‘Amex’’ 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 prepared by the Amex. The Exchange has filed the proposal pursuant to Section 19(b)(3)(A) of the Act,3 and Rule 19b– 4(f)(6) thereunder,4 which renders the proposal effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Amex Rules regarding openings and halts in trading to shorten the minimum time periods required between tape indications and openings or reopenings. The Exchange has designated this proposal as non-controversial and has requested that the Commission waive the 30-day pre-operative waiting period contained in Rule 19b–4(f)(6)(iii) under the Act.5 The text of the proposed rule change is available on the Amex’s Web site at http://www.amex.com, the Office of the Secretary, the Amex and at the Commission’s Public Reference Room. 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A). 4 17 CFR 240.19b–4(f)(6). 5 17 CFR 240.19b–4(f)(6)(iii). 1 15 E:\FR\FM\20APN1.SGM 20APN1

Agencies

[Federal Register Volume 72, Number 76 (Friday, April 20, 2007)]
[Notices]
[Pages 19987-19988]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-7486]



[[Page 19987]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55632; File No. SR-Amex-2006-112]


Self-Regulatory Organizations; American Stock Exchange LLC; Order 
Granting Approval of a Proposed Rule Change, as Modified by Amendment 
No. 1, Relating to the Listing and Trading of Units of the United 
States Natural Gas Fund, LP

April 13, 2007.

I. Introduction

    On December 1, 2006, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposal to list and trade units (a ``Unit'' or collectively, the 
``Units'') of the United States Natural Gas Fund, LP (``USNG'') 
pursuant to Amex Rules 1500 et seq. On February 14, 2007, the Exchange 
submitted Amendment No. 1 to the proposed rule change. The proposed 
rule change, as modified by Amendment No. 1, was published for comment 
in the Federal Register on March 7, 2007 for a 15-day comment 
period.\3\ The Commission received no comments regarding the proposal. 
This order approves the proposed rule change, as modified by Amendment 
No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 55372 (February 28, 
2007), 72 FR 10267.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to list and trade the Units issued by USNG 
pursuant to Amex Rules 1500 et seq. The Units represent ownership of a 
fractional undivided beneficial interest in the net assets of USNG.\4\ 
The net assets of USNG will consist of investments in futures contracts 
based on natural gas, crude oil, heating oil, gasoline, and other 
petroleum-based fuels traded on the New York Mercantile Exchange 
(``NYMEX''), Intercontinental Exchange (``ICE Futures'') or other U.S. 
and foreign exchanges (collectively, ``Futures Contracts''). USNG may 
also invest in other natural gas-related investments such as cash-
settled options on Futures Contracts, forward contracts for natural 
gas, and over-the-counter transactions that are based on the price of 
natural gas, oil and other petroleum-based fuels, Futures Contracts and 
indices based on the foregoing (collectively, ``Other Natural Gas 
Related Investments''). Futures Contracts and Other Natural Gas Related 
Investments collectively are referred to as ``Natural Gas Interests.''
---------------------------------------------------------------------------

    \4\ USNG is a commodity pool that will issue Units that may be 
purchased and sold on the Exchange.
---------------------------------------------------------------------------

    USNG will invest in Natural Gas Interests to the fullest extent 
possible without being leveraged or unable to satisfy its current or 
potential margin or collateral obligations. In pursuing this objective, 
the primary focus of USNG's investment manager, Victoria Bay Asset 
Management, LLC (``General Partner''), will be the investment in 
Futures Contracts and the management of its investments in short-term 
obligations of the United States, cash equivalents, and cash for 
margining purposes and as collateral.
    The investment objective of USNG is for changes in percentage terms 
of a Unit's net asset value (``NAV'') to reflect the changes in 
percentage terms of the price of natural gas delivered at the Henry 
Hub, Louisiana as measured by the natural gas futures contract traded 
on the NYMEX (the ``Benchmark Futures Contract''). The Benchmark 
Futures Contract employed is the near month expiration contract, except 
when the near month contract is within two (2) weeks of expiration, in 
which case the Benchmark Futures Contract is the next expiration 
month.\5\
---------------------------------------------------------------------------

    \5\ The Benchmark Futures Contracts will be changed or 
``rolled'' from the near month contract to expire over to the next 
month to expire over a four (4) day period.
---------------------------------------------------------------------------

    The General Partner will attempt to place USNG's trades in Natural 
Gas Interests and otherwise manage USNG's investments so that ``A'' 
will be within plus/minus 10 percent of ``B,'' where:
     A is the average daily change in USNG's NAV for any period 
of 30 successive valuation days, i.e., any day as of which USNG 
calculates its NAV; and
     B is the average daily change in the price of the 
Benchmark Futures Contract over the same period.
    USNG will be subject to the criteria in Amex Rule 1502 for initial 
and continued listing of the Units. The Amex stated that it will 
require a minimum of 100,000 Units to be outstanding at the start of 
trading and expects that the initial price of a Unit will be $50.00.\6\ 
The Exchange represented that it prohibits the initial and/or continued 
listing of any security that is not in compliance with Rule 10A-3 under 
the Act.\7\ Further, the Exchange stated that it will file a proposed 
rule change with the Commission pursuant to Rule 19b-4 under the Act 
seeking approval to continue trading the Units and, unless approved, 
the Exchange will commence delisting the Units if more than a temporary 
disruption exists in connection with the pricing of the Benchmark 
Futures Contract or the calculation or dissemination of the NAV is more 
than temporarily disrupted, or the NAV is not disseminated to all 
market participants at the same time.
---------------------------------------------------------------------------

