Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Trade 14 Funds of the Commodities and Currency Trust Pursuant to Unlisted Trading Privileges, 42391-42396 [E8-16592]
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Federal Register / Vol. 73, No. 140 / Monday, July 21, 2008 / Notices
B. General Continuance Standards
NSCC’s rules currently require a
member to promptly notify NSCC of the
member’s non-compliance with general
member continuance standards but do
not set forth a specific time frame in
which to do so and do not provide for
the imposition of a fine for not promptly
notifying NSCC. In the interest of
harmonizing this provision with a
similar FICC provision, NSCC is: (a)
Requiring the member to make such a
notification within two business days;
(b) requiring the member to notify NSCC
within the two-day time frame if it
becomes subject to a statutory
disqualification; and (c) subjecting the
member to a $1,000 fine for failure to
timely notify NSCC.
NSCC also currently imposes a fine in
the amount of $5,000 if an applicable
member fails to notify NSCC of a
material change to its business.
Pursuant to NSCC’s rules, a material
change currently includes a merger or
acquisition involving the member; a
change in corporate form; a name
change; a material change in ownership,
control, or management; and
participation as a defendant in litigation
which reasonably could be anticipated
to have a direct negative impact on the
member’s financial condition or ability
to conduct its business. For uniformity
with similar FICC provisions, NSCC is
amending its rules so that notice of such
events must be provided at least ninety
calendar days prior to the effective date
of such event unless the member
demonstrates that it could not have
reasonably given notice within that time
frame.
With respect to both fines, NSCC is
amending its rules to reflect that when
a common member of the Clearing
Agencies is late in providing the same
information to more than one Clearing
Agency, the fine amount will be divided
equally among the Clearing Agencies.7
PWALKER on PROD1PC71 with NOTICES
C. Fine Schedule for Late Clearing Fund
Deficiency Payments
NSCC members are subject to fines for
late payments of Clearing Fund
The Clearing Agencies do not view the proposed
rule changes as fee reductions, because they never
intended to charge a common member multiple
times for a single violation.
7 DTC does not currently maintain a fine in this
regard. However, DTC has filed a proposal to adopt
a fine schedule similar to the one NSCC is
proposing to adopt. Supra note 3.
Where the Member is a participant of DTC and
is a common member of one or more of the other
clearing agencies, the fine would be collected by
DTC and allocated equally among other clearing
agencies, as appropriate. If the member is not a DTC
participant, but is a common member between
NSCC and FICC, NSCC will collect the fine and
allocate the appropriate portion to FICC.
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deficiency calls. NSCC is amending the
footnote to this section of its fine
schedule to correspond with that of
FICC’s fine schedule as proposed by
FICC in a separate rule filing.8 If the
number of occasions of late Clearing
Fund deficiency call payments within a
three-month rolling period exceeds four,
NSCC will obtain the Board’s
concurrence for the fine amount.
Furthermore, a late payment of more
than one hour will result in a fine equal
to the amount applicable to the next
highest occasion for the specific
deficiency amount.9 If a member is late
for more than one hour and it is the
member’s fourth occasion in the rolling
period, NSCC will obtain the Board’s
concurrence for the fine amount.
D. Fine Schedule for Late Settlement
Payments
The Clearing Agencies currently have
provisions for fines for late payment of
settlement obligations. NSCC is
amending the footnote in this section of
its fine schedule to correspond with
those of the other Clearing Agencies. If
the number of occasions of late
settlement payments within the rolling
three-month period exceeds four, NSCC
will obtain the Board’s concurrence for
the fine amount.10 Furthermore, a
payment late by more than one hour
will result in a fine equal to the amount
applicable to the next highest occasion
for the specific deficiency amount. If a
member is late by more than one hour
and it is the member’s fourth occasion
in the rolling three-month period, NSCC
will obtain the Board’s concurrence for
the fine amount.
III. Discussion
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 registered clearing
agency. In particular, the Commission
believes the proposal is consistent with
the requirements of Section
17A(b)(3)(F),11 which, among other
things, requires that the rules of a
clearing agency are designed to remove
note 3.
example, if a firm’s deficiency amount is
under $1,000,000, it is the firm’s second occurrence
of late satisfaction of a deficiency call in the rolling
three-month period, and the firm is late by more
than one hour, the firm would be fined $200 (i.e.
, the fine for a third occasion) instead of $100 (i.e.
, the fine for a second occasion) pursuant to the
proposed fine schedule.
10 This change requires the removal of language
granting NSCC discretion over the fine amount
upon consultation with the settling bank only
member, member, mutual fund/insurance services
member, or fund member.
11 15 U.S.C. 78q–1(b)(3)(F).
PO 00000
8 Supra
9 For
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42391
impediments to and perfect the
mechanisms of a national system for the
prompt and accurate clearance and
settlement of securities transactions and
with the requirements of Section
17A(b)(3)(H) 12 which, among other
things, requires that the rules of a
clearing agency provide a fair procedure
with respect to the disciplining of
participants and the denial of
participation to any person seeking to be
a participant. The Commission finds
that the proposed rule change, which
restructures and harmonizes NSCC’s
fines with those of DTC and FICC, is
consistent with those statutory
obligations.
IV. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the
Act 13 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,14 that the
proposed rule change (File No. SR–
NSCC–2007–07) be, and hereby is,
approved.15
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.16
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–16594 Filed 7–18–08; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58162; File No. SR–
NYSEArca–2008–73]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Relating to Trade 14
Funds of the Commodities and
Currency Trust Pursuant to Unlisted
Trading Privileges
July 15, 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 July 11,
2008, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
12 15
U.S.C. 78q–1(b)(3)(H).
U.S.C. 78q–1.
14 15 U.S.C. 78s(b)(2).
15 In approving the proposed rule change, the
Commission considered the proposal’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
16 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
13 15
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the ‘‘Exchange’’), through its wholly
owned subsidiary NYSE Arca Equities,
Inc. (‘‘NYSE Arca Equities’’ or the
‘‘Corporation’’), 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.
The Exchange filed the proposed rule
change pursuant to Section 19(b)(3)(A)
of the Act 3 and Rule 19b–4(f)(6) 4
thereunder, which renders it effective
upon filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to trade
pursuant to unlisted trading privileges
(‘‘UTP’’) shares (‘‘Shares’’) of fourteen
(14) funds (‘‘Funds’’) of the
Commodities and Currency Trust
(‘‘Trust’’) based on several currencies,
commodities and commodities 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 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 revise
Commentary .02 to NYSE Arca Equities
Rule 8.200 to permit the listing and
trading, including trading pursuant to
UTP, of trust issued receipts (‘‘TIRs’’)
that hold investments in any
combination of cash, securities, options
on securities and indices, futures
contracts, options on futures contracts,
forward contracts, equity caps, collars
and floors, and swap agreements (the
3 15
4 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
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19:22 Jul 18, 2008
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‘‘Financial Instruments’’).5 This
proposal would permit the Exchange to
trade the Shares pursuant to UTP under
revised Commentary .02 to Rule 8.200.
The American Stock Exchange LLC
(‘‘Amex’’) has filed a proposed rule
change to list the Shares.6
The Shares represent common units
of fractional undivided beneficial
interest in, and ownership of, each
Fund. Each Fund will invest the
proceeds of its offering of Shares in
various Financial Instruments that will
provide exposure to the Fund’s
underlying currency, commodity or
commodity index. In addition, the
Funds will also maintain cash positions
in cash or money market instruments for
the purpose of collateralizing such
positions taken in the Financial
Instruments.
