Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the United States Asian Commodities Basket Fund Under NYSE Arca Equities Rule 8.200, 67712-67720 [2012-27551]
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67712
Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68173; File No. SR–
NYSEArca–2012–120]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To List and Trade Shares
of the United States Asian
Commodities Basket Fund Under
NYSE Arca Equities Rule 8.200
November 6, 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 October
25, 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, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares of the United States Asian
Commodities Basket Fund (‘‘UAC’’ or
‘‘Fund’’) under NYSE Arca Equities
Rule 8.200. 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
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.
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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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Trust Issued Receipts either by listing or
pursuant to unlisted trading privileges
(‘‘UTP’’).3 The Exchange proposes to list
and trade shares (‘‘Units’’) of UAC
pursuant to NYSE Arca Equities Rule
8.200.
The Exchange notes that the
Commission has previously approved
the listing and trading of other issues of
Trust Issued Receipts on the American
Stock Exchange LLC,4 trading on NYSE
Arca pursuant to UTP,5 and listing on
NYSE Arca.6 In addition, the
Commission has approved the listing
and trading of other exchange-traded
fund-like products linked to the
performance of underlying
commodities.7
The Units represent beneficial
ownership interests in UAC, as
described in the Registration
Statement.8 UAC is a commodity pool
that is a series of the United States
Commodity Funds Trust I (‘‘Trust’’), a
Delaware statutory trust. UAC is
managed and controlled by United
States Commodity Funds LLC
(‘‘Sponsor’’). The Sponsor 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.
Brown Brothers Harriman & Co. Inc.
3 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.
4 See, e.g., Securities Exchange Act Release No.
58161 (July 15, 2008), 73 FR 42380 (July 21, 2008)
(SR–Amex–2008–39).
5 See, e.g., Securities Exchange Act Release No.
58163 (July 15, 2008), 73 FR 42391 (July 21, 2008)
(SR–NYSEArca–2008–73).
6 See, e.g., Securities Exchange Act Release No.
58457 (September 3, 2008), 73 FR 52711 (September
10, 2008) (SR–NYSEArca–2008–91).
7 See, e.g., Securities Exchange Act Release Nos.
57456 (March 7, 2008), 73 FR 13599 (March 13,
2008) (SR–NYSEArca–2007–91) (order granting
accelerated approval for NYSE Arca listing the
iShares GS Commodity Trusts); 59781 (April 17,
2009), 74 FR 18771 (April 24, 2009) (SR–
NYSEArca–2009–28) (order granting accelerated
approval for NYSE Arca listing the ETFS Silver
Trust); 59895 (May 8, 2009), 74 FR 22993 (May 15,
2009) (SR–NYSEArca–2009–40) (order granting
accelerated approval for NYSE Arca listing the
ETFS Gold Trust); and 62527 (July 19, 2010), 75 FR
43606 (July 26, 2010) (SR–NYSEArca–2010–44)
(order approving listing on NYSE Arca of the
United States Commodity Index Fund).
8 See Amendment No. 2 to the registration
statement on Form S–1 for the United States
Commodity Funds Trust I, dated June 18, 2012 (File
No. 333–177188) relating to UAC (‘‘Registration
Statement’’). The discussion herein relating to the
Trust and the Units is based, in part, on the
Registration Statement.
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Frm 00086
Fmt 4703
Sfmt 4703
(‘‘BBH & Co., Inc.’’) is the administrator
for the Trust (‘‘Administrator’’).
According to the Registration
Statement, the net assets of UAC will
consist of (a) investments in futures
contracts for Asian commodities that are
traded on the Chicago Mercantile
Exchange (‘‘CME’’), Chicago Board of
Trade (‘‘CBOT’’), the New York
Mercantile Exchange (‘‘NYMEX’’),
Commodity Exchange, Inc. (‘‘COMEX’’),
ICE Futures US (‘‘ICE US’’), ICE Futures
Canada (‘‘ICE Canada’’), ICE Futures
Europe (‘‘ICE Europe’’), London Metal
Exchange (‘‘LME’’), Tokyo Commodity
Exchange (‘‘TOCOM’’), Dubai
Mercantile Exchange (‘‘DME’’), and
Bursa Malaysia (‘‘Malaysia’’) 9
(collectively, ‘‘Futures Contracts’’) and
(b) if applicable, other Asian
commodities-related investments such
as exchange-listed cash-settled options
on Futures Contracts, forward contracts
for Asian commodities, cleared swap
contracts, and over-the-counter
transactions that are based on the price
of Asian commodities, Futures
Contracts and indices based on the
foregoing (collectively, ‘‘Other Asian
Commodities-Related Investments’’).