    \6\ USNG expects that the initial Authorized Purchaser will 
purchase the initial Basket of 100,000 Units at the initial offering 
price per Unit of $50.00. On the date of the public offering and 
thereafter, USNG will continuously issue Units in Baskets of 100,000 
Units to Authorized Purchasers at NAV.
    \7\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    Amex Rule 1503 relating to certain specialist prohibitions will 
address potential conflicts of interest in connection with acting as a 
specialist in the Units. Specifically, Rule 1503 provides that the 
prohibitions in Amex Rule 175(c) apply to a specialist in the Units so 
that the specialist or affiliated person may not act or function as a 
market-maker in an underlying asset, related futures contract or option 
or any other related derivative. An affiliated person of the specialist 
consistent with Amex Rule 193 may be afforded an exemption to act in a 
market making capacity, other than as a specialist in the Units on 
another market center, in the underlying asset, related futures or 
options or any other related derivative. In particular, Amex Rule 1503 
provides that an approved person of an equity specialist that has 
established and obtained Exchange approval for procedures restricting 
the flow of material, non-public market information between itself and 
the specialist member organization, and any member, officer, or 
employee associated therewith, may act in a market making capacity, 
other than as a specialist in the Units on another market center, in 
the underlying asset or commodity, related futures or options on 
futures, or any other related derivatives.
    Amex Rule 1504 will also ensure that specialists handling the Units 
provide the Exchange with all the necessary information relating to 
their trading in physical assets or commodities, related futures 
contracts and options thereon or any other derivative. As a general 
matter, the Exchange has regulatory jurisdiction over its members, 
member organizations and approved persons of a member organization. The 
Exchange also has regulatory jurisdiction over any person or entity 
controlling a member organization as well as a subsidiary or affiliate 
of a member organization that is in the securities business. A 
subsidiary or affiliate of a member organization that does business 
only in commodities

[[Page 19988]]

or futures contracts would not be subject to Exchange jurisdiction, but 
the Exchange could obtain information regarding the activities of such 
subsidiary or affiliate through surveillance sharing agreements with 
regulatory organizations of which such subsidiary or affiliate is a 
member.

III. Discussion and Commission Findings

    After careful consideration, 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 \8\ and, in particular, the requirements of Section 6 of the 
Act.\9\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\10\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to 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.
---------------------------------------------------------------------------

    \8\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\11\ 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 transaction in 
securities. Amex represented that quotation for and last-sale 
information regarding the futures contracts held by USNG, including the 
future contracts underlying the Benchmark Index are widely disseminated 
through a variety of market data vendors worldwide, including Bloomberg 
and Reuters. In addition, the Exchange further represented that real-
time futures data is available by subscription from Reuters and 
Bloomberg. The NAV of the Units is available at the Web site of the 
Exchange. The Commission believes that Amex's proposal is reasonable 
designed to promote transparency in the pricing of the Units, and to 
prevent trading when a reasonable degree of transparency cannot be 
assured. The proposal also appears reasonably designed to prevent the 
misuse of information by specialists.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    In support of this proposal, the Exchange has made the following 
representations:
    (1) The Exchange represented that it currently has in place an 
Information Sharing Agreement with the NYMEX and ICE Futures for the 
purpose of providing information in connection with trading in or 
related to futures contracts traded on the NYMEX and ICE Futures, 
respectively. To the extent that USNG invests in Natural Gas Interests 
traded on other exchanges, the Amex represented that it will seek to 
enter into Information Sharing arrangements with those particular 
exchanges.
    (2) Amex would distribute an information circular to Exchange 
members and member organizations, prior to the commencement of trading 
providing guidance with regard to member firm compliance 
responsibilities (including suitability recommendations) when handling 
transaction in the Units. In addition, investors purchasing Units 
directly from USNG (by delivery of the Deposit Amount) would receive a 
prospectus from USNG. Amex members purchasing Units from USNG for 
resale to investors would deliver a prospectus to such investors.
    (3) Amex submits that its surveillance procedures are adequate to 
deter and detect violations of Exchange rules relating to the trading 
of the Units. The surveillance procedures for the Units will be similar 
to those used for units of the United States Oil Fund, LP as well as 
other commodity-based trusts, trust issued receipts and exchange-traded 
funds. In addition, the surveillance procedures will incorporate and 
rely upon existing Amex surveillance procedures governing options and 
equities.
    (4) Amex represents that it prohibits the initial and/or continued 
listing of any security that is not in compliance with Rule 10A-3 under 
the Act.\12\
---------------------------------------------------------------------------

    \12\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    This order is conditioned on Amex's adherence to these 
representations.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\13\ that the proposed rule change (SR-Amex-2006-112), as modified 
by Amendment No. 1, be, and is hereby approved.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-7486 Filed 4-19-07; 8:45 am]
BILLING CODE 8010-01-P