Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Following Under NYSE Arca Equities Rule 8.200: ProShares Short DJ-UBS Natural Gas, ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS Natural Gas, 28483-28489 [2011-11967]

Download as PDF Federal Register / Vol. 76, No. 95 / Tuesday, May 17, 2011 / Notices the date of the hearing (if ordered) and any postponements thereof. At any time after said date, the Commission may issue an order granting the application upon request or upon the Commission’s own motion. SECURITIES AND EXCHANGE COMMISSION For the Commission, by the Division of Corporation Finance, pursuant to delegated authority. Elizabeth M. Murphy, Secretary. Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Following Under NYSE Arca Equities Rule 8.200: ProShares Short DJ–UBS Natural Gas, ProShares Ultra DJ–UBS Natural Gas and ProShares UltraShort DJ–UBS Natural Gas [FR Doc. 2011–12064 Filed 5–16–11; 8:45 am] BILLING CODE 8011–01–P May 11, 2011. SECURITIES AND EXCHANGE COMMISSION Emcdonald on DSK2BSOYB1PROD with NOTICES Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, May 19, 2011 at 2 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matters at the Closed Meeting. Commissioner Paredes, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session, and determined that no earlier notice thereof was possible. The subject matter of the Closed Meeting scheduled for Thursday, May 19, 2011 will be: Institution and settlement of injunctive actions; Institution and settlement of administrative proceedings; and other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact: The Office of the Secretary at (202) 551–5400. Dated: May 13, 2011. Cathy H. Ahn, Deputy Secretary. [Release No. 34–64464; File No. SR– NYSEArca–2011–24] Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on April 28, 2011, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. 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 list and trade shares of the following under NYSE Arca Equities Rule 8.200: ProShares Short DJ–UBS Natural Gas, ProShares Ultra DJ–UBS Natural Gas and ProShares UltraShort DJ–UBS Natural Gas. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and http://www.nyse.com. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. [FR Doc. 2011–12191 Filed 5–13–11; 4:15 pm] 1 15 BILLING CODE 8011–01–P 2 17 VerDate Mar<15>2010 16:21 May 16, 2011 Jkt 223001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00070 Fmt 4703 28483 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose NYSE Arca Equities Rule 8.200, Commentary .02 permits the trading of Trust Issued Receipts (‘‘TIRs’’) either by listing or pursuant to unlisted trading privileges (‘‘UTP’’).3 The Exchange proposes to list and trade shares (‘‘Shares’’) of the following pursuant to NYSE Arca Equities Rule 8.200: ProShares Short DJ–UBS Natural Gas, ProShares Ultra DJ–UBS Natural Gas and ProShares UltraShort DJ–UBS Natural Gas (each a ‘‘Fund’’ and, collectively, the ‘‘Funds’’).4 Each of the Funds is a series of the ProShares Trust II (‘‘Trust’’), a Delaware statutory trust. ProShare Capital Management LLC (‘‘Sponsor’’) is the Trust’s Sponsor, and Wilmington Trust Company is the Trust’s trustee. Brown Brothers Harriman & Co. (‘‘Administrator’’) serves as the administrator, custodian and transfer agent of the Funds. SEI Investments Distribution Co. (‘‘Distributor’’) serves as distributor of the Shares. The Exchange notes that the Commission has previously approved the listing and trading of other series of the Commodities and Currency Trust (now known as ProShares Trust II) both on the American Stock Exchange LLC 5 and on NYSE Arca pursuant to unlisted trading privileges (‘‘UTP’’),6 and listing on NYSE Arca.7 In addition, the 3 Commentary .02 to NYSE Arca Equities Rule 8.200 applies to TIRs that invest in ‘‘Financial Instruments.’’ The term ‘‘Financial Instruments,’’ as defined in Commentary .02(b)(4) to NYSE Arca Equities Rule 8.200, means any combination of investments, including cash; securities; options on securities and indices; futures contracts; options on futures contracts; forward contracts; equity caps, collars and floors; and swap agreements. 4 See Post-Effective Amendment No. 1 dated May 28, 2010 (File No. 333–163511) and Post-Effective Amendment No. 4 dated April 13, 2011 (File No. 333–163511) to the Funds’ Registration Statement on Form S–3 (‘‘Registration Statements’’). The description of the Funds and the Shares contained herein are based on the Registration Statements. 5 See Securities Exchange Act Release No. 58161 (July 15, 2008), 73 FR 42380 (July 21, 2008) (SR– Amex–2008–39) (‘‘Amex Proposal’’). 6 See Securities Exchange Act Release No. 58163 (July 15, 2008), 73 FR 42391 (July 21, 2008) (SR– NYSEArca–2008–73). 7 See Securities Exchange Act Release No. 58457 (September 3, 2008), 73 FR 52711 (September 10, 2008) (SR–NYSEArca–2008–91). The series of the Trust approved for Exchange listing by the Commission included 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 DJ–AIG Crude Oil ProShares, Ultra Gold ProShares, UltraShort Gold ProShares, Ultra Silver ProShares, UltraShort Continued Sfmt 4703 E:\FR\FM\17MYN1.SGM 17MYN1 28484 Federal Register / Vol. 76, No. 95 / Tuesday, May 17, 2011 / Notices Commission has approved other exchange-traded investment products linked to the performance of underlying commodities.8 The Exchange further notes that the shares of other ProShares UltraFunds and UltraShort Funds based on various securities indexes have previously been approved by the Commission.9 According to the Registration Statements, the Funds seek daily investment results (before fees and expenses) that correspond to the inverse (opposite) of the daily performance, a multiple of the daily performance or an inverse multiple of the daily performance of the benchmark index for each of the Funds (the ‘‘Benchmark’’ or ‘‘Index’’), the Dow Jones-UBS Natural Gas Sub-Index.10 The Index is comprised of New York Mercantile Exchange (‘‘NYMEX’’) Natural Gas futures contracts (‘‘Natural Gas Futures Contracts’’).11 The Index is intended to reflect the performance of natural gas as measured by the performance of Natural Gas Futures Contracts, including roll costs, without regard to income earned on cash positions. It rolls (or sells its existing position prior to settlement while purchasing a new position further from settlement) the component Natural Gas Futures Contracts every other month as follows in the table below. The roll for each Index component occurs over a period of five NYMEX business days. Month Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Component Natural Gas Contract ........................ Mar Mar May May Jul Jul Sep Sep Nov Nov Jan Jan Emcdonald on DSK2BSOYB1PROD with NOTICES The Funds will utilize Natural Gas Futures Contracts and, under limited circumstances, swap agreements, as described below, to produce economically ‘‘inverse,’’ ‘‘leveraged,’’ and ‘‘inverse leveraged’’ investment results for the respective Funds.12 For each dollar invested in the Funds, each Fund will seek the requisite exposure in Natural Gas Futures Contracts to pursue its respective investment objective. The Sponsor does not intend to invest directly in any commodity. According to the Registration Statements, each of the Funds uses investment techniques that include the use of any one or a combination of Natural Gas Futures Contracts, and may include swap agreements. The Funds’ investment techniques may involve a small investment relative to the amount of investment exposure assumed and may result in losses exceeding the amounts invested. Such techniques, particularly when used to create leverage, may expose the Funds to potentially dramatic changes (losses or gains) in the value of their investments and imperfect correlation between the value of the investments and the security or index. If ProShares Short DJ–UBS Natural Gas is successful in meeting its objective, its value on a given day (before fees and expenses) should gain approximately as much on a percentage basis as its Benchmark when the Benchmark falls on a given day. Conversely, its value on a given day (before fees and expenses) should lose approximately as much on a percentage basis as the Benchmark when the Benchmark rises on a given day. If the ProShares Ultra DJ–UBS Natural Gas Fund is successful in meeting its objective, its value (before fees and expenses) should gain approximately twice as much on a percentage basis as the Benchmark when it rises on a given day. Conversely, its value (before fees and expenses) should lose approximately twice as much on a percentage basis as the Benchmark when it declines on a given day. If the Silver ProShares, Ultra Euro ProShares, UltraShort Euro ProShares, Ultra Yen ProShares and UltraShort Yen ProShares. See also Securities Exchange Act Release No. 58647 (September 25, 2008), 73 FR 57399 (October 2, 2008) (SR– NYSEArca–2008–99) (notice of filing and immediate effectiveness relating to the names of the Trust and the funds of the Trust, among other matters). 8 See, e.g., Securities Exchange Act Release Nos. 57456 (March 7, 2008), 73 FR 13599 (March 13, 2008) (SR–NYSEArca–2007–91) (order granting accelerated approval for NYSE Arca listing the iShares GS Commodity Trusts); 59781 (April 17, 2009), 74 FR 18771 (April 24, 2009) (SR– NYSEArca–2009–28) (order granting accelerated approval for NYSE Arca listing the ETFS Silver Trust); 59895 (May 8, 2009), 74 FR 22993 (May 15, 2009) (SR–NYSEArca–2009–40) (order granting accelerated approval for NYSE Arca listing the ETFS Gold Trust); 61219 (December 22, 2009), 74 FR 68886 (December 29, 2009) (order approving listing on NYSE Arca of the ETFS Platinum Trust); 61220 (December 22, 2009), 74 FR 68895 (December 29, 2009) (order approving listing on NYSE Arca of the ETFS Palladium Trust). 9 See Securities Exchange Act Release Nos. 52553 (October 3, 2005), 70 FR 59100 (October 11, 2005) (SR–Amex–2004–62) (approving the listing and trading of shares of the xtraShares Trust); 54040 (June 23, 2006), 71 FR 37629 (June 30, 2006) (SR– Amex2006–41) (approving the listing and trading of shares of the ProShares Trust); 55117 (January 17, 2007), 72 FR 3442 (January 25, 2007) (SR–Amex 2006–101) (approving the listing and trading of shares of the ProShares Trust); 56592 (October 1, 2007), 72 FR 57364 (October 9, 2007) (SR–Amex– 2007–60) (approving the listing and trading of 6 funds of the ProShares Trust based on international equity indexes); and 56998 (December 19, 2007), 72 FR 73404 (December 27, 2007) (SR–Amex–2007– 104) (approving the listing and trading of shares of the ProShares Trust). 