Shares of seven (7) of the Funds of the
Trust will be designated as Ultra
ProShares while the other seven (7)
shares of the Trust will be designated as
UltraShort ProShares. Each of the Funds
will have a distinct investment
objective.7 The Funds will attempt, on
a daily basis, to achieve their
investment objective by corresponding
to a specified multiple or an inverse
multiple of the performance of a
particular benchmark commodities
index, commodity or currency (each an
‘‘Underlying Benchmark’’ and
collectively, the ‘‘Underlying
Benchmarks’’) as described in the Amex
Proposal.
Six (6) Funds will be based on the
following benchmark commodities
indexes: (i) The Dow Jones-AIG
Commodity IndexSM; (ii) the Dow
Jones-AIG Crude Oil Sub-IndexSM; and
(iii) the Dow Jones-AIG Agriculture SubIndexSM (each, an ‘‘Underlying Index’’
and collectively, the ‘‘Underlying
Indexes’’). Four (4) Funds will be based
on the following commodities: (i) Gold;
and (ii) silver (each, an ‘‘Underlying
Commodity’’ and collectively, the
‘‘Underlying Commodities’’). Four (4)
Funds will be based on the following
5 Permissible securities in connection with
Financial Instruments would not include foreign
equity securities.
6 See Securities Exchange Act Release No. 57932
(June 5, 2008), 73 FR 33467 (June 12, 2008) (SR–
Amex–2008–39) (‘‘Amex Proposal’’). The
Commission notes that, in a separate action today,
it is approving the Amex Proposal. See Securities
Exchange Act Release No. 58161 (July 15, 2008).
7 The Funds are the Ultra DJ–AIG Commodity
ProShares, UltraShort DJ–AIG Commodity
ProShares, Ultra DJ–AIG Agriculture ProShares,
UltraShort DJ–AIG Agriculture ProShares, Ultra DJ–
AIG Crude Oil ProShares, UltraShort DJAIG Crude
Oil ProShares, Ultra Gold ProShares, UltraShort
Gold ProShares, Ultra Silver ProShares, UltraShort
Silver ProShares, Ultra Euro ProShares, UltraShort
Euro ProShares, Ultra Yen ProShares and
UltraShort Yen ProShares.
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benchmark currencies versus the U.S.
dollar: (1) The Euro; and (2) the
Japanese Yen (each, an ‘‘Underlying
Currency’’ and collectively, the
‘‘Underlying Currencies’’). The
Exchange proposes to trade pursuant to
UTP shares of the Funds that seek daily
investment results, before fees and
expenses, that correspond to twice
(200%) the daily performance of the
Underlying Benchmark (the ‘‘Ultra
Funds’’). If a Fund is successful in
meeting its investment objective, the net
asset value (‘‘NAV’’) 8 of the shares of
each Fund is expected to gain on a
percentage basis, approximately twice
as much as each Fund’s respective
Underlying Benchmark when the price
of the Underlying Benchmark increases
on a given day, and should lose
approximately twice as much when
such price declines on a given day,
before fees and expenses.
The Exchange also proposes to trade
pursuant to UTP shares of the Funds
that seek daily investment results,
before fees and expenses that
correspond to twice the inverse
(¥200%) of the daily performance of
the Underlying Benchmark (the
‘‘UltraShort Funds’’). If each Fund is
successful in meeting its objective, the
NAV of the shares of each Fund is
expected to increase approximately
twice as much, on a percentage basis, as
the respective Underlying Benchmark
loses on a given day, or should decrease
approximately twice as much as the
respective Underlying Benchmark gains
when the Underlying Benchmark rises
on a given day, before fees and
expenses.
The Exchange notes that the
Commission has permitted the listing
and trading on the Exchange and other
national securities exchanges of
securities linked to the performance of
underlying currencies and
commodities.9 The Commission also has
8 ‘‘Net asset value’’ means the total assets of a
Fund including, but not limited to, all cash and
cash equivalents or other debt securities less total
liabilities of such Fund, each determined on the
basis of generally accepted accounting principles in
the United States, consistently applied under the
accrual method of accounting. In particular, net
asset value includes any unrealized profit or loss on
open swaps and futures contracts, and any other
credit or debit accruing to a Fund but unpaid or not
received by a Fund.
9 The Commission has previously approved
issues of Commodity-Based Trust Shares, Currency
Trust Shares and Commodity Index Trust Shares,
which have certain characteristics similar to the
proposed TIRs, for exchange listing and trading.
See, e.g., Securities Exchange Act Release No.
50603 (October 28, 2004), 69 FR 64614 (November
5, 2004) (SR–NYSE–2004–22) (order approving
listing on the New York Stock Exchange (‘‘NYSE’’)
of streetTRACKS Gold Trust); Securities Exchange
Act Release No. 51058 (January 19, 2005), 70 FR
3749 (January 26, 2005) (SR–Amex–2004–38) (order
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approved for trading on the Exchange
on a UTP basis under NYSE Arca
Equities Rule 5.2(j)(3) UltraFunds, Short
Funds and UltraShort Funds of the
ProShares Trust.10
PWALKER on PROD1PC71 with NOTICES
Proposed Revision to Commentary .02
to Rule 8.200
Shares of each Fund will be generally
subject to the rules that apply to TIRs.
The Exchange also proposes to revise
Commentary .02 to Rule 8.200 in order
to permit the listing and trading of TIRs
directly holding Financial Instruments.
Current Commentary .02 to Rule 8.200
permits the Exchange to list and trade
approving listing on the American Stock Exchange
(‘‘Amex’’) of the iShares COMEX Gold Trust);
Securities Exchange Act Release No. 53521 (March
20, 2006), 71 FR 14967 (March 24, 2006) (SR–
Amex–2005–72) (order approving listing on Amex
of the iShares Silver Trust); Securities Exchange Act
Release No. 56041 (July 11, 2007), 72 FR 39114
(July 17, 2007) (SR–NYSEArca–2007–43) (order
granting accelerated approval to list on NYSE Arca
the iShares COMEX Gold Trust); Securities
Exchange Act Release No. 52843 (November 28,
2005), 70 FR 72486 (December 5, 2005) (SR–NYSE
2005–65) (order granting accelerated approval for
NYSE to list and trade shares of the CurrencyShares
Euro Trust); Securities Exchange Act Release No.
54020 (June 20, 2006), 71 FR 36579 (June 27, 2006)
(SR–NYSE–2006–35) (order granting accelerated
approval for NYSE to list and trade shares of the
CurrencyShares Australian Dollar Trust,
CurrencyShares British Pound Sterling Trust,
CurrencyShares Canadian Dollar Trust,
CurrencyShares Mexican Peso Trust,
CurrencyShares Swedish Krona Trust and
CurrencyShares Swiss Franc Trust); Securities
Exchange Act Release No. 55268 (February 9, 2007),
72 FR 7793 (February 20, 2007) (SR–NYSE–2007–
03) (order granting accelerated approval for NYSE
to list and trade shares of the CurrencyShares
Japanese Yen Trust); Securities Exchange Act
Release No. 56131 (July 25, 2007), 72 FR 42212
(August 1, 2007) (SR–NYSEArca–2007–57) (order
granting accelerated approval for listing on NYSE
Arca of CurrencyShares Trusts); Securities
Exchange Act Release No. 54013 (June 16, 2006), 71
FR 36372 (June 26, 2006) (SR–NYSE–2006–17)
(approving listing on the NYSE of the iShares GSCI
Trust); Securities Exchange Act Release No. 55585
(April 5, 2007), 72 FR 18500 (April 12, 2007) (SR–
NYSE–2006–75) (approving for NYSE listing the
iShares GS Commodity Light Energy Indexed Trust;
iShares GS Commodity Industrial Metals Indexed
Trust; iShares GS Commodity Livestock Indexed
Trust and iShares GS Commodity Non-Energy
Indexed Trust); Securities Exchange Act Release
No. 56932 (December 7, 2007), 72 FR 71178
(December 14, 2007) (SR–NYSEArca–2007–112)
(order granting accelerated approval to list iShares
S&P GSCI Commodity-Indexed Trust); Securities
Exchange Act Release No. 57456 (March 7, 2008),
73 FR 13599 (March 13, 2008) (SR–NYSEArca–
2007–91) (order granting accelerated approval for
NYSE Arca listing the iShares S&P GSCI Energy
Commodity-Indexed Trust; iShares S&P GSCI
Natural Gas Commodity-Indexed Trust; iShares S&P
GSCI Industrial Metals Commodity-Indexed Trust;
iShares S&P GSCI Light Energy Commodity-Indexed
Trust; iShares S&P GSCI Livestock CommodityIndexed Trust; and iShares S&P GSCI Non-Energy
Commodity-Indexed Trust).
