Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing and Order Granting Accelerated Approval of Proposed Rule Change to Trade Shares of 12 Funds of the ProShares Trust Pursuant to Unlisted Trading Privileges, 32369-32373 [E8-12629]
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Federal Register / Vol. 73, No. 110 / Friday, June 6, 2008 / Notices
is proposing to amend the BOX Fee
Schedule, effective June 2, 2008,
pending Commission approval.
2. Statutory Basis
The Exchange believes that the
proposal is consistent with the
requirements of Section 6(b) of the
Act,10 in general, and Section 6(b)(4) of
the Act,11 in particular, in that it is
designed to provide for the equitable
allocation of reasonable dues, fees, and
other charges among its members and
issuers and other persons using its
facilities for the purpose of executing
Linkage Orders that are routed to the
Exchange from other market centers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
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–BSE–2008–32 and should
be submitted on or before June 27, 2008.
IV. Commission’s Findings and Order
Granting Accelerated Approval of
Proposed Rule Change
After careful consideration, the
III. Solicitation of Comments
Commission finds that the proposed
Interested persons are invited to
rule change is consistent with the
requirements of the Act and the rules
submit written data, views, and
and regulations thereunder applicable to
arguments concerning the foregoing,
a national securities exchange 12 and, in
including whether the proposed rule
particular, with the requirements of
change is consistent with the Act.
Section 6(b) of the Act.13 In particular,
Comments may be submitted by any of
the Commission finds that the
the following methods.
Exchange’s proposal is consistent with
Electronic Comments
Section 6(b)(4) of the Act,14 which
• Use the Commission’s Internet
requires that the rules of the Exchange
comment form (https://www.sec.gov/
provide for the equitable allocation of
rules/sro.shtml); or
reasonable dues, fees, and other charges
• Send an e-mail to ruleamong its members and other persons
comments@sec.gov. Please include File
using its facilities. The Commission
Number SR–BSE–2008–32 on the
notes that this proposal conforms
subject line.
Linkages Fees with those fees charged
on other broker-dealer executions.
Paper Comments
The Exchange requests that the
• Send paper comments in triplicate
Commission approve the proposed rule
to Secretary, Securities and Exchange
change on an accelerated basis pursuant
Commission, 100 F Street, NE.,
to Section 19(b)(2) of the Act.15 The
Washington, DC 20549–1090.
Commission finds good cause, pursuant
to Section 19(b)(2)(B) of the Act,16 for
All submissions should refer to File
approving the proposed rule change
Number SR–BSE–2008–32. This file
prior to the 30th day after the date of
number should be included on the
subject line if e-mail is used. To help the publication of the notice of the filing
thereof in the Federal Register. An
Commission process and review your
comments more efficiently, please use
12 In approving this rule, the Commission notes
only one method. The Commission will
that it has considered its impact on efficiency,
post all comments on the Commission’s competition, and capital formation. 15 U.S.C. 78c(f).
13 15. U.S.C. 78f(b).
Internet Web site (https://www.sec.gov/
PWALKER on PROD1PC71 with NOTICES
Written comments on the proposed
rule change were neither solicited nor
received.
10 15
11 15
U.S.C. 78f(b)(4).
15 15 U.S.C. 78s(b)(2).
16 15 U.S.C. 78s(b)(2)(B).
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
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accelerated approval will allow the
Exchange to immediately implement a
lower fee for market participants
executing certain Linkage Orders on the
Exchange.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 17 that the
proposed rule change (SR–BSE–2008–
32), is hereby approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–12688 Filed 6–5–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57884; File No. SR–CHX–
2008–07]
Self-Regulatory Organizations;
Chicago Stock Exchange, Inc.; Notice
of Filing and Order Granting
Accelerated Approval of Proposed
Rule Change to Trade Shares of 12
Funds of the ProShares Trust Pursuant
to Unlisted Trading Privileges
May 30, 2008.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 15,
2008, the Chicago Stock Exchange, Inc.
(‘‘CHX’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
substantially prepared by the Exchange.
This order provides notice of the
proposed rule change and approves the
proposal on an accelerated basis.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to trade
shares (‘‘Shares’’) of the following 12
funds of the ProShares Trust (f/k/a
xtraShares Trust) (‘‘Trust’’) pursuant to
unlisted trading privileges (‘‘UTP’’): (1)
Ultra S&P 500 ProShares (f/k/a Ultra 500
Fund); (2) Ultra QQQ ProShares (f/k/a
Ultra 100 Fund); (3) Ultra Dow 30
ProShares (f/k/a Ultra 30 Fund); (4)
Ultra Mid-Cap 400 ProShares (f/k/a
Ultra Mid-Cap 400 Fund); (5) Short S&P
17 15
U.S.C. 78s(b)(2).
U.S.C. 78s(b)(2)(B).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
18 15
14 15
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Federal Register / Vol. 73, No. 110 / Friday, June 6, 2008 / Notices
500 ProShares (f/k/a Short 500 Fund);
(6) Short QQQ ProShares (f/k/a Short
100 Fund); (7) Short Dow 30 ProShares
(f/k/a Short 30 Fund); (8) Short Mid-Cap
400 ProShares (f/k/a Short Mid-Cap 400
Fund); (9) UltraShort S&P 500 ProShares
(f/k/a Ultra Short 500 Fund); (10)
UltraShort QQQ ProShares (f/k/a Ultra
Short 100 Fund); (11) UltraShort Dow
30 ProShares (f/k/a Ultra Short 30
Fund); and (12) UltraShort Mid-Cap 400
ProShares (Ultra Short Mid-Cap 400
Fund) (collectively, ‘‘Funds’’). The text
of this proposed rule change is available
on the Exchange’s Web site at https://
www.chx.com/content/
Participant_Information/
Rules_Filings.html, at the Exchange’s
principal office, and at the
Commission’s Public Reference Room.
