Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change as Modified by Amendment No. 1 Thereto to Trade Shares of 11 Funds of the ProShares Trust Pursuant to Unlisted Trading Privileges, 73955-73960 [E7-25207]

Download as PDF Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices 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. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing proposed rule change, which is concerned solely with the administration of the self-regulatory organization, has become effective as of November 30, 2007 pursuant to section 19(b)(3)(A)(iii) 16 of the Act and Rule 19b–4(f)(3) thereunder.17 At any time within 60 days of the filing of the proposed rule change, the Commission may summarily abrogate such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. mstockstill on PROD1PC66 with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change, as amended, is consistent with the Act. Comments may be submitted by any of the following methods: 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 on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the NYSE. 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–NYSE– 2007–108 and should be submitted on or before January 18, 2008. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Florence E. Harmon, Deputy Secretary. Deletions [bracketed] Capital Requirements Member Organizations General Provisions Rule 325. (a) Each member organization shall comply with the net capital requirements prescribed by Rule 15c3–1 under the Securities Exchange Electronic Comments Act of 1934 (the ‘‘Exchange Act’’) and • Use the Commission’s Internet with the additional requirements of this comment form (http://www.sec.gov/ Rule 325. rules/sro.shtml); or [(e) In addition to the net capital • Send an e-mail to rulerequirement prescribed in Rule 15c3–1 comments@sec.gov. Please include File promulgated under the Securities Number SR–NYSE–2007–108 on the Exchange Act of 1934, each member subject line. organization which employs individuals to execute orders on the floor of the Paper Comments Exchange, must present evidence of • Send paper comments in triplicate financial responsibility in the amount of to Nancy M. Morris, Secretary, $100,000 for each such employee by one Securities and Exchange Commission, of the following methods; 100 F Street NE., Washington, DC (1) A written guarantee by a member 20549–1090. organization which is a member of a All submissions should refer to File qualified clearing agency and has excess Number SR–NYSE–2007–108. This file net capital of not less than $100,000 for number should be included on the each member for whom such guarantee subject line if e-mail is used. To help the has been extended, or Commission process and review your (2) $100,000 held by an independent comments more efficiently, please use agent in escrow, or only one method. The Commission will (3) a letter of credit issued by a bank post all comments on the Commission’s or other party acceptable to the Internet Web site (http://www.sec.gov/ Exchange in the amount of $100,000, or rules/sro/shtml). Copies of the (4) marketable securities with a total submission, all subsequent value of at least $100,000 (after amendments, all written statements appropriate haircuts, to be determined with respect to the proposed rule in the same manner as haircuts are change that are filed with the determined for capital requirements) on 16 15 17 17 U.S.C. 78s(b)(3)(A)(iii). CFR 240.19b–4(f)(3). VerDate Aug<31>2005 22:27 Dec 27, 2007 deposit with an organization acceptable to the Exchange and readily available, or Such written guarantee, escrow account, letter of credit or marketable securities shall be available solely for sums due the Exchange and such sums as the Board of Directors shall determine are due by such member to member organizations as the result of losses arising directly from the closing out under the Rules, of contracts entered into, in the ordinary course of business in the market on the floor of the Exchange for the purchase, sale, borrowing or loaning of securities. The Exchange will consider alternate methods of compliance with the financial responsibility standard.] Applicability, Definitions and References Rule 700. (a) The Rules in this 700 series (Rules 700 through 794) shall be applicable to (i) the trading on the Exchange of option contracts issued by The Options Clearing Corporation, (ii) the terms and conditions, and the exercise and settlement, of option contracts so traded, and (iii) the handling of orders, and the conduct of accounts and other matters, relating to option contracts dealt in by any member or member organization. Except as may be specifically provided in the Rules in this series, [(i)] Rules 6, 45 through 298 and Rule 440B shall not apply to option transactions [and (ii) Rule 325(e) shall not apply to members whose transactions on the Exchange are in options solely]. [FR Doc. E7–25190 Filed 12–27–07; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–57017; File No. SR– NYSEArca–2007–108] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Order Granting Accelerated Approval of a Proposed Rule Change as Modified by Amendment No. 1 Thereto to Trade Shares of 11 Funds of the ProShares Trust Pursuant to Unlisted Trading Privileges December 20, 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 October 17, 2007, NYSE Arca, Inc. (‘‘Exchange’’), through its wholly-owned subsidiary NYSE Arca Equities, Inc. (‘‘NYSE Arca 1 15 18 17 Jkt 214001 PO 00000 CFR 200.30–3(a)(12). Frm 00199 Fmt 4703 Sfmt 4703 73955 2 17 E:\FR\FM\28DEN1.SGM U.S.C. 78s(b)(1). CFR 240.19b–4. 28DEN1 73956 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices Equities’’), 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 December 20, 2007, the Exchange 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange, through its whollyowned subsidiary NYSE Arca Equities, proposes to trade pursuant to unlisted trading privileges (‘‘UTP’’) shares (‘‘Shares’’) of 11 funds (‘‘Funds’’) of the ProShares Trust (‘‘Trust’’) based on a domestic stock index and several fixed income indexes. The text of the proposed rule change is available at the Exchange’s principal office, the Commission’s Public Reference Room, and http://www.nyse.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 mstockstill on PROD1PC66 with NOTICES The Exchange proposes to trade pursuant to UTP under NYSE Arca Equities Rule 5.2(j)(3), Shares of ten Funds of the Trust that are designated as Short Funds and UltraShort Funds, and one Fund designated as an Ultra Fund.3 The Commission has approved the original listing and trading of the 3 The Commission has previously approved the trading of certain Ultra Funds, Short Funds, and UltraShort Funds of the ProShares Trust on the Exchange pursuant to UTP under NYSE Arca Equities Rule 5.2(j)(3). See Securities Exchange Act Release No. 55125 (January 18, 2007), 72 FR 3462 (January 25, 2007) (SR–NYSEArca–2006–87). VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 Shares on the American Stock Exchange LLC (‘‘Amex’’).4 The Funds to be traded are as follows: Short ProShares (1) Short Lehman Brothers 7–10 Year U.S. Treasury ProShares (2) Short Lehman Brothers 20+ Year U.S. Treasury ProShares (3) Short iBoxx $ Liquid Investment Grade ProShares (4) Short iBoxx $ Liquid High Yield ProShares (5) Short Dow Jones U.S. Select Telecommunications ProShares UltraShort ProShares (1) UltraShort Lehman Brothers 7–10 Year U.S. Treasury ProShares (2) UltraShort Lehman Brothers 20+ Year U.S. Treasury ProShares (3) UltraShort iBoxx $ Liquid Investment Grade ProShares (4) UltraShort iBoxx $ Liquid High Yield ProShares (5) UltraShort Dow Jones U.S. Select Telecommunications ProShares Ultra ProShares (1) Ultra Dow Jones U.S. Select Telecommunications ProShares Each of the Funds will have a distinct investment objective. The Funds will attempt, on a daily basis, to achieve their investment objective by corresponding to a specified multiple of the performance, the inverse performance, or an inverse multiple of the performance of a particular fixed income or equity securities index, as briefly described below. The Funds will be based on the following benchmark indexes: (1) Lehman Brothers 7–10 Year U.S. Treasury Index, (2) Lehman Brothers 20+ Year U.S. Treasury Index, (3) iBoxx $ Liquid Investment Grade Index, (4) iBoxx $ Liquid High Yield Index, and (5) the Dow Jones Select Telecommunications Index (the ‘‘Underlying Indexes’’). Certain