10 See Securities Exchange Act Release No. 55125
(January 18, 2007), 72 FR 3462 (January 25, 2007)
(SR–NYSEArca–2006–87); Securities Exchange Act
Release No. 57017 (December 20, 2007), 72 FR
73955 (December 28, 2007) (SR–NYSEArca–2007–
108).
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TIRs, including trading on a UTP basis,
where the underlying trust, partnership,
commodity pool or other similar entity
holds ‘‘Investment Shares.’’ 11 The term
‘‘Investment Shares’’ is defined in
Commentary .02(b)(1) as a security (a)
that is issued by a trust, partnership,
commodity pool or other similar entity
that invests in any combination of
futures contracts, options on futures
contracts, forward contracts,
commodities, swaps or high credit
quality short-term fixed income
securities or other securities; and (b)
issued and redeemed daily at net asset
value in amounts correlating to the
number of receipts created and
redeemed in a specified aggregate
minimum number. As a result, a TIR
that is listed or UTP-traded pursuant to
current Commentary .02 to Rule 8.200 is
required to be in the form of a ‘‘masterfeeder’’ structure, whereby the listed or
UTP-traded security holds or invests in
the security of the fund that is investing
in the Financial Instruments. This
proposal would provide an alternative
for issuers so that a security may be
listed and traded, including UTP-traded,
on the Exchange that directly invests in
or holds Financial Instruments rather
than through an additional security of a
fund.
The proposal will expand the
application of Commentary .02 to Rule
8.200 to both Investment Shares and
Financial Instruments. Accordingly,
new Commentary .02(b)(4) to Rule 8.200
would be added to define ‘‘Financial
Instrument’’ as any combination of cash,
securities, options on securities and
indices, futures contracts, options on
futures contracts, forward contracts,
equity caps, collars and floors and swap
agreements. Throughout Commentary
.02 to Rule 8.200, the term ‘‘Financial
Instrument’’ will be added to
‘‘Investment Shares’’ indicating that
TIRs directly holding Financial
Instruments may be listed and traded,
including UTP-traded, on the Exchange.
Additional information regarding the
Underlying Indexes, the Commodities
Benchmarks, the Currencies
Benchmarks, the structure and
investment objective of the Funds, the
portfolio investment methodology,
investment techniques, creation and
redemption of Shares is provided in the
Amex Proposal.
Availability of Information Regarding
the Shares
According to the Amex Proposal, the
Web sites for the Funds and/or the
11 See Securities Exchange Act Release No. 53736
(April 27, 2006), 71 FR 26582 (May 5, 2006 (SR–
PCX–2006–22).
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42393
Amex, which are publicly accessible at
no charge, will contain the following
information: (a) The current NAV per
Share daily and the prior business day’s
NAV per Share and the reported closing
price; (b) the mid-point of the bid-ask
price in relation to the NAV per Share
as of the time it is calculated (the ‘‘BidAsked Price’’); (c) calculation of the
premium or discount of such price
against the NAV per Share; (d) data in
chart form displaying the frequency
distribution of discounts and premiums
of the Bid-Ask Price against the NAV
per Share, within appropriate ranges for
each of the four (4) previous calendar
quarters; (e) the Prospectus; and (f) other
applicable quantitative information.
The NAV per Share will be calculated
and disseminated daily. The Amex will
disseminate for the Funds on a daily
basis by means of CTA/CQ High Speed
Lines information with respect to the
corresponding ‘‘Indicative Value’’ (as
discussed below), recent NAV per Share
and Shares outstanding. The Amex will
also make available on its Web site
(https://www.amex.com) daily trading
volume of the Shares, closing prices of
the Shares, and the NAV per Share. The
closing price and settlement prices of
the futures contracts held by the Funds
are also readily available from the
Chicago Mercantile Exchange (‘‘CME’’),
New York Mercantile Exchange
(‘‘NYMEX’’), Chicago Board of Trade
(‘‘CBOT’’), Intercontinental Exchange/
New York Board of Trade (‘‘ICE/
NYBOT’’), London Metal Exchange
(‘‘LME’’), automated quotation systems,
published or other public sources, or
on-line information services such as
Bloomberg or Reuters. Real-time
dissemination of spot pricing for gold,
silver, euro and Japanese yen is
available on a 24-hour basis worldwide
from various major market data vendors.
Portfolio Disclosure
Each Fund’s total portfolio
composition will be disclosed on the
Web site of the Trust (https://
www.proshares.com) or another relevant
Web site as determined by the Trust
and/or the Amex. The Trust will
provide Web site disclosure of portfolio
holdings daily and will include, as
applicable, the names and number of
Financial Instruments and
characteristics of such instruments, cash
equivalents and amount of cash held in
the portfolio of each Fund. This public
Web site disclosure of the portfolio
composition of each Fund will occur at
the same time as the disclosure by the
Managing Owner of the portfolio
composition to Authorized Participants,
so that all market participants are
provided portfolio composition
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information at the same time. Therefore,
the same portfolio information will be
provided on the public Web site as well
as in electronic files provided to
Authorized Participants. Accordingly,
each investor will have access to the
current portfolio composition of each
Fund through the Trust’s Web site, at
https://www.proshares.com, and/or at the
Amex’s Web site.
PWALKER on PROD1PC71 with NOTICES
Availability of Information About the
Underlying Benchmarks
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.ino.com and
https://www.finance.yahoo.com. Data
regarding each Underlying Index is also
available from the respective index
provider to subscribers. In addition,
data is also available regarding the
underlying component commodities of
each Underlying Index from those
futures exchanges that list and trade
futures contracts on those commodities.
Several independent data vendors also
package and disseminate index data in
various value-added formats (including
vendors displaying both index
constituents and index levels and
vendors displaying index levels only).
Data regarding spot pricing of the
Underlying Commodities (gold and
silver) is publicly available on a 24-hour
basis from various financial information
service providers, such as Reuters and
Bloomberg. In addition, the daily
London fix for gold and silver is also
disseminated by various market data
vendors and is available from the
London Bullion Market Association
(‘‘LBMA’’) Web site at https://
www.lbma.org.uk.
Data regarding futures contracts and
options on futures contracts in
connection with the Underlying
Commodities is also available from the
NYMEX at https://nymex.com. There is
considerable public price and data
information regarding the Underlying
Currencies (euro and Japanese yen).