Futures Contracts and Other Asian
Commodities-Related Investments
collectively are referred to as ‘‘Asian
Commodities Interests.’’ UAC will also
invest in short-term obligations of the
United States of two years or less
(‘‘Treasuries’’), cash, and cash
equivalents for margining purposes and
as collateral.10
According to the Registration
Statement, UAC will invest in Asian
Commodities Interests, to the fullest
extent possible, without being leveraged
or unable to satisfy its current or
potential margin and/or collateral
obligations with respect to its
investments in Futures Contracts and
Other Asian Commodities-Related
Investments.11 The primary focus of the
Sponsor will be the investment in
Futures Contracts and the management
of UAC’s investments in Treasuries,
cash, and cash equivalents for
margining purposes and as collateral.
According to the Registration
Statement, the investment objective of
9 CME, CBOT, NYMEX, COMEX, ICE US, ICE
Canada, ICE Europe, LME, TOCOM, DME, and
Malaysia are each referred to herein as a ‘‘Futures
Exchange.’’
10 Pursuant to the Dodd-Frank Wall Street Reform
and Consumer Protection Act, the CFTC has been
tasked with implementing rules and regulations
that are expected to impact position limits and
visibility levels and other regulatory requirements
that will be applicable to the Fund and its holdings.
11 The Sponsor represents that the Fund will
invest in Asian Commodities Interests in a manner
consistent with the Fund’s investment objective and
not to achieve additional leverage.
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Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices
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UAC (before fees and expenses) will be
to have the daily changes in percentage
terms of its net asset value (‘‘NAV’’)
reflect the daily changes in percentage
terms of the price of a basket of Futures
Contracts, each of which tracks one of
the Asian Benchmark Commodities
(‘‘Futures Basket’’). The ‘‘Asian
Benchmark Commodities’’ will be
commodities selected by the Sponsor.
The Futures Contracts designated for
inclusion in the Futures Basket will be
selected by the Sponsor, and are
referred to as the ‘‘Benchmark Futures
Contracts.’’
According to the Registration
Statement, the Asian Benchmark
Commodities will be selected by the
Sponsor 12 based on either their
systemic importance to Asian
economies, including the three major
Asian economies of China, Japan, and
India, or the fact that there are futures
contracts relating to the commodity or
commodities that trade on an Asian
domiciled futures exchange. The
Sponsor will select the Asian
Benchmark Commodities based on the
following four criteria:
• First, the physical commodity must
be one in which the economies of
China, Japan, and India annually
consume 10% or more of global
consumption based on publically
available industry and government
statistics.
• Second, the physical commodity
must be one in which, based on
publically available industry and
government statistics, China, Japan, and
India annually produce less of the
commodity than they typically
consume, indicating that they are likely
to be net importers of the commodity
and not net exporters.
• Third, the Futures Contracts on the
physical commodity must be traded on
a regulated Futures Exchange in the
United States, Canada, the United
Kingdom, Japan, Dubai, Malaysia, or
other domicile which allows a U.S.
domiciled passive investment fund to
buy and sell such contracts.
• Fourth and finally, the Futures
Contracts traded on such commodities
must have average open interest
measured in U.S. dollars in excess of
$150 million at the time of the
commodity’s selection. In the event the
same or substantially similar physical
contract is traded on more than one
Futures Exchange, the minimum
liquidity test will be applied to the
12 The Sponsor is not a broker-dealer or a
registered investment adviser. The Sponsor
represents that it will implement and maintain
procedures designed to prevent the use and
dissemination of material, non-public information
regarding the Futures Basket.
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17:08 Nov 09, 2012
Jkt 229001
exchange with the largest open interest
US dollar terms in that particular
commodity.
The Asian Benchmark Commodities
will be selected by the Sponsor in
accordance with the above specific
quantitative data. Then, according to the
Registration Statement, in the first
quarter of each calendar year, the
Sponsor will reevaluate the selection of
commodities based on the prior year’s
data. As a result of changes in Asian
commodity production, commodity
consumption, net imports or exports of
commodities, and changes in
commodity futures contract liquidity
and in strict accordance with the criteria
and factors listed above, the Sponsor
may elect to add or delete a commodity
from the list of Asian Benchmark
Commodities, and thus the Futures
Basket.13 Under normal
circumstances,14 the Sponsor
anticipates that any changes in either
the list of Asian Benchmark
Commodities, the list of Benchmark
Futures Contracts in the Futures Basket,
or their weightings, would be made as
part of the annual review process and
disclosed to investors with no less than
30 days advanced notice of the change.