10 CME Group Index Services LLC (‘‘CME Indexes’’), a joint venture between Dow Jones & Company, Inc. (‘‘Dow Jones’’ or ‘‘Index Provider’’) and CME Group Inc. (‘‘CME Group’’), and UBS Securities LLC (‘‘UBS’’) have entered into a nonexclusive license agreement providing for the use of the Index in connection with the Funds. UBS, a co-sponsor of the Index, is a registered broker-dealer and has represented to the Exchange that it will: (1) Implement and maintain procedures reasonably designed to prevent the use and dissemination by relevant personnel of UBS, in violation of applicable laws, rules, and regulations, of material non-public information relating to changes in the composition or method of computation or calculation of the Index; and (2) periodically review the requirements of such procedures as they relate to certain personnel of UBS directly responsible for such changes. CME Indexes, a co-sponsor of the Index, is not engaged in the business of trading in commodities or securities. CME Group, together with its subsidiaries, operates derivatives exchanges. CME Group maintains a Code of Conduct applicable to all personnel that prohibits disclosure of any confidential information obtained during the course of one’s employment and the use or disclosure of any material non-public information relating to changes to the composition of the Index or changes to the Index methodology in violation of applicable laws, rules or regulations. For a transitional period, certain Dow Jones employees are providing indexrelated services to CME Indexes. Dow Jones also maintains a Code of Conduct applicable to all personnel that prohibits disclosure of any confidential information relating to changes to the composition of the Index or changes to the Index methodology obtained during the course of one’s employment and the use of any material non-public information in violation of applicable laws, rules or regulations. 11 Natural gas futures volume on NYMEX for 2009 and 2010 (through December 31, 2010) was 47,864,639 contracts and 64,350,673 contracts, respectively. As of December 31, 2010, NYMEX open interest for all natural gas futures was 772,104 contracts, and the approximate value of all outstanding contracts was $35,664,257,310 billion. Open interest as of December 31, 2010 for the near month contract was 166,757 contracts and the near month contract value was $7,345,645,850 ($4.405 per MMBtu and 10,000 MMBtu per contract). The position accountability limits for all months is 12,000 contracts and the total value of contracts if position accountability limits were reached would be approximately $528,600,000 million (based on the $4.405 contract price). As of December 31, 2010, open interest in natural gas swaps cleared on the NYMEX was approximately 1,493,013 contracts, with an approximate value of $16,463,384,003 ($4.411 per MMBtu and 2,500 MMBtu per contract). Natural gas futures are also traded on ICE Futures Europe (‘‘ICE’’) and the European Energy Exchange. 12 Terms relating to the Funds, the Shares and the Index referred to, but not defined, herein are defined in the Registration Statements. VerDate Mar<15>2010 16:21 May 16, 2011 Jkt 223001 PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 E:\FR\FM\17MYN1.SGM 17MYN1 Emcdonald on DSK2BSOYB1PROD with NOTICES Federal Register / Vol. 76, No. 95 / Tuesday, May 17, 2011 / Notices ProShares UltraShort DJ–UBS Natural Gas Fund is successful in meeting its objective, its value (before fees and expenses) should gain approximately twice as much on a percentage basis as the Benchmark when it declines on a given day. Conversely, its value (before fees and expenses) should lose approximately twice as much on a percentage basis as the Benchmark when it rises on a given day. In seeking to achieve each Fund’s daily investment objective, the Sponsor uses a mathematical approach to investing. Using this approach, the Sponsor determines the type, quantity and mix of investment positions that the Sponsor believes in combination should produce daily returns consistent with a Fund’s objective. The Sponsor relies upon a pre-determined model to generate orders that result in repositioning each Fund’s investments in accordance with its daily investment objectives. A number of factors may affect a Fund’s ability to achieve a high degree of correlation with its Benchmark, and there can be no guarantee that a Fund will achieve a high degree of correlation. While the Funds do not expect that their daily returns will deviate adversely from their respective daily investment objectives, several factors may affect their ability to achieve this correlation. Among these factors are a Fund’s expenses, including fees, transaction costs and the cost of the investment techniques employed by that Fund, bid-ask spreads, a Fund’s Share prices being rounded to the nearest cent, changes to a Benchmark that are not disseminated in advance and the need to conform a Fund’s portfolio holdings to comply with investment restrictions or policies or regulatory or tax law requirements. The Funds will obtain exposure to the Index through Natural Gas Futures Contracts. Any futures contracts held by the Funds are expected to be the Natural Gas Futures Contracts. To the extent that Dow Jones alters the construction or composition of the Index to include natural gas futures contracts that trade on a different exchange, the Funds may so invest in such futures contracts. According to the Registration Statements, each Fund seeks to achieve its investment objective by investing under normal market conditions in Natural Gas Futures Contracts. In the event position accountability rules are reached with respect to Natural Gas Futures Contracts, the Sponsor may, in its commercially reasonable judgment, cause the Funds to obtain exposure through swaps referencing the Index or particular Natural Gas Futures VerDate Mar<15>2010 17:27 May 16, 2011 Jkt 223001 Contracts, or invest in other futures contracts or swaps not based on the particular Natural Gas Futures Contracts if such instruments tend to exhibit trading prices or returns that correlate with the Index or any Natural Gas Futures Contract and will further the investment objective of such Fund.13 Each Fund may also invest in swaps if the market for a specific futures contract experiences emergencies (e.g., natural disaster, terrorist attack or an act of God) or disruptions (e.g., a trading halt or a flash crash) that prevent such Fund from obtaining the appropriate amount of investment exposure to the affected Natural Gas Futures Contracts directly or to other futures contracts.14 The Sponsor expects the Funds to have a statistical correlation 15 over time of ¥.95 or better (for ProShares Short DJ–UBS Natural Gas and ProShares UltraShort DJ–UBS Natural Gas) and +.95 or better (for ProShares Ultra DJ– UBS Natural Gas) when correlating the daily return of a Fund’s Net Asset Value (‘‘NAV’’) against the daily return of its relevant Index or Benchmark. Each Fund may also invest in cash, cash equivalents and/or U.S. Treasury Securities or other high credit quality short-term fixed-income or similar securities (such as shares of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes and repurchase agreements collateralized by government securities) that will serve as collateral for any futures contracts or swap agreements held by the Funds. Futures Contracts Held by the Funds All open futures contracts held by the Funds will be traded on the NYMEX and will be calculated at their then current market value, based upon the settlement price for that particular futures contract traded on the date with respect to which NAV is being determined; provided that, if a futures contract could not be liquidated on such 13 To the extent practicable, the Funds will invest in swaps cleared through the facilities of a centralized clearing house. 14 According to the Registration Statements, the Sponsor will also attempt to mitigate the Funds’ credit risk by transacting only with large, wellcapitalized institutions using measures designed to determine the creditworthiness of a counterparty. The Sponsor will take various steps to limit counterparty credit risk, as described in the Registration Statements. 15 Correlation is the strength of the relationship between (1) the change in a Fund’s NAV and (2) the change in the underlying Index or Benchmark. The statistical measure of correlation is known as the ‘‘correlation coefficient.’’ A correlation coefficient of +1 indicates a perfect positive correlation while a value of ¥1 indicates a perfect negative (inverse) correlation. A value of zero would mean that there is no correlation between the two variables. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 28485 day, due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise, the Sponsor may in its sole discretion choose to determine a fair value price as the basis for determining the market value of such position for such day. The Sponsor will, in good faith, establish an appropriate methodology for determining such fair value prices, based on factors it deems relevant, including the prices of other instruments that provide an indication of the fair value price of the future contracts. For example, the Sponsor expects that such fair value determinations would be based on publicly traded options prices of Natural Gas Futures Contracts, if available and relevant. Net Asset Value According to the Registration Statements, the NAV of each Fund is calculated by the value of its total assets including, but not limited to, all cash and cash equivalents or other debt securities, less total liabilities, each determined on the basis of generally accepted accounting principles. In particular, the NAV includes any unrealized profit or loss on open Natural Gas Futures Contracts and swap agreements, and any other credit or debit accruing to a Fund, but unpaid or not received. The NAV per Share of each Fund will be 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. Expenses and fees are accrued daily and taken into account for purposes of determining NAV. The NAV of each Fund is calculated by the Administrator and is determined each business day as described in the Registration Statements. Creation and Redemption of Shares According to the Registration Statements, the Funds create and redeem Shares from time to time, but only in one or more Creation Units. A Creation Unit is a block of 50,000 Shares of a Fund. Creation Units may be created or redeemed only by Authorized Participants, as described in the Registration Statements. Except when aggregated in Creation Units, the Shares are not redeemable securities. Authorized Participants may pay a fixed and variable transaction fee in connection with each order to create or redeem a Creation Unit. Authorized Participants may sell the Shares included in the Creation