Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Allow the Use of Swap Agreements Under Limited Circumstances by the ProShares VIX Short-Term Futures ETF and the ProShares VIX Mid-Term Futures ETF, Which Are Listed and Traded on the Exchange Under NYSE Arca Equities Rule 8.200, Commentary .02, 34117-34121 [2012-13892]
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Federal Register / Vol. 77, No. 111 / Friday, June 8, 2012 / Notices
the ability to enter PL Select Orders
would be an additional option for Users.
Furthermore, the Exchange believes that
the proposed PL Select Order furthers
the goals of a free and open market and
national market system by providing
Users with the ability to add additional
instructions to PL Orders to ensure that
such orders are used primarily for
liquidity providing, price improvement
purposes.
The Exchange further believes that
providing the Exchange with the ability
to suspend the entry of PL Select Orders
supports the principle of promoting just
and equitable principles of trade and
removing impediments to and
perfecting the mechanism of a free and
open market. Currently, the technology
process associated with the proposed PL
Select Orders would be to assess each
incoming order to determine whether it
can interact with resting PL Select
Orders. If, in the rare circumstances, the
volume of orders received by the
Exchange, including of PL Select
Orders, and the attendant need to assess
each order, results in reduced trading
performance and increased latency, the
Exchange believes that it is appropriate
to suspend the entry of PL Select
Orders, which would also result in
cancelling any open PL Select Orders,
until such time that the potential cause
of increased latencies has been resolved.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
mstockstill on DSK4VPTVN1PROD with NOTICES
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
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(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 Exchange
Act. Comments may be submitted by
any of the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2012–48 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–2012–48. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for 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 the 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–2012–48 and should be
submitted on or before June 29, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–13893 Filed 6–7–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67100; File No. SR–
NYSEArca–2012–49]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Allow the Use of Swap
Agreements Under Limited
Circumstances by the ProShares VIX
Short-Term Futures ETF and the
ProShares VIX Mid-Term Futures ETF,
Which Are Listed and Traded on the
Exchange Under NYSE Arca Equities
Rule 8.200, Commentary .02
June 4, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on May 22,
2012, NYSE Arca, Inc. (‘‘Exchange’’ or
‘‘NYSE Arca’’) filed with the Securities
and Exchange Commission
(‘‘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
accommodate the use of swap
agreements under limited circumstances
by the ProShares VIX Short-Term
Futures ETF and the ProShares VIX
Mid-Term Futures ETF, which are listed
and traded on the Exchange under
NYSE Arca Equities Rule 8.200,
Commentary .02. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
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
self-regulatory organization included
1 15
9 17
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34117
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 77, No. 111 / Friday, June 8, 2012 / Notices
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
Statutory Basis for, the Proposed Rule
Change
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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 Commission
has approved listing and trading on the
Exchange of shares (‘‘Shares’’) of the
ProShares VIX Short-Term Futures ETF
and the ProShares VIX Mid-Term
Futures ETF (‘‘Funds’’) under NYSE
Arca Equities Rule 8.200, Commentary
.02,4 and the Shares have commenced
listing and trading on the Exchange.
The Funds seek to provide investment
results (before fees and expenses) that
match the performance of a benchmark
that seeks to offer exposure to market
volatility through publicly traded
futures markets. The benchmark for
ProShares VIX Short-Term Futures ETF
is the S&P 500 VIX Short-Term Futures
Index, and the benchmark for ProShares
VIX Mid-Term Futures ETF is the S&P
500 VIX Mid-Term Futures Index (each,
an ‘‘Index,’’ and collectively,
‘‘Indexes’’).5 To pursue their respective
investment objectives, the Funds invest
in futures contracts that comprise their
respective Index and that are based on
the Chicago Board Options Exchange
(‘‘CBOE’’) Volatility Index or ‘‘VIX’’
(‘‘VIX Futures Contracts’’). VIX Futures
Contracts are traded on the CBOE
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 Securities Exchange Act Release No. 63610
(December 27, 2010), 76 FR 199 (January 3, 2011)
(SR–NYSEArca–2010–101) (‘‘Prior Order’’). The
notice with respect to the Prior Order was
published in Securities Exchange Act Release No.
63317 (November 16, 2010), 75 FR 71158
(November 22, 2010) (‘‘Prior Notice’’ and, together
with the Prior Order, ‘‘Prior Release’’).
5 Standard & Poor’s Financial Services LLC, the
index sponsor with respect to the Indexes, is not a
broker-dealer or affiliated with a broker-dealer, and
has implemented procedures designed to prevent
the use and dissemination of material, non-public
information regarding the Indexes.