Spot pricing related to foreign exchange
is available to investors and market
professionals on a 24-hour basis. A
variety of public Web sites and
professional and subscription services
provide market and price information
regarding the euro and the yen. Current
spot prices are also generally available
from foreign exchange dealers.
The value of each Underlying
Benchmark will be updated intra-day on
a real time basis as its components
change in price.
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Dissemination of Net Asset Value and
Indicative Value
The Administrator calculates and
disseminates, once each trading day, the
NAV per Share to market participants.
The Amex Proposal represents that the
Amex will obtain a representation (prior
to listing of the Funds) from the Trust
that the NAV per Share will be
calculated daily and made available to
all market participants at the same time.
In addition, the Administrator causes to
be made available on a daily basis the
corresponding Cash Deposit Amounts to
be deposited in connection with the
issuance of the respective Shares.
In order to provide updated
information relating to the Fund for use
by investors, professionals and persons
wishing to create or redeem the Shares,
the Amex will disseminate an updated
Indicative Value. The Indicative Value
will be disseminated on a per Share
basis at least every 15 seconds during
regular Amex trading hours of 9:30 a.m.
to 4 p.m. ET. The Indicative Value will
be calculated based on the cash required
for creations and redemptions for a
Fund adjusted to reflect the price
changes of the Financial Instruments.
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. Trading in the Shares
on the Exchange will occur in
accordance with NYSE Arca Equities
Rule 7.34(a). The Exchange has
appropriate rules to facilitate
transactions in the Shares during this
time. The minimum trading increment
for Shares on the Exchange will be
$0.01.
Further, NYSE Arca Equities Rule
8.200, Commentary .02 sets forth certain
restrictions on equity trading permit
holders (‘‘ETP Holders’’) acting as
registered Market Makers in Trust
Issued Receipts to facilitate
surveillance. Rule 8.200, Commentary
.02(e)(3) requires that the ETP Holder
acting as a registered Market Maker in
the Shares provide the Exchange with
information relating to its trading in the
applicable physical asset or commodity,
related futures or options on futures, or
any other related derivatives as may be
requested. NYSE Arca Equities Rule
8.200, Commentary .02(e)(4) prohibits
the ETP Holder acting as a registered
Market Maker in the Shares from using
any material nonpublic information
received from any person associated
with an ETP Holder or employee of such
person regarding trading by such person
or employee in the applicable
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
underlying physical asset or
commodity, related futures or options
on futures, or any other related
derivative (including the TIRs). In
addition, NYSE Arca Equities Rule
8.200, Commentary .02(e)(1) prohibits
the ETP Holder acting as a registered
Market Maker in the Shares from being
affiliated with a market maker in the
applicable physical asset or commodity,
related futures or any other related
derivatives unless adequate information
barriers are in place, as provided in
NYSE Arca Equities Rule 7.26.
As a general matter, the Exchange has
regulatory jurisdiction over its ETP
Holders and any person or entity
controlling an ETP Holder. The
Exchange also has regulatory
jurisdiction over a subsidiary or affiliate
of an ETP Holder that is in the securities
business. A subsidiary or affiliate of an
ETP Holder that does business only in
commodities or futures contracts would
not be subject to Exchange jurisdiction,
but the Exchange could obtain certain
information regarding the activities of
such subsidiary or affiliate through
surveillance sharing agreements with
regulatory organizations of which such
subsidiary or affiliate is a member.
Surveillance
The Exchange intends to utilize its
existing surveillance procedures
applicable to derivative products,
including TIRs, 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 and applicable federal securities
laws.
The Exchange’s current trading
surveillances focus on detecting
securities trading 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 is able
to obtain information regarding trading
in the Shares, and certain of the
Financial Instruments held by TIRs
including securities, options on
securities and indices, commodities,
futures contracts, and options on futures
contracts, through ETP Holders, in
connection with such ETP Holders’
proprietary or customer trades which
they effect on any relevant market. The
Exchange currently has in place
comprehensive surveillance sharing
agreements with ICE, LME and NYMEX
for the purpose of providing information
in connection with trading in or related
to futures contracts traded on their
E:\FR\FM\21JYN1.SGM
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Federal Register / Vol. 73, No. 140 / Monday, July 21, 2008 / Notices
respective exchanges comprising the
Underlying Benchmarks. The Exchange
also notes that CBOT, CME and NYBOT
are members of the Intermarket
Surveillance Group (‘‘ISG’’).
PWALKER on PROD1PC71 with NOTICES
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares,
including risks inherent with trading
the Shares during the Opening and Late
Trading Sessions when the updated
Indicative Value is not calculated and
disseminated and suitability
recommendation requirements.
Specifically, the Information Bulletin
will discuss the following: (1) The
procedures for purchases and
redemptions of Shares in Baskets; (2)
NYSE Arca Equities Rule 9.2(a),12 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; (3) how information
regarding the Indicative Value is
disseminated; (4) 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 (5)
trading information. For example, the
Information Bulletin will advise ETP
Holders, prior to the commencement of
trading, of the prospectus delivery
requirements applicable to the Trust.
The Exchange notes that investors
purchasing Shares directly from the
Funds (by delivery of the Basket
Amount) will receive a prospectus. ETP
Holders purchasing Shares from the
Trust for resale to investors will deliver
a prospectus to such investors.
In addition, the Information Bulletin
will reference that the Trust is subject
to various fees and expenses described
in each Fund’s Registration Statement.
The Information Bulletin will also
reference the fact that there is no
regulated source of last sale information
regarding physical commodities, that
12 NYSE Arca Equities Rule 9.2(a) (‘‘Diligence as
to Accounts’’) provides that ETP Holders, 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 proposed rule amendment provides,
with a limited exception, that prior to the execution
of a transaction recommended to a non-institutional
customer, the ETP Holders shall make reasonable
efforts to obtain information concerning the
customer’s financial status, tax status, investment
objectives, and any other information that they
believe 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).
VerDate Aug<31>2005
19:22 Jul 18, 2008
Jkt 214001
42395
the Commission has no jurisdiction over
the trading of physical commodities or
the futures contracts on which the value
of the Shares is based.
Shares to be equity securities, thus
rendering the Shares subject to the
Exchange’s rules governing the trading
of equity securities.
Trading Halts
The Exchange represents that it will
cease trading the Shares of the Funds 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 will also be governed by the
trading halt provisions of NYSE Arca
Equities Rule 7.34, relating to temporary
interruptions in the calculation or wide
dissemination of the Indicative Value or
the value of the underlying index, as
applicable.
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares.
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 underlying
securities; or (2) whether other unusual
conditions or circumstances detrimental
to the maintenance of a fair and orderly
market are present.
If the Exchange becomes aware that
the NAV for a Fund is not disseminated
to all market participants at the same
time, it will halt trading until such time
as the NAV is available to all market
participants.
B. Self Regulatory Organization’s
Statement on Burden on Competition
2. Statutory Basis
The proposed rule change is
consistent with Section 6(b) of the
Exchange Act 13 in general and furthers
the objectives of Section 6(b)(5) 14 in
particular in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transaction in
securities, and, in general to protect
investors and the public interest. The
Exchange believes that the proposal will
facilitate the listing and trading of
additional types of commodity and
currency-based investments that will
enhance competition among market
participants, to the benefit of investors
and the marketplace.
In addition, the proposed rule change
is consistent with Rule 12f–5 under the
Exchange Act 15 because it deems the
PO 00000
13 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
15 17 CFR 240.12f–5.