Units they purchase from the Funds to other investors. On any business day, an E:\FR\FM\17MYN1.SGM 17MYN1 28486 Federal Register / Vol. 76, No. 95 / Tuesday, May 17, 2011 / Notices Emcdonald on DSK2BSOYB1PROD with NOTICES Authorized Participant may place an order with the Distributor to create one or more Creation Units. An order to create or redeem Shares must be placed by 1:30 p.m. Eastern Time (‘‘E.T.’’). The total cash payment required to create each Creation Unit is the NAV of 50,000 Shares of the applicable Fund on the purchase order date plus the applicable transaction fee. According to the Registration Statements, the procedures by which an Authorized Participant can redeem one or more Creation Units mirror the procedures for the creation of Creation Units. On any business day, an Authorized Participant may place an order with the Distributor to redeem one or more Creation Units. Individual shareholders may not redeem directly from a Fund. By placing a redemption order, an Authorized Participant agrees to deliver the Creation Units to be redeemed through the Depository Trust Company’s book-entry system to the applicable Fund not later than noon E.T., on the third business day immediately following the redemption order date (T+3). The redemption proceeds from a Fund consist of the cash redemption amount. The cash redemption amount is equal to the NAV of the number of Creation Unit(s) of such Fund requested in the Authorized Participant’s redemption order as of the time of the calculation of such Fund’s NAV on the redemption order date, less transaction fees, as described in the Registration Statements. Availability of Information Regarding the Shares The Web site for the Funds (http:// www.proshares.com) and/or the Exchange, 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; (b) calculation of the premium or discount of the closing market price against the NAV per Share; (c) the Prospectus; and (d) other applicable quantitative information. The NAV per Share will be calculated and disseminated daily. One or more major market data vendors will disseminate for the Funds on a daily basis information with respect to the ‘‘Indicative Fund Value’’ (as discussed below), recent NAV per Share and Shares outstanding. The Exchange will also make available on its Web site (http://www.nyse.com) daily trading volume of the Shares, closing prices of the Shares, and the NAV per Share. The intra-day futures prices, closing price and settlement prices of the futures contracts held by the Funds are also VerDate Mar<15>2010 16:21 May 16, 2011 Jkt 223001 available from the NYMEX, automated quotation systems, published or other public sources, or on-line information services such as Bloomberg or Reuters. Quotation and last-sale information for the Shares will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line. Portfolio Disclosure Each Fund’s total portfolio composition will be disclosed on the Funds’ Web site or another relevant Web site as determined by the Trust and/or the Exchange. The Trust will provide Web site disclosure of portfolio holdings daily and will include, as applicable, the names and notional value (in U.S. dollars) of Natural Gas Futures Contracts and swap agreements, if any, 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 Sponsor of the portfolio composition to Authorized Participants, so that all market participants are provided portfolio composition 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 Funds’ Web site, and/ or at the Exchange’s Web site. Availability of Information About the Benchmarks The daily closing Index level and the percentage change in the daily closing Index level for the Index will be publicly available on various Web sites, e.g., http://www.bloomberg.com. The Index level will be disseminated by one or more major market data vendors and will be updated at least every 15 seconds during the Exchange’s Core Trading Session, except for that period after the end of the NYMEX Natural Gas pit trading session at 2:30 p.m. E.T., at which point the Index value will be static. Data regarding the Index is also available from the Index Provider to subscribers. In addition, data is available for the Natural Gas Futures Contracts in the Index and for other futures contracts from those futures exchanges that list and trade futures contracts on such commodity. 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). PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 Dissemination of Net Asset Value and Indicative Fund Value The NAV for the Funds’ Shares will be calculated by the Administrator once a day and will be disseminated daily to all market participants. The NAV calculation time for the Funds is 2:30 p.m. E.T.16 The Exchange 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 Sponsor will cause to be made available on a daily basis the total payment required to create each Creation Unit of the applicable Fund on the purchase order date in connection with the issuance of the respective Shares. In order to provide updated information relating to each Fund for use by investors, professionals and persons wishing to create or redeem the Shares, one or more major market data vendors will disseminate an updated Indicative Fund Value (‘‘IFV’’). The IFV will be disseminated on a per-Share basis at least every 15 seconds during Exchange’s Core Trading Session trading hours of 9:30 a.m. to 4 p.m. E.T. The IFV will be calculated based on the cash required for creations and redemptions for a Fund (prior calculated NAV) adjusted to reflect the price changes of such Fund’s holdings. The value of a Share may be influenced by non-concurrent trading hours between NYSE Arca and NYMEX when the Shares are traded on NYSE Arca after normal trading hours of NYMEX. The IFV will be updated during the NYSE Arca Core Trading Session when Natural Gas Futures Contracts held by the Funds are traded. However, a static IFV will be disseminated between the close of trading of Natural Gas Futures Contracts and the close of the NYSE Arca Core Trading Session. Criteria for Initial and Continued Listing The Funds will be subject to the criteria in NYSE Arca Equity Rule 8.200 and Commentary .02 thereto for initial and continued listing of the Shares. The minimum number of Shares for each Fund to be outstanding at the start of trading will be 100,000 Shares. The Exchange believes that this anticipated 16 The Commission previously has approved a commodity-based trust security for which the NAV is calculated earlier than 4 p.m. E.T. See, e.g., Securities Exchange Act Release Nos. 50603 (October 28, 2004), 69 FR 64614 (November 5, 2004) (SR–NYSE–2004–22) (order approving listing of streetTRACKS Gold Trust; and 61219 (December 22, 2009), 74 FR 68886 (December 29, 2009) (SR– NYSEArca–2009–95) (order approving listing of ETFS Platinum Trust). E:\FR\FM\17MYN1.SGM 17MYN1 Federal Register / Vol. 76, No. 95 / Tuesday, May 17, 2011 / Notices Emcdonald on DSK2BSOYB1PROD with NOTICES minimum number of Shares for each Fund to be outstanding at the start of trading is sufficient to provide adequate market liquidity and to further the objectives of the Funds. The Exchange represents that, for the initial and continued listing of the Shares, the Funds will be in compliance with NYSE Arca Equities Rule 5.3 and Rule 10A–3 under the Act. Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The trading of the Shares will be subject to NYSE Arca Equities Rule 8.200, Commentary .02(e), which sets forth certain restrictions on ETP Holders acting as registered Market Makers in Trust Issued Receipts to facilitate surveillance. See ‘‘Surveillance’’ below for more information. 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 futures contracts, 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 17 or by the halt or suspension of trading of the underlying futures contracts. The Exchange represents that the Exchange may halt trading during the day in which an interruption to the dissemination of the Index value, IFV or the value of the underlying futures contracts occurs. If the interruption to the dissemination of the Index value, IFV or the value of the underlying 17 See NYSE Arca Equities Rule 7.12. VerDate Mar<15>2010 16:21 May 16, 2011 Jkt 223001 futures contracts persists past the trading day in which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption. In addition, if the Exchange becomes aware that the NAV with respect to the Shares is not disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV is available to all market participants. Suitability Currently, NYSE Arca Equities Rule 9.2(a) (Diligence as to Accounts) provides that an ETP Holder, before recommending a transaction in any security, must have reasonable grounds to believe that the recommendation is suitable for the customer based on any facts disclosed by the customer as to its other security holdings and as to its financial situation and needs. Further, the rule provides, with a limited exception, that prior to the execution of a transaction recommended to a noninstitutional customer, the ETP Holder must make reasonable efforts to obtain information concerning the customer’s financial status, tax status, investment objectives, and any other information that such ETP Holder believes would be useful to make a recommendation. Prior to the commencement of trading, the Exchange will inform its ETP Holders of the suitability requirements of NYSE Arca Equities Rule 9.2(a) in an Information Bulletin. Specifically, ETP Holders will be reminded in the Information Bulletin that, in recommending transactions in the Shares, they must have a reasonable basis to believe that (1) the recommendation is suitable for a customer given reasonable inquiry concerning the customer’s investment objectives, financial situation, needs, and any other information known by such member, and (2) the customer can evaluate the special characteristics, and is able to bear the financial risks, of an investment in the Shares. In connection with the suitability obligation, the Information Bulletin will also provide that members must make reasonable efforts to obtain the following information: (1) The customer’s financial status; (2) the customer’s tax status; (3) the customer’s investment objectives; and (4) such other information used or considered to be reasonable by such member or registered representative in making recommendations to the customer. In addition, FINRA has implemented increased sales practice and customer margin requirements for FINRA members applicable to leveraged ETFs (which include the Shares) and options PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 28487 on leveraged ETFs, as described in FINRA Regulatory Notices 09–31 (June 2009), 09–53 (August 2009) and 09–65 (November 2009) (‘‘FINRA Regulatory Notices’’). ETP Holders that carry customer accounts will be required to follow the FINRA guidance set forth in these notices. As disclosed in the Registration Statement, the Funds seek leveraged, inverse, or leveraged inverse returns on a daily basis, and the Funds do not seek to achieve their stated investment objective over a period of time greater than one day because mathematical compounding prevents the Funds from perfectly achieving such results. Accordingly, results over periods of time greater than one day typically will not be a leveraged multiple (+200%), the inverse (¥100%) or a leveraged inverse multiple (¥200%) of the period return of the Benchmark and may differ significantly from these multiples. The Exchange’s Information Bulletin regarding the Funds, described below, will provide information regarding the suitability of an investment in the Shares, as stated in the Registration Statement. Surveillance The Exchange intends to utilize its existing surveillance procedures applicable to derivative products, including Trust Issued Receipts, 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 surveillance focuses 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 can obtain market surveillance information, including customer identity information, with respect to transactions occurring on the NYMEX, which is a member of the Intermarket Surveillance Group (‘‘ISG’’). A list of ISG members is available at http://www.isgportal.org.18 18 The Exchange may obtain information from futures exchanges with which the Exchange has entered into a surveillance sharing agreement or that are ISG members. The Exchange notes that not all components of the portfolio for the Funds may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. E:\FR\FM\17MYN1.SGM 17MYN1 28488 Federal Register / Vol. 76, No. 95 / Tuesday, May 17, 2011 / Notices Emcdonald on DSK2BSOYB1PROD with NOTICES In addition, with respect to the Funds’ futures contracts traded on exchanges, not more than 10% of the weight of such futures contracts in the aggregate shall consist of components whose principal trading market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement. The Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Information Bulletin will discuss the following: (1) The risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated IFV will not be calculated or publicly disseminated; (2) the procedures for purchases and redemptions of Shares in Creation Baskets and Redemption Baskets (and that Shares are not individually redeemable); (3) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (4) how information regarding the IFV is disseminated; (5) a static IFV will be disseminated between the close of trading Natural Gas Futures Contracts on the NYMEX and the close of the NYSE Arca Core Trading Session; (6) 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 (7) trading information. In addition, the Information Bulletin will advise ETP Holders, prior to the commencement of trading, of the prospectus delivery requirements applicable to the Funds. The Exchange notes that investors purchasing Shares directly from the Funds will receive a prospectus. ETP Holders purchasing Shares from the Funds for resale to investors will deliver a prospectus to such investors. The Information Bulletin will reference the FINRA Regulatory Notices regarding sales practice and customer margin requirements for FINRA members applicable to leveraged ETFs and options on leveraged ETFs. The Information Bulletin will also discuss any exemptive, no-action and interpretive relief granted by the Commission from any rules under the Act. In addition, the Information Bulletin will reference that the Funds are subject to various fees and expenses described in the Registration Statements. The Information Bulletin will also reference that the Commodity Futures Trading Commission has regulatory jurisdiction over the trading of futures contracts traded on U.S. markets. The Information Bulletin will also disclose the trading hours of the Shares of the Funds. The Bulletin will disclose that information about the Shares of the Funds is publicly available on the Funds’ Web site. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 19 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.200 and Commentary .02 thereto. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable Federal securities laws. The Exchange may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. Any futures contracts held by the Funds are expected to be the Natural Gas Futures Contracts, which are traded on NYMEX, an ISG member. The intra-day futures prices, closing price and settlement prices of the futures contracts held by the Funds are also available from the NYMEX, automated quotation systems, published or other public sources, or on-line information services. Quotation and last-sale information for the Shares will be available via CTA. Each Fund’s total portfolio composition will be disclosed on the Funds’ Web site or another relevant Web site. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that a large amount of VerDate Mar<15>2010 16:21 May 16, 2011 Jkt 223001 19 15 PO 00000 U.S.C. 78f(b)(5). Frm 00075 Fmt 4703 Sfmt 4703 information is publicly available regarding the Funds and the Shares, thereby promoting market transparency. The Index level will be disseminated by one or more major market data vendors and will be updated at least every 15 seconds during the Exchange’s Core Trading Session, except for that period after the end of the NYMEX Natural Gas pit trading session at 2:30 p.m. E.T., at which point the Index value will be static. The NAV per Share will be calculated daily and made available to all market participants at the same time. One or more major market data vendors will disseminate for the Funds on a daily basis information with respect to the IFV, recent NAV per Share and Shares outstanding. Trading in Shares of the Funds will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Moreover, 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. The Information Bulletin will also reference the FINRA Regulatory Notices regarding sales practice and customer margin requirements for FINRA members applicable to leveraged ETFs and options on leveraged ETFs. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of actively-managed exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Funds’ holdings, IFV, and quotation and lastsale information for the Shares. 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. E:\FR\FM\17MYN1.SGM 17MYN1 Federal Register / Vol. 76, No. 95 / Tuesday, May 17, 2011 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) Institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments 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 Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2011–24 and should be submitted on or before June 7, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–11967 Filed 5–16–11; 8:45 am] BILLING CODE 8011–01–P Electronic Comments Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule To Amend EDGA Rule 11.9 To Introduce Additional Routing Options to the Rule SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64466; File No. SR–EDGA– 2011–16] May 11, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 • Send paper comments in triplicate notice is hereby given that on May 5, to Elizabeth M. Murphy, Secretary, 2011, the EDGA Exchange, Inc. (the Securities and Exchange Commission, ‘‘Exchange’’ or the ‘‘EDGA’’) filed with 100 F Street, NE., Washington, DC the Securities and Exchange 20549–1090. Commission (‘‘Commission’’) the All submissions should refer to File proposed rule change as described in Number SR–NYSEArca–2011–24. This Items I and II below, which items have file number should be included on the been prepared by the self-regulatory subject line if e-mail is used. To help the organization. The Commission is Commission process and review your publishing this notice to solicit comments more efficiently, please use comments on the proposed rule change only one method. The Commission will from interested persons. post all comments on the Commission’s I. Self-Regulatory Organization’s Internet Web site (http://www.sec.gov/ Statement of the Terms of Substance of rules/sro.shtml). Copies of the the Proposed Rule Change submission, all subsequent amendments, all written statements The Exchange proposes to introduce with respect to the proposed rule additional routing options to Rule 11.9 change that are filed with the Commission, and all written 20 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). communications relating to the 2 17 CFR 240.19b–4. proposed rule change between the Emcdonald on DSK2BSOYB1PROD with NOTICES Paper Comments VerDate Mar<15>2010 16:21 May 16, 2011 Jkt 223001 PO 00000 Frm 00076 Fmt 4703 and amend existing routing options. The text of the proposed rule change is available on the Exchange’s Web site at http://www.directedge.com, 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 IV below. The self-regulatory organization 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 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: • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2011–24 on the subject line. 28489 Sfmt 4703 The Exchange’s current list of routing options are codified in Rule 11.9(b)(3). In this filing, the Exchange proposes to amend Rule 11.9(b)(3) to add three new additional strategies and amend other ones. In Rule 11.9(b)(3), the Exchange describes that its system (‘‘System’’) provides a variety of routing options. Routing options may be combined with all available order types and times-inforce, with the exception of order types and times-in-force whose terms are inconsistent with the terms of a particular routing option. The System will consider the quotations only of accessible markets. The term ‘‘System routing table’’ refers to the proprietary process for determining the specific trading venues to which the System routes orders and the order in which it routes them. The Exchange reserves the right to maintain a different System routing table for different routing options and to modify the System routing table at any time without notice. The new System routing options are described in more detail below. The Exchange proposes to introduce the ROBB and ROCO routing strategies and add them to Rules 11.9(b)(3)(c)(vi)– (vii). ROBB/ROCO are routing options under which an order checks the System for available shares and then are sent to destinations on the System routing table. If shares remain unexecuted after routing, they are posted on the book, unless otherwise E:\FR\FM\17MYN1.SGM 17MYN1