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16:23 Jun 07, 2012
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Futures Exchange (‘‘CFE’’). Each Fund
also may invest in cash or cash
equivalents such as U.S. Treasury
securities or other high credit quality,
short-term fixed-income or similar
securities (including shares of money
market funds, bank deposits, bank
money market accounts, certain variable
rate-demand notes, and repurchase
agreements collateralized by
government securities) that may serve as
collateral for the futures contracts.
ProShare Capital Management LLC
(‘‘Sponsor’’), a Maryland limited
liability company, serves as the Sponsor
of ProShares Trust II (‘‘Trust’’).6 The
Sponsor is a commodity pool operator
and commodity trading advisor. Brown
Brothers Harriman & Co. serves as the
administrator (‘‘Administrator’’),
custodian, and transfer agent of the
Funds and their respective Shares. SEI
Investments Distribution Co.
(‘‘Distributor’’) serves as Distributor of
the Shares. Wilmington Trust Company,
a Delaware banking corporation, is the
sole trustee of the Trust.
According to the Registration
Statement, if a Fund is successful in
meeting its objective, its value (before
fees and expenses) should gain
approximately as much on a percentage
basis as the level of its corresponding
Index when it rises. Conversely, its
value (before fees and expenses) should
lose approximately as much on a
percentage basis as the level of its
corresponding Index when it declines.
Each Fund acquires exposure through
VIX Futures Contracts such that each
Fund has exposure intended to
approximate the benchmark at the time
of the net asset value (‘‘NAV’’)
calculation.7
Under the current proposal, the Funds
seek to utilize swap agreements and
futures contracts other than VIX Futures
Contracts (as further described herein)
to pursue their respective investment
objectives.8
6 The Trust has filed a registration statement on
Form S–3 under the Securities Act of 1933 (15
U.S.C. 77a), dated November 5, 2010, relating to the
Funds (File No. 333–163511) (‘‘Registration
Statement’’). The description of the Funds and the
Shares contained in the Prior Release were based,
in part, on the Registration Statement. The changes
described herein will become effective upon filing
with the Commission of an amendment to the
Trust’s Registration Statement. The Sponsor
represents that the Sponsor has managed and will
continue to manage the Funds in the manner
described in the Prior Release, and will not
implement the changes described herein until the
instant proposed rule change becomes operative
and an amendment to the Registration Statement
has become effective.
7 Terms relating to the Funds, the Shares, and the
Indexes referred to, but not defined, herein are
defined in the Registration Statement.
8 The Commission previously has approved
listing and trading on the Exchange of issues of
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Fmt 4703
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Going forward, in the event position
accountability rules are reached with
respect to VIX Futures Contracts, the
Sponsor, may, in its commercially
reasonable judgment, cause the Funds to
obtain exposure through swaps
referencing the relevant Index or
particular VIX Futures Contracts, or
invest in other futures contracts or
swaps not based on the particular VIX
Futures Contracts if such instruments
tend to exhibit trading prices or returns
that correlate with the Indexes or any
VIX Futures Contract and will further
the investment objective of the Funds.9
The Funds 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 the Funds
from obtaining the appropriate amount
of investment exposure to the affected
VIX Futures Contracts directly or other
futures contract.10
TIRs under NYSE Arca Equities Rule 8.200,
Commentary .02 that may hold swaps under limited
circumstances. See, e.g., Securities Exchange Act
Release Nos. 62527 (July 19, 2010), 75 FR 43606
(July 26, 2010) (SR–NYSEArca–2010–44) (order
approving Exchange listing and trading of United
States Commodity Index Fund); 63869 (February 8,
2011), 76 FR 8799 (February 15, 2011) (SR–
NYSEArca–2010–119) (order approving Exchange
listing and trading of Teucrium WTI Crude Oil
Fund); and 65134 (August 15, 2011), 76 FR 52034
(August 19, 2011) (SR–NYSEArca–2011–23) (order
approving Exchange listing and trading of
ProShares Short VIX Short-Term Futures ETF,
ProShares Short VIX Mid-Term Futures ETF,
ProShares Ultra VIX Short-Term Futures ETF,
ProShares Ultra VIX Mid-Term Futures ETF,
ProShares UltraShort VIX Short-Term Futures ETF,
and ProShares UltraShort VIX Mid-Term Futures
ETF).
9 To the extent practicable, the Funds will invest
in swaps cleared through the facilities of a
centralized clearing house. Each Fund also may
invest in cash or cash equivalents, such as U.S.
Treasury securities or other high credit quality,
short-term fixed-income or similar securities
(including shares of money market funds, bank
deposits, bank money market accounts, certain
variable rate-demand notes, and repurchase
agreements collateralized by government securities)
that may serve as collateral for the futures contracts
and swap agreements.