From time to time throughout the
year, it is possible that the Sponsor may
determine that a Futures Contract that is
currently a Benchmark Futures Contract
is no longer suitable due to changes in
the liquidity of the Futures Contract or
due to changes in the rules regarding
that particular Futures Contract on its
regulated Futures Exchange.15 In such
cases the Sponsor would first attempt to
select another Futures Contract based on
the same commodity that trades on
either the current regulated Futures
Exchange, or trades on another
regulated Futures Exchange, and
disclose on the Fund’s Web site and in
a prospectus supplement that the new
13 In making any such change, the Sponsor will
file a prospectus supplement informing investors of
the proposed changes no less than 30 days prior to
the first month in which the commodity or
commodities added will become part of the Asian
Benchmark Commodities, or 30 days prior to the
first month in which the commodity or
commodities deleted will no longer be part of the
Asian Benchmark Commodities. Any changes to the
eligible Asian Benchmark Commodities will also be
published on the Web site for the Fund.
14 ‘‘Normal circumstances’’ as used herein
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.
15 According to the Sponsor, an example would
be a case where a Futures Contract has decreased
average liquidity under $150 million.
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
67713
Futures Contract will become a
Benchmark Futures Contract for the
relevant Asian Benchmark Commodity
and the prior Benchmark Futures
Contract for such Asian Benchmark
Commodity would be deleted. In the
event that the Sponsor determined that
no other existing Futures Contract is a
suitable replacement, then the Sponsor
would file a prospectus supplement and
post on the Web site indicating that the
relevant Benchmark Futures Contract
would no longer be included as part of
the Futures Basket. In cases where a
suitable Benchmark Futures Contract no
longer exists, the Sponsor will also
remove the underlying commodity from
the list of Asian Benchmark
Commodities.16 Although the Sponsor
would normally seek to provide at least
30 days’ notice of any such change,
specific circumstances could mean that
the Sponsor would be unable to provide
that amount of advanced notice.
The Benchmark Futures Contracts
may trade on any of the Futures
Exchanges. It is not the intent of UAC
to be operated in a fashion such that its
NAV will equal, in dollar terms, the
spot price of any particular commodity
or any particular Benchmark Futures
Contract. It is not the intent of UAC to
be operated in a fashion such that its
NAV will reflect the percentage change
of the price of the Futures Basket as
measured over a time period greater
than one day. The Sponsor does not
believe that is an achievable goal due to
the potential impact of backwardation
and contango on returns of any portfolio
of futures contracts.
According to the Registration
Statement, UAC will seek to achieve its
investment objective by investing in
Futures Contracts and, if applicable,
Other Asian Commodities-Related
Investments such that the daily changes
in UAC’s NAV will closely track
changes in the daily price of the Futures
Basket. The Sponsor believes changes in
the price of the Benchmark Futures
Contracts have historically exhibited a
close correlation with the changes in the
price of the corresponding Asian
Benchmark Commodities. On any
valuation day (a valuation day is any
NYSE Arca trading day as of which
UAC calculates its NAV, as described
herein), each Benchmark Futures
Contract will be the near month contract
for the corresponding Asian Benchmark
16 According to the Sponsor, in a case where an
underlying commodity is removed from the list of
Asian Benchmark Commodities as described, if a
Futures Contract in such commodity becomes
available at some later date, the underlying
commodity would be eligible for selection as an
Asian Benchmark Commodity in the annual review
process.
E:\FR\FM\13NON1.SGM
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Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices
Commodity traded on the Futures
Exchange where such Benchmark
Futures Contract is listed, unless the
near month contract will expire within
4 business days prior to the end of the
month. Only the Benchmark Futures
Contracts that will be reaching
expiration in the upcoming month will
be sold and the next Futures Contract
for that commodity that expires later
than the upcoming month, the next
month contract, will be used to replace
the contract being sold. Benchmark
Futures Contracts which are not
reaching expiration in the upcoming
month will not be ‘‘rolled’’ forward.