Agencies

[Federal Register Volume 76, Number 95 (Tuesday, May 17, 2011)]
[Notices]
[Pages 28483-28489]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-11967]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64464; File No. SR-NYSEArca-2011-24]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the Following Under 
NYSE Arca Equities Rule 8.200: ProShares Short DJ-UBS Natural Gas, 
ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS 
Natural Gas

May 11, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on April 28, 2011, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.200: ProShares Short DJ-UBS Natural 
Gas, ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS 
Natural Gas. The text of the proposed rule change is available at the 
Exchange, the Commission's Public Reference Room, and http://www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Arca Equities Rule 8.200, Commentary .02 permits the trading 
of Trust Issued Receipts (``TIRs'') either by listing or pursuant to 
unlisted trading privileges (``UTP'').\3\ The Exchange proposes to list 
and trade shares (``Shares'') of the following pursuant to NYSE Arca 
Equities Rule 8.200: ProShares Short DJ-UBS Natural Gas, ProShares 
Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS Natural Gas 
(each a ``Fund'' and, collectively, the ``Funds'').\4\ Each of the 
Funds is a series of the ProShares Trust II (``Trust''), a Delaware 
statutory trust. ProShare Capital Management LLC (``Sponsor'') is the 
Trust's Sponsor, and Wilmington Trust Company is the Trust's trustee. 
Brown Brothers Harriman & Co. (``Administrator'') serves as the 
administrator, custodian and transfer agent of the Funds. SEI 
Investments Distribution Co. (``Distributor'') serves as distributor of 
the Shares.
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    \3\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
TIRs that invest in ``Financial Instruments.'' The term ``Financial 
Instruments,'' as defined in Commentary .02(b)(4) to NYSE Arca 
Equities Rule 8.200, means any combination of investments, including 
cash; securities; options on securities and indices; futures 
contracts; options on futures contracts; forward contracts; equity 
caps, collars and floors; and swap agreements.
    \4\ See Post-Effective Amendment No. 1 dated May 28, 2010 (File 
No. 333-163511) and Post-Effective Amendment No. 4 dated April 13, 
2011 (File No. 333-163511) to the Funds' Registration Statement on 
Form S-3 (``Registration Statements''). The description of the Funds 
and the Shares contained herein are based on the Registration 
Statements.
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    The Exchange notes that the Commission has previously approved the 
listing and trading of other series of the Commodities and Currency 
Trust (now known as ProShares Trust II) both on the American Stock 
Exchange LLC \5\ and on NYSE Arca pursuant to unlisted trading 
privileges (``UTP''),\6\ and listing on NYSE Arca.\7\ In addition, the

[[Page 28484]]

Commission has approved other exchange-traded investment products 
linked to the performance of underlying commodities.\8\ The Exchange 
further notes that the shares of other ProShares UltraFunds and 
UltraShort Funds based on various securities indexes have previously 
been approved by the Commission.\9\
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    \5\ See Securities Exchange Act Release No. 58161 (July 15, 
2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39) (``Amex 
Proposal'').
    \6\ See Securities Exchange Act Release No. 58163 (July 15, 
2008), 73 FR 42391 (July 21, 2008) (SR-NYSEArca-2008-73).
    \7\ See Securities Exchange Act Release No. 58457 (September 3, 
2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-2008-91). The 
series of the Trust approved for Exchange listing by the Commission 
included 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 DJ-AIG 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. See also Securities 
Exchange Act Release No. 58647 (September 25, 2008), 73 FR 57399 
(October 2, 2008) (SR-NYSEArca-2008-99) (notice of filing and 
immediate effectiveness relating to the names of the Trust and the 
funds of the Trust, among other matters).
    \8\ See, e.g., Securities Exchange Act Release Nos. 57456 (March 
7, 2008), 73 FR 13599 (March 13, 2008) (SR-NYSEArca-2007-91) (order 
granting accelerated approval for NYSE Arca listing the iShares GS 
Commodity Trusts); 59781 (April 17, 2009), 74 FR 18771 (April 24, 
2009) (SR-NYSEArca-2009-28) (order granting accelerated approval for 
NYSE Arca listing the ETFS Silver Trust); 59895 (May 8, 2009), 74 FR 
22993 (May 15, 2009) (SR-NYSEArca-2009-40) (order granting 
accelerated approval for NYSE Arca listing the ETFS Gold Trust); 
61219 (December 22, 2009), 74 FR 68886 (December 29, 2009) (order 
approving listing on NYSE Arca of the ETFS Platinum Trust); 61220 
(December 22, 2009), 74 FR 68895 (December 29, 2009) (order 
approving listing on NYSE Arca of the ETFS Palladium Trust).
    \9\ See Securities Exchange Act Release Nos. 52553 (October 3, 
2005), 70 FR 59100 (October 11, 2005) (SR-Amex-2004-62) (approving 
the listing and trading of shares of the xtraShares Trust); 54040 
(June 23, 2006), 71 FR 37629 (June 30, 2006) (SR-Amex2006-41) 
(approving the listing and trading of shares of the ProShares 
Trust); 55117 (January 17, 2007), 72 FR 3442 (January 25, 2007) (SR-
Amex 2006-101) (approving the listing and trading of shares of the 
ProShares Trust); 56592 (October 1, 2007), 72 FR 57364 (October 9, 
2007) (SR-Amex-2007-60) (approving the listing and trading of 6 
funds of the ProShares Trust based on international equity indexes); 
and 56998 (December 19, 2007), 72 FR 73404 (December 27, 2007) (SR-
Amex-2007-104) (approving the listing and trading of shares of the 
ProShares Trust).
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    According to the Registration Statements, the Funds seek daily 
investment results (before fees and expenses) that correspond to the 
inverse (opposite) of the daily performance, a multiple of the daily 
performance or an inverse multiple of the daily performance of the 
benchmark index for each of the Funds (the ``Benchmark'' or ``Index''), 
the Dow Jones-UBS Natural Gas Sub-Index.\10\
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    \10\ CME Group Index Services LLC (``CME Indexes''), a joint 
venture between Dow Jones & Company, Inc. (``Dow Jones'' or ``Index 
Provider'') and CME Group Inc. (``CME Group''), and UBS Securities 
LLC (``UBS'') have entered into a non-exclusive license agreement 
providing for the use of the Index in connection with the Funds.
    UBS, a co-sponsor of the Index, is a registered broker-dealer 
and has represented to the Exchange that it will: (1) Implement and 
maintain procedures reasonably designed to prevent the use and 
dissemination by relevant personnel of UBS, in violation of 
applicable laws, rules, and regulations, of material non-public 
information relating to changes in the composition or method of 
computation or calculation of the Index; and (2) periodically review 
the requirements of such procedures as they relate to certain 
personnel of UBS directly responsible for such changes.
    CME Indexes, a co-sponsor of the Index, is not engaged in the 
business of trading in commodities or securities. CME Group, 
together with its subsidiaries, operates derivatives exchanges. CME 
Group maintains a Code of Conduct applicable to all personnel that 
prohibits disclosure of any confidential information obtained during 
the course of one's employment and the use or disclosure of any 
material non-public information relating to changes to the 
composition of the Index or changes to the Index methodology in 
violation of applicable laws, rules or regulations. For a 
transitional period, certain Dow Jones employees are providing 
index-related services to CME Indexes. Dow Jones also maintains a 
Code of Conduct applicable to all personnel that prohibits 
disclosure of any confidential information relating to changes to 
the composition of the Index or changes to the Index methodology 
obtained during the course of one's employment and the use of any 
material non-public information in violation of applicable laws, 
rules or regulations.
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    The Index is comprised of New York Mercantile Exchange (``NYMEX'') 
Natural Gas futures contracts (``Natural Gas Futures Contracts'').\11\ 
The Index is intended to reflect the performance of natural gas as 
measured by the performance of Natural Gas Futures Contracts, including 
roll costs, without regard to income earned on cash positions. It rolls 
(or sells its existing position prior to settlement while purchasing a 
new position further from settlement) the component Natural Gas Futures 
Contracts every other month as follows in the table below. The roll for 
each Index component occurs over a period of five NYMEX business days.
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    \11\ Natural gas futures volume on NYMEX for 2009 and 2010 
(through December 31, 2010) was 47,864,639 contracts and 64,350,673 
contracts, respectively. As of December 31, 2010, NYMEX open 
interest for all natural gas futures was 772,104 contracts, and the 
approximate value of all outstanding contracts was $35,664,257,310 
billion. Open interest as of December 31, 2010 for the near month 
contract was 166,757 contracts and the near month contract value was 
$7,345,645,850 ($4.405 per MMBtu and 10,000 MMBtu per contract). The 
position accountability limits for all months is 12,000 contracts 
and the total value of contracts if position accountability limits 
were reached would be approximately $528,600,000 million (based on 
the $4.405 contract price). As of December 31, 2010, open interest 
in natural gas swaps cleared on the NYMEX was approximately 
1,493,013 contracts, with an approximate value of $16,463,384,003 
($4.411 per MMBtu and 2,500 MMBtu per contract). Natural gas futures 
are also traded on ICE Futures Europe (``ICE'') and the European 
Energy Exchange.