10 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, which will be
described in the Registration Statement. The Funds
will enter into swap agreements only with financial
institutions that meet certain credit quality
standards and monitoring policies. The Funds may
use various techniques to minimize credit risk
including early termination or reset and payment,
using different counterparties, and limiting the net
amount due from any individual counterparty. The
Funds generally will collateralize swap agreements
with cash and/or certain securities. Such collateral
will generally be held for the benefit of the
counterparty in a segregated tri-party account at the
custodian to protect the counterparty against nonpayment by the Funds. In the event of a default by
the counterparty, and the Funds are owed money
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mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 111 / Friday, June 8, 2012 / Notices
The above representations regarding
the Funds’ prospective use of swaps and
other futures contracts are substantially
the same as those made with respect to
other funds of the Trust that utilize VIX
Futures Contracts and that have been
approved by the Commission for listing
and trading on the Exchange.11 The
Sponsor believes it is necessary and
appropriate to have additional
flexibility to utilize swaps and futures
contracts other than VIX Futures
Contracts in a manner that will further
the investment objective of the Funds,
in the event position accountability
rules are reached with respect to VIX
Futures Contracts. Such procedures
would be the same as those applicable
to other funds of the Trust based on VIX
Futures Contracts that are currently
listed on the Exchange. The Sponsor
believes application by the Sponsor of
consistent investment procedures
among funds of the Trust that hold VIX
Futures Contracts, including the Funds,
with respect to utilization of swaps and
futures contracts other than VIX Futures
Contracts, will promote efficient
operation of the Funds in furtherance of
each Fund’s investment objective.
In addition, with respect to any
Fund’s holdings of 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
Intermarket Surveillance Group (‘‘ISG’’)
or is a market with which the Exchange
does not have a comprehensive
surveillance sharing agreement.
The intra-day futures prices, closing
price, and settlement prices of the VIX
Futures Contracts or other futures
contracts, as applicable, held by the
Funds will be available from the CFE,
other futures exchanges, automated
quotation systems, published or other
public sources, or on-line information
services. Information relating to cleared
swaps will be available from major
market data vendors. The value of
swaps and futures contracts other than
VIX Futures Contracts, as applicable,
will be included in: (1) The calculation
of the NAV for the Shares, which is
disseminated daily; and (2) the
Indicative Optimized Portfolio Value
(‘‘IOPV’’) for the Shares, which is
widely disseminated at least every 15
seconds during the Core Trading
Session by one or more major market
in the swap transaction, the Funds will seek
withdrawal of this collateral from the segregated
account and may incur certain costs exercising its
right with respect to the collateral.
11 See note 9, supra, regarding Commission
approval of SR–NYSEArca–2011–23.
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16:23 Jun 07, 2012
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data vendors.12 The portfolio disclosure
for the Funds, which is disseminated
daily, will include swaps and futures
contracts other than VIX Futures
Contracts, if any, in addition to VIX
Futures Contracts.
All other representations in the Prior
Release remain as stated therein and no
other changes are being made.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 13 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
the ISG from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement. Under normal market
conditions, the Funds invest in VIX
Futures Contracts, which are traded on
CFE, an ISG member. Going forward, in
the event position accountability rules
are reached with respect to VIX Futures
Contracts, the Sponsor, may, in its
commercially reasonable judgment,
cause the Funds to obtain exposure
through swaps or other futures
contracts, as described above. To the
extent practicable, the Funds will invest
in swaps cleared through the facilities of
a centralized clearing house. The
Sponsor will 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 intra-day futures prices, closing
price, and settlement prices of the VIX
Futures Contracts or other futures
contracts, as applicable, held by the
12 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IOPVs taken from the
Consolidated Tape Association or other data feeds.
13 15 U.S.C. 78f(b)(5).
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34119
Funds will also be available from the
CFE, other futures exchanges,
automated quotation systems, published
or other public sources, or on-line
information services. Information
relating to cleared swaps and futures
contracts other than VIX Futures
Contracts, as applicable, held by the
Funds will be available from major
market data vendors. The value of
swaps and futures contracts other than
VIX Futures Contracts, as applicable,
will be included in: (1) The calculation
of NAV for the Shares, which is
disseminated daily, and (2) the IOPV for
the Shares. The portfolio disclosure for
the Funds, which is disseminated daily,
will include swaps and futures contracts
other than VIX Futures Contracts, if any,
in addition to VIX Futures Contracts.
Quotation and last-sale information for
the Shares will be available via the
Consolidated Tape Association. Each
Fund’s total portfolio composition will
be disclosed on the Funds’ Web site or
another relevant Web site. The
Exchange represents that the Exchange
may halt trading during the day in
which the interruption to the
dissemination of the IOPV, the value of
the Indexes, the VIX, or the value of the
underlying VIX Futures Contracts
occurs. If the interruption to the
dissemination of the IOPV, the value of
the Indexes, the VIX, or the value of the
underlying VIX 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. With respect to any Fund’s
holdings of 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.