UAC will invest in Benchmark
Futures Contracts to the fullest extent
possible, turning next to investments in
other Futures Contracts, and finally to
Other Asian Commodities-Related
Investments only if required to by
applicable regulatory requirements or
under adverse market conditions.17 The
types of regulatory requirements and
market conditions that would cause
UAC to invest in this manner are of a
limited nature. An example of a
regulatory requirement that would cause
UAC to invest in Futures Contracts or
Other Asian Commodities-Related
Investments other than Benchmark
Futures Contracts would be where UAC
received payment from an Authorized
Purchaser for the issuance of a Creation
Basket, but could not invest the
payment in Benchmark Futures
Contracts because doing so would cause
UAC to exceed the position limits
applicable to such Benchmark Futures
Contracts. Imposition of other regulatory
requirements, such as accountability
levels, daily price fluctuation limits, or
the imposition of capital controls on
foreign investments, may cause UAC to
invest in Futures Contracts or Other
Asian Commodities-Related Investments
other than Benchmark Futures
Contracts.18 Adverse market conditions
that the Sponsor currently anticipates
could cause UAC to invest in Futures
Contracts and Other Asian
Commodities-Related Investments
would be those allowing UAC to obtain
greater liquidity or to execute
transactions with more favorable
pricing.
More specifically, if applicable
regulatory requirements or adverse
market conditions make investing in
Benchmark Futures Contracts
impracticable, UAC would then invest
to the fullest extent possible in other
Futures Contracts that, while relating to
the same commodity and trading on the
same Futures Exchange as a Benchmark
Futures Contract, have a different
expiration date. If and when investing
in such other Futures Contracts becomes
impracticable because of regulatory
requirements or adverse market
conditions, UAC would then invest to
the fullest extent possible in Futures
Contracts that, while relating to the
same commodity as the corresponding
Benchmark Futures Contract, are traded
on a different futures exchange. Only
when UAC has invested in Benchmark
Futures Contracts and other Futures
Contracts to the fullest extent possible
in the manner described above, will it
then invest in Other Asian
Commodities-Related Investments.19
According to the Registration
Statement, the Sponsor will endeavor to
place UAC’s trades in Asian
Commodities Interests and otherwise
manage UAC’s investments so that ‘‘A’’
will be within plus/minus 10 percent of
‘‘B,’’ where:
• A is the average daily percentage
change in UAC’s NAV for any period of
30 successive valuation days, i.e., any
NYSE Arca trading day as of which
UAC calculates its NAV; and
• B is the average daily percentage
change in the price of the Futures
Basket over the same period.
A list of the current Asian Benchmark
Commodities is shown in the table
below. Included with the list is the
Sponsor’s estimate of the percentage of
global production and consumption for
each commodity that is attributable to
China, Japan, and India combined.
Finally, the current assigned base
weight of each commodity for use in the
Futures Basket is listed.
ASIAN BENCHMARK COMMODITIES
[As of December 31, 2011]
China, Japan,
and India’s share
of global
production
(percent)
Commodity
China, Japan,
and India’s share
of global
consumption
(percent)
Current base
weight
(percent)
5.9
5.9
23.3
9.1
32.3
4.8
34.5
4.3
24.4
19.0
19.0
24.6
32.1
32.6
60.9
48.9
41.6
26.2
22
2
10
10
10
10
5
5
5
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Crude Oil ..........................................................................................................................
Gasoil ...............................................................................................................................
Corn .................................................................................................................................
Soybeans .........................................................................................................................
Wheat ...............................................................................................................................
Copper .............................................................................................................................
Zinc ..................................................................................................................................
Nickel ...............................................................................................................................
Sugar ...............................................................................................................................
17 ‘‘Adverse market conditions’’ as used herein
includes, but is not limited to, those conditions
whereby the Sponsor believes the price of the
Benchmark Futures Contract appears adversely
impacted or economically dislocated compared to
substantially similar Futures Contracts, i.e., those
futures contracts of the same commodity as the
Benchmark Futures Contract, but traded on a
different exchange.
18 According to the Registration Statement, U.S.
designated contract markets such as the CME,
CBOT, COMEX, NYMEX, and ICE US have
established accountability levels and position limits
on the maximum net long or net short futures
contracts in commodity interests that any person or
group of persons under common trading control
(other than as a hedge, which an investment by
UAC is not) may hold, own, or control.
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In addition to accountability levels and position
limits, the regulated Futures Exchanges may also set
daily price fluctuation limits on futures contracts.
The daily price fluctuation limit establishes the
maximum amount that the price of a futures
contract may vary either up or down from the
previous day’s settlement price. Once the daily
price fluctuation limit has been reached in a
particular futures contract, no trades may be made
at a price beyond that limit.