--------------------------------------------------------------------------------------------------------------------------------------------------------
              Month                  Jan       Feb       Mar       Apr       May       Jun       Jul       Aug       Sep       Oct       Nov       Dec
--------------------------------------------------------------------------------------------------------------------------------------------------------
Component Natural Gas Contract..      Mar       Mar       May       May       Jul       Jul       Sep       Sep       Nov       Nov       Jan       Jan
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The Funds will utilize Natural Gas Futures Contracts and, under 
limited circumstances, swap agreements, as described below, to produce 
economically ``inverse,'' ``leveraged,'' and ``inverse leveraged'' 
investment results for the respective Funds.\12\ For each dollar 
invested in the Funds, each Fund will seek the requisite exposure in 
Natural Gas Futures Contracts to pursue its respective investment 
objective. The Sponsor does not intend to invest directly in any 
commodity.
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    \12\ Terms relating to the Funds, the Shares and the Index 
referred to, but not defined, herein are defined in the Registration 
Statements.
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    According to the Registration Statements, each of the Funds uses 
investment techniques that include the use of any one or a combination 
of Natural Gas Futures Contracts, and may include swap agreements. The 
Funds' investment techniques may involve a small investment relative to 
the amount of investment exposure assumed and may result in losses 
exceeding the amounts invested. Such techniques, particularly when used 
to create leverage, may expose the Funds to potentially dramatic 
changes (losses or gains) in the value of their investments and 
imperfect correlation between the value of the investments and the 
security or index.
    If ProShares Short DJ-UBS Natural Gas is successful in meeting its 
objective, its value on a given day (before fees and expenses) should 
gain approximately as much on a percentage basis as its Benchmark when 
the Benchmark falls on a given day. Conversely, its value on a given 
day (before fees and expenses) should lose approximately as much on a 
percentage basis as the Benchmark when the Benchmark rises on a given 
day. If the ProShares Ultra DJ-UBS Natural Gas Fund is successful in 
meeting its objective, its value (before fees and expenses) should gain 
approximately twice as much on a percentage basis as the Benchmark when 
it rises on a given day. Conversely, its value (before fees and 
expenses) should lose approximately twice as much on a percentage basis 
as the Benchmark when it declines on a given day. If the

[[Page 28485]]

ProShares UltraShort DJ-UBS Natural Gas Fund is successful in meeting 
its objective, its value (before fees and expenses) should gain 
approximately twice as much on a percentage basis as the Benchmark when 
it declines on a given day. Conversely, its value (before fees and 
expenses) should lose approximately twice as much on a percentage basis 
as the Benchmark when it rises on a given day.
    In seeking to achieve each Fund's daily investment objective, the 
Sponsor uses a mathematical approach to investing. Using this approach, 
the Sponsor determines the type, quantity and mix of investment 
positions that the Sponsor believes in combination should produce daily 
returns consistent with a Fund's objective. The Sponsor relies upon a 
pre-determined model to generate orders that result in repositioning 
each Fund's investments in accordance with its daily investment 
objectives.
    A number of factors may affect a Fund's ability to achieve a high 
degree of correlation with its Benchmark, and there can be no guarantee 
that a Fund will achieve a high degree of correlation. While the Funds 
do not expect that their daily returns will deviate adversely from 
their respective daily investment objectives, several factors may 
affect their ability to achieve this correlation. Among these factors 
are a Fund's expenses, including fees, transaction costs and the cost 
of the investment techniques employed by that Fund, bid-ask spreads, a 
Fund's Share prices being rounded to the nearest cent, changes to a 
Benchmark that are not disseminated in advance and the need to conform 
a Fund's portfolio holdings to comply with investment restrictions or 
policies or regulatory or tax law requirements.
    The Funds will obtain exposure to the Index through Natural Gas 
Futures Contracts. Any futures contracts held by the Funds are expected 
to be the Natural Gas Futures Contracts. To the extent that Dow Jones 
alters the construction or composition of the Index to include natural 
gas futures contracts that trade on a different exchange, the Funds may 
so invest in such futures contracts.
    According to the Registration Statements, each Fund seeks to 
achieve its investment objective by investing under normal market 
conditions in Natural Gas Futures Contracts. In the event position 
accountability rules are reached with respect to Natural Gas Futures 
Contracts, the Sponsor may, in its commercially reasonable judgment, 
cause the Funds to obtain exposure through swaps referencing the Index 
or particular Natural Gas Futures Contracts, or invest in other futures 
contracts or swaps not based on the particular Natural Gas Futures 
Contracts if such instruments tend to exhibit trading prices or returns 
that correlate with the Index or any Natural Gas Futures Contract and 
will further the investment objective of such Fund.\13\ Each Fund may 
also invest in swaps if the market for a specific futures contract 
experiences emergencies (e.g., natural disaster, terrorist attack or an 
act of God) or disruptions (e.g., a trading halt or a flash crash) that 
prevent such Fund from obtaining the appropriate amount of investment 
exposure to the affected Natural Gas Futures Contracts directly or to 
other futures contracts.\14\
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    \13\ To the extent practicable, the Funds will invest in swaps 
cleared through the facilities of a centralized clearing house.
    \14\ According to the Registration Statements, the Sponsor will 
also attempt to mitigate the Funds' credit risk by transacting only 
with large, well-capitalized institutions using measures designed to 
determine the creditworthiness of a counterparty. The Sponsor will 
take various steps to limit counterparty credit risk, as described 
in the Registration Statements.
---------------------------------------------------------------------------

    The Sponsor expects the Funds to have a statistical correlation 
\15\ over time of -.95 or better (for ProShares Short DJ-UBS Natural 
Gas and ProShares UltraShort DJ-UBS Natural Gas) and +.95 or better 
(for ProShares Ultra DJ-UBS Natural Gas) when correlating the daily 
return of a Fund's Net Asset Value (``NAV'') against the daily return 
of its relevant Index or Benchmark.
---------------------------------------------------------------------------

    \15\ Correlation is the strength of the relationship between (1) 
the change in a Fund's NAV and (2) the change in the underlying 
Index or Benchmark. The statistical measure of correlation is known 
as the ``correlation coefficient.'' A correlation coefficient of +1 
indicates a perfect positive correlation while a value of -1 
indicates a perfect negative (inverse) correlation. A value of zero 
would mean that there is no correlation between the two variables.
---------------------------------------------------------------------------