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.
One or more major market data vendors
will disseminate the level of each Index
at least every 15 seconds both in real
time from 9:30 a.m. to 4:15 p.m. Eastern
time and at the close of trading on each
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Federal Register / Vol. 77, No. 111 / Friday, June 8, 2012 / Notices
business day. The NAV per Share is
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 recent NAV per Share and Shares
outstanding. The IOPV will be widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Core Trading
Session. 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.
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, IOPV, 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.
mstockstill on DSK4VPTVN1PROD with 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
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A) of the Act 14 and Rule 19b–
4(f)(6) thereunder.15 Because the
14 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
15 17
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16:23 Jun 07, 2012
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proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b–4(f)(6)(iii),16 the
Commission may designate a shorter
time if such action is consistent with the
protection of investors and the public
interest. NYSE Arca has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Commission notes that
waiver of the operative delay would
permit the Funds to utilize, under
certain limited circumstances, swap
agreements and futures contracts other
than VIX Futures Contracts to pursue
their respective investment objectives.
The Funds may invest in swaps and
futures contracts other than VIX Futures
Contracts in the event position
accountability rules are reached with
respect to VIX Futures Contracts, and
may also invest in swaps if the market
for a specific futures contract
experiences certain emergencies or
disruptions. NYSE Arca represents that
any investments in swaps or futures
contracts other than VIX Futures
Contracts would be consistent with the
Funds’ respective investment objectives.
To the extent practicable, the Funds will
invest in swaps cleared through the
facilities of a centralized clearinghouse.
In addition, the Sponsor will attempt to
mitigate swap counterparty credit risk
by transacting only with large, wellcapitalized institutions. The value of
swaps and futures contracts other than
VIX Futures Contracts will be included
in the calculation of the NAV and IOPV
for the Shares. Each Fund’s total
portfolio composition, including any
swaps and futures contracts other than
VIX Futures Contracts held by the
Funds, will be disclosed on the Funds’
Web site or another relevant Web site.
In addition, not more than 10% of the
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
16 17 CFR 240.19b–4(f)(6)(iii).
PO 00000
Frm 00118
Fmt 4703
Sfmt 4703
weight of futures contracts traded on
exchanges held by each Fund in the
aggregate shall consist of components
whose principal trading market is not a
member of the ISG or is a market with
which NYSE Arca does not have a
comprehensive surveillance sharing
agreement. Further, NYSE Arca
represents that the Funds’ respective
investment objectives are not changing,
all other representations made in the
Prior Release remain unchanged, and
the Funds will continue to comply with
initial and continued listing
requirements under NYSE Arca Equities
Rule 8.200 and Commentary .02 thereto.
For the foregoing reasons, the
Commission believes that the proposed
change does not raise novel or unique
regulatory issues that should delay the
implementation of the Funds’ proposed
investments in swaps and futures
contracts other than VIX Futures
Contracts. Accordingly, the Commission
waives the 30-day operative delay
requirement because the proposed rule
change is consistent with the protection
of investors and the public interest.17
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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 (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2012–49 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
17 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
E:\FR\FM\08JNN1.SGM
08JNN1
Federal Register / Vol. 77, No. 111 / Friday, June 8, 2012 / Notices
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2012–49. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for 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 the 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–2012–49 and should be
submitted on or before June 29, 2012.
seq.), Delegation of Authority No. 234 of
October 1, 1999, Delegation of Authority
No. 236–3 of August 28, 2000 (and, as
appropriate, Delegation of Authority No.
257 of April 15, 2003), I hereby
determine that the objects to be
included in the exhibition ‘‘Revealing
the African Presence in Renaissance
Europe’’ imported from abroad for
temporary exhibition within the United
States, are of cultural significance. The
objects are imported pursuant to loan
agreements with the foreign owners or
custodians. I also determine that the
exhibition or display of the exhibit
objects at The Walters Art Museum,
Baltimore, MD, from on or about
October 14, 2012, until on or about
January 21, 2013; at the Princeton
University Art Museum, Princeton, NJ,
from on or about February 16, 2013,
until on or about June 9, 2013, and at
possible additional exhibitions or
venues yet to be determined, is in the
national interest. I have ordered that
Public Notice of these Determinations
be published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a list of
the exhibit objects, contact Julie
Simpson, Attorney-Adviser, Office of
the Legal Adviser, U.S. Department of
State (telephone: 202–632–6467). The
mailing address is U.S. Department of
State, SA–5, L/PD, Fifth Floor (Suite
5H03), Washington, DC 20522–0505.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–13977 Filed 6–7–12; 8:45 am]
[FR Doc. 2012–13892 Filed 6–7–12; 8:45 am]
Dated: June 5, 2012.