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
PWALKER on PROD1PC71 with NOTICES
1. Purpose
The Exchange proposes to trade
pursuant to UTP the Shares of the
Funds, which are ‘‘investment company
units’’ under CHX Article 22, Rule 24
(‘‘Rule 24’’). 3The Shares seek to provide
investment results that exceed the daily
performance of a specified stock index
by a specified percentage, or that seek
to provide investment results that
correspond to the inverse or opposite of
the index’s daily performance or twice
the inverse or opposite (¥200%) of the
index’s daily performance. The
Commission previously approved the
original listing and trading of the Shares
of the 12 Funds on the American Stock
3 CHX Rule 24(A)(1)(a) allows the listing and
trading of investment company units issued by a
registered investment company that holds securities
comprising, or otherwise based on or representing
an interest in, an index of portfolio or securities.
The Exchange represents that the Shares qualify
under CHX Rule 24 because they are being
registered under the Investment Company Act of
1940 (‘‘1940 Act’’) and are ‘‘otherwise based on’’ an
index.
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Exchange LLC (‘‘Amex’’).4 In addition,
the Funds are currently trading
pursuant to UTP on NYSE Arca, Inc.5
Four of the Funds—the Ultra S&P 500
ProShares, Ultra QQQ ProShares, Ultra
Dow 30 ProShares, and Ultra Mid-Cap
400 ProShares (‘‘Bullish Funds’’)—seek
daily investment results, before fees and
expenses, that correspond to twice
(200%) the daily performance of the
Standard & Poor’s 500 Index (‘‘S&P
500’’), the Nasdaq-100 Index (‘‘Nasdaq
100’’), the Dow Jones Industrial
AverageSM (‘‘DJIA’’), and the S&P
MidCap400TM Index (‘‘S&P MidCap’’),
respectively. Each such index is referred
to herein individually as an
‘‘Underlying Index’’ or ‘‘Index’’ and
collectively as ‘‘Underlying Indexes.’’ 6
Any such Fund, if successful in meeting
its objective, should gain, on a
percentage basis, approximately twice
as much as the Fund’s Underlying Index
when the prices 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.
In addition, four Funds-the Short S&P
500 ProShares, Short QQQ ProShares,
Short Dow 30 ProShares, and Short
Mid-Cap 400 ProShares (‘‘Initial Bearish
Funds’’)—seek daily investment results,
before fees and expenses, which
correspond to the inverse or opposite of
the daily performance (¥100%) of the
S&P 500, Nasdaq 100, DJIA, and S&P
MidCap, respectively. If one such Fund
is successful in meeting its objective,
4 See Securities Exchange Act Release No. 52553
(October 3, 2005), 70 FR 59100 (October 11, 2005)
(SR–Amex–2004–62) (‘‘Amex Order I’’) (approving
the listing and trading on Amex of the following
eight Funds: Ultra 500 Fund, Ultra 100 Fund, Ultra
30 Fund, Ultra Mid-Cap 400 Fund, Short 500 Fund,
Short 100 Fund, Short 30 Fund, and Short Mid-Cap
400 Fund); Securities Exchange Act Release No.
52197 (August 2, 2005), 70 FR 46228 (August 9,
2005) (SR–Amex–2004–62) (‘‘Amex Notice’’). See
also Securities Exchange Act Release No. 54040
(June 23, 2006) (SR–Amex–2006–41) (‘‘Amex Order
II’’, together with Amex Order I and Amex Notice,
‘‘Amex Releases’’) (approving the listing and
trading on Amex of the following four funds: Ultra
Short 500 Fund, Ultra Short 100 Fund, Ultra Short
30 Fund, and Ultra Short Mid-Cap 400 Fund).
5 See Securities Exchange Act Release No. 54026
(June 21, 2006), 71 FR 36850 (June 28, 2006) (SR–
PCX–2005–115) (order approving the trading
pursuant to UTP of the Ultra 500 Fund, Ultra 100
Fund, Ultra 30 Fund, Ultra Mid-Cap 400 Fund,
Short 500 Fund, Short 100 Fund, Short 30 Fund,
and Short Mid-Cap 400 Fund); Securities Exchange
Act Release No. 54045 (June 26, 2006), 71 FR 37971
(July 3, 2006) (SR–PCX–2005–115) (order approving
the trading of the Ultra Short 500 Fund, Ultra Short
100 Fund, Ultra Short 30 Fund, and Ultra Short
Mid-Cap 400 Fund).
6 Exchange-traded funds based on the Underlying
Indexes are traded on several exchanges, including
the CHX. The Statement of Additional Information
(‘‘SAI’’) of each Fund discloses that such Fund
reserves the right to substitute a different
Underlying Index under certain circumstances.
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the net asset value (‘‘NAV’’) of shares of
the Fund should increase approximately
as much, on a percentage basis, as the
respective Underlying Index decreases
when the prices of the securities in the
Index decline on a given day; or should
decrease approximately as much, on a
percentage basis, as the respective Index
gains when the prices of the securities
in the index rise on a given day.
The remaining four Funds—the
UltraShort S&P 500 ProShares,
UltraShort QQQ ProShares, UltraShort
Dow 30 ProShares, and UltraShort MidCap 400 ProShares (the ‘‘Additional
Bearish Funds’’)—seek daily investment
results, before fees and expenses, that
correspond to twice (or two times) the
inverse or opposite (¥200%) of the
daily performance of the S&P 500,
Nasdaq 100, DJIA, and S&P MidCap,
respectively. If one such Fund is
successful in meeting its objective, the
NAV of the Shares of the Fund 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. The ‘‘Initial Bearish
Funds’’ and the ‘‘Additional Bearish
Funds’’ are referred to herein
collectively as ‘‘Bearish Funds.’’
Each Share represents a beneficial
ownership interest in the net assets of
the corresponding Fund, less expenses.