    Each Fund may also invest in cash, cash equivalents and/or U.S. 
Treasury Securities or other high credit quality short-term fixed-
income or similar securities (such as shares of money market funds, 
bank deposits, bank money market accounts, certain variable rate-demand 
notes and repurchase agreements collateralized by government 
securities) that will serve as collateral for any futures contracts or 
swap agreements held by the Funds.
Futures Contracts Held by the Funds
    All open futures contracts held by the Funds will be traded on the 
NYMEX and will be calculated at their then current market value, based 
upon the settlement price for that particular futures contract traded 
on the date with respect to which NAV is being determined; provided 
that, if a futures contract could not be liquidated on such day, due to 
the operation of daily limits or other rules of the exchange upon which 
that position is traded or otherwise, the Sponsor may in its sole 
discretion choose to determine a fair value price as the basis for 
determining the market value of such position for such day. The Sponsor 
will, in good faith, establish an appropriate methodology for 
determining such fair value prices, based on factors it deems relevant, 
including the prices of other instruments that provide an indication of 
the fair value price of the future contracts. For example, the Sponsor 
expects that such fair value determinations would be based on publicly 
traded options prices of Natural Gas Futures Contracts, if available 
and relevant.
Net Asset Value
    According to the Registration Statements, the NAV of each Fund is 
calculated by the value of its total assets including, but not limited 
to, all cash and cash equivalents or other debt securities, less total 
liabilities, each determined on the basis of generally accepted 
accounting principles. In particular, the NAV includes any unrealized 
profit or loss on open Natural Gas Futures Contracts and swap 
agreements, and any other credit or debit accruing to a Fund, but 
unpaid or not received.
    The NAV per Share of each Fund will be 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. Expenses and fees are accrued daily and taken into account 
for purposes of determining NAV. The NAV of each Fund is calculated by 
the Administrator and is determined each business day as described in 
the Registration Statements.
Creation and Redemption of Shares
    According to the Registration Statements, the Funds create and 
redeem Shares from time to time, but only in one or more Creation 
Units. A Creation Unit is a block of 50,000 Shares of a Fund. Creation 
Units may be created or redeemed only by Authorized Participants, as 
described in the Registration Statements. Except when aggregated in 
Creation Units, the Shares are not redeemable securities. Authorized 
Participants may pay a fixed and variable transaction fee in connection 
with each order to create or redeem a Creation Unit. Authorized 
Participants may sell the Shares included in the Creation Units they 
purchase from the Funds to other investors. On any business day, an

[[Page 28486]]

Authorized Participant may place an order with the Distributor to 
create one or more Creation Units. An order to create or redeem Shares 
must be placed by 1:30 p.m. Eastern Time (``E.T.''). The total cash 
payment required to create each Creation Unit is the NAV of 50,000 
Shares of the applicable Fund on the purchase order date plus the 
applicable transaction fee.
    According to the Registration Statements, the procedures by which 
an Authorized Participant can redeem one or more Creation Units mirror 
the procedures for the creation of Creation Units. On any business day, 
an Authorized Participant may place an order with the Distributor to 
redeem one or more Creation Units. Individual shareholders may not 
redeem directly from a Fund.
    By placing a redemption order, an Authorized Participant agrees to 
deliver the Creation Units to be redeemed through the Depository Trust 
Company's book-entry system to the applicable Fund not later than noon 
E.T., on the third business day immediately following the redemption 
order date (T+3). The redemption proceeds from a Fund consist of the 
cash redemption amount. The cash redemption amount is equal to the NAV 
of the number of Creation Unit(s) of such Fund requested in the 
Authorized Participant's redemption order as of the time of the 
calculation of such Fund's NAV on the redemption order date, less 
transaction fees, as described in the Registration Statements.
Availability of Information Regarding the Shares
    The Web site for the Funds (http://www.proshares.com) and/or the 
Exchange, 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; (b) calculation of the premium or 
discount of the closing market price against the NAV per Share; (c) the 
Prospectus; and (d) other applicable quantitative information.
    The NAV per Share will be calculated and disseminated daily. One or 
more major market data vendors will disseminate for the Funds on a 
daily basis information with respect to the ``Indicative Fund Value'' 
(as discussed below), recent NAV per Share and Shares outstanding. The 
Exchange will also make available on its Web site (http://www.nyse.com) 
daily trading volume of the Shares, closing prices of the Shares, and 
the NAV per Share. The intra-day futures prices, closing price and 
settlement prices of the futures contracts held by the Funds are also 
available from the NYMEX, automated quotation systems, published or 
other public sources, or on-line information services such as Bloomberg 
or Reuters. Quotation and last-sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line.
Portfolio Disclosure
    Each Fund's total portfolio composition will be disclosed on the 
Funds' Web site or another relevant Web site as determined by the Trust 
and/or the Exchange. The Trust will provide Web site disclosure of 
portfolio holdings daily and will include, as applicable, the names and 
notional value (in U.S. dollars) of Natural Gas Futures Contracts and 
swap agreements, if any, 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 Sponsor of the portfolio composition to Authorized 
Participants, so that all market participants are provided portfolio 
composition 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 Funds' Web site, and/or at the Exchange's Web site.
Availability of Information About the Benchmarks
    The daily closing Index level and the percentage change in the 
daily closing Index level for the Index will be publicly available on 
various Web sites, e.g., http://www.bloomberg.com. The Index level will 
be disseminated by one or more major market data vendors and will be 
updated at least every 15 seconds during the Exchange's Core Trading 
Session, except for that period after the end of the NYMEX Natural Gas 
pit trading session at 2:30 p.m. E.T., at which point the Index value 
will be static. Data regarding the Index is also available from the 
Index Provider to subscribers. In addition, data is available for the 
Natural Gas Futures Contracts in the Index and for other futures 
contracts from those futures exchanges that list and trade futures 
contracts on such commodity. 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).
Dissemination of Net Asset Value and Indicative Fund Value
    The NAV for the Funds' Shares will be calculated by the 
Administrator once a day and will be disseminated daily to all market 
participants. The NAV calculation time for the Funds is 2:30 p.m. 
E.T.\16\ The Exchange 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 Sponsor will cause to be made available on a daily 
basis the total payment required to create each Creation Unit of the 
applicable Fund on the purchase order date in connection with the 
issuance of the respective Shares.
---------------------------------------------------------------------------

    \16\ The Commission previously has approved a commodity-based 
trust security for which the NAV is calculated earlier than 4 p.m. 
E.T. See, e.g., Securities Exchange Act Release Nos. 50603 (October 
28, 2004), 69 FR 64614 (November 5, 2004) (SR-NYSE-2004-22) (order 
approving listing of streetTRACKS Gold Trust; and 61219 (December 
22, 2009), 74 FR 68886 (December 29, 2009) (SR-NYSEArca-2009-95) 
(order approving listing of ETFS Platinum Trust).
---------------------------------------------------------------------------

    In order to provide updated information relating to each Fund for 
use by investors, professionals and persons wishing to create or redeem 
the Shares, one or more major market data vendors will disseminate an 
updated Indicative Fund Value (``IFV''). The IFV will be disseminated 
on a per-Share basis at least every 15 seconds during Exchange's Core 
Trading Session trading hours of 9:30 a.m. to 4 p.m. E.T. The IFV will 
be calculated based on the cash required for creations and redemptions 
for a Fund (prior calculated NAV) adjusted to reflect the price changes 
of such Fund's holdings.
    The value of a Share may be influenced by non-concurrent trading 
hours between NYSE Arca and NYMEX when the Shares are traded on NYSE 
Arca after normal trading hours of NYMEX. The IFV will be updated 
during the NYSE Arca Core Trading Session when Natural Gas Futures 
Contracts held by the Funds are traded. However, a static IFV will be 
disseminated between the close of trading of Natural Gas Futures 
Contracts and the close of the NYSE Arca Core Trading Session.
Criteria for Initial and Continued Listing
    The Funds will be subject to the criteria in NYSE Arca Equity Rule 
8.200 and Commentary .02 thereto for initial and continued listing of 
the Shares.
    The minimum number of Shares for each Fund to be outstanding at the 
start of trading will be 100,000 Shares. The Exchange believes that 
this anticipated