J. Adam Ereli,
Principal Deputy Assistant Secretary, Bureau
of Educational and Cultural Affairs,
Department of State.
BILLING CODE 4710–05–P
DEPARTMENT OF STATE
[Public Notice 7917]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
Culturally Significant Objects Imported
for Exhibition Determinations: ‘‘Lucian
Freud: Portraits’’
[Public Notice 7918]
SUMMARY:
Culturally Significant Objects Imported
for Exhibition Determinations:
‘‘Revealing the African Presence in
Renaissance Europe’’
Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
mstockstill on DSK4VPTVN1PROD with NOTICES
SUMMARY:
18 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:21 Jun 07, 2012
Jkt 226001
Notice is hereby given of the
following determinations: Pursuant to
the authority vested in me by the Act of
October 19, 1965 (79 Stat. 985; 22 U.S.C.
2459), Executive Order 12047 of March
27, 1978, the Foreign Affairs Reform and
Restructuring Act of 1998 (112 Stat.
2681, et seq.; 22 U.S.C. 6501 note, et
seq.), Delegation of Authority No. 234 of
October 1, 1999, and Delegation of
Authority No. 236–3 of August 28, 2000
(and, as appropriate, Delegation of
Authority No. 257 of April 15, 2003), I
hereby determine that the object to be
included in the exhibition ‘‘Lucian
Freud: Portraits,’’ imported from abroad
PO 00000
Frm 00119
Fmt 4703
Sfmt 4703
34121
by The Modern Art Museum of Fort
Worth for temporary exhibition within
the United States, is of cultural
significance. The object is imported
pursuant to a loan agreement with the
foreign owners or custodians. I also
determine that the exhibition or display
of the exhibit object at The Modern Art
Museum of Fort Worth in Fort Worth,
Texas from on or about July 1, 2012,
until on or about October 28, 2012; and
possible additional exhibitions or
venues yet to be determined; is in the
national interest. I have ordered that
Public Notice of these Determinations
be published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: For
further information, including a listing
of the exhibit object, contact Ona M.
Hahs, Attorney-Adviser, Office of the
Legal Adviser, U.S. Department of State
(telephone: 202–632–6473). The mailing
address is U.S. Department of State, SA–
5, L/PD, Fifth Floor (Suite 5H03),
Washington, DC 20522–0505.
Dated: June 5, 2012.
J. Adam Ereli,
Principal Deputy Assistant Secretary, Bureau
of Educational and Cultural Affairs,
Department of State.
[FR Doc. 2012–13975 Filed 6–7–12; 8:45 am]
BILLING CODE 4710–05–P
DEPARTMENT OF STATE
[Public Notice: 7916]
Designation and Determination
Pursuant to the Foreign Missions Act
Concerning the Designation of Entities
in the United States That Are
Substantially Owned or Effectively
Controlled by the Government of
Azerbaijan as Foreign Missions and
the Determination That Property
Transactions on the Part of Such
Entities Are Subject to Foreign Mission
Act Regulation
In order to adjust for costs and
procedures of obtaining benefits for the
United States Embassy in Azerbaijan
and to protect the interests of the United
States, pursuant to the authority vested
in the Secretary of State under the
Foreign Missions Act, 22 U.S.C. 4301–
4316 as amended (‘‘the Act’’), which has
been delegated to me in accordance
with the Department of State’s
Delegation of Authority No. 214, dated
September 20, 1994, I hereby designate
the State Oil Company of the Republic
of Azerbaijan (SOCAR), an entity
engaged in activities in the United
States that is substantially owned or
effectively controlled by the
Government of Azerbaijan and all other
entities, including any that are
E:\FR\FM\08JNN1.SGM
08JNN1
]]>Agencies
[Federal Register Volume 77, Number 111 (Friday, June 8, 2012)]
[Notices]
[Pages 34117-34121]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-13892]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67100; File No. SR-NYSEArca-2012-49]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Allow the Use of
Swap Agreements Under Limited Circumstances by the ProShares VIX Short-
Term Futures ETF and the ProShares VIX Mid-Term Futures ETF, Which Are
Listed and Traded on the Exchange Under NYSE Arca Equities Rule 8.200,
Commentary .02
June 4, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on May 22, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to accommodate the use of swap agreements
under limited circumstances by the ProShares VIX Short-Term Futures ETF
and the ProShares VIX Mid-Term Futures ETF, which are listed and traded
on the Exchange under NYSE Arca Equities Rule 8.200, Commentary .02.
The text of the proposed rule change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization
included
[[Page 34118]]
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
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 Commission has approved
listing and trading on the Exchange of shares (``Shares'') of the
ProShares VIX Short-Term Futures ETF and the ProShares VIX Mid-Term
Futures ETF (``Funds'') under NYSE Arca Equities Rule 8.200, Commentary
.02,\4\ and the Shares have commenced listing and trading on the
Exchange.