14 15
Frm 00083
Fmt 4703
Sfmt 4703
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
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 Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 16 and Rule
19b–4(f)(6) thereunder.17 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.18
The Exchange has asked the
Commission to waive the 30-day
operative delay, provided that the
proposed rule change will not be
operative prior to the Commission
approval of the Amex Proposal. The
Exchange believes the waiver of this
period is necessary to permit the
Exchange to begin trading the Shares at
the time trading in the Shares begins on
the Amex. The Commission believes
such waiver is consistent with the
protection of investors and the public
interest because the Exchange’s
proposal is nearly identical to the Amex
Proposal, which has been subject to a
full notice-and-comment period and
16 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
18 Rule 19b–4(f)(6) also requires the Exchange to
give the Commission written notice of its intent to
file the proposed rule change along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied the pre-filing requirement.
17 17
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42396
Federal Register / Vol. 73, No. 140 / Monday, July 21, 2008 / Notices
approved by the Commission.19 The
Exchange’s proposal raises no novel or
substantial issues and should benefit
investors by creating, without undue
delay, additional competition in the
market for the Shares. For these reasons,
the Commission designates the proposal
to be operative simultaneous with the
Amex Proposal.20
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.
IV. 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:
PWALKER on PROD1PC71 with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send e-mail to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2008–73 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street, NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2008–73. 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
supra note 6.
purposes only of waiving this designation,
the Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
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 will also 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–2008–73 and should be
submitted on or before August 11, 2008.
National Securities Clearing Corporation
(‘‘NSCC’’) and the Fixed Income
Clearing Corporation (‘‘FICC’’).3
DTC’s rules (a) require participants to
submit certain financial, regulatory, and
other information within certain time
frames and (b) enable DTC to levy fines
against participants for violations of its
rules. However, DTC’s rules do not
explicitly set forth the amount of the
fine with respect to failure to submit
this information. As part of the ongoing
effort to harmonize its rules with those
of its clearing agency affiliates, DTC is
proposing to adopt FICC’s fine schedule
for such violations.4
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8–16592 Filed 7–18–08; 8:45 am]
1. Fines for Late Submissions
If the participant’s late submission
violates the rules of more than one DTCaffiliated clearing agency (which
includes DTC, NSCC, and FICC), the
fine amount will be divided equally
among those clearing agencies.5 When
the member is a DTC participant and a
member of FICC or NSCC, DTC will
collect the fine and allocate the amount
equally among other clearing agencies,
as appropriate. If the member is not a
DTC participant but is a member of
NSCC and FICC, NSCC will collect the
fine and allocate the appropriate portion
to FICC.
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–58157; File No. SR–DTC–
2007–05]
Self-Regulatory Organizations; The
Depository Trust Company; Order
Approving a Proposed Rule Change
Relating to Harmonizing Fines With the
National Securities Clearing
Corporation and the Fixed Income
Clearing Corporation
July 15, 2008.
I. Introduction
On May 15, 2007, The Depository
Trust Company (‘‘DTC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) and on December 10,
2007, amended the proposed rule
change pursuant to Section 19(b)(1) of
the Securities Exchange Act of 1934
(‘‘Act’’).1 On April 15, 2008, the
Commission published notice of the
proposed rule change to solicit
comments from interested parties.2 The
Commission received no comment
letters in response to the proposed rule
change. For the reasons discussed
below, the Commission is approving the
proposed rule change, as amended.
II. Description
This filing will conform DTC’s fine
structure relating to participants not
providing financial information in a
timely manner to similar fine structures
of DTC’s clearing agency affiliates, the
19 See
20 For
VerDate Aug<31>2005
19:22 Jul 18, 2008
Jkt 214001
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 Securities Exchange Act Release No. 57665
(Apr. 15, 2008), 73 FR 21675.
PO 00000
21 17
1 15
Frm 00084
Fmt 4703
Sfmt 4703
2. Fines Relating to Continuance
Standards
DTC Rule 2 sets forth the basic
standards for the admission of DTC
participants. The rule states that the
admission of a participant is subject to
an applicant’s demonstration that it
meets reasonable standards of financial
responsibility, operational capability,
and character. Rule 2 also requires DTC
participants to demonstrate that these
standards are met on an ongoing basis.
Each applicant, upon approval of its
application for DTC participation, signs
a letter of representation that outlines
the nature of the applicant’s business,
its DTC settlement projections, and its
financial condition at the time of the
approval and that requires the applicant
to affirm that such representations are
accurate. Moreover, the participant
3 Securities Exchange Act Release Nos. 57666
(Apr. 15, 2008), 73 FR 21675 [SR–FICC–2007–05]
and 57667 (Apr. 15, 2008) [SR–NSCC–2007–07].
4 The three clearing agencies do not view the
proposed rule changes as fee reductions because
they never intended to charge a common member
two or three times for a single violation that trips
another clearing agency’s rules on the same matter.
5 For example, assume that Firm A is a participant
of DTC, FICC, and NSCC and is required to submit
its annual audited financial statement within a
certain time frame. If participant A is late in its
submission of the statement (and this is Firm A’s
first violation), Firm A will be fined $300 total and
would owe $100 to DTC, $100 to FICC, and $100
to NSCC.
E:\FR\FM\21JYN1.SGM
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]]>Agencies
[Federal Register Volume 73, Number 140 (Monday, July 21, 2008)]
[Notices]
[Pages 42391-42396]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-16592]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58162; File No. SR-NYSEArca-2008-73]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to Trade
14 Funds of the Commodities and Currency Trust Pursuant to Unlisted
Trading Privileges
July 15, 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 July 11, 2008, NYSE Arca, Inc. (``NYSE Arca'' or
[[Page 42392]]
the ``Exchange''), through its wholly owned subsidiary NYSE Arca
Equities, Inc. (``NYSE Arca Equities'' or the ``Corporation''), 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. The Exchange filed
the proposed rule change pursuant to Section 19(b)(3)(A) of the Act \3\
and Rule 19b-4(f)(6) \4\ thereunder, which renders it effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to trade pursuant to unlisted trading
privileges (``UTP'') shares (``Shares'') of fourteen (14) funds
(``Funds'') of the Commodities and Currency Trust (``Trust'') based on
several currencies, commodities and commodities 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
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 revise Commentary .02 to NYSE Arca
Equities Rule 8.200 to permit the listing and trading, including
trading pursuant to UTP, of trust issued receipts (``TIRs'') that hold
investments in any combination of cash, securities, options on
securities and indices, futures contracts, options on futures
contracts, forward contracts, equity caps, collars and floors, and swap
agreements (the ``Financial Instruments'').\5\ This proposal would
permit the Exchange to trade the Shares pursuant to UTP under revised
Commentary .02 to Rule 8.200. The American Stock Exchange LLC
(``Amex'') has filed a proposed rule change to list the Shares.\6\
---------------------------------------------------------------------------
\5\ Permissible securities in connection with Financial
Instruments would not include foreign equity securities.
\6\ See Securities Exchange Act Release No. 57932 (June 5,
2008), 73 FR 33467 (June 12, 2008) (SR-Amex-2008-39) (``Amex
Proposal''). The Commission notes that, in a separate action today,
it is approving the Amex Proposal. See Securities Exchange Act
Release No. 58161 (July 15, 2008).
---------------------------------------------------------------------------
The Shares represent common units of fractional undivided
beneficial interest in, and ownership of, each Fund. Each Fund will
invest the proceeds of its offering of Shares in various Financial
Instruments that will provide exposure to the Fund's underlying
currency, commodity or commodity index. In addition, the Funds will
also maintain cash positions in cash or money market instruments for
the purpose of collateralizing such positions taken in the Financial
Instruments.