Funds seek daily investment results, before fees and expenses, that correspond to the inverse or opposite of the daily performance (¥100%) of the Underlying Indexes (the ‘‘Short Funds’’). If such a Fund is successful in meeting its objective, the net asset value (the ‘‘NAV’’) of the Fund’s shares should increase approximately as much, on a percentage basis, as the respective Underlying Index loses when the prices of the securities in the Index decline on a given day, or should decrease approximately as much as the respective Index gains when the prices of the 4 See Securities Exchange Act Release No. 59998 (December 19, 2007) (SR–Amex–2007–104) (‘‘Amex Proposal’’). PO 00000 Frm 00200 Fmt 4703 Sfmt 4703 securities in the index rise on a given day, before fees and expenses. Certain Funds seek daily investment results, before fees and expenses that correspond to twice the inverse or opposite of the daily performance (¥200%) of the Underlying Indexes (the ‘‘UltraShort Funds’’). If such a Fund is successful in meeting its objective, the NAV the Fund’s shares should increase approximately twice as much, on a percentage basis, as the respective Underlying Index loses when the prices of the securities in the Index decline on a given day, or should decrease approximately twice as much as the respective Underlying Index gains when the prices of the securities in the index rise on a given day, before fees and expenses. The Short Funds and UltraShort Funds each have investment objectives that seek investment results corresponding to an inverse performance of the Underlying Indexes and are collectively referred to as the ‘‘Bearish Funds.’’ One Fund, the Ultra Dow Jones Select Telecommunications ProShares Fund, seeks daily investment results, before fees and expenses, that corresponds to twice the daily performance (200%) of the Underlying Index (the ‘‘Ultra Fund’’ or the ‘‘Bullish Fund’’). This Fund, if successful in meeting its investment objective, should gain, on a percentage basis, approximately twice as much as the Fund’s Underlying Index when the price of the securities in such Index increase on a given day, and should lose approximately twice as much when such prices decline on a given day. The financial instruments to be held by any of the Funds may include stock index futures contracts; options on futures contracts; options on securities and indices; equity caps, collars, and floors as well as swap agreements, forward contracts, repurchase agreements, and reverse repurchase agreements (the ‘‘Financial Instruments’’). Money market instruments include U.S. government securities and repurchase agreements. The Underlying Indexes The Lehman Brothers 7–10 Year U.S. Treasury Index is market-capitalizationweighted and includes all publicly issued, U.S. Treasury securities that have a remaining maturity of between seven and ten years and have more than $250 million par outstanding. The index value is calculated and published daily by 10 p.m. Eastern Time (‘‘E.T.’’). The Lehman Brothers 20+ Year U.S. Treasury Index is market-capitalizationweighted and includes all publicly issued, U.S. Treasury Securities that have a remaining maturity greater than E:\FR\FM\28DEN1.SGM 28DEN1 mstockstill on PROD1PC66 with NOTICES Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices 73957 20 years and have more than $150 million par outstanding. The index value is calculated and published daily by 10 p.m. E.T. The iBoxx $ Liquid Investment Grade Index is a rules-based index consisting of up to 100 highly liquid, investmentgrade, U.S.-dollar-denominated corporate bonds with a minimum amount outstanding of $500 million that seeks to maximize liquidity while maintaining representation of the broader investment-grade corporate bond market. The index consists of issuers domiciled in the U.S., Bermuda, Cayman Islands, Canada, Japan or Western Europe. The index is equally priced weighted and is re-balanced monthly. The index value is calculated and published daily by 4:30 p.m. E.T. The iBoxx $ Liquid High Yield Index is a rules-based index consisting of up to 50 of the most liquid, high-yield, U.S.-dollar-denominated corporate bonds with a minimum amount outstanding of $200 million that seeks to maximize liquidity while maintaining representation of the broader high-yield corporate bond market. The index consists of issuers domiciled in the United States, Bermuda, Cayman Islands, Canada, Japan, or Western Europe. The index is equally priced weighted and is re-balanced monthly. The index value is calculated and published daily by 4:30 p.m. E.T. The Dow Jones U.S. Select Telecommunications Index is a floatadjusted market-capitalization-weighted index designed to measure the performance of the telecommunications economic sector of the U.S. equity market. Component companies include fixed line and mobile telecommunications companies. Component weights are capped for diversification. The index includes all common stocks of companies in the Dow Jones U.S. Select Telecommunications Index that are categorized as belonging to the telecommunications sector, based on Industry Classification Benchmark (ICB) definitions. The company at the 90% cumulative market capitalization of the index must have a float-adjusted market capitalization of at least $75 million. The Index value is calculated and distributed every 15 seconds during Amex’s trading hours. Additional information regarding the Underlying Indexes and the Funds is included in the Amex Proposal. for each Fund’s Shares: (1) The prior business day’s closing NAV, the reported closing price, and a calculation of the premium or discount of such price in relation to the closing NAV; (2) data for a period covering at least the four previous calendar quarters (or the life of a Fund, if shorter) indicating how frequently each Fund’s Shares traded at a premium or discount to NAV based on the daily closing price and the closing NAV, and the magnitude of such premiums and discounts; (3) its prospectus and/or product description; and (4) other quantitative information such as daily trading volume. The prospectus and/or product description for each Fund will inform investors that the Trust’s Web site has information about the premiums and discounts at which the Fund’s Shares have traded. According to the Amex Proposal, Amex will disseminate for each Fund on a daily basis every 15 seconds by means of Consolidated Tape Association (‘‘CTA’’) and CQ High Speed Lines information with respect to an Indicative Intra-Day Value (‘‘IIV’’), the recent NAV, the number of shares outstanding, the estimated cash amount, and the total cash amount per Creation Unit. Amex will make available on its Web site daily trading volume, the closing price, the NAV, and the final dividend amounts to be paid for each Fund. Each Fund’s total portfolio composition will be disclosed on the Trust’s Web site (www.proshares.com) or another relevant Web site as determined by the Trust and/or Amex. According to the Amex Proposal, the Trust will provide Web site disclosure of portfolio holdings daily, which will include, as applicable, the names and number of shares held of each equity security (if applicable), the specific types of Financial Instruments and characteristics of such instruments, cash equivalents, and the amount of cash held in the portfolio of each Fund. This public Web site disclosure of the portfolio composition of each Fund will coincide with the disclosure by the Advisor of the ‘‘IIV File’’ (described below) and the ‘‘PCF File’’, when applicable (described below). Therefore, the same portfolio information (including accrued expenses and dividends) will be provided on the public Web site, as well as in the IIV File and PCF File (when applicable) provided to ‘‘Authorized Participants.’’ 