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]
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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.
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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 (https://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 (https://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
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2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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 https://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
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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).
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22:27 Dec 27, 2007
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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’’).
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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
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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.
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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.
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22:27 Dec 27, 2007
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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).
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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 (https://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 (https://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]
-----------------------------------------------------------------------
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.
---------------------------------------------------------------------------
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 https://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\
---------------------------------------------------------------------------
\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'').
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
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\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.
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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.
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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\
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\11\ A list of the current members and affiliate members of ISG
is available at www.isgportal.com.
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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.
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\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).
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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 (https://
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 (https://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