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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 Securities Exchange Act Release No. 63610 (December 27,
2010), 76 FR 199 (January 3, 2011) (SR-NYSEArca-2010-101) (``Prior
Order''). The notice with respect to the Prior Order was published
in Securities Exchange Act Release No. 63317 (November 16, 2010), 75
FR 71158 (November 22, 2010) (``Prior Notice'' and, together with
the Prior Order, ``Prior Release'').
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The Funds seek to provide investment results (before fees and
expenses) that match the performance of a benchmark that seeks to offer
exposure to market volatility through publicly traded futures markets.
The benchmark for ProShares VIX Short-Term Futures ETF is the S&P 500
VIX Short-Term Futures Index, and the benchmark for ProShares VIX Mid-
Term Futures ETF is the S&P 500 VIX Mid-Term Futures Index (each, an
``Index,'' and collectively, ``Indexes'').\5\ To pursue their
respective investment objectives, the Funds invest in futures contracts
that comprise their respective Index and that are based on the Chicago
Board Options Exchange (``CBOE'') Volatility Index or ``VIX'' (``VIX
Futures Contracts''). VIX Futures Contracts are traded on the CBOE
Futures Exchange (``CFE''). Each Fund also may invest in cash or cash
equivalents such as U.S. Treasury securities or other high credit
quality, short-term fixed-income or similar securities (including
shares of money market funds, bank deposits, bank money market
accounts, certain variable rate-demand notes, and repurchase agreements
collateralized by government securities) that may serve as collateral
for the futures contracts.
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\5\ Standard & Poor's Financial Services LLC, the index sponsor
with respect to the Indexes, is not a broker-dealer or affiliated
with a broker-dealer, and has implemented procedures designed to
prevent the use and dissemination of material, non-public
information regarding the Indexes.
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ProShare Capital Management LLC (``Sponsor''), a Maryland limited
liability company, serves as the Sponsor of ProShares Trust II
(``Trust'').\6\ The Sponsor is a commodity pool operator and commodity
trading advisor. Brown Brothers Harriman & Co. serves as the
administrator (``Administrator''), custodian, and transfer agent of the
Funds and their respective Shares. SEI Investments Distribution Co.
(``Distributor'') serves as Distributor of the Shares. Wilmington Trust
Company, a Delaware banking corporation, is the sole trustee of the
Trust.
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\6\ The Trust has filed a registration statement on Form S-3
under the Securities Act of 1933 (15 U.S.C. 77a), dated November 5,
2010, relating to the Funds (File No. 333-163511) (``Registration
Statement''). The description of the Funds and the Shares contained
in the Prior Release were based, in part, on the Registration
Statement. The changes described herein will become effective upon
filing with the Commission of an amendment to the Trust's
Registration Statement. The Sponsor represents that the Sponsor has
managed and will continue to manage the Funds in the manner
described in the Prior Release, and will not implement the changes
described herein until the instant proposed rule change becomes
operative and an amendment to the Registration Statement has become
effective.
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According to the Registration Statement, if a Fund is successful in
meeting its objective, its value (before fees and expenses) should gain
approximately as much on a percentage basis as the level of its
corresponding Index when it rises. Conversely, its value (before fees
and expenses) should lose approximately as much on a percentage basis
as the level of its corresponding Index when it declines. Each Fund
acquires exposure through VIX Futures Contracts such that each Fund has
exposure intended to approximate the benchmark at the time of the net
asset value (``NAV'') calculation.\7\
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\7\ Terms relating to the Funds, the Shares, and the Indexes
referred to, but not defined, herein are defined in the Registration
Statement.
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Under the current proposal, the Funds seek to utilize swap
agreements and futures contracts other than VIX Futures Contracts (as
further described herein) to pursue their respective investment
objectives.\8\
---------------------------------------------------------------------------
\8\ The Commission previously has approved listing and trading
on the Exchange of issues of TIRs under NYSE Arca Equities Rule
8.200, Commentary .02 that may hold swaps under limited
circumstances. See, e.g., Securities Exchange Act Release Nos. 62527
(July 19, 2010), 75 FR 43606 (July 26, 2010) (SR-NYSEArca-2010-44)
(order approving Exchange listing and trading of United States
Commodity Index Fund); 63869 (February 8, 2011), 76 FR 8799
(February 15, 2011) (SR-NYSEArca-2010-119) (order approving Exchange
listing and trading of Teucrium WTI Crude Oil Fund); and 65134
(August 15, 2011), 76 FR 52034 (August 19, 2011) (SR-NYSEArca-2011-
23) (order approving Exchange listing and trading of ProShares Short
VIX Short-Term Futures ETF, ProShares Short VIX Mid-Term Futures
ETF, ProShares Ultra VIX Short-Term Futures ETF, ProShares Ultra VIX
Mid-Term Futures ETF, ProShares UltraShort VIX Short-Term Futures
ETF, and ProShares UltraShort VIX Mid-Term Futures ETF).