Shares of seven (7) of the Funds of the Trust will be designated as
Ultra ProShares while the other seven (7) shares of the Trust will be
designated as UltraShort ProShares. Each of the Funds will have a
distinct investment objective.\7\ The Funds will attempt, on a daily
basis, to achieve their investment objective by corresponding to a
specified multiple or an inverse multiple of the performance of a
particular benchmark commodities index, commodity or currency (each an
``Underlying Benchmark'' and collectively, the ``Underlying
Benchmarks'') as described in the Amex Proposal.
---------------------------------------------------------------------------
\7\ The Funds are the Ultra DJ-AIG Commodity ProShares,
UltraShort DJ-AIG Commodity ProShares, Ultra DJ-AIG Agriculture
ProShares, UltraShort DJ-AIG Agriculture ProShares, Ultra DJ-AIG
Crude Oil ProShares, UltraShort DJAIG Crude Oil ProShares, Ultra
Gold ProShares, UltraShort Gold ProShares, Ultra Silver ProShares,
UltraShort Silver ProShares, Ultra Euro ProShares, UltraShort Euro
ProShares, Ultra Yen ProShares and UltraShort Yen ProShares.
---------------------------------------------------------------------------
Six (6) Funds will be based on the following benchmark commodities
indexes: (i) The Dow Jones-AIG Commodity IndexSM; (ii) the Dow Jones-
AIG Crude Oil Sub-IndexSM; and (iii) the Dow Jones-AIG Agriculture Sub-
IndexSM (each, an ``Underlying Index'' and collectively, the
``Underlying Indexes''). Four (4) Funds will be based on the following
commodities: (i) Gold; and (ii) silver (each, an ``Underlying
Commodity'' and collectively, the ``Underlying Commodities''). Four (4)
Funds will be based on the following benchmark currencies versus the
U.S. dollar: (1) The Euro; and (2) the Japanese Yen (each, an
``Underlying Currency'' and collectively, the ``Underlying
Currencies''). The Exchange proposes to trade pursuant to UTP shares of
the Funds that seek daily investment results, before fees and expenses,
that correspond to twice (200%) the daily performance of the Underlying
Benchmark (the ``Ultra Funds''). If a Fund is successful in meeting its
investment objective, the net asset value (``NAV'') \8\ of the shares
of each Fund is expected to gain on a percentage basis, approximately
twice as much as each Fund's respective Underlying Benchmark when the
price of the Underlying Benchmark increases on a given day, and should
lose approximately twice as much when such price declines on a given
day, before fees and expenses.
---------------------------------------------------------------------------
\8\ ``Net asset value'' means the total assets of a Fund
including, but not limited to, all cash and cash equivalents or
other debt securities less total liabilities of such Fund, each
determined on the basis of generally accepted accounting principles
in the United States, consistently applied under the accrual method
of accounting. In particular, net asset value includes any
unrealized profit or loss on open swaps and futures contracts, and
any other credit or debit accruing to a Fund but unpaid or not
received by a Fund.
---------------------------------------------------------------------------
The Exchange also proposes to trade pursuant to UTP shares of the
Funds that seek daily investment results, before fees and expenses that
correspond to twice the inverse (-200%) of the daily performance of the
Underlying Benchmark (the ``UltraShort Funds''). If each Fund is
successful in meeting its objective, the NAV of the shares of each Fund
is expected to increase approximately twice as much, on a percentage
basis, as the respective Underlying Benchmark loses on a given day, or
should decrease approximately twice as much as the respective
Underlying Benchmark gains when the Underlying Benchmark rises on a
given day, before fees and expenses.
The Exchange notes that the Commission has permitted the listing
and trading on the Exchange and other national securities exchanges of
securities linked to the performance of underlying currencies and
commodities.\9\ The Commission also has
[[Page 42393]]
approved for trading on the Exchange on a UTP basis under NYSE Arca
Equities Rule 5.2(j)(3) UltraFunds, Short Funds and UltraShort Funds of
the ProShares Trust.\10\
---------------------------------------------------------------------------
\9\ The Commission has previously approved issues of Commodity-
Based Trust Shares, Currency Trust Shares and Commodity Index Trust
Shares, which have certain characteristics similar to the proposed
TIRs, for exchange listing and trading. See, e.g., Securities
Exchange Act Release No. 50603 (October 28, 2004), 69 FR 64614
(November 5, 2004) (SR-NYSE-2004-22) (order approving listing on the
New York Stock Exchange (``NYSE'') of streetTRACKS Gold Trust);
Securities Exchange Act Release No. 51058 (January 19, 2005), 70 FR
3749 (January 26, 2005) (SR-Amex-2004-38) (order approving listing
on the American Stock Exchange (``Amex'') of the iShares COMEX Gold
Trust); Securities Exchange Act Release No. 53521 (March 20, 2006),
71 FR 14967 (March 24, 2006) (SR-Amex-2005-72) (order approving
listing on Amex of the iShares Silver Trust); Securities Exchange
Act Release No. 56041 (July 11, 2007), 72 FR 39114 (July 17, 2007)
(SR-NYSEArca-2007-43) (order granting accelerated approval to list
on NYSE Arca the iShares COMEX Gold Trust); Securities Exchange Act
Release No. 52843 (November 28, 2005), 70 FR 72486 (December 5,
2005) (SR-NYSE 2005-65) (order granting accelerated approval for
NYSE to list and trade shares of the CurrencyShares Euro Trust);
Securities Exchange Act Release No. 54020 (June 20, 2006), 71 FR
36579 (June 27, 2006) (SR-NYSE-2006-35) (order granting accelerated
approval for NYSE to list and trade shares of the CurrencyShares
Australian Dollar Trust, CurrencyShares British Pound Sterling
Trust, CurrencyShares Canadian Dollar Trust, CurrencyShares Mexican
Peso Trust, CurrencyShares Swedish Krona Trust and CurrencyShares
Swiss Franc Trust); Securities Exchange Act Release No. 55268
(February 9, 2007), 72 FR 7793 (February 20, 2007) (SR-NYSE-2007-03)
(order granting accelerated approval for NYSE to list and trade
shares of the CurrencyShares Japanese Yen Trust); Securities
Exchange Act Release No. 56131 (July 25, 2007), 72 FR 42212 (August
1, 2007) (SR-NYSEArca-2007-57) (order granting accelerated approval
for listing on NYSE Arca of CurrencyShares Trusts); Securities
Exchange Act Release No. 54013 (June 16, 2006), 71 FR 36372 (June
26, 2006) (SR-NYSE-2006-17) (approving listing on the NYSE of the
iShares GSCI Trust); Securities Exchange Act Release No. 55585
(April 5, 2007), 72 FR 18500 (April 12, 2007) (SR-NYSE-2006-75)
(approving for NYSE listing the iShares GS Commodity Light Energy
Indexed Trust; iShares GS Commodity Industrial Metals Indexed Trust;
iShares GS Commodity Livestock Indexed Trust and iShares GS
Commodity Non-Energy Indexed Trust); Securities Exchange Act Release
No. 56932 (December 7, 2007), 72 FR 71178 (December 14, 2007) (SR-
NYSEArca-2007-112) (order granting accelerated approval to list
iShares S&P GSCI Commodity-Indexed Trust); Securities Exchange Act
Release No. 57456 (March 7, 2008), 73 FR 13599 (March 13, 2008) (SR-
NYSEArca-2007-91) (order granting accelerated approval for NYSE Arca
listing the iShares S&P GSCI Energy Commodity-Indexed Trust; iShares
S&P GSCI Natural Gas Commodity-Indexed Trust; iShares S&P GSCI
Industrial Metals Commodity-Indexed Trust; iShares S&P GSCI Light
Energy Commodity-Indexed Trust; iShares S&P GSCI Livestock
Commodity-Indexed Trust; and iShares S&P GSCI Non-Energy Commodity-
Indexed Trust).