5 The format of the public Web site disclosure and the IIV File and PCF File (when applicable) will differ because the public Web site will list all portfolio holdings while the IIV File and PCF File (when applicable) will similarly provide the portfolio holdings but in a format appropriate for Authorized Participants, i.e., the exact components of a Creation Unit.6 Accordingly, each investor will have access to the current portfolio composition of each Fund through the Trust’s Web site, at www.proshares.com, and/or at the Amex’s Web site at www.amex.com. Amex has represented in the Amex Proposal that it will obtain a representation from the Trust (for each Fund), prior to listing, that the NAV per share for each Fund will be calculated daily and made available to all market participants at the same time.7 Beneficial owners of Shares (‘‘Beneficial Owners’’) will receive all of the statements, notices, and reports required under the 1940 Act and other applicable laws. They will receive, for example, annual and semi-annual fund reports, written statements accompanying dividend payments, proxy statements, annual notifications detailing the tax status of fund distributions, and Form 1099–DIVs. Some of these documents will be provided to Beneficial Owners by their brokers, while others will be provided by the Fund through the brokers. The daily closing index value and the percentage change in the daily closing index value for each Underlying Index will be publicly available on various Web sites, e.g., www.bloomberg.com. Data regarding each Underlying Index is also available from the respective index provider to subscribers. The value of the Dow Jones U.S. Select Telecommunications Index will be updated intra-day on a real-time basis as its individual component securities change in price. This intra-day value of this index will be disseminated at least every 15 seconds throughout Amex’s trading day by Amex or another organization authorized by the relevant Underlying Index provider. Because the NSCC’s system for the receipt and dissemination to its participants of the PCF is not currently capable of processing information with respect to Financial Instruments, the ProShare Advisors LLC, the investment advisor to each Fund (the ‘‘Advisor’’), has developed an ‘‘IIV File,’ which it Availability of Information About the Shares and the Underlying Indexes The Trust’s Web site, which is and will be publicly accessible at no charge, will contain the following information 5 An Authorized Participant is either (1) a brokerdealer or other participant in the continuous net settlement system of the National Securities Clearing Corporation (‘‘NSCC’’) or (2) a DTC participant, and which has entered into a participant agreement with the Distributor. 6 The composition will be used to calculate the NAV later that day. 7 If the Amex halts trading in the Shares of the Funds because the NAV is not being disseminated to all market participants at the same time, then the Exchange would do so as well. VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 PO 00000 Frm 00201 Fmt 4703 Sfmt 4703 E:\FR\FM\28DEN1.SGM 28DEN1 73958 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices will use to disclose the Funds’’ holdings of Financial Instruments.8 The IIV File will contain, for the Bullish Fund (to the extent that it holds Financial Instruments) and Bearish Funds, information sufficient by itself or in connection with the PCF File and other available information for market participants to calculate a Fund’s IIV and effectively arbitrage the Fund. Dissemination of Intra-Day Indicative Value (IIV) To provide updated information relating to each Fund for use by investors, professionals, and persons wishing to create or redeem Shares, Amex will disseminate through the facilities of the CTA: (1) Continuously throughout the Amex’s trading day, the market value of a Share; and (2) at least every 15 seconds throughout the Amex’s trading day, a calculation of the IIV of each Fund as calculated by the Amex (the ‘‘IIV Calculator’’). Comparing these two figures helps an investor to determine whether, and to what extent, the Shares may be selling at a premium or a discount to NAV. The IIV Calculator will calculate an IIV for each Fund in the manner discussed below. The IIV is designed to provide investors with a reference value that can be used in connection with other related market information. The IIV does not necessarily reflect the precise composition of the current portfolio held by each Fund at a particular point in time. Therefore, the IIV on a per Share basis disseminated during Amex trading hours should not be viewed as a real-time update of the NAV of a particular Fund, which is calculated only once a day. While the IIV that will be disseminated by Amex is expected to be close to the most recently calculated Fund NAV on a per Share basis, it is possible that the value of the portfolio held by a Fund may diverge from the IIV during any trading day. In such case, the IIV will not precisely reflect the value of the Fund portfolio. Trading Halts The Exchange represents that it will cease trading the Shares of the Fund if the listing market stops trading the Shares because of a regulatory halt similar to a halt based on NYSE Arca Equities Rule 7.12. UTP trading in the Shares is also governed by the trading halts provisions of NYSE Arca Equities Rule 7.34 relating to temporary interruptions in the calculation or wide dissemination of the IIV or the value of the underlying index. The Exchange may also consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of a Fund. Trading may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities comprising an Underlying Index and/or the Financial Instruments of a Fund, or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. In addition, trading in Shares could be halted pursuant to the Exchange’s ‘‘circuit breaker’’ rule 9 or by the halt or suspension of trading of the underlying securities. Trading Rules 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. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions).10 The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. The minimum trading increment for Shares on the Exchange will be $0.01. Surveillance The Exchange intends to utilize its existing surveillance procedures applicable to derivative products to monitor trading in the Shares. The Exchange 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. The Exchange’s current trading surveillance focuses on detecting when securities trade outside their normal patterns. When such situations are 9 See NYSE Arca Equities Rule 7.12. NSCC does not disseminate the new basket amount to market participants until approximately 6 p.m. to 7 p.m. E.T., an updated IIV cannot be calculated during the Exchange’s late trading session (from 4:15 p.m. to 8 p.m. E.T.). Official index sponsors for the Underlying Indexes currently do not calculate updated index values during the Exchange’s late trading session; however, if the index sponsors do so in the future, the Exchange would not trade this product unless such official index value is widely disseminated. mstockstill on PROD1PC66 with NOTICES 10 Because 8 The Trust or the Advisor will post the IIV File to a password-protected Web site before the opening of business on each business day, and all Authorized Participants and the Amex will have access to a password and the Web site containing the IIV File. However, the Fund will disclose each business day to the public identical information, but in a format appropriate to public investors, at the same time the Fund discloses the IIV and PCF files, as applicable, to industry participants. VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 PO 00000 Frm 00202 Fmt 4703 Sfmt 4703 detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations. The Exchange may obtain information via the Intermarket Surveillance Group (‘‘ISG’’) from other exchanges who are members or affiliates of the ISG.11 In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; 12 (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated IIV will not be calculated or publicly disseminated; (4) how information regarding the IIV is disseminated; (5) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that the Funds are subject to various fees and expenses described in the registration statements for the Funds. The Bulletin will also discuss any exemptive, no-action, and interpretive relief granted by the Commission from Section 11(d)(1) of the Act 13 and certain rules under the Act, including Rule 11 A list of the current members and affiliate members of ISG is available at www.isgportal.com. 12 NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder, before recommending a transaction, must have reasonable grounds to believe that the recommendation is suitable for the customer based on any facts disclosed by the customer as to his other security holdings and as to his financial situation and needs. Further, the rule provides, with a limited exception, that prior to the execution of a transaction recommended to a non-institutional customer, the ETP Holder shall make reasonable efforts to obtain information concerning the customer’s financial status, tax status, investment objectives, and any other information that it believes would be useful to make a recommendation. See Securities Exchange Act Release No. 54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR–PCX–2005–115). 