---------------------------------------------------------------------------
Going forward, in the event position accountability rules are
reached with respect to VIX Futures Contracts, the Sponsor, may, in its
commercially reasonable judgment, cause the Funds to obtain exposure
through swaps referencing the relevant Index or particular VIX Futures
Contracts, or invest in other futures contracts or swaps not based on
the particular VIX Futures Contracts if such instruments tend to
exhibit trading prices or returns that correlate with the Indexes or
any VIX Futures Contract and will further the investment objective of
the Funds.\9\ The Funds 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 the Funds from obtaining
the appropriate amount of investment exposure to the affected VIX
Futures Contracts directly or other futures contract.\10\
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\9\ To the extent practicable, the Funds will invest in swaps
cleared through the facilities of a centralized clearing house. Each
Fund also may invest in cash or cash equivalents, such as U.S.
Treasury securities or other high credit quality, short-term fixed-
income or similar securities (including shares of money market
funds, bank deposits, bank money market accounts, certain variable
rate-demand notes, and repurchase agreements collateralized by
government securities) that may serve as collateral for the futures
contracts and swap agreements.
\10\ 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, which will be described in the
Registration Statement. The Funds will enter into swap agreements
only with financial institutions that meet certain credit quality
standards and monitoring policies. The Funds may use various
techniques to minimize credit risk including early termination or
reset and payment, using different counterparties, and limiting the
net amount due from any individual counterparty. The Funds generally
will collateralize swap agreements with cash and/or certain
securities. Such collateral will generally be held for the benefit
of the counterparty in a segregated tri-party account at the
custodian to protect the counterparty against non-payment by the
Funds. In the event of a default by the counterparty, and the Funds
are owed money in the swap transaction, the Funds will seek
withdrawal of this collateral from the segregated account and may
incur certain costs exercising its right with respect to the
collateral.
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[[Page 34119]]
The above representations regarding the Funds' prospective use of
swaps and other futures contracts are substantially the same as those
made with respect to other funds of the Trust that utilize VIX Futures
Contracts and that have been approved by the Commission for listing and
trading on the Exchange.\11\ The Sponsor believes it is necessary and
appropriate to have additional flexibility to utilize swaps and futures
contracts other than VIX Futures Contracts in a manner that will
further the investment objective of the Funds, in the event position
accountability rules are reached with respect to VIX Futures Contracts.
Such procedures would be the same as those applicable to other funds of
the Trust based on VIX Futures Contracts that are currently listed on
the Exchange. The Sponsor believes application by the Sponsor of
consistent investment procedures among funds of the Trust that hold VIX
Futures Contracts, including the Funds, with respect to utilization of
swaps and futures contracts other than VIX Futures Contracts, will
promote efficient operation of the Funds in furtherance of each Fund's
investment objective.
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\11\ See note 9, supra, regarding Commission approval of SR-
NYSEArca-2011-23.
---------------------------------------------------------------------------
In addition, with respect to any Fund's holdings of 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 Intermarket
Surveillance Group (``ISG'') or is a market with which the Exchange
does not have a comprehensive surveillance sharing agreement.
The intra-day futures prices, closing price, and settlement prices
of the VIX Futures Contracts or other futures contracts, as applicable,
held by the Funds will be available from the CFE, other futures
exchanges, automated quotation systems, published or other public
sources, or on-line information services. Information relating to
cleared swaps will be available from major market data vendors. The
value of swaps and futures contracts other than VIX Futures Contracts,
as applicable, will be included in: (1) The calculation of the NAV for
the Shares, which is disseminated daily; and (2) the Indicative
Optimized Portfolio Value (``IOPV'') for the Shares, which is widely
disseminated at least every 15 seconds during the Core Trading Session
by one or more major market data vendors.\12\ The portfolio disclosure
for the Funds, which is disseminated daily, will include swaps and
futures contracts other than VIX Futures Contracts, if any, in addition
to VIX Futures Contracts.
---------------------------------------------------------------------------
\12\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IOPVs
taken from the Consolidated Tape Association or other data feeds.
---------------------------------------------------------------------------
All other representations in the Prior Release remain as stated
therein and no other changes are being made.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \13\ 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.