\10\ See Securities Exchange Act Release No. 55125 (January 18,
2007), 72 FR 3462 (January 25, 2007) (SR-NYSEArca-2006-87);
Securities Exchange Act Release No. 57017 (December 20, 2007), 72 FR
73955 (December 28, 2007) (SR-NYSEArca-2007-108).
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Proposed Revision to Commentary .02 to Rule 8.200
Shares of each Fund will be generally subject to the rules that
apply to TIRs. The Exchange also proposes to revise Commentary .02 to
Rule 8.200 in order to permit the listing and trading of TIRs directly
holding Financial Instruments. Current Commentary .02 to Rule 8.200
permits the Exchange to list and trade TIRs, including trading on a UTP
basis, where the underlying trust, partnership, commodity pool or other
similar entity holds ``Investment Shares.'' \11\ The term ``Investment
Shares'' is defined in Commentary .02(b)(1) as a security (a) that is
issued by a trust, partnership, commodity pool or other similar entity
that invests in any combination of futures contracts, options on
futures contracts, forward contracts, commodities, swaps or high credit
quality short-term fixed income securities or other securities; and (b)
issued and redeemed daily at net asset value in amounts correlating to
the number of receipts created and redeemed in a specified aggregate
minimum number. As a result, a TIR that is listed or UTP-traded
pursuant to current Commentary .02 to Rule 8.200 is required to be in
the form of a ``master-feeder'' structure, whereby the listed or UTP-
traded security holds or invests in the security of the fund that is
investing in the Financial Instruments. This proposal would provide an
alternative for issuers so that a security may be listed and traded,
including UTP-traded, on the Exchange that directly invests in or holds
Financial Instruments rather than through an additional security of a
fund.
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\11\ See Securities Exchange Act Release No. 53736 (April 27,
2006), 71 FR 26582 (May 5, 2006 (SR-PCX-2006-22).
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The proposal will expand the application of Commentary .02 to Rule
8.200 to both Investment Shares and Financial Instruments. Accordingly,
new Commentary .02(b)(4) to Rule 8.200 would be added to define
``Financial Instrument'' as any combination of cash, securities,
options on securities and indices, futures contracts, options on
futures contracts, forward contracts, equity caps, collars and floors
and swap agreements. Throughout Commentary .02 to Rule 8.200, the term
``Financial Instrument'' will be added to ``Investment Shares''
indicating that TIRs directly holding Financial Instruments may be
listed and traded, including UTP-traded, on the Exchange.
Additional information regarding the Underlying Indexes, the
Commodities Benchmarks, the Currencies Benchmarks, the structure and
investment objective of the Funds, the portfolio investment
methodology, investment techniques, creation and redemption of Shares
is provided in the Amex Proposal.
Availability of Information Regarding the Shares
According to the Amex Proposal, the Web sites for the Funds and/or
the Amex, which are publicly accessible at no charge, will contain the
following information: (a) The current NAV per Share daily and the
prior business day's NAV per Share and the reported closing price; (b)
the mid-point of the bid-ask price in relation to the NAV per Share as
of the time it is calculated (the ``Bid-Asked Price''); (c) calculation
of the premium or discount of such price against the NAV per Share; (d)
data in chart form displaying the frequency distribution of discounts
and premiums of the Bid-Ask Price against the NAV per Share, within
appropriate ranges for each of the four (4) previous calendar quarters;
(e) the Prospectus; and (f) other applicable quantitative information.
The NAV per Share will be calculated and disseminated daily. The
Amex will disseminate for the Funds on a daily basis by means of CTA/CQ
High Speed Lines information with respect to the corresponding
``Indicative Value'' (as discussed below), recent NAV per Share and
Shares outstanding. The Amex will also make available on its Web site
(https://www.amex.com) daily trading volume of the Shares, closing
prices of the Shares, and the NAV per Share. The closing price and
settlement prices of the futures contracts held by the Funds are also
readily available from the Chicago Mercantile Exchange (``CME''), New
York Mercantile Exchange (``NYMEX''), Chicago Board of Trade
(``CBOT''), Intercontinental Exchange/New York Board of Trade (``ICE/
NYBOT''), London Metal Exchange (``LME''), automated quotation systems,
published or other public sources, or on-line information services such
as Bloomberg or Reuters. Real-time dissemination of spot pricing for
gold, silver, euro and Japanese yen is available on a 24-hour basis
worldwide from various major market data vendors.
Portfolio Disclosure
Each Fund's total portfolio composition will be disclosed on the
Web site of the Trust (https://www.proshares.com) or another relevant
Web site as determined by the Trust and/or the Amex. The Trust will
provide Web site disclosure of portfolio holdings daily and will
include, as applicable, the names and number of Financial Instruments
and characteristics of such instruments, cash equivalents and amount of
cash held in the portfolio of each Fund. This public Web site
disclosure of the portfolio composition of each Fund will occur at the
same time as the disclosure by the Managing Owner of the portfolio
composition to Authorized Participants, so that all market participants
are provided portfolio composition
[[Page 42394]]
information at the same time. Therefore, the same portfolio information
will be provided on the public Web site as well as in electronic files
provided to Authorized Participants. Accordingly, each investor will
have access to the current portfolio composition of each Fund through
the Trust's Web site, at https://www.proshares.com, and/or at the Amex's
Web site.
Availability of Information About the Underlying Benchmarks
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.ino.com and https://
www.finance.yahoo.com. Data regarding each Underlying Index is also
available from the respective index provider to subscribers. In
addition, data is also available regarding the underlying component
commodities of each Underlying Index from those futures exchanges that
list and trade futures contracts on those commodities. Several
independent data vendors also package and disseminate index data in
various value-added formats (including vendors displaying both index
constituents and index levels and vendors displaying index levels
only).
Data regarding spot pricing of the Underlying Commodities (gold and
silver) is publicly available on a 24-hour basis from various financial
information service providers, such as Reuters and Bloomberg. In
addition, the daily London fix for gold and silver is also disseminated
by various market data vendors and is available from the London Bullion
Market Association (``LBMA'') Web site at https://www.lbma.org.uk.
Data regarding futures contracts and options on futures contracts
in connection with the Underlying Commodities is also available from
the NYMEX at https://nymex.com. There is considerable public price and
data information regarding the Underlying Currencies (euro and Japanese
yen). Spot pricing related to foreign exchange is available to
investors and market professionals on a 24-hour basis. A variety of
public Web sites and professional and subscription services provide
market and price information regarding the euro and the yen. Current
spot prices are also generally available from foreign exchange dealers.
The value of each Underlying Benchmark will be updated intra-day on
a real time basis as its components change in price.
Dissemination of Net Asset Value and Indicative Value
The Administrator calculates and disseminates, once each trading
day, the NAV per Share to market participants. The Amex Proposal
represents that the Amex will obtain a representation (prior to listing
of the Funds) from the Trust that the NAV per Share will be calculated
daily and made available to all market participants at the same time.
In addition, the Administrator causes to be made available on a daily
basis the corresponding Cash Deposit Amounts to be deposited in
connection with the issuance of the respective Shares.
