Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change Relating to Listing and Trading of Shares of the Teucrium Agriculture Fund Under NYSE Arca Equities Rule 8.200, 12631-12635 [2012-4915]
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Federal Register / Vol. 77, No. 41 / Thursday, March 1, 2012 / Notices
business days between the hours of
10 a.m. and 3 p.m. Copies of the filing
also will be available for inspection and
copying at 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
publicly available. All submissions
should refer to File Number SR–NYSE–
2011–55 or SR–NYSEAmex–2011–84
and should be submitted on or before
March 22, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–4913 Filed 2–29–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66466; File No.
SR–NYSEArca–2011–97]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change Relating to
Listing and Trading of Shares of the
Teucrium Agriculture Fund Under
NYSE Arca Equities Rule 8.200
February 24, 2012.
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I. Introduction
On December 20, 2011, NYSE Arca,
Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares of the
Teucrium Agriculture Fund under
Commentary .02 to NYSE Arca Equities
Rule 8.200. The proposed rule change
was published for comment in the
Federal Register on January 10, 2012.3
The Commission received no comments
on the proposal. This order grants
approval of the proposed rule change.
II. Description of the Proposed Rule
Change
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the Teucrium
Agriculture Fund (‘‘Fund’’) pursuant to
NYSE Arca Equities Rule 8.200,
Commentary .02, which permits the
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66098
(January 4, 2012), 77 FR 1526 (‘‘Notice’’).
1 15
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trading of Trust Issued Receipts either
by listing or pursuant to unlisted trading
privileges.4 The Fund is a commodity
pool that is a series of the Teucrium
Commodity Trust (‘‘Trust’’), a Delaware
statutory trust.5 The Fund is managed
and controlled by Teucrium Trading,
LLC (‘‘Sponsor’’), which is a Delaware
limited liability company that is
registered as a commodity pool operator
with the Commodity Futures Trading
Commission (‘‘CFTC’’) and is a member
of the National Futures Association. The
Bank of New York Mellon (‘‘Custodian’’
or ‘‘Administrator’’) is the custodian,
transfer agent, and administrator for the
Fund. Foreside Fund Services, LLC
(‘‘Distributor’’) is the distributor for the
Fund’s Shares.
Teucrium Agriculture Fund
The investment objective of the Fund
is to have the daily changes in
percentage terms of the Shares’ net asset
value (‘‘NAV’’) reflect the daily changes
in percentage terms of a weighted
average (‘‘Underlying Fund Average’’) of
the NAVs per share of four other
commodity pools that are series of the
Trust and are sponsored by the Sponsor:
Teucrium Corn Fund, Teucrium Wheat
Fund, Teucrium Soybean Fund, and
Teucrium Sugar Fund (collectively,
‘‘Underlying Funds’’).6 The Fund seeks
to achieve its investment objective by
4 Commentary .02 to NYSE Arca Equities Rule
8.200 applies to Trust Issued Receipts 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.
5 See Amendment No. 1 to Form S–1 for the
Trust, dated December 5, 2011 (File No. 333–
173691) relating to the Fund (‘‘Registration
Statement’’).
6 Additional information regarding the
Underlying Funds is included in the Commission
orders approving the listing and trading of the
Underlying Funds and in their corresponding
registration statements. See Securities Exchange Act
Release Nos. 62213 (June 3, 2010), 75 FR 32828
(June 9, 2010) (SR–NYSEArca–2010–22) (order
approving listing on the Exchange of Teucrium
Corn Fund); 65344 (September 15, 2011), 76 FR
58549 (September 21, 2011) (SR–NYSEArca–2011–
48) (order approving listing on the Exchange of the
Teucrium Wheat Fund, Teucrium Soybean Fund,
and Teucrium Sugar Fund). See also Amendment
No. 4 to the Registration Statement on Form S–1 for
Teucrium Commodity Trust, dated May 26, 2010
(File No. 333–162033) relating to the Teucrium
Corn Fund; Amendment No. 3 to Form S–1 for
Teucrium Commodity Trust, dated June 3, 2011
(File No. 333–167591) relating to the Teucrium
Wheat Fund; Amendment No. 3 to Form S–1 for
Teucrium Commodity Trust, dated June 3, 2011
(File No. 333–167590) relating to the Teucrium
Soybean Fund; and Amendment No. 3 to Form
S–1 for Teucrium Commodity Trust, dated June 3,
2011 (File No. 333–167585) relating to the
Teucrium Sugar Fund.
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12631
investing under normal market
conditions 7 in the publicly-traded
shares of each Underlying Fund so that
the Underlying Fund Average will have
a weighting of 25% for each Underlying
Fund, and the Fund’s assets will be
rebalanced, generally on a daily basis, to
maintain the approximate 25%
allocation to each Underlying Fund. The
Fund does not intend to invest directly
in futures contracts (‘‘Futures
Contracts’’) or other Commodity
Interests (as defined below), although it
reserves the right to do so in the future,
including if an Underlying Fund ceases
operations or if shares of an Underlying
Fund cease trading on the Exchange.
While the Fund expects to maintain
substantially all of its assets in shares of
the Underlying Funds at all times, the
Fund may hold some residual amount of
assets in obligations of the United States
government (‘‘Treasury Securities’’) or
cash equivalents, and/or hold such
assets in cash (generally in interestbearing accounts). The Fund will earn
interest income from the Treasury
Securities and/or cash equivalents that
it purchases and on the cash it holds
through the Custodian.
The investment objective of each
Underlying Fund is to have the daily
changes in percentage terms of its
shares’ NAV reflect the daily changes in
percentage terms of a weighted average
of the closing settlement prices for
certain Futures Contracts for the
commodity specified in the Underlying
Fund’s name.8 The Teucrium Corn
Fund’s Benchmark is: (1) The second-toexpire Futures Contract for corn traded
on the Chicago Board of Trade
(‘‘CBOT’’), weighted 35%, (2) the thirdto-expire CBOT corn Futures Contract,
weighted 30%, and (3) the CBOT corn
Futures Contract expiring in the
December following the expiration
month of the third-to-expire contract,
weighted 35%. The Teucrium Wheat
Fund’s Benchmark is: (1) The second-toexpire CBOT wheat Futures Contract,
weighted 35%, (2) the third-to-expire
CBOT wheat Futures Contract, weighted
7 The term ‘‘under normal market conditions’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the commodity
markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance.
8 This weighted average is referred to herein as
the Underlying Fund’s ‘‘Benchmark,’’ the Futures
Contracts that at any given time make up an
Underlying Fund’s Benchmark are referred to
herein as the Underlying Fund’s ‘‘Benchmark
Component Futures Contracts,’’ and the commodity
specified in the Underlying Fund’s name is referred
to herein as its ‘‘Specified Commodity.’’