Each Bullish Fund generally will hold at
least 80% of its assets in the component
equity securities of the relevant
Underlying Index (‘‘Equity Securities’’).
The remainder of assets will be devoted
to Financial Instruments (as defined
below) that are intended to create the
additional needed exposure to such
Underlying Index necessary to pursue
the Fund’s investment objective. A
Bearish Fund will not invest directly in
the component securities of the relevant
Underlying Index, but instead, will
create short exposure to such Index. At
least 80% of the value of the portfolio
of each Bearish Fund will be devoted to
Financial Instruments (defined below),
debt instruments, and money market
instruments, including U.S. government
securities and repurchase agreements
(‘‘Money Market Instruments’’). The
financial instruments to be held by any
of the Bullish or Bearish Funds may
include stock index futures contracts;
options on futures contracts; options on
securities and indices; equity caps,
collars, and floors; swap agreements;
forward contracts; repurchase
agreements and reverse repurchase
agreements (‘‘Financial Instruments’’);
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Federal Register / Vol. 73, No. 110 / Friday, June 6, 2008 / Notices
and Money Market Instruments.
ProShare Advisors LLC is the
investment adviser (‘‘Advisor’’) to each
Fund.
(a) The Shares. A description of the
Trust, the operation of the Funds, and
the creation and redemption process for
the Shares is set forth in the Amex
Releases. To summarize, issuances of
Shares will be made only in
aggregations of at least 75,000 Shares or
multiples thereof (‘‘Creation Units’’).
Each Fund will issue and redeem the
Creation Units on a continuous basis, by
or through participants that have
entered into participant agreements
(each, an ‘‘Authorized Participant’’)
with the distributor.
The NAV per Share of each Fund is
computed by dividing the value of the
net assets of such Fund (i.e., the value
of its total assets less total liabilities) by
its total number of Shares outstanding.
The NAV of each Fund is calculated by
the accounting agent for the Fund and
determined each business day at the
close of regular trading of the New York
Stock Exchange (ordinarily 4 p.m.
Eastern Time (‘‘ET’’)).
(b) Dissemination of Information
About the Shares and the Underlying
Indexes. The Trust’s or Advisor’s Web
site, which is and will be publicly
accessible at no charge (and to which
the Exchange will provide a hyperlink
on its Web site), 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
reported closing price and NAV, and the
magnitude of such premiums and
discounts; (3) its prospectus and
Product Description; and (4) other
quantitative information such as daily
trading volume.
Amex represented that it will
disseminate for each Fund on a daily
basis by means of Consolidated Tape
Association (‘‘CTA’’) and CQ High
Speed Lines information with respect to
an Indicative Intra-Day Value (‘‘IIV’’)
(discussed below), recent NAV, shares
outstanding, estimated cash amount,
and total cash amount per Creation
Unit. Quotations for and last-sale
information regarding the Shares are
disseminated through the facilities of
the Consolidated Tape Association and
Consolidated Quotation System. Amex
also represented that it will make
available on its Web site (https://
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16:09 Jun 05, 2008
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www.amex.com) daily trading volume,
closing price, the NAV, and final
dividend amounts, if any, to be paid for
each Fund. The closing prices of the
Shares are readily available from
exchanges, automated quotation
systems, published or other public
sources, or on-line information services
such as Bloomberg or Reuters.
Each Fund’s total portfolio
composition will be disclosed on the
Web site of the trust (https://
www.profunds.com). The Trust expects
that Web site disclosure of portfolio
holdings will be made daily and will
include, as applicable, the names and
number of shares held of each specific
Equity Security, the specific types of
Financial Instruments and
characteristics of such instruments, cash
equivalents, and amount of cash held in
the portfolio of each Fund.7
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., https://
www.bloomberg.com).8 The value of
each Underlying Index will be updated
intra-day on a real time basis as its
individual component securities change
in price. These intra-day values of each
Underlying Index will be disseminated
every 15 seconds throughout the trading
day by the Amex or another
organization authorized by the relevant
Underlying Index provider.
To provide updated information
relating to each Fund, Amex will
disseminate through the facilities of the
CTA from 9:30 a.m. ET to 4:15 p.m. ET:
(1) Continuously, the market value of a
Share; and (2) every 15 seconds, a
calculation of the IIV as calculated by a
third-party 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 is
designed to provide investors with a
reference value that can be used in
connection with other related market
information. The IIV may not reflect the
7 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 provided to Authorized Participants.
The format of the public Web site disclosure and
the IIV and PCF Files will differ because the public
Web site will list all portfolio holdings, whereas the
IIV and PCF Files provide the portfolio holdings in
a different format appropriate for Authorized
Participants, i.e., the exact components of a
Creation Unit.
8 Data regarding each Underlying Index are also
available from the respective index provider to
subscribers. Several independent data vendors also
package and disseminate index data in various
value-added formats (including vendors displaying
both securities and index levels and vendors
displaying index levels only).
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32371
value of all securities included in the
Underlying Index or the precise
composition of the current portfolio of
securities held by each Fund at a
particular point in time. Therefore, the
IIV should not be viewed as a real-time
update of the NAV of a particular Fund,
which is calculated only once a day.
(c) UTP Trading Criteria. The
Exchange represents that it would
immediately halt trading the Shares
during the listing market’s trading hours
if: (1) The listing market stops trading
the Shares because of a regulatory halt
similar to a halt based on CHX Article
20, Rule 2 or a halt because the IIV or
the value of the applicable Underlying
Index is no longer widely disseminated;
(2) the listing market delists the Shares;
or (3) in the situations described in
‘‘Trading Rules’’ below. Additionally,
the Exchange may cease trading the
Shares if such other event shall occur or
condition exists which in the opinion of
the Exchange makes further dealings on
the Exchange inadvisable.