In order to provide updated information relating to the Fund for
use by investors, professionals and persons wishing to create or redeem
the Shares, the Amex will disseminate an updated Indicative Value. The
Indicative Value will be disseminated on a per Share basis at least
every 15 seconds during regular Amex trading hours of 9:30 a.m. to 4
p.m. ET. The Indicative Value will be calculated based on the cash
required for creations and redemptions for a Fund adjusted to reflect
the price changes of the Financial Instruments.
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. Trading in the Shares
on the Exchange will occur in accordance with NYSE Arca Equities Rule
7.34(a). The Exchange has appropriate rules to facilitate transactions
in the Shares during this time. The minimum trading increment for
Shares on the Exchange will be $0.01.
Further, NYSE Arca Equities Rule 8.200, Commentary .02 sets forth
certain restrictions on equity trading permit holders (``ETP Holders'')
acting as registered Market Makers in Trust Issued Receipts to
facilitate surveillance. Rule 8.200, Commentary .02(e)(3) requires that
the ETP Holder acting as a registered Market Maker in the Shares
provide the Exchange with information relating to its trading in the
applicable physical asset or commodity, related futures or options on
futures, or any other related derivatives as may be requested. NYSE
Arca Equities Rule 8.200, Commentary .02(e)(4) prohibits the ETP Holder
acting as a registered Market Maker in the Shares from using any
material nonpublic information received from any person associated with
an ETP Holder or employee of such person regarding trading by such
person or employee in the applicable underlying physical asset or
commodity, related futures or options on futures, or any other related
derivative (including the TIRs). In addition, NYSE Arca Equities Rule
8.200, Commentary .02(e)(1) prohibits the ETP Holder acting as a
registered Market Maker in the Shares from being affiliated with a
market maker in the applicable physical asset or commodity, related
futures or any other related derivatives unless adequate information
barriers are in place, as provided in NYSE Arca Equities Rule 7.26.
As a general matter, the Exchange has regulatory jurisdiction over
its ETP Holders and any person or entity controlling an ETP Holder. The
Exchange also has regulatory jurisdiction over a subsidiary or
affiliate of an ETP Holder that is in the securities business. A
subsidiary or affiliate of an ETP Holder that does business only in
commodities or futures contracts would not be subject to Exchange
jurisdiction, but the Exchange could obtain certain information
regarding the activities of such subsidiary or affiliate through
surveillance sharing agreements with regulatory organizations of which
such subsidiary or affiliate is a member.
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products, including TIRs, 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 and applicable federal securities laws.
The Exchange's current trading surveillances focus on detecting
securities trading 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 is able to
obtain information regarding trading in the Shares, and certain of the
Financial Instruments held by TIRs including securities, options on
securities and indices, commodities, futures contracts, and options on
futures contracts, through ETP Holders, in connection with such ETP
Holders' proprietary or customer trades which they effect on any
relevant market. The Exchange currently has in place comprehensive
surveillance sharing agreements with ICE, LME and NYMEX for the purpose
of providing information in connection with trading in or related to
futures contracts traded on their
[[Page 42395]]
respective exchanges comprising the Underlying Benchmarks. The Exchange
also notes that CBOT, CME and NYBOT are members of the Intermarket
Surveillance Group (``ISG'').
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares, including risks inherent
with trading the Shares during the Opening and Late Trading Sessions
when the updated Indicative Value is not calculated and disseminated
and suitability recommendation requirements.
Specifically, the Information Bulletin will discuss the following:
(1) The procedures for purchases and redemptions of Shares in Baskets;
(2) NYSE Arca Equities Rule 9.2(a),\12\ 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; (3) how information
regarding the Indicative Value is disseminated; (4) 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 (5) trading information. For example, the Information
Bulletin will advise ETP Holders, prior to the commencement of trading,
of the prospectus delivery requirements applicable to the Trust. The
Exchange notes that investors purchasing Shares directly from the Funds
(by delivery of the Basket Amount) will receive a prospectus. ETP
Holders purchasing Shares from the Trust for resale to investors will
deliver a prospectus to such investors.
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\12\ NYSE Arca Equities Rule 9.2(a) (``Diligence as to
Accounts'') provides that ETP Holders, 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 proposed rule
amendment provides, with a limited exception, that prior to the
execution of a transaction recommended to a non-institutional
customer, the ETP Holders shall make reasonable efforts to obtain
information concerning the customer's financial status, tax status,
investment objectives, and any other information that they believe
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 Information Bulletin will reference that the Trust
is subject to various fees and expenses described in each Fund's
Registration Statement. The Information Bulletin will also reference
the fact that there is no regulated source of last sale information
regarding physical commodities, that the Commission has no jurisdiction
over the trading of physical commodities or the futures contracts on
which the value of the Shares is based.
Trading Halts
The Exchange represents that it will cease trading the Shares of
the Funds 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 will also be governed by the trading
halt provisions of NYSE Arca Equities Rule 7.34, relating to temporary
interruptions in the calculation or wide dissemination of the
Indicative Value or the value of the underlying index, as applicable.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. 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 underlying securities; or (2)
whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present.
If the Exchange becomes aware that the NAV for a Fund is not
disseminated to all market participants at the same time, it will halt
trading until such time as the NAV is available to all market
participants.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Exchange Act \13\ in general and furthers the objectives of Section
6(b)(5) \14\ in particular in that it is designed to prevent fraudulent
and manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transaction in
securities, and, in general to protect investors and the public
interest. The Exchange believes that the proposal will facilitate the
listing and trading of additional types of commodity and currency-based
investments that will enhance competition among market participants, to
the benefit of investors and the marketplace.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
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In addition, the proposed rule change is consistent with Rule 12f-5
under the Exchange Act \15\ because it deems the Shares to be equity
securities, thus rendering the Shares subject to the Exchange's rules
governing the trading of equity securities.
---------------------------------------------------------------------------
\15\ 17 CFR 240.12f-5.
---------------------------------------------------------------------------
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
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 Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \16\ and Rule 19b-4(f)(6) thereunder.\17\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\18\
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\16\ 15 U.S.C. 78s(b)(3)(A)(iii).
\17\ 17 CFR 240.19b-4(f)(6).
\18\ Rule 19b-4(f)(6) also requires the Exchange to give the
Commission written notice of its intent to file the proposed rule
change along with a brief description and text of the proposed rule
change, at least five business days prior to the date of filing of
the proposed rule change, or such shorter time as designated by the
Commission. The Exchange has satisfied the pre-filing requirement.
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The Exchange has asked the Commission to waive the 30-day operative
delay, provided that the proposed rule change will not be operative
prior to the Commission approval of the Amex Proposal. The Exchange
believes the waiver of this period is necessary to permit the Exchange
to begin trading the Shares at the time trading in the Shares begins on
the Amex. The Commission believes such waiver is consistent with the
protection of investors and the public interest because the Exchange's
proposal is nearly identical to the Amex Proposal, which has been
subject to a full notice-and-comment period and
[[Page 42396]]
approved by the Commission.\19\ The Exchange's proposal raises no novel
or substantial issues and should benefit investors by creating, without
undue delay, additional competition in the market for the Shares. For
these reasons, the Commission designates the proposal to be operative
simultaneous with the Amex Proposal.\20\
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\19\ See supra note 6.
\20\ For purposes only of waiving this designation, the
Commission has considered the proposed rule's impact on efficiency,
competition, and capital formation. See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------
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.
IV. 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 e-mail to rule-comments@sec.gov. Please include File
Number SR-NYSEArca-2008-73 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-73. 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 will also 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-2008-73 and should
be submitted on or before August 11, 2008.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16592 Filed 7-18-08; 8:45 am]
BILLING CODE 8010-01-P