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30%, and (3) the CBOT wheat Futures
Contract expiring in the December
following the expiration month of the
third-to-expire contract, weighted 35%.
The Teucrium Soybean Fund’s
Benchmark is: (1) The second-to-expire
CBOT soybean Futures Contract,
weighted 35%, (2) the third-to-expire
CBOT soybean Futures Contract,
weighted 30%, and (3) the CBOT
soybean Futures Contract expiring in
the November following the expiration
month of the third-to-expire contract,
weighted 35%, except that CBOT
soybean Futures Contracts expiring in
August and September will not be part
of the Teucrium Soybean Fund’s
Benchmark because of the less liquid
market for these Futures Contracts. The
Teucrium Sugar Fund’s Benchmark is:
(1) The second-to-expire Sugar No. 11
Futures Contract traded on ICE Futures
U.S. (‘‘ICE Futures’’),9 weighted 35%,
(2) the third-to-expire ICE Futures Sugar
No. 11 Futures Contract, weighted 30%,
and (3) the ICE Futures Sugar No. 11
Futures Contract expiring in the March
following the expiration month of the
third-to-expire contract, weighted 35%.
Each Underlying Fund seeks to
achieve its investment objective by
investing under normal market
conditions in Benchmark Component
Futures Contracts or, in certain
circumstances, in other Futures
Contracts for its Specified Commodity.
In addition, and to a limited extent, an
Underlying Fund also may invest in
exchange-traded options on Futures
Contracts for its Specified Commodity
and in swap agreements based on its
Specified Commodity that are cleared
through a futures exchange or its
affiliated provider of clearing services
(‘‘Cleared Swaps’’) in furtherance of the
Underlying Fund’s investment
objective. Once position limits or
accountability levels on Futures
Contracts on an Underlying Fund’s
Specified Commodity are reached, each
Underlying Fund’s intention is to invest
first in Cleared Swaps based on its
Specified Commodity to the extent
practicable under the position limits or
accountability levels applicable to such
Cleared Swaps and appropriate in light
of the liquidity in the market for such
Cleared Swaps, and then in contracts
and instruments such as cash-settled
options on Futures Contracts and
forward contracts, swaps other than
Cleared Swaps, and other over-thecounter transactions that are based on
the price of its Specified Commodity or
9 According to the Registration Statement,
although sugar Futures Contracts are primarily
traded on the ICE Futures, they may also be traded
on the New York Mercantile Exchange (‘‘NYMEX’’).
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Futures Contracts on its Specified
Commodity (collectively, ‘‘Other
Commodity Interests,’’ and, together
with Futures Contracts and Cleared
Swaps, ‘‘Commodity Interests’’). By
utilizing certain or all of these
investments, the Sponsor will endeavor
to cause each Underlying Fund’s
performance to closely track that of its
Benchmark.
The Underlying Funds seek to achieve
their investment objectives primarily by
investing in Commodity Interests such
that daily changes in the Underlying
Fund’s NAV will be expected to closely
track the changes in its Benchmark.
Each Underlying Fund’s positions in
Commodity Interests will be changed or
‘‘rolled’’ on a regular basis in order to
track the changing nature of its
Benchmark. For example, several times
a year (on the dates on which Futures
Contracts on the Underlying Fund’s
Specified Commodity expire), a
particular Futures Contract will no
longer be a Benchmark Component
Futures Contract, and the Underlying
Fund’s investments will have to be
changed accordingly. In order that the
Underlying Funds’ trading does not
cause unwanted market movements and
to make it more difficult for third parties
to profit by trading based on such
expected market movements, the
Underlying Funds’ investments
typically will not be rolled entirely on
that day, but rather will typically be
rolled over a period of several days.
Consistent with achieving each
Underlying Fund’s investment objective
of closely tracking its Benchmark, the
Sponsor may for certain reasons cause
the Underlying Fund to enter into or
hold Futures Contracts other than the
Benchmark Component Futures
Contracts, Cleared Swaps and/or Other
Commodity Interests. For example,
certain Cleared Swaps have
standardized terms similar to, and are
priced by reference to, a corresponding
Benchmark Component Futures
Contract. Additionally, Other
Commodity Interests that do not have
standardized terms and are not
exchange-traded, referred to as ‘‘overthe-counter’’ Commodity Interests, can
generally be structured as the parties to
the Commodity Interest contract desire.
Therefore, an Underlying Fund might
enter into multiple Cleared Swaps and/
or over-the-counter Commodity Interests
related to its Specified Commodity that
are intended to exactly replicate the
performance of Benchmark Component
Futures Contracts of the Underlying
Fund, or a single over-the-counter
Commodity Interest designed to
replicate the performance of its
Benchmark as a whole. Assuming that
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there is no default by a counterparty to
an over-the-counter Commodity Interest,
the performance of the Commodity
Interest will necessarily correlate
exactly with the performance of the
Underlying Fund’s Benchmark or the
applicable Benchmark Component
Futures Contract.10 The Underlying
Funds might also enter into or hold
Commodity Interests other than
Benchmark Component Futures
Contracts to facilitate effective trading.
In addition, an Underlying Fund might
enter into or hold Commodity Interests
related to its Specified Commodity that
would be expected to alleviate overall
deviation between the Underlying
Fund’s performance and that of its
Benchmark that may result from certain
market and trading inefficiencies or
other reasons.
The Underlying Funds invest in
Commodity Interests to the fullest
extent possible without being
leveraged 11 or unable to satisfy their
expected current or potential margin or
collateral obligations with respect to
their investments in Commodity
Interests. After fulfilling such margin
and collateral requirements, the
Underlying Funds will invest the
remainder of the proceeds from the sale
of baskets in Treasury Securities or cash
equivalents, and/or hold such assets in
cash. Therefore, the focus of the
Sponsor in managing the Underlying
Funds is investing in Commodity
Interests and in Treasury Securities,
cash and/or cash equivalents. The
Underlying Funds will earn interest
income from the Treasury Securities
and/or cash equivalents that it
purchases and on the cash it holds
through the Custodian.
The Sponsor will endeavor to place
the Fund’s trades in the Underlying
Funds and otherwise manage the Fund’s
investments so that the Fund’s average
daily tracking error against the
Underlying Fund Average will be less
than 10 percent over any period of 30
trading days. More specifically, the
Sponsor will endeavor to manage the
Fund so that A will be within plus/
minus 10 percent of B, where A is the
average daily change in the Fund’s NAV
for any period of 30 successive
valuation days, i.e., any trading day as
10 With respect to the Underlying Funds, the
creditworthiness of each potential counterparty will
be assessed by the Sponsor. The Sponsor will assess
or review, as appropriate, the creditworthiness of
each potential or existing counterparty to an overthe-counter contract pursuant to guidelines
approved by the Sponsor.