The Exchange also represents that it
would immediately halt trading the
Shares of a Fund upon notification by
the listing market that the NAV is not
being disseminated to all market
participants at the same time. The
Exchange would resume trading only
when trading in the Shares resumes on
the listing market.
(d) Other 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
CHX during both its regular trading
session (from 8:30 a.m. to 3 p.m.
(Central Time (‘‘CT’’))) and during its
late trading session (from 3 p.m. to 4
p.m. CT), even if the IIV is not
disseminated from 3:14 to 4 p.m. CT.9
The Exchange has appropriate rules to
facilitate transactions in the Shares
during all trading sessions.
With respect to trading halts, the
Exchange may 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
9 Because NSCC does not disseminate the new
basket amount to market participants until
approximately 6 p.m. to 7 p.m. ET, an updated IIV
is not possible to calculate during the Exchange’s
late trading session. Currently the official index
sponsors for the Funds’ indexes do not calculate
updated index values during the Exchange’s late
trading session; however, if the index sponsors did
so in the future, the Exchange would not trade this
product unless such official index value is widely
disseminated.
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Federal Register / Vol. 73, No. 110 / Friday, June 6, 2008 / Notices
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 will be subject to trading halts
caused by extraordinary market
volatility pursuant to the Exchange’s
‘‘circuit breaker’’ rule or by the halt or
suspension of trading of the underlying
securities.
Shares will be deemed ‘‘NMS stocks’’
and therefore will be subject to, among
other things, Rule 611 of Regulation
NMS under the Act (‘‘Order Protection
Rule’’).
(e) Surveillance. The Exchange
intends to utilize its existing
surveillance procedures applicable to
Investment Company Units to monitor
trading in the Shares. The Exchange
represents that these procedures are
adequate to monitor Exchange trading of
the Shares and to deter and detect
violations of Exchange rules.
The Exchange’s current trading
surveillance focuses on detecting
securities trading on the Exchange
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
(f) Information Bulletin. Prior to the
commencement of trading, the Exchange
will inform its Participants in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Information 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) CHX Rules 11 and 16, which impose
a suitability obligation and a duty of due
diligence on Participants to learn the
essential facts relating to every customer
prior to trading the Shares; (3) how
information regarding the IIV is
disseminated; (4) the requirement that
Participants deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (5)
trading information.
The Information Bulletin also will
advise Participants, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to the Funds.10 The
10 The Commission issued an exemptive order
pursuant to, among other things, Section 24(d) of
the 1940 Act that permits dealers to sell Shares in
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Jkt 214001
Exchange notes that investors
purchasing Shares directly from the
Trust will receive a prospectus.
Participants purchasing Shares from the
Trust for resale to investors will deliver
a prospectus to such investors. The
Information Bulletin will also discuss
any relief, if granted, by the Commission
or the staff from any rules under the
Act. In addition, the Information
Bulletin will reference that the Trust is
subject to various fees and expenses
described in the Registration Statement.
The Information Bulletin will also
disclose that the NAV for the Shares
will be calculated shortly after 4 p.m.
ET each trading day.
2. Statutory Basis
The CHX believes the proposal is
consistent with the requirements of the
Act and the rules and regulations
thereunder that are applicable to a
national securities exchange, and, in
particular, with the requirements of
Section 6(b).11 The proposed rule
change is consistent with Section 6(b)(5)
of the Act because it would promote just
and equitable principles of trade;
remove impediments to, and perfect the
mechanism of, a free and open market
and a national market system; and, in
general, protect investors and the public
interest by allowing CHX participants to
trade these products.
In addition, the Exchange believes
that the proposal is consistent with Rule
12f–5 under the Act 12 because it deems
the Shares to be equity securities, thus
rendering the Shares subject to the
Exchange’s existing rules governing the
trading of equity securities.
B. Self-Regulatory Organization’s
Statement of Burden on Competition
The Exchange does not believe that
the proposed rule changes will impose
any burden on competition.
the secondary market unaccompanied by a statutory
prospectus when prospectus delivery is not
required by the Securities Act of 1933. See
ProShares Trust, et al., Investment Company Act
Release Nos. 27323 (May 18, 2006) (notice) and
27394 (June 13, 2006) (order), as subsequently
amended by ProShares Trust, et al., Investment
Company Act Release Nos. 27609 (December 22,
2006) (notice) and 27666 (January 18, 2007) (order).
Under the orders, certain investors will receive a
product description (‘‘Product Description’’)
describing the Trust, the Funds, and the Shares.
This Product Description will contain information
about the Shares that is tailored to meet the needs
of investors purchasing the Shares in the secondary
market.
11 15 U.S.C. 78(f)(b).
12 17 CFR 240.12f–5.
PO 00000
Frm 00090
Fmt 4703
Sfmt 4703
C. Self-Regulatory Organization’s
Statement on Comments Regarding the
Proposed Rule Changes Received From
Members, Participants or Others
No written comments were either
solicited or 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–CHX–2008–07 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549.
All submissions should refer to File
Number SR–CHX–2008–07. 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 CHX. 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–CHX–2008–07 and should
be submitted on or before June 27, 2008.
E:\FR\FM\06JNN1.SGM
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Federal Register / Vol. 73, No. 110 / Friday, June 6, 2008 / Notices
PWALKER on PROD1PC71 with NOTICES
IV. Commission’s Findings and Order
Granting Accelerated Approval of the
Proposed Rule Change
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.13 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,14 which requires that
an exchange have rules designed, among
other things, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and in
general to protect investors and the
public interest. The Commission
believes that this proposal should
benefit investors by increasing
competition among markets that trade
the Shares.