13 15 U.S.C. 78k(d)(1). E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices 10b–10, Rule 14e–5, Rule 10b–17, Rule 11d1–2, Rules 15c1–5 and 15c1–6, and Rules 101 and 102 of Regulation M under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4 p.m. E.T. each trading day. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6 of the Act,14 in general, and with Section 6(b)(5) of the Act,15 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 a free and open market and a national market system, and, in general, to protect investors and the public interest. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change would result in 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 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 rulecomments@sec.gov. Please include File Number SR–NYSEArca–2007–108 on the subject line. mstockstill on PROD1PC66 with NOTICES 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–NYSEArca–2007–108. This file number should be included on the 14 15 15 15 U.S.C. 78f. U.S.C. 78f(b)(5). VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 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, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. 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–NYSEArca–2007–108 and should be submitted on or before January 18, 2008. IV Commission’s Findings and Order Granting Accelerated Approval of the Proposed Rule Change 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.16 Specifically, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,17 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 believes that this proposal should benefit investors by increasing competition among markets that trade the Shares. 16 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). 17 15 U.S.C. 78f(b)(5). PO 00000 Frm 00203 Fmt 4703 Sfmt 4703 73959 In addition, the Commission finds that the proposal is consistent with Section 12(f) of the Act,18 which permits an exchange to trade, pursuant to UTP, a security that is listed and registered on another exchange.19 The Commission notes that it previously approved the listing and trading of the Shares on Amex.20 The Commission also finds that the proposal is consistent with Rule 12f–5 under the Act,21 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. The Commission further believes that the proposal is consistent with Section 11A(a)(1)(C)(iii) of the Act,22 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 disseminated through the facilities of the CTA and the Consolidated Quotation System. In addition, from 9:30 a.m. to 4:15 p.m. E.T., Amex will disseminate via the facilities of the CTA and CQ High Speed lines the IIV at least every 15 seconds, the market value of a Share for each Fund, the most recent NAV for each Fund, the number of Shares outstanding for each Fund, and the estimated cash amount and total cash amount per Creation Unit. Amex will also make available on its Web site daily trading volume, the closing prices, the NAV, and the final dividend amounts to be paid for each Fund. The Trust’s Web site will contain a variety of other quantitative information for the Shares of each Fund. Finally, each Fund’s total 18 15 U.S.C. 78l(f). 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. 20 See supra note 4. 21 17 CFR 240.12f–5. 22 15 U.S.C. 78k–1(a)(1)(C)(iii). 19 Section E:\FR\FM\28DEN1.SGM 28DEN1 mstockstill on PROD1PC66 with NOTICES 73960 Federal Register / Vol. 72, No. 248 / Friday, December 28, 2007 / Notices portfolio composition will be disclosed on the Web site of the Trust or another relevant Web site. Furthermore, the Commission believes that the proposal is reasonably designed to preclude trading of the Shares when transparency is impaired. Trading in the Shares will be subject to NYSE Arca Equities Rule 7.34, which provides that, if the listing market halts trading when the IIV is not being calculated or disseminated, the Exchange also would halt trading. The Exchange also may halt trading in the Shares of a Fund when trading is not occurring in the securities comprising an Underlying Index and/or the Financial Instruments of a Fund. The Commission notes that, if the Shares should be delisted by the 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 made the following representations: 1. The Exchange’s surveillance procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules. 2. Prior to the commencement of trading, the Exchange would inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. In particular, the Information Bulletin would discuss the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated IIV will not be calculated or publicly disseminated. 3. The Information Bulletin also would discuss the requirement that an ETP Holder deliver a prospectus to an investor purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction. This approval order is based on the Exchange’s 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 the listing and trading of the Shares on Amex be consistent with the Act. The Commission presently is not aware of any regulatory issue that should cause it to revisit that finding or would preclude the trading of the Shares on the Exchange pursuant to UTP. Therefore, accelerating approval of this proposal should benefit investors by creating, without undue delay, additional competition in the market for the Shares. VerDate Aug<31>2005 22:27 Dec 27, 2007 Jkt 214001 V. Conclusion Percent It is therefore ordered, pursuant to Section 19(b)(2) of the Act,23 that the proposed rule change (SR–NYSEArca– 2007–108), as amended, be and it hereby is approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Florence E. Harmon, Deputy Secretary. [FR Doc. E7–25207 Filed 12–27–07; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION Other (Including Non-Profit Organizations) With Credit Available Elsewhere: .................................. Businesses and Non-Profit Organizations Without Credit Available Elsewhere: .................................. 5.250 4.000 The number assigned to this disaster for physical damage is 11139. (Catalog of Federal Domestic Assistance Number 59008) Herbert L. Mitchell, Associate Administrator for Disaster Assistance. [FR Doc. E7–25252 Filed 12–27–07; 8:45 am] BILLING CODE 8025–01–P [Disaster Declaration #11139] Oklahoma Disaster #OK–00016 SMALL BUSINESS ADMINISTRATION U.S. Small Business Administration. ACTION: Notice. [Disaster Declaration # 11137] AGENCY: Oregon Disaster # OR–00025 12/18/2007. Physical Loan Application Deadline Date: 02/18/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 12/18/2007, Private Non-Profit organizations that provide essential services of a governmental nature may file disaster loan applications at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Cleveland, Lincoln, Mayes, Oklahoma, Pottawatomie, Tulsa, Wagoner. EFFECTIVE DATE: The Interest Rates are: 23 15 24 17 PO 00000 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). Frm 00204 Fmt 4703 Sfmt 4703 U.S. Small Business Administration. ACTION: Notice. AGENCY: This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of OKLAHOMA (FEMA–1735– DR), dated 12/18/2007. Incident: Severe Winter Storms. Incident Period: 12/08/2007 and continuing. SUMMARY: SUMMARY: This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of OREGON ( FEMA—1733— DR), dated 12/08/2007. Incident: Severe Storms, Flooding, Landslides, and Mudslides. Incident Period: 12/01/2007 and continuing. 12/08/2007. Physical Loan Application Deadline Date: 02/07/2008. ADDRESSES: Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155. FOR FURTHER INFORMATION CONTACT: A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street, SW., Suite 6050, Washington, DC 20416. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 12/08/2007, Private Non-Profit organizations that provide essential services of a governmental nature may file disaster loan applications at the address listed above or other locally announced locations. The following areas have been determined to be adversely affected by the disaster: Primary Counties: Clatsop, Columbia, Lincoln, Polk. Tillamook, Washington, Yamhill, The Interest Rates are: EFFECTIVE DATE: E:\FR\FM\28DEN1.SGM 28DEN1