11 The Sponsor represents that the Fund and
Underlying Funds will invest in their applicable
Commodity Interests in a manner consistent with
their respective investment objectives and not to
achieve additional leverage.
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of which the Fund calculates its NAV,
and B is the average daily change in the
Underlying Fund Average over the same
period.12
The Sponsor will employ a ‘‘neutral’’
investment strategy intended so that the
Fund will track the changes in the
Underlying Fund Average and each
Underlying Fund will track the changes
in its Benchmark regardless of whether
the Underlying Fund Average or
Benchmark goes up or down. According
to the Registration Statement, the
Fund’s and Underlying Funds’
‘‘neutral’’ investment strategies are
designed to permit investors generally
to purchase and sell the Fund’s Shares
for the purpose of investing indirectly in
the agricultural commodities market in
a cost-effective manner. Such investors
may include participants in agricultural
industries and other industries seeking
to hedge the risk of losses in their
commodity-related transactions, as well
as investors seeking exposure to the
agricultural commodities market. The
Sponsor does not intend to operate the
Fund or an Underlying Fund in a
fashion such that its per share NAV will
equal, in dollar terms, the spot price of
a unit of a Specified Commodity or the
price of any particular Futures Contract.
The Exchange represents that the
Fund will meet the initial and
continued listing requirements
applicable to Trust Issued Receipts in
NYSE Arca Equities Rule 8.200 and
Commentary .02 thereto. The Exchange
further represents that, with respect to
application of Rule 10A–3 under the
Act,13 the Trust will rely on the
exception contained in Rule 10A–
3(c)(7),14 and a minimum of 100,000
Shares for the Fund will be outstanding
as of the start of trading on the
Exchange.
Additional details regarding the Trust;
Fund; Shares; Underlying Funds;
Commodity Interests and other aspects
of the applicable commodities markets;
trading policies of the Fund; creations
and redemptions of the Shares;
Underlying Fund Average and
Underlying Fund Benchmarks;
investment risks; fees; NAV calculation;
the dissemination and availability of
information about the underlying assets
of the Fund and the Underlying Funds;
12 The Sponsor believes that market arbitrage
opportunities will cause the Fund’s Share price on
the NYSE Arca to closely track the Fund’s NAV per
Share. The Sponsor believes that the net effect of
this expected relationship and the expected
relationship described above between the Fund’s
NAV and the Underlying Fund Average will be that
the changes in the price of the Fund’s Shares on the
NYSE Arca will closely track, in percentage terms,
changes in the Underlying Fund Average.
13 17 CFR 240.10A–3.
14 17 CFR 240.10A–3(c)(7).
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trading halts; applicable trading rules;
surveillance; and the Information
Bulletin, among other things, can be
found in the Notice and/or the
Registration Statement,15 as applicable,
and the registration statements relating
to the Underlying Funds and the
releases approving the listing and
trading of the Underlying Funds, as
applicable.16
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule change to
list and trade the Shares of the Fund is
consistent with the requirements of
Section 6 of the Act and the rules and
regulations thereunder applicable to a
national securities exchange.17 In
particular, the Commission finds that
the proposed rule change is consistent
with the requirements of Section 6(b)(5)
of the Act,18 which requires, among
other things, that the Exchange’s rules
be designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Commission notes
that the Fund and the Shares must
comply with the requirements of NYSE
Arca Equities Rule 8.200 and
Commentary .02 thereto to be listed and
traded on the Exchange.
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,19 which sets
forth Congress’s finding that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
to assure the availability to brokers,
dealers, and investors of information
with respect to quotations for, and
transactions in, securities. Quotation
and last-sale information regarding the
Shares and shares of the Underlying
Funds will be disseminated through the
facilities of the Consolidated Tape
Association. In addition, the Underlying
Fund Average and each Benchmark will
be disseminated by one or more major
15 See Notice and Registration Statement, supra
notes 3 and 5, respectively.
16 See supra note 6.
17 In approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
18 15 U.S.C. 78f(b)(5).
19 15 U.S.C. 78k–1(a)(1)(C)(iii).
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12633
market data vendors every 15 seconds
during the NYSE Arca Core Trading
Session of 9:30 a.m. to 4 p.m. Eastern
Time (‘‘E.T.’’). In addition, an updated
Indicative Fund Value (‘‘IFV’’) for the
Fund, which is calculated by using the
prior day’s closing NAV per Share of the
Fund as a base and updating that value
throughout the NYSE Arca Core Trading
Session to reflect changes in the value
of the Underlying Funds’ shares, and
updated IFVs for each Underlying Fund
will be widely disseminated on a pershare basis by one or more major market
data vendors every 15 seconds during
the NYSE Arca Core Trading Session.20
The NAV for the Fund will be
calculated by the Administrator once
each trading day and will be
disseminated daily to all market
participants at the same time.21 The
Fund will provide Web site disclosure
of portfolio holdings daily and will
include, as applicable, the names,
quantity, price, and market value of the
Underlying Funds held by the Fund,
and other financial instruments, if any,
and the characteristics of such
instruments and cash equivalents, and
amount of cash held in the portfolio of
the Fund. In addition, the Underlying
Funds provide Web site disclosure of
their respective portfolio holdings daily
and include the names, quantity, price
and market value of such holdings and
the characteristics of such holdings. The
closing price and settlement prices of
the corn, wheat and soybean Futures
Contracts are readily available from
CBOT, and of sugar Futures Contracts
from ICE Futures, and on other
automated quotation systems, published
or other public sources, or on-line
information services. The Exchange
represents that quotation and last sale
information for the corn, wheat, soybean
and sugar Futures Contracts are widely
disseminated through a variety of major
market data vendors worldwide,
including Bloomberg and Reuters. In
addition, the Exchange further
represents that complete real-time data
for such contracts is available by
20 The normal trading hours for Futures Contracts
may begin after 9:30 a.m. and end before 4 p.m.
E.T., and there is a gap in time at the beginning and
the end of each day during which the Underlying
Funds’ shares are traded on the Exchange but realtime trading prices for at least some of the Futures
Contracts held by the Underlying Funds are not
available. As a result, during those gaps there will
be no update to the IFVs of the Underlying Funds
holding such Futures Contracts, and such IFVs will
be static.
21 The NAV for the Fund will be calculated by
taking the current market value of the Fund’s total
assets and subtracting any liabilities. The
Administrator will calculate the NAV of the Fund
as of the earlier of the close of the New York Stock
Exchange or 4 p.m. E.T. The NAV for a particular
trading day will be released after 4:15 p.m. E.T.