In addition, the Commission finds
that the proposal is consistent with
Section 12(f) of the Act,15 which permits
an exchange to trade, pursuant to UTP,
a security that is listed and registered on
another exchange.16 The Commission
notes that it previously approved the
listing and trading of the Shares on
Amex.17 The Commission also finds that
the proposal is consistent with Rule
12f–5 under the Act,18 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,19 which sets
forth Congress’ finding that it is in the
13 In approving this rule change, the Commission
notes that it has considered the proposal’s impact
on efficiency, competition, and capital formation.
See 15 U.S.C. 78c(f).
14 15 U.S.C. 78f(b)(5).
15 15 U.S.C. 78l(f).
16 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.
17 See supra notes 4 and 5.
18 17 CFR 240.12f–5.
19 15 U.S.C. 78k–1(a)(1)(C)(iii).
VerDate Aug<31>2005
16:09 Jun 05, 2008
Jkt 214001
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.
Furthermore, the IIV, updated to reflect
changes in currency exchange rates, will
be calculated by Amex and publicly
disseminated on a 15-second delayed
basis from 8:30 a.m. to 3:14 p.m. CT. As
mentioned above, Amex’s Web site
provides various information about the
value of the Shares, such as the prior
business day’s closing NAV, the
reported closing price, and the daily
trading volume.
The Commission also believes that the
Exchange’s trading halt procedures are
reasonably designed to prevent trading
in the Shares when transparency is
impaired. CHX has represented that if
the listing market halts trading when the
IIV is not being calculated or
disseminated, the Exchange would halt
trading in the Shares until trading
resumes on the listing market.
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
Participants in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
3. Prior to the commencement of
trading, the Exchange would inform its
Participants in an Information Bulletin
of the requirement that Participants
deliver a prospectus or Product
Description to investors 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 that the listing and
trading of the Shares on other exchanges
PO 00000
Frm 00091
Fmt 4703
Sfmt 4703
32373
is consistent with the Act.20 The
Commission presently is not aware of
any regulatory issue that should cause it
to revisit those findings 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,21 that the
proposed rule change (SR–CHX–2008–
07) be, and it hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–12629 Filed 6–5–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–57901; File Nos. SR–DTC–
2007–14 and SR–NSCC–2007–14]
Self-Regulatory Organizations; the
Depository Trust Company and
National Securities Clearing
Corporation; Order Approving
Proposed Rule Changes, as Amended,
To Provide for the Settlement of
Institutional Transactions in
Conjunction With Each Other Through
a Service Called ID Net
June 2, 2008.
I. Introduction
October 15, 2007, The Depository
Trust Company (‘‘DTC’’) and the
National Securities Clearing Corporation
(‘‘NSCC’’) each filed with the Securities
and Exchange Commission
(‘‘Commission’’) and on December 20,
2007, and on February 25, 2008, each
amended their proposed rule changes
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’).1 Notice of the proposal was
published in the Federal Register on
April 2, 2008.2 The Commission
received no comment letters in response
to the proposed rule changes. For the
reasons discussed below, the
20 See
supra notes 4 and 5.
U.S.C. 78s(b)(2).
22 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 57573
(March 27, 2008), 73 FR 18019 (SR–DTC–2007–14
and SR–NSCC–2007–14).
21 15
E:\FR\FM\06JNN1.SGM
06JNN1
]]>Agencies
[Federal Register Volume 73, Number 110 (Friday, June 6, 2008)]
[Notices]
[Pages 32369-32373]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-12629]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57884; File No. SR-CHX-2008-07]
Self-Regulatory Organizations; Chicago Stock Exchange, Inc.;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change to Trade Shares of 12 Funds of the ProShares Trust Pursuant
to Unlisted Trading Privileges
May 30, 2008.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 15, 2008, the Chicago Stock Exchange, Inc. (``CHX'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by the
Exchange. This order provides notice of the proposed rule change and
approves the proposal 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 proposes to trade shares (``Shares'') of the following
12 funds of the ProShares Trust (f/k/a xtraShares Trust) (``Trust'')
pursuant to unlisted trading privileges (``UTP''): (1) Ultra S&P 500
ProShares (f/k/a Ultra 500 Fund); (2) Ultra QQQ ProShares (f/k/a Ultra
100 Fund); (3) Ultra Dow 30 ProShares (f/k/a Ultra 30 Fund); (4) Ultra
Mid-Cap 400 ProShares (f/k/a Ultra Mid-Cap 400 Fund); (5) Short S&P
[[Page 32370]]
500 ProShares (f/k/a Short 500 Fund); (6) Short QQQ ProShares (f/k/a
Short 100 Fund); (7) Short Dow 30 ProShares (f/k/a Short 30 Fund); (8)
Short Mid-Cap 400 ProShares (f/k/a Short Mid-Cap 400 Fund); (9)
UltraShort S&P 500 ProShares (f/k/a Ultra Short 500 Fund); (10)
UltraShort QQQ ProShares (f/k/a Ultra Short 100 Fund); (11) UltraShort
Dow 30 ProShares (f/k/a Ultra Short 30 Fund); and (12) UltraShort Mid-
Cap 400 ProShares (Ultra Short Mid-Cap 400 Fund) (collectively,
``Funds''). The text of this proposed rule change is available on the
Exchange's Web site at https://www.chx.com/content/Participant_
Information/Rules_Filings.html, at the Exchange's principal office,
and at the Commission's Public Reference Room.
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 the Shares of the
Funds, which are ``investment company units'' under CHX Article 22,
Rule 24 (``Rule 24''). \3\The Shares seek to provide investment results
that exceed the daily performance of a specified stock index by a
specified percentage, or that seek to provide investment results that
correspond to the inverse or opposite of the index's daily performance
or twice the inverse or opposite (-200%) of the index's daily
performance. The Commission previously approved the original listing
and trading of the Shares of the 12 Funds on the American Stock
Exchange LLC (``Amex'').\4\ In addition, the Funds are currently
trading pursuant to UTP on NYSE Arca, Inc.\5\
---------------------------------------------------------------------------
\3\ CHX Rule 24(A)(1)(a) allows the listing and trading of
investment company units issued by a registered investment company
that holds securities comprising, or otherwise based on or
representing an interest in, an index of portfolio or securities.