---------------------------------------------------------------------------
\13\ 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 the ISG from other exchanges that are members of ISG or
with which the Exchange has entered into a comprehensive surveillance
sharing agreement. Under normal market conditions, the Funds invest in
VIX Futures Contracts, which are traded on CFE, an ISG member. Going
forward, in the event position accountability rules are reached with
respect to VIX Futures Contracts, the Sponsor, may, in its commercially
reasonable judgment, cause the Funds to obtain exposure through swaps
or other futures contracts, as described above. To the extent
practicable, the Funds will invest in swaps cleared through the
facilities of a centralized clearing house. The Sponsor will 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 intra-day futures prices,
closing price, and settlement prices of the VIX Futures Contracts or
other futures contracts, as applicable, held by the Funds will also be
available from the CFE, other futures exchanges, automated quotation
systems, published or other public sources, or on-line information
services. Information relating to cleared swaps and futures contracts
other than VIX Futures Contracts, as applicable, held by the Funds will
be available from major market data vendors. The value of swaps and
futures contracts other than VIX Futures Contracts, as applicable, will
be included in: (1) The calculation of NAV for the Shares, which is
disseminated daily, and (2) the IOPV for the Shares. The portfolio
disclosure for the Funds, which is disseminated daily, will include
swaps and futures contracts other than VIX Futures Contracts, if any,
in addition to VIX Futures Contracts. Quotation and last-sale
information for the Shares will be available via the Consolidated Tape
Association. Each Fund's total portfolio composition will be disclosed
on the Funds' Web site or another relevant Web site. The Exchange
represents that the Exchange may halt trading during the day in which
the interruption to the dissemination of the IOPV, the value of the
Indexes, the VIX, or the value of the underlying VIX Futures Contracts
occurs. If the interruption to the dissemination of the IOPV, the value
of the Indexes, the VIX, or the value of the underlying VIX 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. With respect to any Fund's holdings of 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.
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. One or
more major market data vendors will disseminate the level of each Index
at least every 15 seconds both in real time from 9:30 a.m. to 4:15 p.m.
Eastern time and at the close of trading on each
[[Page 34120]]
business day. The NAV per Share is 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 recent NAV per Share and Shares
outstanding. The IOPV will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Core Trading
Session. 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.
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,
IOPV, 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.
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
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6) thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative prior to 30 days after the date of the filing.
However, pursuant to Rule 19b-4(f)(6)(iii),\16\ the Commission may
designate a shorter time if such action is consistent with the
protection of investors and the public interest. NYSE Arca has asked
the Commission to waive the 30-day operative delay so that the proposal
may become operative immediately upon filing. The Commission notes that
waiver of the operative delay would permit the Funds to utilize, under
certain limited circumstances, swap agreements and futures contracts
other than VIX Futures Contracts to pursue their respective investment
objectives.
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\16\ 17 CFR 240.19b-4(f)(6)(iii).
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The Funds may invest in swaps and futures contracts other than VIX
Futures Contracts in the event position accountability rules are
reached with respect to VIX Futures Contracts, and may also invest in
swaps if the market for a specific futures contract experiences certain
emergencies or disruptions. NYSE Arca represents that any investments
in swaps or futures contracts other than VIX Futures Contracts would be
consistent with the Funds' respective investment objectives. To the
extent practicable, the Funds will invest in swaps cleared through the
facilities of a centralized clearinghouse. In addition, the Sponsor
will attempt to mitigate swap counterparty credit risk by transacting
only with large, well-capitalized institutions. The value of swaps and
futures contracts other than VIX Futures Contracts will be included in
the calculation of the NAV and IOPV for the Shares. Each Fund's total
portfolio composition, including any swaps and futures contracts other
than VIX Futures Contracts held by the Funds, will be disclosed on the
Funds' Web site or another relevant Web site. In addition, not more
than 10% of the weight of futures contracts traded on exchanges held by
each Fund in the aggregate shall consist of components whose principal
trading market is not a member of the ISG or is a market with which
NYSE Arca does not have a comprehensive surveillance sharing agreement.
Further, NYSE Arca represents that the Funds' respective investment
objectives are not changing, all other representations made in the
Prior Release remain unchanged, and the Funds will continue to comply
with initial and continued listing requirements under NYSE Arca
Equities Rule 8.200 and Commentary .02 thereto. For the foregoing
reasons, the Commission believes that the proposed change does not
raise novel or unique regulatory issues that should delay the
implementation of the Funds' proposed investments in swaps and futures
contracts other than VIX Futures Contracts. Accordingly, the Commission
waives the 30-day operative delay requirement because the proposed rule
change is consistent with the protection of investors and the public
interest.\17\
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\17\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2012-49 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission,
[[Page 34121]]
100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2012-49. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for 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 the 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-2012-49 and should
be submitted on or before June 29, 2012.
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\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-13892 Filed 6-7-12; 8:45 am]
BILLING CODE 8011-01-P