[[Page 28487]]

minimum number of Shares for each Fund to be outstanding at the start 
of trading is sufficient to provide adequate market liquidity and to 
further the objectives of the Funds. The Exchange represents that, for 
the initial and continued listing of the Shares, the Funds will be in 
compliance with NYSE Arca Equities Rule 5.3 and Rule 10A-3 under the 
Act.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. The Exchange has 
appropriate rules to facilitate transactions in the Shares during all 
trading sessions. As provided in NYSE Arca Equities Rule 7.6, 
Commentary .03, the minimum price variation (``MPV'') for quoting and 
entry of orders in equity securities traded on the NYSE Arca 
Marketplace is $0.01, with the exception of securities that are priced 
less than $1.00 for which the MPV for order entry is $0.0001.
    The trading of the Shares will be subject to NYSE Arca Equities 
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on 
ETP Holders acting as registered Market Makers in Trust Issued Receipts 
to facilitate surveillance. See ``Surveillance'' below for more 
information.
    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 futures contracts, 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 \17\ or by the halt or suspension of trading of the 
underlying futures contracts.
---------------------------------------------------------------------------

    \17\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

    The Exchange represents that the Exchange may halt trading during 
the day in which an interruption to the dissemination of the Index 
value, IFV or the value of the underlying futures contracts occurs. If 
the interruption to the dissemination of the Index value, IFV or the 
value of the underlying futures contracts persists past the trading day 
in which it occurred, the Exchange will halt trading no later than the 
beginning of the trading day following the interruption. In addition, 
if the Exchange becomes aware that the NAV with respect to the Shares 
is not disseminated to all market participants at the same time, it 
will halt trading in the Shares until such time as the NAV is available 
to all market participants.
Suitability
    Currently, NYSE Arca Equities Rule 9.2(a) (Diligence as to 
Accounts) provides that an ETP Holder, before recommending a 
transaction in any security, must have reasonable grounds to believe 
that the recommendation is suitable for the customer based on any facts 
disclosed by the customer as to its other security holdings and as to 
its financial situation and needs. Further, the rule provides, with a 
limited exception, that prior to the execution of a transaction 
recommended to a non-institutional customer, the ETP Holder must make 
reasonable efforts to obtain information concerning the customer's 
financial status, tax status, investment objectives, and any other 
information that such ETP Holder believes would be useful to make a 
recommendation.
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders of the suitability requirements of NYSE Arca Equities Rule 
9.2(a) in an Information Bulletin. Specifically, ETP Holders will be 
reminded in the Information Bulletin that, in recommending transactions 
in the Shares, they must have a reasonable basis to believe that (1) 
the recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's investment objectives, financial situation, 
needs, and any other information known by such member, and (2) the 
customer can evaluate the special characteristics, and is able to bear 
the financial risks, of an investment in the Shares. In connection with 
the suitability obligation, the Information Bulletin will also provide 
that members must make reasonable efforts to obtain the following 
information: (1) The customer's financial status; (2) the customer's 
tax status; (3) the customer's investment objectives; and (4) such 
other information used or considered to be reasonable by such member or 
registered representative in making recommendations to the customer.
    In addition, FINRA has implemented increased sales practice and 
customer margin requirements for FINRA members applicable to leveraged 
ETFs (which include the Shares) and options on leveraged ETFs, as 
described in FINRA Regulatory Notices 09-31 (June 2009), 09-53 (August 
2009) and 09-65 (November 2009) (``FINRA Regulatory Notices''). ETP 
Holders that carry customer accounts will be required to follow the 
FINRA guidance set forth in these notices.
    As disclosed in the Registration Statement, the Funds seek 
leveraged, inverse, or leveraged inverse returns on a daily basis, and 
the Funds do not seek to achieve their stated investment objective over 
a period of time greater than one day because mathematical compounding 
prevents the Funds from perfectly achieving such results. Accordingly, 
results over periods of time greater than one day typically will not be 
a leveraged multiple (+200%), the inverse (-100%) or a leveraged 
inverse multiple (-200%) of the period return of the Benchmark and may 
differ significantly from these multiples. The Exchange's Information 
Bulletin regarding the Funds, described below, will provide information 
regarding the suitability of an investment in the Shares, as stated in 
the Registration Statement.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products, including Trust Issued 
Receipts, 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 surveillance focuses 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 can obtain market surveillance information, including 
customer identity information, with respect to transactions occurring 
on the NYMEX, which is a member of the Intermarket Surveillance Group 
(``ISG''). A list of ISG members is available at http://www.isgportal.org.\18\
---------------------------------------------------------------------------

    \18\ The Exchange may obtain information from futures exchanges 
with which the Exchange has entered into a surveillance sharing 
agreement or that are ISG members. The Exchange notes that not all 
components of the portfolio for the Funds may trade on markets that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.

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

[[Page 28488]]

    In addition, with respect to the Funds' futures contracts traded on 
exchanges, not more than 10% of the weight of such futures contracts in 
the aggregate shall consist of components whose principal trading 
market is not a member of ISG or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement.
    The Exchange also has a general policy prohibiting the distribution 
of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin of the special characteristics 
and risks associated with trading the Shares. Specifically, the 
Information Bulletin will discuss the following: (1) The risks involved 
in trading the Shares during the Opening and Late Trading Sessions when 
an updated IFV will not be calculated or publicly disseminated; (2) the 
procedures for purchases and redemptions of Shares in Creation Baskets 
and Redemption Baskets (and that Shares are not individually 
redeemable); (3) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (4) how 
information regarding the IFV is disseminated; (5) a static IFV will be 
disseminated between the close of trading Natural Gas Futures Contracts 
on the NYMEX and the close of the NYSE Arca Core Trading Session; (6) 
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 (7) trading information.
    In addition, the Information Bulletin will advise ETP Holders, 
prior to the commencement of trading, of the prospectus delivery 
requirements applicable to the Funds. The Exchange notes that investors 
purchasing Shares directly from the Funds will receive a prospectus. 
ETP Holders purchasing Shares from the Funds for resale to investors 
will deliver a prospectus to such investors. The Information Bulletin 
will reference the FINRA Regulatory Notices regarding sales practice 
and customer margin requirements for FINRA members applicable to 
leveraged ETFs and options on leveraged ETFs. The Information Bulletin 
will also discuss any exemptive, no-action and interpretive relief 
granted by the Commission from any rules under the Act.
    In addition, the Information Bulletin will reference that the Funds 
are subject to various fees and expenses described in the Registration 
Statements. The Information Bulletin will also reference that the 
Commodity Futures Trading Commission has regulatory jurisdiction over 
the trading of futures contracts traded on U.S. markets.
    The Information Bulletin will also disclose the trading hours of 
the Shares of the Funds. The Bulletin will disclose that information 
about the Shares of the Funds is publicly available on the Funds' Web 
site.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \19\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 8.200 
and Commentary .02 thereto. The Exchange has in place surveillance 
procedures that are adequate to properly monitor trading in the Shares 
in all trading sessions and to deter and detect violations of Exchange 
rules and applicable Federal securities laws. The Exchange may obtain 
information via ISG from other exchanges that are members of ISG or 
with which the Exchange has entered into a comprehensive surveillance 
sharing agreement. Any futures contracts held by the Funds are expected 
to be the Natural Gas Futures Contracts, which are traded on NYMEX, an 
ISG member. The intra-day futures prices, closing price and settlement 
prices of the futures contracts held by the Funds are also available 
from the NYMEX, automated quotation systems, published or other public 
sources, or on-line information services. Quotation and last-sale 
information for the Shares will be available via CTA. Each Fund's total 
portfolio composition will be disclosed on the Funds' Web site or 
another relevant Web site.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information is publicly available regarding the 
Funds and the Shares, thereby promoting market transparency. The Index 
level will be disseminated by one or more major market data vendors and 
will be updated at least every 15 seconds during the Exchange's Core 
Trading Session, except for that period after the end of the NYMEX 
Natural Gas pit trading session at 2:30 p.m. E.T., at which point the 
Index value will be static. The NAV per Share will be calculated daily 
and made available to all market participants at the same time. One or 
more major market data vendors will disseminate for the Funds on a 
daily basis information with respect to the IFV, recent NAV per Share 
and Shares outstanding. Trading in Shares of the Funds will be halted 
if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have 
been reached or because of market conditions or for reasons that, in 
the view of the Exchange, make trading in the Shares inadvisable. 
Moreover, 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. The 
Information Bulletin will also reference the FINRA Regulatory Notices 
regarding sales practice and customer margin requirements for FINRA 
members applicable to leveraged ETFs and options on leveraged ETFs.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Funds' holdings, 
IFV, and quotation and last-sale information for the Shares.

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.

[[Page 28489]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-24 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2011-24. This 
file number should be included on the subject line if e-mail is used. 
To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2011-24 and should be submitted on or before June 7, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-11967 Filed 5-16-11; 8:45 am]
BILLING CODE 8011-01-P