The Exchange represents that the Shares qualify under CHX Rule 24
because they are being registered under the Investment Company Act
of 1940 (``1940 Act'') and are ``otherwise based on'' an index.
\4\ See Securities Exchange Act Release No. 52553 (October 3,
2005), 70 FR 59100 (October 11, 2005) (SR-Amex-2004-62) (``Amex
Order I'') (approving the listing and trading on Amex of the
following eight Funds: Ultra 500 Fund, Ultra 100 Fund, Ultra 30
Fund, Ultra Mid-Cap 400 Fund, Short 500 Fund, Short 100 Fund, Short
30 Fund, and Short Mid-Cap 400 Fund); Securities Exchange Act
Release No. 52197 (August 2, 2005), 70 FR 46228 (August 9, 2005)
(SR-Amex-2004-62) (``Amex Notice''). See also Securities Exchange
Act Release No. 54040 (June 23, 2006) (SR-Amex-2006-41) (``Amex
Order II'', together with Amex Order I and Amex Notice, ``Amex
Releases'') (approving the listing and trading on Amex of the
following four funds: Ultra Short 500 Fund, Ultra Short 100 Fund,
Ultra Short 30 Fund, and Ultra Short Mid-Cap 400 Fund).
\5\ See Securities Exchange Act Release No. 54026 (June 21,
2006), 71 FR 36850 (June 28, 2006) (SR-PCX-2005-115) (order
approving the trading pursuant to UTP of the Ultra 500 Fund, Ultra
100 Fund, Ultra 30 Fund, Ultra Mid-Cap 400 Fund, Short 500 Fund,
Short 100 Fund, Short 30 Fund, and Short Mid-Cap 400 Fund);
Securities Exchange Act Release No. 54045 (June 26, 2006), 71 FR
37971 (July 3, 2006) (SR-PCX-2005-115) (order approving the trading
of the Ultra Short 500 Fund, Ultra Short 100 Fund, Ultra Short 30
Fund, and Ultra Short Mid-Cap 400 Fund).
---------------------------------------------------------------------------
Four of the Funds--the Ultra S&P 500 ProShares, Ultra QQQ
ProShares, Ultra Dow 30 ProShares, and Ultra Mid-Cap 400 ProShares
(``Bullish Funds'')--seek daily investment results, before fees and
expenses, that correspond to twice (200%) the daily performance of the
Standard & Poor's 500[reg] Index (``S&P 500''), the Nasdaq-100[reg]
Index (``Nasdaq 100''), the Dow Jones Industrial Average\SM\
(``DJIA''), and the S&P MidCap400\TM\ Index (``S&P MidCap''),
respectively. Each such index is referred to herein individually as an
``Underlying Index'' or ``Index'' and collectively as ``Underlying
Indexes.'' \6\ Any such Fund, if successful in meeting its objective,
should gain, on a percentage basis, approximately twice as much as the
Fund's Underlying Index when the prices 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.
---------------------------------------------------------------------------
\6\ Exchange-traded funds based on the Underlying Indexes are
traded on several exchanges, including the CHX. The Statement of
Additional Information (``SAI'') of each Fund discloses that such
Fund reserves the right to substitute a different Underlying Index
under certain circumstances.
---------------------------------------------------------------------------
In addition, four Funds-the Short S&P 500 ProShares, Short QQQ
ProShares, Short Dow 30 ProShares, and Short Mid-Cap 400 ProShares
(``Initial Bearish Funds'')--seek daily investment results, before fees
and expenses, which correspond to the inverse or opposite of the daily
performance (-100%) of the S&P 500, Nasdaq 100, DJIA, and S&P MidCap,
respectively. If one such Fund is successful in meeting its objective,
the net asset value (``NAV'') of shares of the Fund should increase
approximately as much, on a percentage basis, as the respective
Underlying Index decreases when the prices of the securities in the
Index decline on a given day; or should decrease approximately as much,
on a percentage basis, as the respective Index gains when the prices of
the securities in the index rise on a given day.
The remaining four Funds--the UltraShort S&P 500 ProShares,
UltraShort QQQ ProShares, UltraShort Dow 30 ProShares, and UltraShort
Mid-Cap 400 ProShares (the ``Additional Bearish Funds'')--seek daily
investment results, before fees and expenses, that correspond to twice
(or two times) the inverse or opposite (-200%) of the daily performance
of the S&P 500, Nasdaq 100, DJIA, and S&P MidCap, respectively. If one
such Fund is successful in meeting its objective, the NAV of the Shares
of the Fund 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. The ``Initial Bearish Funds'' and the ``Additional Bearish Funds''
are referred to herein collectively as ``Bearish Funds.''
Each Share represents a beneficial ownership interest in the net
assets of the corresponding Fund, less expenses. Each Bullish Fund
generally will hold at least 80% of its assets in the component equity
securities of the relevant Underlying Index (``Equity Securities'').
The remainder of assets will be devoted to Financial Instruments (as
defined below) that are intended to create the additional needed
exposure to such Underlying Index necessary to pursue the Fund's
investment objective. A Bearish Fund will not invest directly in the
component securities of the relevant Underlying Index, but instead,
will create short exposure to such Index. At least 80% of the value of
the portfolio of each Bearish Fund will be devoted to Financial
Instruments (defined below), debt instruments, and money market
instruments, including U.S. government securities and repurchase
agreements (``Money Market Instruments''). The financial instruments to
be held by any of the Bullish or Bearish Funds may include stock index
futures contracts; options on futures contracts; options on securities
and indices; equity caps, collars, and floors; swap agreements; forward
contracts; repurchase agreements and reverse repurchase agreements
(``Financial Instruments'');
[[Page 32371]]
and Money Market Instruments. ProShare Advisors LLC is the investment
adviser (``Advisor'') to each Fund.