Agencies

[Federal Register Volume 72, Number 248 (Friday, December 28, 2007)]
[Notices]
[Pages 73955-73960]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-25207]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57017; File No. SR-NYSEArca-2007-108]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of a Proposed Rule Change as 
Modified by Amendment No. 1 Thereto to Trade Shares of 11 Funds of the 
ProShares Trust Pursuant to Unlisted Trading Privileges

December 20, 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 October 17, 2007, NYSE Arca, Inc. (``Exchange''), through its 
wholly-owned subsidiary NYSE Arca Equities, Inc. (``NYSE Arca

[[Page 73956]]

Equities''), 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 December 20, 2007, the Exchange 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly-owned subsidiary NYSE Arca 
Equities, proposes to trade pursuant to unlisted trading privileges 
(``UTP'') shares (``Shares'') of 11 funds (``Funds'') of the ProShares 
Trust (``Trust'') based on a domestic stock index and several fixed 
income indexes. The text of the proposed rule change is available at 
the Exchange's principal office, the Commission's Public Reference 
Room, and http://www.nyse.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
    The Exchange proposes to trade pursuant to UTP under NYSE Arca 
Equities Rule 5.2(j)(3), Shares of ten Funds of the Trust that are 
designated as Short Funds and UltraShort Funds, and one Fund designated 
as an Ultra Fund.\3\ The Commission has approved the original listing 
and trading of the Shares on the American Stock Exchange LLC 
(``Amex'').\4\
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    \3\ The Commission has previously approved the trading of 
certain Ultra Funds, Short Funds, and UltraShort Funds of the 
ProShares Trust on the Exchange pursuant to UTP under NYSE Arca 
Equities Rule 5.2(j)(3). See Securities Exchange Act Release No. 
55125 (January 18, 2007), 72 FR 3462 (January 25, 2007) (SR-
NYSEArca-2006-87).
    \4\ See Securities Exchange Act Release No. 59998 (December 19, 
2007) (SR-Amex-2007-104) (``Amex Proposal'').
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    The Funds to be traded are as follows:

Short ProShares

    (1) Short Lehman Brothers 7-10 Year U.S. Treasury ProShares
    (2) Short Lehman Brothers 20+ Year U.S. Treasury ProShares
    (3) Short iBoxx $ Liquid Investment Grade ProShares
    (4) Short iBoxx $ Liquid High Yield ProShares
    (5) Short Dow Jones U.S. Select Telecommunications ProShares

UltraShort ProShares

    (1) UltraShort Lehman Brothers 7-10 Year U.S. Treasury ProShares
    (2) UltraShort Lehman Brothers 20+ Year U.S. Treasury ProShares
    (3) UltraShort iBoxx $ Liquid Investment Grade ProShares
    (4) UltraShort iBoxx $ Liquid High Yield ProShares
    (5) UltraShort Dow Jones U.S. Select Telecommunications ProShares