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subscription from Reuters and
Bloomberg. CBOT and ICE Futures also
provide delayed futures information on
current and past trading sessions and
market news free of charge on their Web
sites. The specific contract
specifications for such contracts are also
available at the CBOT and ICE Futures
Web sites, as well as other financial
informational sources. The spot prices
of corn, wheat, soybeans, and sugar are
also available on a 24-hour basis from
major market data vendors. In addition,
the Web site for the Fund and/or the
Exchange will contain the prospectus
and additional data relating to NAV and
other applicable quantitative
information.
The Commission further believes that
the proposal to list and trade the Shares
is reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. 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.
Further, the Exchange represents that it
may halt trading during the day in
which an interruption to the
dissemination of the IFV or the
Underlying Fund Average or the value
of the applicable Benchmark
Component Futures Contracts or the
applicable Benchmark occurs. If the
interruption to the dissemination of the
IFV, the Underlying Fund Average, the
value of the applicable Benchmark
Component Futures Contracts, or the
applicable Benchmark 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.22 In
addition, the Web site disclosure of the
portfolio composition of the Fund will
occur at the same time as the disclosure
by the Sponsor of the portfolio
composition to Authorized Purchasers
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 Purchasers. Accordingly,
each investor will have access to the
current portfolio composition of the
22 The Exchange also notes that, for each of the
Underlying Funds, the Exchange may halt trading
during the day in which an interruption to the
dissemination of the IFV or the value of the
applicable Benchmark Component Futures
Contracts or Benchmark occurs.
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Fund and each Underlying Fund
through the applicable fund’s Web sites.
The Exchange may halt trading in the
Shares if trading is not occurring in the
Futures Contracts or shares of the
Underlying Funds, or if other unusual
conditions or circumstances detrimental
to the maintenance of a fair and orderly
market are present.23 The Exchange
states that it has a general policy
prohibiting the distribution of material,
non-public information by its
employees. Lastly, 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 24 acting as registered
Market Makers 25 in Trust Issued
Receipts to facilitate surveillance.
The Exchange has represented that
the Shares are deemed to be equity
securities, thus rendering trading in the
Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. In support of this
proposal, the Exchange has made
representations, including:
(1) The Fund will meet the initial and
continued listing requirements
applicable to Trust Issued Receipts in
NYSE Arca Equities Rule 8.200 and
Commentary .02 thereto.
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) The Exchange’s surveillance
procedures applicable to derivative
products, including Trust Issued
Receipts, 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.
(4) To the extent that the Fund invests
in Futures Contracts, 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 the
Intermarket Surveillance Group (‘‘ISG’’)
or is a market with which the Exchange
does not have a comprehensive
surveillance sharing agreement. In
addition, with respect to the Underlying
Funds’ Futures Contracts traded on
exchanges, not more than 10% of the
23 With respect to trading halts, the Exchange may
consider all relevant factors in exercising its
discretion to halt or suspend trading in the Shares
of the Fund. Trading in the Shares of the Fund will
be subject to halts caused by extraordinary market
volatility pursuant to the Exchange’s circuit breaker
rules in NYSE Arca Equities Rule 7.12. Trading also
may be halted because of market conditions or for
reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.
24 See NYSE Arca Equities Rule 1.1(n) (defining
ETP Holder).
25 See NYSE Arca Equities Rule 1.1(u) (defining
Market Maker).
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
weight of such Futures Contracts in the
aggregate shall consist of components
whose principal trading market is not a
member of the ISG or is a market with
which the Exchange does not have a
comprehensive surveillance sharing
agreement. With respect to the
Underlying Funds, which are listed and
traded on the Exchange, the Exchange
can obtain market surveillance
information from CBOT, NYMEX, and
ICE Futures, which are ISG members,
and from Kansas City Board of Trade
(‘‘KCBT’’) and Minneapolis Grain
Exchange (‘‘MGEX’’) in that the
Exchange has in place a comprehensive
surveillance sharing agreement with
KCBT and MGEX.
(5) 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: (a) 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; (b)
the procedures for purchases and
redemptions of Shares in creation
baskets and redemption baskets (and
that Shares are not individually
redeemable); (c) 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; (d)
how information regarding the IFV is
disseminated; (e) 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 (f)
trading information.
(6) A minimum of 100,000 Shares for
the Fund will be outstanding as of the
start of trading on the Exchange.
(7) With respect to the application of
Rule 10A–3 under the Act, the Trust
will rely on the exception contained in
Rule 10A–3(c)(7).26
This approval order is based on all of
the Exchange’s representations.27 The
Commission notes that the Fund will
primarily invest in shares of the
26 See
supra notes 13 and 14 and accompanying
text.
27 The Commission notes that it does not regulate
the market for futures in which the Fund and the
Underlying Funds plan to take positions, which is
the responsibility of the CFTC. The CFTC has the
authority to set limits on the positions that any
person may take in futures. These limits may be
directly set by the CFTC or by the markets on which
the futures are traded. The Commission has no role
in establishing position limits on futures, even
though such limits could impact an exchangetraded product that is under the jurisdiction of the
Commission.
E:\FR\FM\01MRN1.SGM
01MRN1
Federal Register / Vol. 77, No. 41 / Thursday, March 1, 2012 / Notices
Underlying Funds, which have been
approved for listing and trading on the
Exchange by the Commission.28
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 29 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,30 that the
proposed rule change (SR–NYSEArca–
2011–97) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Kevin M. O’Neill,
Secretary.
[FR Doc. 2012–4915 Filed 2–29–12; 8:45 am]
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 the Substance
of the Proposed Rule Change
FINRA is proposing to amend Section
4(c) of Schedule A to the FINRA ByLaws to (1) increase qualification
examination fees, and (2) assess a
service charge for any Regulatory
Element sessions taken in a test center
located outside the territorial limits of
the United States. The text of the
proposed rule change is available on
FINRA’s Web site at https://
www.finra.org, at the principal office of
FINRA 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
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66465; File No. SR–FINRA–
2012–009]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Section 4(c) of
Schedule A to the FINRA By-Laws To
Increase Qualification Examination
Fees and Assess a Service Charge for
Regulatory Element Continuing
Education Sessions Taken Outside the
United States
In its filing with the Commission,
FINRA 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. FINRA 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
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
23, 2012, Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II
and III below, which Items have been
prepared by FINRA. FINRA has
designated the proposed rule change as
‘‘establishing or changing a due, fee or
other charge’’ under Section
19(b)(3)(A)(ii) of the Act 3 and Rule 19b–
4(f)(2) thereunder,4 which renders the
proposal effective upon receipt of this
filing by the Commission. The
mstockstill on DSK4VPTVN1PROD with NOTICES
February 24, 2012.
As discussed in further detail below,
the proposed rule change amends
Section 4(c) of Schedule A to the FINRA
By-Laws to (1) increase qualification
examination fees, and (2) assess a
service charge for any Regulatory
Element session taken in a test center
located outside the territorial limits of
the United States.