(a) The Shares. A description of the Trust, the operation of the
Funds, and the creation and redemption process for the Shares is set
forth in the Amex Releases. To summarize, issuances of Shares will be
made only in aggregations of at least 75,000 Shares or multiples
thereof (``Creation Units''). Each Fund will issue and redeem the
Creation Units on a continuous basis, by or through participants that
have entered into participant agreements (each, an ``Authorized
Participant'') with the distributor.
The NAV per Share of each Fund is computed by dividing the value of
the net assets of such Fund (i.e., the value of its total assets less
total liabilities) by its total number of Shares outstanding. The NAV
of each Fund is calculated by the accounting agent for the Fund and
determined each business day at the close of regular trading of the New
York Stock Exchange (ordinarily 4 p.m. Eastern Time (``ET'')).
(b) Dissemination of Information About the Shares and the
Underlying Indexes. The Trust's or Advisor's Web site, which is and
will be publicly accessible at no charge (and to which the Exchange
will provide a hyperlink on its Web site), 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
reported closing price and NAV, and the magnitude of such premiums and
discounts; (3) its prospectus and Product Description; and (4) other
quantitative information such as daily trading volume.
Amex represented that it will disseminate for each Fund on a daily
basis by means of Consolidated Tape Association (``CTA'') and CQ High
Speed Lines information with respect to an Indicative Intra-Day Value
(``IIV'') (discussed below), recent NAV, shares outstanding, estimated
cash amount, and total cash amount per Creation Unit. Quotations for
and last-sale information regarding the Shares are disseminated through
the facilities of the Consolidated Tape Association and Consolidated
Quotation System. Amex also represented that it will make available on
its Web site (https://www.amex.com) daily trading volume, closing price,
the NAV, and final dividend amounts, if any, to be paid for each Fund.
The closing prices of the Shares are readily available from exchanges,
automated quotation systems, published or other public sources, or on-
line information services such as Bloomberg or Reuters.
Each Fund's total portfolio composition will be disclosed on the
Web site of the trust (https://www.profunds.com). The Trust expects that
Web site disclosure of portfolio holdings will be made daily and will
include, as applicable, the names and number of shares held of each
specific Equity Security, the specific types of Financial Instruments
and characteristics of such instruments, cash equivalents, and amount
of cash held in the portfolio of each Fund.\7\
---------------------------------------------------------------------------
\7\ 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 provided to Authorized Participants. The
format of the public Web site disclosure and the IIV and PCF Files
will differ because the public Web site will list all portfolio
holdings, whereas the IIV and PCF Files provide the portfolio
holdings in a different format appropriate for Authorized
Participants, i.e., the exact components of a Creation Unit.
---------------------------------------------------------------------------
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., https://www.bloomberg.com).\8\ The
value of each Underlying Index will be updated intra-day on a real time
basis as its individual component securities change in price. These
intra-day values of each Underlying Index will be disseminated every 15
seconds throughout the trading day by the Amex or another organization
authorized by the relevant Underlying Index provider.
---------------------------------------------------------------------------
\8\ Data regarding each Underlying Index are also available from
the respective index provider to subscribers. Several independent
data vendors also package and disseminate index data in various
value-added formats (including vendors displaying both securities
and index levels and vendors displaying index levels only).
---------------------------------------------------------------------------
To provide updated information relating to each Fund, Amex will
disseminate through the facilities of the CTA from 9:30 a.m. ET to 4:15
p.m. ET: (1) Continuously, the market value of a Share; and (2) every
15 seconds, a calculation of the IIV as calculated by a third-party
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 is designed to provide investors with a
reference value that can be used in connection with other related
market information. The IIV may not reflect the value of all securities
included in the Underlying Index or the precise composition of the
current portfolio of securities held by each Fund at a particular point
in time. Therefore, the IIV should not be viewed as a real-time update
of the NAV of a particular Fund, which is calculated only once a day.
(c) UTP Trading Criteria. The Exchange represents that it would
immediately halt trading the Shares during the listing market's trading
hours if: (1) The listing market stops trading the Shares because of a
regulatory halt similar to a halt based on CHX Article 20, Rule 2 or a
halt because the IIV or the value of the applicable Underlying Index is
no longer widely disseminated; (2) the listing market delists the
Shares; or (3) in the situations described in ``Trading Rules'' below.
Additionally, the Exchange may cease trading the Shares if such other
event shall occur or condition exists which in the opinion of the
Exchange makes further dealings on the Exchange inadvisable.
The Exchange also represents that it would immediately halt trading
the Shares of a Fund upon notification by the listing market that the
NAV is not being disseminated to all market participants at the same
time. The Exchange would resume trading only when trading in the Shares
resumes on the listing market.
(d) Other 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 CHX during both its regular trading session (from
8:30 a.m. to 3 p.m. (Central Time (``CT''))) and during its late
trading session (from 3 p.m. to 4 p.m. CT), even if the IIV is not
disseminated from 3:14 to 4 p.m. CT.\9\ The Exchange has appropriate
rules to facilitate transactions in the Shares during all trading
sessions.
---------------------------------------------------------------------------
\9\ Because NSCC does not disseminate the new basket amount to
market participants until approximately 6 p.m. to 7 p.m. ET, an
updated IIV is not possible to calculate during the Exchange's late
trading session. Currently the official index sponsors for the
Funds' indexes do not calculate updated index values during the
Exchange's late trading session; however, if the index sponsors did
so in the future, the Exchange would not trade this product unless
such official index value is widely disseminated.