Ultra ProShares

    (1) Ultra Dow Jones U.S. Select Telecommunications ProShares
    Each of the Funds will have a distinct investment objective. The 
Funds will attempt, on a daily basis, to achieve their investment 
objective by corresponding to a specified multiple of the performance, 
the inverse performance, or an inverse multiple of the performance of a 
particular fixed income or equity securities index, as briefly 
described below. The Funds will be based on the following benchmark 
indexes: (1) Lehman Brothers 7-10 Year U.S. Treasury Index, (2) Lehman 
Brothers 20+ Year U.S. Treasury Index, (3) iBoxx $ Liquid Investment 
Grade Index, (4) iBoxx $ Liquid High Yield Index, and (5) the Dow Jones 
Select Telecommunications Index (the ``Underlying Indexes'').
    Certain Funds seek daily investment results, before fees and 
expenses, that correspond to the inverse or opposite of the daily 
performance (-100%) of the Underlying Indexes (the ``Short Funds''). If 
such a Fund is successful in meeting its objective, the net asset value 
(the ``NAV'') of the Fund's shares should increase approximately as 
much, on a percentage basis, as the respective Underlying Index loses 
when the prices of the securities in the Index decline on a given day, 
or should decrease approximately as much as the respective Index gains 
when the prices of the securities in the index rise on a given day, 
before fees and expenses.
    Certain Funds seek daily investment results, before fees and 
expenses that correspond to twice the inverse or opposite of the daily 
performance (-200%) of the Underlying Indexes (the ``UltraShort 
Funds''). If such a Fund is successful in meeting its objective, the 
NAV the Fund's shares should increase approximately twice as much, on a 
percentage basis, as the respective Underlying Index loses when the 
prices of the securities in the Index decline on a given day, or should 
decrease approximately twice as much as the respective Underlying Index 
gains when the prices of the securities in the index rise on a given 
day, before fees and expenses. The Short Funds and UltraShort Funds 
each have investment objectives that seek investment results 
corresponding to an inverse performance of the Underlying Indexes and 
are collectively referred to as the ``Bearish Funds.''
    One Fund, the Ultra Dow Jones Select Telecommunications ProShares 
Fund, seeks daily investment results, before fees and expenses, that 
corresponds to twice the daily performance (200%) of the Underlying 
Index (the ``Ultra Fund'' or the ``Bullish Fund''). This Fund, if 
successful in meeting its investment objective, should gain, on a 
percentage basis, approximately twice as much as the Fund's Underlying 
Index when the price of the securities in such Index increase on a 
given day, and should lose approximately twice as much when such prices 
decline on a given day.
    The financial instruments to be held by any of the Funds may 
include stock index futures contracts; options on futures contracts; 
options on securities and indices; equity caps, collars, and floors as 
well as swap agreements, forward contracts, repurchase agreements, and 
reverse repurchase agreements (the ``Financial Instruments''). Money 
market instruments include U.S. government securities and repurchase 
agreements.

The Underlying Indexes

    The Lehman Brothers 7-10 Year U.S. Treasury Index is market-
capitalization-weighted and includes all publicly issued, U.S. Treasury 
securities that have a remaining maturity of between seven and ten 
years and have more than $250 million par outstanding. The index value 
is calculated and published daily by 10 p.m. Eastern Time (``E.T.'').
    The Lehman Brothers 20+ Year U.S. Treasury Index is market-
capitalization-weighted and includes all publicly issued, U.S. Treasury 
Securities that have a remaining maturity greater than

[[Page 73957]]

20 years and have more than $150 million par outstanding. The index 
value is calculated and published daily by 10 p.m. E.T.
    The iBoxx $ Liquid Investment Grade Index is a rules-based index 
consisting of up to 100 highly liquid, investment-grade, U.S.-dollar-
denominated corporate bonds with a minimum amount outstanding of $500 
million that seeks to maximize liquidity while maintaining 
representation of the broader investment-grade corporate bond market. 
The index consists of issuers domiciled in the U.S., Bermuda, Cayman 
Islands, Canada, Japan or Western Europe. The index is equally priced 
weighted and is re-balanced monthly. The index value is calculated and 
published daily by 4:30 p.m. E.T.
    The iBoxx $ Liquid High Yield Index is a rules-based index 
consisting of up to 50 of the most liquid, high-yield, U.S.-dollar-
denominated corporate bonds with a minimum amount outstanding of $200 
million that seeks to maximize liquidity while maintaining 
representation of the broader high-yield corporate bond market. The 
index consists of issuers domiciled in the United States, Bermuda, 
Cayman Islands, Canada, Japan, or Western Europe. The index is equally 
priced weighted and is re-balanced monthly. The index value is 
calculated and published daily by 4:30 p.m. E.T.
    The Dow Jones U.S. Select Telecommunications Index is a float-
adjusted market-capitalization-weighted index designed to measure the 
performance of the telecommunications economic sector of the U.S. 
equity market. Component companies include fixed line and mobile 
telecommunications companies. Component weights are capped for 
diversification. The index includes all common stocks of companies in 
the Dow Jones U.S. Select Telecommunications Index that are categorized 
as belonging to the telecommunications sector, based on Industry 
Classification Benchmark (ICB) definitions. The company at the 90% 
cumulative market capitalization of the index must have a float-
adjusted market capitalization of at least $75 million. The Index value 
is calculated and distributed every 15 seconds during Amex's trading 
hours.
    Additional information regarding the Underlying Indexes and the 
Funds is included in the Amex Proposal.
Availability of Information About the Shares and the Underlying Indexes
    The Trust's Web site, which is and will be publicly accessible at 
no charge, will contain the following information for each Fund's 
Shares: (1) The prior business day's closing NAV, the reported closing 
price, and a calculation of the premium or discount of such price in 
relation to the closing NAV; (2) data for a period covering at least 
the four previous calendar quarters (or the life of a Fund, if shorter) 
indicating how frequently each Fund's Shares traded at a premium or 
discount to NAV based on the daily closing price and the closing NAV, 
and the magnitude of such premiums and discounts; (3) its prospectus 
and/or product description; and (4) other quantitative information such 
as daily trading volume. The prospectus and/or product description for 
each Fund will inform investors that the Trust's Web site has 
information about the premiums and discounts at which the Fund's Shares 
have traded.
    According to the Amex Proposal, Amex will disseminate for each Fund 
on a daily basis every 15 seconds by means of Consolidated Tape 
Association (``CTA'') and CQ High Speed Lines information with respect 
to an Indicative Intra-Day Value (``IIV''), the recent NAV, the number 
of shares outstanding, the estimated cash amount, and the total cash 
amount per Creation Unit. Amex will make available on its Web site 
daily trading volume, the closing price, the NAV, and the final 
dividend amounts to be paid for each Fund.
    Each Fund's total portfolio composition will be disclosed on the 
Trust's Web site (www.proshares.com) or another relevant Web site as 
determined by the Trust and/or Amex. According to the Amex Proposal, 
the Trust will provide Web site disclosure of portfolio holdings daily, 
which will include, as applicable, the names and number of shares held 
of each equity security (if applicable), the specific types of 
Financial Instruments and characteristics of such instruments, cash 
equivalents, and the amount of cash held in the portfolio of each Fund. 
This public Web site disclosure of the portfolio composition of each 
Fund will coincide with the disclosure by the Advisor of the ``IIV 
File'' (described below) and the ``PCF File'', when applicable 
(described below). Therefore, the same portfolio information (including 
accrued expenses and dividends) will be provided on the public Web 
site, as well as in the IIV File and PCF File (when applicable) 
provided to ``Authorized Participants.'' \5\ The format of the public 
Web site disclosure and the IIV File and PCF File (when applicable) 
will differ because the public Web site will list all portfolio 
holdings while the IIV File and PCF File (when applicable) will 
similarly provide the portfolio holdings but in a format appropriate 
for Authorized Participants, i.e., the exact components of a Creation 
Unit.\6\ Accordingly, each investor will have access to the current 
portfolio composition of each Fund through the Trust's Web site, at 
www.proshares.com, and/or at the Amex's Web site at www.amex.com.
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    \5\ An Authorized Participant is either (1) a broker-dealer or 
other participant in the continuous net settlement system of the 
National Securities Clearing Corporation (``NSCC'') or (2) a DTC 
participant, and which has entered into a participant agreement with 
the Distributor.
    \6\ The composition will be used to calculate the NAV later that 
day.
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    Amex has represented in the Amex Proposal that it will obtain a 
representation from the Trust (for each Fund), prior to listing, that 
the NAV per share for each Fund will be calculated daily and made 
available to all market participants at the same time.\7\
---------------------------------------------------------------------------