28 See
supra note 6.
U.S.C. 78f(b)(5).
30 15 U.S.C. 78s(b)(2).
31 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
29 15
VerDate Mar<15>2010
17:25 Feb 29, 2012
Qualification Examination Fees
NASD Rules 1021(a) and 1031(a)
require that persons engaged, or to be
engaged, in the investment banking or
securities business of a FINRA member
who are to function as principals or
representatives register with FINRA in
each category of registration appropriate
to their functions as specified in NASD
Rules 1022 and 1032.5 Such individuals
must pass an appropriate qualification
5 See also NASD Rules 1041 and 1050 and FINRA
Rule 1230(b)(6) regarding the qualification and
registration requirements for Order Processing
Assistant Representatives, Research Analysts and
Operations Professionals, respectively.
Jkt 226001
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
12635
examination before their registration can
become effective. These mandatory
qualification examinations cover a
broad range of subjects regarding
financial markets and products,
individual responsibilities, securities
industry rules, and regulatory structure.
FINRA develops, maintains, and
delivers all qualification examinations
for individuals who are registered or
seeking registration with FINRA. FINRA
also administers and delivers
examinations sponsored (i.e.,
developed) by the Municipal Securities
Rulemaking Board (‘‘MSRB’’), the North
American Securities Administrators
Association, the National Futures
Association, the Federal Deposit
Insurance Corporation, and other selfregulatory organizations.
FINRA currently administers
examinations via computer through the
PROCTOR® system 6 at testing centers
operated by vendors under contract
with FINRA. FINRA charges an
examination fee to candidates for
FINRA-sponsored and co-sponsored
examinations to cover the development,
maintenance, and delivery of these
examinations. For qualification
examinations sponsored by a FINRA
client and administered by FINRA,
FINRA charges a delivery fee that
represents either a portion of or the
entire examination fee for the
examination.7
FINRA regularly conducts a
comprehensive review of the
examination fee structure, including an
analysis of the costs associated with
developing, administering, and
delivering examinations. Based on the
results of its review, FINRA may
propose changes to better align the
examination fee structure with the costs
associated with the programs. In this
regard, the most recent review revealed
that certain operational costs have
increased and, based on current
information, will continue to increase
over the next few years. In particular,
these costs consist of (1) fees that
vendors charge FINRA for delivering
qualification examinations, and (2)
PROCTOR maintenance and
enhancement expenses. FINRA believes
that the proposed rule change will help
6 PROCTOR is a computer system that is
specifically designed for the administration and
delivery of computer-based testing and training.
7 The delivery fee represents a portion of the
entire examination fee when a FINRA client has
established an additional fee for an examination
that it sponsors. For example, the fee to take the
Series 51 (Municipal Fund Securities Limited
Principal) examination is currently $145. Of this
amount, $85 is the FINRA administration and
delivery fee, and $60 is the development fee
determined by the FINRA client, the MSRB. See
MSRB Rule A–16.
E:\FR\FM\01MRN1.SGM
01MRN1
]]>Agencies
[Federal Register Volume 77, Number 41 (Thursday, March 1, 2012)]
[Notices]
[Pages 12631-12635]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4915]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66466; File No. SR-NYSEArca-2011-97]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change Relating to Listing and Trading of
Shares of the Teucrium Agriculture Fund Under NYSE Arca Equities Rule
8.200
February 24, 2012.
I. Introduction
On December 20, 2011, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares of the Teucrium
Agriculture Fund under Commentary .02 to NYSE Arca Equities Rule 8.200.
The proposed rule change was published for comment in the Federal
Register on January 10, 2012.\3\ The Commission received no comments on
the proposal. This order grants approval of the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 66098 (January 4,
2012), 77 FR 1526 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to list and trade shares (``Shares'') of the
Teucrium Agriculture Fund (``Fund'') pursuant to NYSE Arca Equities
Rule 8.200, Commentary .02, which permits the trading of Trust Issued
Receipts either by listing or pursuant to unlisted trading
privileges.\4\ The Fund is a commodity pool that is a series of the
Teucrium Commodity Trust (``Trust''), a Delaware statutory trust.\5\
The Fund is managed and controlled by Teucrium Trading, LLC
(``Sponsor''), which is a Delaware limited liability company that is
registered as a commodity pool operator with the Commodity Futures
Trading Commission (``CFTC'') and is a member of the National Futures
Association. The Bank of New York Mellon (``Custodian'' or
``Administrator'') is the custodian, transfer agent, and administrator
for the Fund. Foreside Fund Services, LLC (``Distributor'') is the
distributor for the Fund's Shares.
---------------------------------------------------------------------------
\4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to
Trust Issued Receipts 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.
\5\ See Amendment No. 1 to Form S-1 for the Trust, dated
December 5, 2011 (File No. 333-173691) relating to the Fund
(``Registration Statement'').
---------------------------------------------------------------------------
Teucrium Agriculture Fund
The investment objective of the Fund is to have the daily changes
in percentage terms of the Shares' net asset value (``NAV'') reflect
the daily changes in percentage terms of a weighted average
(``Underlying Fund Average'') of the NAVs per share of four other
commodity pools that are series of the Trust and are sponsored by the
Sponsor: Teucrium Corn Fund, Teucrium Wheat Fund, Teucrium Soybean
Fund, and Teucrium Sugar Fund (collectively, ``Underlying Funds'').\6\
The Fund seeks to achieve its investment objective by investing under
normal market conditions \7\ in the publicly-traded shares of each
Underlying Fund so that the Underlying Fund Average will have a
weighting of 25% for each Underlying Fund, and the Fund's assets will
be rebalanced, generally on a daily basis, to maintain the approximate
25% allocation to each Underlying Fund. The Fund does not intend to
invest directly in futures contracts (``Futures Contracts'') or other
Commodity Interests (as defined below), although it reserves the right
to do so in the future, including if an Underlying Fund ceases
operations or if shares of an Underlying Fund cease trading on the
Exchange.
---------------------------------------------------------------------------
\6\ Additional information regarding the Underlying Funds is
included in the Commission orders approving the listing and trading
of the Underlying Funds and in their corresponding registration
statements. See Securities Exchange Act Release Nos. 62213 (June 3,
2010), 75 FR 32828 (June 9, 2010) (SR-NYSEArca-2010-22) (order
approving listing on the Exchange of Teucrium Corn Fund); 65344
(September 15, 2011), 76 FR 58549 (September 21, 2011) (SR-NYSEArca-
2011-48) (order approving listing on the Exchange of the Teucrium
Wheat Fund, Teucrium Soybean Fund, and Teucrium Sugar Fund). See
also Amendment No. 4 to the Registration Statement on Form S-1 for
Teucrium Commodity Trust, dated May 26, 2010 (File No. 333-162033)
relating to the Teucrium Corn Fund; Amendment No. 3 to Form S-1 for
Teucrium Commodity Trust, dated June 3, 2011 (File No. 333-167591)
relating to the Teucrium Wheat Fund; Amendment No. 3 to Form S-1 for
Teucrium Commodity Trust, dated June 3, 2011 (File No. 333-167590)
relating to the Teucrium Soybean Fund; and Amendment No. 3 to Form
S-1 for Teucrium Commodity Trust, dated June 3, 2011 (File No. 333-
167585) relating to the Teucrium Sugar Fund.