---------------------------------------------------------------------------
With respect to trading halts, the Exchange may 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
[[Page 32372]]
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
will be subject to trading halts caused by extraordinary market
volatility pursuant to the Exchange's ``circuit breaker'' rule or by
the halt or suspension of trading of the underlying securities.
Shares will be deemed ``NMS stocks'' and therefore will be subject
to, among other things, Rule 611 of Regulation NMS under the Act
(``Order Protection Rule'').
(e) Surveillance. The Exchange intends to utilize its existing
surveillance procedures applicable to Investment Company Units to
monitor trading in the Shares. The Exchange represents that these
procedures are adequate to monitor Exchange trading of the Shares and
to deter and detect violations of Exchange rules.
The Exchange's current trading surveillance focuses on detecting
securities trading on the Exchange 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
(f) Information Bulletin. Prior to the commencement of trading, the
Exchange will inform its Participants in an Information Bulletin of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information 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) CHX
Rules 11 and 16, which impose a suitability obligation and a duty of
due diligence on Participants to learn the essential facts relating to
every customer prior to trading the Shares; (3) how information
regarding the IIV is disseminated; (4) the requirement that
Participants deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (5) trading information.
The Information Bulletin also will advise Participants, prior to
the commencement of trading, of the prospectus delivery requirements
applicable to the Funds.\10\ The Exchange notes that investors
purchasing Shares directly from the Trust will receive a prospectus.
Participants purchasing Shares from the Trust for resale to investors
will deliver a prospectus to such investors. The Information Bulletin
will also discuss any relief, if granted, by the Commission or the
staff from any rules under the Act. In addition, the Information
Bulletin will reference that the Trust is subject to various fees and
expenses described in the Registration Statement. The Information
Bulletin will also disclose that the NAV for the Shares will be
calculated shortly after 4 p.m. ET each trading day.
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\10\ The Commission issued an exemptive order pursuant to, among
other things, Section 24(d) of the 1940 Act that permits dealers to
sell Shares in the secondary market unaccompanied by a statutory
prospectus when prospectus delivery is not required by the
Securities Act of 1933. See ProShares Trust, et al., Investment
Company Act Release Nos. 27323 (May 18, 2006) (notice) and 27394
(June 13, 2006) (order), as subsequently amended by ProShares Trust,
et al., Investment Company Act Release Nos. 27609 (December 22,
2006) (notice) and 27666 (January 18, 2007) (order). Under the
orders, certain investors will receive a product description
(``Product Description'') describing the Trust, the Funds, and the
Shares. This Product Description will contain information about the
Shares that is tailored to meet the needs of investors purchasing
the Shares in the secondary market.
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2. Statutory Basis
The CHX believes the proposal is consistent with the requirements
of the Act and the rules and regulations thereunder that are applicable
to a national securities exchange, and, in particular, with the
requirements of Section 6(b).\11\ The proposed rule change is
consistent with Section 6(b)(5) of the Act because it would promote
just and equitable principles of trade; remove impediments to, and
perfect the mechanism of, a free and open market and a national market
system; and, in general, protect investors and the public interest by
allowing CHX participants to trade these products.
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\11\ 15 U.S.C. 78(f)(b).
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In addition, the Exchange believes that the proposal is consistent
with Rule 12f-5 under the Act \12\ because it deems the Shares to be
equity securities, thus rendering the Shares subject to the Exchange's
existing rules governing the trading of equity securities.
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\12\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement of Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition.
C. Self-Regulatory Organization's Statement on Comments Regarding the
Proposed Rule Changes Received From Members, Participants or Others
No written comments were either solicited or 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-CHX-2008-07 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549.
All submissions should refer to File Number SR-CHX-2008-07. 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 CHX. 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-CHX-2008-07 and should be
submitted on or before June 27, 2008.
[[Page 32373]]
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of the Act and the rules and
regulations thereunder applicable to a national securities
exchange.\13\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\14\ which
requires that an exchange have rules designed, among other things, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and in general to protect investors and the public
interest. The Commission believes that this proposal should benefit
investors by increasing competition among markets that trade the
Shares.
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\13\ In approving this rule change, the Commission notes that it
has considered the proposal's impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
\14\ 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,\15\ which permits an exchange to trade,
pursuant to UTP, a security that is listed and registered on another
exchange.\16\ The Commission notes that it previously approved the
listing and trading of the Shares on Amex.\17\ The Commission also
finds that the proposal is consistent with Rule 12f-5 under the
Act,\18\ 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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\15\ 15 U.S.C. 78l(f).
\16\ 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.
\17\ See supra notes 4 and 5.
\18\ 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,\19\ 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. Furthermore, the IIV, updated to reflect
changes in currency exchange rates, will be calculated by Amex and
publicly disseminated on a 15-second delayed basis from 8:30 a.m. to
3:14 p.m. CT. As mentioned above, Amex's Web site provides various
information about the value of the Shares, such as the prior business
day's closing NAV, the reported closing price, and the daily trading
volume.
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\19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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The Commission also believes that the Exchange's trading halt
procedures are reasonably designed to prevent trading in the Shares
when transparency is impaired. CHX has represented that if the listing
market halts trading when the IIV is not being calculated or
disseminated, the Exchange would halt trading in the Shares until
trading resumes on the listing market.
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 Participants in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
3. Prior to the commencement of trading, the Exchange would inform
its Participants in an Information Bulletin of the requirement that
Participants deliver a prospectus or Product Description to investors
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
that the listing and trading of the Shares on other exchanges is
consistent with the Act.\20\ The Commission presently is not aware of
any regulatory issue that should cause it to revisit those findings 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.
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\20\ See supra notes 4 and 5.
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V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\21\ that the proposed rule change (SR-CHX-2008-07) be, and it
hereby is, approved on an accelerated basis.
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\21\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Florence E. Harmon,
Acting Secretary.
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\22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E8-12629 Filed 6-5-08; 8:45 am]
BILLING CODE 8010-01-P