    \7\ If the Amex halts trading in the Shares of the Funds because 
the NAV is not being disseminated to all market participants at the 
same time, then the Exchange would do so as well.
---------------------------------------------------------------------------

    Beneficial owners of Shares (``Beneficial Owners'') will receive 
all of the statements, notices, and reports required under the 1940 Act 
and other applicable laws. They will receive, for example, annual and 
semi-annual fund reports, written statements accompanying dividend 
payments, proxy statements, annual notifications detailing the tax 
status of fund distributions, and Form 1099-DIVs. Some of these 
documents will be provided to Beneficial Owners by their brokers, while 
others will be provided by the Fund through the brokers.
    The daily closing index value and the percentage change in the 
daily closing index value for each Underlying Index will be publicly 
available on various Web sites, e.g., www.bloomberg.com. Data regarding 
each Underlying Index is also available from the respective index 
provider to subscribers. The value of the Dow Jones U.S. Select 
Telecommunications Index will be updated intra-day on a real-time basis 
as its individual component securities change in price. This intra-day 
value of this index will be disseminated at least every 15 seconds 
throughout Amex's trading day by Amex or another organization 
authorized by the relevant Underlying Index provider.
    Because the NSCC's system for the receipt and dissemination to its 
participants of the PCF is not currently capable of processing 
information with respect to Financial Instruments, the ProShare 
Advisors LLC, the investment advisor to each Fund (the ``Advisor''), 
has developed an ``IIV File,' which it

[[Page 73958]]

will use to disclose the Funds'' holdings of Financial Instruments.\8\ 
The IIV File will contain, for the Bullish Fund (to the extent that it 
holds Financial Instruments) and Bearish Funds, information sufficient 
by itself or in connection with the PCF File and other available 
information for market participants to calculate a Fund's IIV and 
effectively arbitrage the Fund.
---------------------------------------------------------------------------

    \8\ The Trust or the Advisor will post the IIV File to a 
password-protected Web site before the opening of business on each 
business day, and all Authorized Participants and the Amex will have 
access to a password and the Web site containing the IIV File. 
However, the Fund will disclose each business day to the public 
identical information, but in a format appropriate to public 
investors, at the same time the Fund discloses the IIV and PCF 
files, as applicable, to industry participants.
---------------------------------------------------------------------------

Dissemination of Intra-Day Indicative Value (IIV)
    To provide updated information relating to each Fund for use by 
investors, professionals, and persons wishing to create or redeem 
Shares, Amex will disseminate through the facilities of the CTA: (1) 
Continuously throughout the Amex's trading day, the market value of a 
Share; and (2) at least every 15 seconds throughout the Amex's trading 
day, a calculation of the IIV of each Fund as calculated by the Amex 
(the ``IIV Calculator''). Comparing these two figures helps an investor 
to determine whether, and to what extent, the Shares may be selling at 
a premium or a discount to NAV.
    The IIV Calculator will calculate an IIV for each Fund in the 
manner discussed below. The IIV is designed to provide investors with a 
reference value that can be used in connection with other related 
market information. The IIV does not necessarily reflect the precise 
composition of the current portfolio held by each Fund at a particular 
point in time. Therefore, the IIV on a per Share basis disseminated 
during Amex trading hours should not be viewed as a real-time update of 
the NAV of a particular Fund, which is calculated only once a day. 
While the IIV that will be disseminated by Amex is expected to be close 
to the most recently calculated Fund NAV on a per Share basis, it is 
possible that the value of the portfolio held by a Fund may diverge 
from the IIV during any trading day. In such case, the IIV will not 
precisely reflect the value of the Fund portfolio.
Trading Halts
    The Exchange represents that it will cease trading the Shares of 
the Fund if the listing market stops trading the Shares because of a 
regulatory halt similar to a halt based on NYSE Arca Equities Rule 
7.12. UTP trading in the Shares is also governed by the trading halts 
provisions of NYSE Arca Equities Rule 7.34 relating to temporary 
interruptions in the calculation or wide dissemination of the IIV or 
the value of the underlying index.
    The Exchange may also consider all relevant factors in exercising 
its discretion to halt or suspend trading in the Shares of a Fund. 
Trading may be halted because of market conditions or for reasons that, 
in the view of the Exchange, make trading in the Shares inadvisable. 
These may include: (1) The extent to which trading is not occurring in 
the securities comprising an Underlying Index and/or the Financial 
Instruments of a Fund, or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present. In addition, trading in Shares could be halted 
pursuant to the Exchange's ``circuit breaker'' rule \9\ or by the halt 
or suspension of trading of the underlying securities.
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    \9\ See NYSE Arca Equities Rule 7.12.
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Trading Rules