\7\ The term ``under normal market conditions'' includes, but is
not limited to, the absence of extreme volatility or trading halts
in the commodity markets or the financial markets generally;
operational issues causing dissemination of inaccurate market
information; or force majeure type events such as systems failure,
natural or man-made disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar intervening
circumstance.
---------------------------------------------------------------------------
While the Fund expects to maintain substantially all of its assets
in shares of the Underlying Funds at all times, the Fund may hold some
residual amount of assets in obligations of the United States
government (``Treasury Securities'') or cash equivalents, and/or hold
such assets in cash (generally in interest-bearing accounts). The Fund
will earn interest income from the Treasury Securities and/or cash
equivalents that it purchases and on the cash it holds through the
Custodian.
The investment objective of each Underlying Fund is to have the
daily changes in percentage terms of its shares' NAV reflect the daily
changes in percentage terms of a weighted average of the closing
settlement prices for certain Futures Contracts for the commodity
specified in the Underlying Fund's name.\8\ The Teucrium Corn Fund's
Benchmark is: (1) The second-to-expire Futures Contract for corn traded
on the Chicago Board of Trade (``CBOT''), weighted 35%, (2) the third-
to-expire CBOT corn Futures Contract, weighted 30%, and (3) the CBOT
corn Futures Contract expiring in the December following the expiration
month of the third-to-expire contract, weighted 35%. The Teucrium Wheat
Fund's Benchmark is: (1) The second-to-expire CBOT wheat Futures
Contract, weighted 35%, (2) the third-to-expire CBOT wheat Futures
Contract, weighted
[[Page 12632]]
30%, and (3) the CBOT wheat Futures Contract expiring in the December
following the expiration month of the third-to-expire contract,
weighted 35%. The Teucrium Soybean Fund's Benchmark is: (1) The second-
to-expire CBOT soybean Futures Contract, weighted 35%, (2) the third-
to-expire CBOT soybean Futures Contract, weighted 30%, and (3) the CBOT
soybean Futures Contract expiring in the November following the
expiration month of the third-to-expire contract, weighted 35%, except
that CBOT soybean Futures Contracts expiring in August and September
will not be part of the Teucrium Soybean Fund's Benchmark because of
the less liquid market for these Futures Contracts. The Teucrium Sugar
Fund's Benchmark is: (1) The second-to-expire Sugar No. 11 Futures
Contract traded on ICE Futures U.S. (``ICE Futures''),\9\ weighted 35%,
(2) the third-to-expire ICE Futures Sugar No. 11 Futures Contract,
weighted 30%, and (3) the ICE Futures Sugar No. 11 Futures Contract
expiring in the March following the expiration month of the third-to-
expire contract, weighted 35%.
---------------------------------------------------------------------------
\8\ This weighted average is referred to herein as the
Underlying Fund's ``Benchmark,'' the Futures Contracts that at any
given time make up an Underlying Fund's Benchmark are referred to
herein as the Underlying Fund's ``Benchmark Component Futures
Contracts,'' and the commodity specified in the Underlying Fund's
name is referred to herein as its ``Specified Commodity.''
\9\ According to the Registration Statement, although sugar
Futures Contracts are primarily traded on the ICE Futures, they may
also be traded on the New York Mercantile Exchange (``NYMEX'').
---------------------------------------------------------------------------
Each Underlying Fund seeks to achieve its investment objective by
investing under normal market conditions in Benchmark Component Futures
Contracts or, in certain circumstances, in other Futures Contracts for
its Specified Commodity. In addition, and to a limited extent, an
Underlying Fund also may invest in exchange-traded options on Futures
Contracts for its Specified Commodity and in swap agreements based on
its Specified Commodity that are cleared through a futures exchange or
its affiliated provider of clearing services (``Cleared Swaps'') in
furtherance of the Underlying Fund's investment objective. Once
position limits or accountability levels on Futures Contracts on an
Underlying Fund's Specified Commodity are reached, each Underlying
Fund's intention is to invest first in Cleared Swaps based on its
Specified Commodity to the extent practicable under the position limits
or accountability levels applicable to such Cleared Swaps and
appropriate in light of the liquidity in the market for such Cleared
Swaps, and then in contracts and instruments such as cash-settled
options on Futures Contracts and forward contracts, swaps other than
Cleared Swaps, and other over-the-counter transactions that are based
on the price of its Specified Commodity or Futures Contracts on its
Specified Commodity (collectively, ``Other Commodity Interests,'' and,
together with Futures Contracts and Cleared Swaps, ``Commodity
Interests''). By utilizing certain or all of these investments, the
Sponsor will endeavor to cause each Underlying Fund's performance to
closely track that of its Benchmark.
The Underlying Funds seek to achieve their investment objectives
primarily by investing in Commodity Interests such that daily changes
in the Underlying Fund's NAV will be expected to closely track the
changes in its Benchmark. Each Underlying Fund's positions in Commodity
Interests will be changed or ``rolled'' on a regular basis in order to
track the changing nature of its Benchmark. For example, several times
a year (on the dates on which Futures Contracts on the Underlying
Fund's Specified Commodity expire), a particular Futures Contract will
no longer be a Benchmark Component Futures Contract, and the Underlying
Fund's investments will have to be changed accordingly. In order that
the Underlying Funds' trading does not cause unwanted market movements
and to make it more difficult for third parties to profit by trading
based on such expected market movements, the Underlying Funds'
investments typically will not be rolled entirely on that day, but
rather will typically be rolled over a period of several days.
Consistent with achieving each Underlying Fund's investment
objective of closely tracking its Benchmark, the Sponsor may for
certain reasons cause the Underlying Fund to enter into or hold Futures
Contracts other than the Benchmark Component Futures Contracts, Cleared
Swaps and/or Other Commodity Interests. For example, certain Cleared
Swaps have standardized terms similar to, and are priced by reference
to, a corresponding Benchmark Component Futures Contract. Additionally,
Other Commodity Interests that do not have standardized terms and are
not exchange-traded, referred to as ``over-the-counter'' Commodity
Interests, can generally be structured as the parties to the Commodity
Interest contract desire. Therefore, an Underlying Fund might enter
into multiple Cleared Swaps and/or over-the-counter Commodity Interests
related to its Specified Commodity that are intended to exactly
replicate the performance of Benchmark Component Futures Contracts of
the Underlying Fund, or a single over-the-counter Commodity Interest
designed to replicate the performance of its Benchmark as a whole.
Assuming that there is no default by a counterparty to an over-the-
counter Commodity Interest, the performance of the Commodity Interest
will necessarily correlate exactly with the performance of the
Underlying Fund's Benchmark or the applicable Benchmark Component
Futures Contract.\10\ The Underlying Funds might also enter into or
hold Commodity Interests other than Benchmark Component Futures
Contracts to facilitate effective trading. In addition, an Underlying
Fund might enter into or hold Commodity Interests related to its
Specified Commodity that would be expected to alleviate overall
deviation between the Underlying Fund's performance and that of its
Benchmark that may result from certain market and trading
inefficiencies or other reasons.
---------------------------------------------------------------------------
\10\ With respect to the Underlying Funds, the creditworthiness
of each potential counterparty will be assessed by the Sponsor. The
Sponsor will assess or review, as appropriate, the creditworthiness
of each potential or existing counterparty to an over-the-counter
contract pursuant to guidelines approved by the Sponsor.
---------------------------------------------------------------------------
The Underlying Funds invest in Commodity Interests to the fullest
extent possible without being leveraged \11\ or unable to satisfy their
expected current or potential margin or collateral obligations with
respect to their investments in Commodity Interests. After fulfilling
such margin and collateral requirements, the Underlying Funds will
invest the remainder of the proceeds from the sale of baskets in
Treasury Securities or cash equivalents, and/or hold such assets in
cash. Therefore, the focus of the Sponsor in managing the Underlying
Funds is investing in Commodity Interests and in Treasury Securities,
cash and/or cash equivalents. The Underlying Funds will earn interest
income from the Treasury Securities and/or cash equivalents that it
purchases and on the cash it holds through the Custodian.
---------------------------------------------------------------------------
\11\ The Sponsor represents that the Fund and Underlying Funds
will invest in their applicable Commodity Interests in a manner
consistent with their respective investment objectives and not to
achieve additional leverage.
---------------------------------------------------------------------------
The Sponsor will endeavor to place the Fund's trades in the
Underlying Funds and otherwise manage the Fund's investments so that
the Fund's average daily tracking error against the Underlying Fund
Average will be less than 10 percent over any period of 30 trading
days. More specifically, the Sponsor will endeavor to manage the Fund
so that A will be within plus/minus 10 percent of B, where A is the
average daily change in the Fund's NAV for any period of 30 successive
valuation days, i.e., any trading day as
[[Page 12633]]
of which the Fund calculates its NAV, and B is the average daily change
in the Underlying Fund Average over the same period.\12\
---------------------------------------------------------------------------
\12\ The Sponsor believes that market arbitrage opportunities
will cause the Fund's Share price on the NYSE Arca to closely track
the Fund's NAV per Share. The Sponsor believes that the net effect
of this expected relationship and the expected relationship
described above between the Fund's NAV and the Underlying Fund
Average will be that the changes in the price of the Fund's Shares
on the NYSE Arca will closely track, in percentage terms, changes in
the Underlying Fund Average.
---------------------------------------------------------------------------
The Sponsor will employ a ``neutral'' investment strategy intended
so that the Fund will track the changes in the Underlying Fund Average
and each Underlying Fund will track the changes in its Benchmark
regardless of whether the Underlying Fund Average or Benchmark goes up
or down. According to the Registration Statement, the Fund's and
Underlying Funds' ``neutral'' investment strategies are designed to
permit investors generally to purchase and sell the Fund's Shares for
the purpose of investing indirectly in the agricultural commodities
market in a cost-effective manner. Such investors may include
participants in agricultural industries and other industries seeking to
hedge the risk of losses in their commodity-related transactions, as
well as investors seeking exposure to the agricultural commodities
market. The Sponsor does not intend to operate the Fund or an
Underlying Fund in a fashion such that its per share NAV will equal, in
dollar terms, the spot price of a unit of a Specified Commodity or the
price of any particular Futures Contract.
The Exchange represents that the Fund will meet the initial and
continued listing requirements applicable to Trust Issued Receipts in
NYSE Arca Equities Rule 8.200 and Commentary .02 thereto. The Exchange
further represents that, with respect to application of Rule 10A-3
under the Act,\13\ the Trust will rely on the exception contained in
Rule 10A-3(c)(7),\14\ and a minimum of 100,000 Shares for the Fund will
be outstanding as of the start of trading on the Exchange.
---------------------------------------------------------------------------
\13\ 17 CFR 240.10A-3.
\14\ 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------
Additional details regarding the Trust; Fund; Shares; Underlying
Funds; Commodity Interests and other aspects of the applicable
commodities markets; trading policies of the Fund; creations and
redemptions of the Shares; Underlying Fund Average and Underlying Fund
Benchmarks; investment risks; fees; NAV calculation; the dissemination
and availability of information about the underlying assets of the Fund
and the Underlying Funds; trading halts; applicable trading rules;
surveillance; and the Information Bulletin, among other things, can be
found in the Notice and/or the Registration Statement,\15\ as
applicable, and the registration statements relating to the Underlying
Funds and the releases approving the listing and trading of the
Underlying Funds, as applicable.\16\
---------------------------------------------------------------------------
\15\ See Notice and Registration Statement, supra notes 3 and 5,
respectively.
\16\ See supra note 6.
---------------------------------------------------------------------------
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change to list and trade the Shares of the Fund is consistent with the
requirements of Section 6 of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\17\ In
particular, the Commission finds that the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act,\18\
which requires, among other things, that the Exchange's rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The Commission notes that
the Fund and the Shares must comply with the requirements of NYSE Arca
Equities Rule 8.200 and Commentary .02 thereto to be listed and traded
on the Exchange.
---------------------------------------------------------------------------
\17\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\19\ which sets forth Congress's finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. Quotation and last-
sale information regarding the Shares and shares of the Underlying
Funds will be disseminated through the facilities of the Consolidated
Tape Association. In addition, the Underlying Fund Average and each
Benchmark will be disseminated by one or more major market data vendors
every 15 seconds during the NYSE Arca Core Trading Session of 9:30 a.m.
to 4 p.m. Eastern Time (``E.T.''). In addition, an updated Indicative
Fund Value (``IFV'') for the Fund, which is calculated by using the
prior day's closing NAV per Share of the Fund as a base and updating
that value throughout the NYSE Arca Core Trading Session to reflect
changes in the value of the Underlying Funds' shares, and updated IFVs
for each Underlying Fund will be widely disseminated on a per-share
basis by one or more major market data vendors every 15 seconds during
the NYSE Arca Core Trading Session.\20\ The NAV for the Fund will be
calculated by the Administrator once each trading day and will be
disseminated daily to all market participants at the same time.\21\ The
Fund will provide Web site disclosure of portfolio holdings daily and
will include, as applicable, the names, quantity, price, and market
value of the Underlying Funds held by the Fund, and other financial
instruments, if any, and the characteristics of such instruments and
cash equivalents, and amount of cash held in the portfolio of the Fund.