    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. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with 
NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading 
Sessions).\10\ The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. The minimum 
trading increment for Shares on the Exchange will be $0.01.
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    \10\ Because NSCC does not disseminate the new basket amount to 
market participants until approximately 6 p.m. to 7 p.m. E.T., an 
updated IIV cannot be calculated during the Exchange's late trading 
session (from 4:15 p.m. to 8 p.m. E.T.). Official index sponsors for 
the Underlying Indexes currently do not calculate updated index 
values during the Exchange's late trading session; however, if the 
index sponsors do so in the future, the Exchange would not trade 
this product unless such official index value is widely 
disseminated.
---------------------------------------------------------------------------

Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products to monitor trading in the 
Shares. The Exchange 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.
    The Exchange's current trading surveillance focuses on detecting 
when securities trade outside their normal patterns. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members or 
affiliates of the ISG.\11\
---------------------------------------------------------------------------

    \11\ A list of the current members and affiliate members of ISG 
is available at www.isgportal.com.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.

Information Bulletin

    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its ETP Holders to learn the essential facts relating to every 
customer prior to trading the Shares; \12\ (3) the risks involved in 
trading the Shares during the Opening and Late Trading Sessions when an 
updated IIV will not be calculated or publicly disseminated; (4) how 
information regarding the IIV is disseminated; (5) the requirement that 
ETP Holders deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
and (6) trading information.
---------------------------------------------------------------------------

    \12\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
rule provides, with a limited exception, that prior to the execution 
of a transaction recommended to a non-institutional customer, the 
ETP Holder shall make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives, and any other information that it believes would be 
useful to make a recommendation. See Securities Exchange Act Release 
No. 54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR-PCX-2005-
115).
---------------------------------------------------------------------------

    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the registration statements 
for the Funds.
    The Bulletin will also discuss any exemptive, no-action, and 
interpretive relief granted by the Commission from Section 11(d)(1) of 
the Act \13\ and certain rules under the Act, including Rule

[[Page 73959]]

10b-10, Rule 14e-5, Rule 10b-17, Rule 11d1-2, Rules 15c1-5 and 15c1-6, 
and Rules 101 and 102 of Regulation M under the Act.
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    \13\ 15 U.S.C. 78k(d)(1).
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    The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4 p.m. E.T. each trading day.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\14\ in general, and with 
Section 6(b)(5) of the Act,\15\ 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 a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(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 would 
result in 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 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2007-108 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-NYSEArca-2007-108. 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, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. 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-NYSEArca-2007-108 and should 
be submitted on or before January 18, 2008.

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

    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.\16\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\17\ 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 believes that this proposal should 
benefit investors by increasing competition among markets that trade 
the Shares.
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    \16\ 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).
    \17\ 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,\18\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\19\ The Commission notes that it previously approved the 
listing and trading of the Shares on Amex.\20\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\21\ 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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    \18\ 15 U.S.C. 78l(f).
    \19\ 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.
    \20\ See supra note 4.
    \21\ 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,\22\ 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 disseminated through the facilities of the CTA and the 
Consolidated Quotation System. In addition, from 9:30 a.m. to 4:15 p.m. 
E.T., Amex will disseminate via the facilities of the CTA and CQ High 
Speed lines the IIV at least every 15 seconds, the market value of a 
Share for each Fund, the most recent NAV for each Fund, the number of 
Shares outstanding for each Fund, and the estimated cash amount and 
total cash amount per Creation Unit. Amex will also make available on 
its Web site daily trading volume, the closing prices, the NAV, and the 
final dividend amounts to be paid for each Fund. The Trust's Web site 
will contain a variety of other quantitative information for the Shares 
of each Fund. Finally, each Fund's total

[[Page 73960]]

portfolio composition will be disclosed on the Web site of the Trust or 
another relevant Web site.
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    \22\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Furthermore, the Commission believes that the proposal is 
reasonably designed to preclude trading of the Shares when transparency 
is impaired. Trading in the Shares will be subject to NYSE Arca 
Equities Rule 7.34, which provides that, if the listing market halts 
trading when the IIV is not being calculated or disseminated, the 
Exchange also would halt trading. The Exchange also may halt trading in 
the Shares of a Fund when trading is not occurring in the securities 
comprising an Underlying Index and/or the Financial Instruments of a 
Fund.
    The Commission notes that, if the Shares should be delisted by the 
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 made the following 
representations:
    1. The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules.
    2. Prior to the commencement of trading, the Exchange would inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. In 
particular, the Information Bulletin would discuss the risks involved 
in trading the Shares during the Opening and Late Trading Sessions when 
an updated IIV will not be calculated or publicly disseminated.
    3. The Information Bulletin also would discuss the requirement that 
an ETP Holder deliver a prospectus to an investor purchasing newly 
issued Shares prior to or concurrently with the confirmation of a 
transaction.
    This approval order is based on the Exchange's 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 
the listing and trading of the Shares on Amex be consistent with the 
Act. The Commission presently is not aware of any regulatory issue that 
should cause it to revisit that finding or would preclude the trading 
of the Shares on the Exchange pursuant to UTP. Therefore, accelerating 
approval of this proposal should benefit investors by creating, without 
undue delay, additional competition in the market for the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-NYSEArca-2007-108), as 
amended, be and it hereby is approved on an accelerated basis.
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    \23\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-25207 Filed 12-27-07; 8:45 am]
BILLING CODE 8011-01-P