In addition, the Underlying Funds provide Web site disclosure of their
respective portfolio holdings daily and include the names, quantity,
price and market value of such holdings and the characteristics of such
holdings. The closing price and settlement prices of the corn, wheat
and soybean Futures Contracts are readily available from CBOT, and of
sugar Futures Contracts from ICE Futures, and on other automated
quotation systems, published or other public sources, or on-line
information services. The Exchange represents that quotation and last
sale information for the corn, wheat, soybean and sugar Futures
Contracts are widely disseminated through a variety of major market
data vendors worldwide, including Bloomberg and Reuters. In addition,
the Exchange further represents that complete real-time data for such
contracts is available by
[[Page 12634]]
subscription from Reuters and Bloomberg. CBOT and ICE Futures also
provide delayed futures information on current and past trading
sessions and market news free of charge on their Web sites. The
specific contract specifications for such contracts are also available
at the CBOT and ICE Futures Web sites, as well as other financial
informational sources. The spot prices of corn, wheat, soybeans, and
sugar are also available on a 24-hour basis from major market data
vendors. In addition, the Web site for the Fund and/or the Exchange
will contain the prospectus and additional data relating to NAV and
other applicable quantitative information.
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\19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\20\ The normal trading hours for Futures Contracts may begin
after 9:30 a.m. and end before 4 p.m. E.T., and there is a gap in
time at the beginning and the end of each day during which the
Underlying Funds' shares are traded on the Exchange but real-time
trading prices for at least some of the Futures Contracts held by
the Underlying Funds are not available. As a result, during those
gaps there will be no update to the IFVs of the Underlying Funds
holding such Futures Contracts, and such IFVs will be static.
\21\ The NAV for the Fund will be calculated by taking the
current market value of the Fund's total assets and subtracting any
liabilities. The Administrator will calculate the NAV of the Fund as
of the earlier of the close of the New York Stock Exchange or 4 p.m.
E.T. The NAV for a particular trading day will be released after
4:15 p.m. E.T.
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The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. 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. Further, the Exchange represents
that it may halt trading during the day in which an interruption to the
dissemination of the IFV or the Underlying Fund Average or the value of
the applicable Benchmark Component Futures Contracts or the applicable
Benchmark occurs. If the interruption to the dissemination of the IFV,
the Underlying Fund Average, the value of the applicable Benchmark
Component Futures Contracts, or the applicable Benchmark 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.\22\ In addition, the Web site disclosure of the portfolio
composition of the Fund will occur at the same time as the disclosure
by the Sponsor of the portfolio composition to Authorized Purchasers 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 Purchasers. Accordingly, each investor will have
access to the current portfolio composition of the Fund and each
Underlying Fund through the applicable fund's Web sites. The Exchange
may halt trading in the Shares if trading is not occurring in the
Futures Contracts or shares of the Underlying Funds, or if other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present.\23\ The Exchange states that it
has a general policy prohibiting the distribution of material, non-
public information by its employees. Lastly, 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 \24\ acting as
registered Market Makers \25\ in Trust Issued Receipts to facilitate
surveillance.
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\22\ The Exchange also notes that, for each of the Underlying
Funds, the Exchange may halt trading during the day in which an
interruption to the dissemination of the IFV or the value of the
applicable Benchmark Component Futures Contracts or Benchmark
occurs.
\23\ With respect to trading halts, the Exchange may consider
all relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund. Trading in the Shares of the Fund
will be subject to halts caused by extraordinary market volatility
pursuant to the Exchange's circuit breaker rules in NYSE Arca
Equities Rule 7.12. Trading also may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.
\24\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
\25\ See NYSE Arca Equities Rule 1.1(u) (defining Market Maker).
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The Exchange has represented that the Shares are deemed to be
equity securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made representations,
including:
(1) The Fund will meet the initial and continued listing
requirements applicable to Trust Issued Receipts in NYSE Arca Equities
Rule 8.200 and Commentary .02 thereto.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) The Exchange's surveillance procedures applicable to derivative
products, including Trust Issued Receipts, 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.
(4) To the extent that the Fund invests in Futures Contracts, 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 the Intermarket Surveillance Group (``ISG'') or is a market
with which the Exchange does not have a comprehensive surveillance
sharing agreement. In addition, with respect to the Underlying 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 the ISG or is a
market with which the Exchange does not have a comprehensive
surveillance sharing agreement. With respect to the Underlying Funds,
which are listed and traded on the Exchange, the Exchange can obtain
market surveillance information from CBOT, NYMEX, and ICE Futures,
which are ISG members, and from Kansas City Board of Trade (``KCBT'')
and Minneapolis Grain Exchange (``MGEX'') in that the Exchange has in
place a comprehensive surveillance sharing agreement with KCBT and
MGEX.
(5) 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: (a)
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; (b) the procedures for purchases and redemptions of
Shares in creation baskets and redemption baskets (and that Shares are
not individually redeemable); (c) 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;
(d) how information regarding the IFV is disseminated; (e) 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 (f) trading information.
(6) A minimum of 100,000 Shares for the Fund will be outstanding as
of the start of trading on the Exchange.
(7) With respect to the application of Rule 10A-3 under the Act,
the Trust will rely on the exception contained in Rule 10A-3(c)(7).\26\
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\26\ See supra notes 13 and 14 and accompanying text.
This approval order is based on all of the Exchange's
representations.\27\ The Commission notes that the Fund will primarily
invest in shares of the
[[Page 12635]]
Underlying Funds, which have been approved for listing and trading on
the Exchange by the Commission.\28\
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\27\ The Commission notes that it does not regulate the market
for futures in which the Fund and the Underlying Funds plan to take
positions, which is the responsibility of the CFTC. The CFTC has the
authority to set limits on the positions that any person may take in
futures. These limits may be directly set by the CFTC or by the
markets on which the futures are traded. The Commission has no role
in establishing position limits on futures, even though such limits
could impact an exchange-traded product that is under the
jurisdiction of the Commission.
\28\ See supra note 6.
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For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \29\ and the
rules and regulations thereunder applicable to a national securities
exchange.
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\29\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-NYSEArca-2011-97) be, and it
hereby is, approved.
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\30\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Secretary.
[FR Doc. 2012-4915 Filed 2-29-12; 8:45 am]
BILLING CODE 8011-01-P