Imposition of, or changes in, accountability
levels, position limits or fluctuation limits on
futures contracts could constitute a regulatory
requirement that would cause UAC to invest in
Futures Contracts or Other Asian CommoditiesRelated Investments other than Benchmark Futures
Contracts. All of these limits may potentially cause
a tracking error between the price of the Units and
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
the price of the Futures Basket. This may in turn
prevent investors from being able to effectively use
UAC as a way to hedge against Asian commoditiesrelated losses or as a way to indirectly invest in
Asian commodities.
19 UAC anticipates that, to the extent it invests in
Futures Contracts other than the Benchmark
Futures Contracts and Other Asian CommoditiesRelated Investments that are not economically
equivalent to the Benchmark Futures Contracts, it
will enter into various non-exchange-traded
derivative contracts to hedge the short-term price
movements of such Futures Contracts and Other
Asian Commodities-Related Investments against the
current Benchmark Futures Contracts.
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Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices
ASIAN BENCHMARK COMMODITIES—Continued
[As of December 31, 2011]
China, Japan,
and India’s share
of global
production
(percent)
China, Japan,
and India’s share
of global
consumption
(percent)
Current base
weight
(percent)
Platinum ...........................................................................................................................
Gold .................................................................................................................................
Silver ................................................................................................................................
Canola Oil ........................................................................................................................
Palm Oil ...........................................................................................................................
Rubber .............................................................................................................................
0
13.1
15.1
15
0
14.6
41.9
63.8
66.8
44.7
40.1
47.3
5
5
5
2
2
2
Total ..........................................................................................................................
............................
............................
100
Commodity
A list of the current Benchmark
Futures Contracts and their weighting in
the Futures Basket is shown in the table
below.
BENCHMARK FUTURES CONTRACTS
Commodity
Primary futures
exchange
Trading hours
(eastern time)
Contract
ticker or
code
Crude Oil-Light/Sweet-Brent .......
Crude Oil-Medium-DME/Oman ...
Gasoil ..........................................
Corn .............................................
ICE Europe ............
DME/CME ** ..........
ICE Europe ............
CBOT ....................
CO ...........
OQD ........
QS ...........
ZC ............
1,000
1,000
100
5,000
USD/bbl ............
USD/bbl ............
USD/Tonne .......
c/bu ...................
20.0
2.0
2.0
10.0
Soybeans .....................................
CBOT ....................
ZS ............
5,000
c/bu ...................
10.0
Wheat ..........................................
CBOT ....................
ZW ...........
5,000
c/bu ...................
10.0
Copper .........................................
Zinc ..............................................
Nickel ...........................................
Sugar ...........................................
Platinum .......................................
Gold .............................................
Silver ............................................
Canola Oil ....................................
Palm Oil .......................................
HG ...........
LX ............
LN ............
SB ............
JA ............
GC ...........
SI .............
RS ...........
KO ...........
25,000
25
6
112,000
500
100
5,000
20
25
USD/lb ..............
USD/Tonne .......
USD/Tonne .......
c/lb ....................
JPY/g ................
USD/T.Oz .........
USD/T.Oz .........
CAD/Tonne .......
MYR/Tonne ......
10.0
5.0
5.0
5.0
5.0
5.0
5.0
2.0
2.0
Rubber .........................................
COMEX .................
LME .......................
LME .......................
ICE US ..................
TOCOM *** ............
COMEX .................
COMEX .................
ICE Canada ...........
Bursa Malaysia/
CME **.
TOCOM .................
8 p.m.–6 p.m.* .......
6 p.m.–5:15 p.m.* ..
8 p.m.–6 p.m.* .......
8:30 a.m.–12:15
p.m.
8:30 a.m.–12:15
p.m.
8:30 a.m.–12:15
p.m.
8:10 a.m.–1 p.m. ...
8 p.m.–2 p.m. ........
8 p.m.–2 p.m. ........
3:30 a.m.–2 p.m. ...
7 p.m.–1:30 a.m. *
8:20 a.m.–1:30 p.m
8:25 a.m.–1:25 p.m
8 p.m.–2:15 p.m. ...
7 p.m.–3:50 a.m.* ..
7 p.m.–1:30 a.m.* ..
JN ............
5,000
JPY/kg ..............
2.0
Total .....................................
................................
................................
..................
........................
...........................
100
Pricing
convention
Contract size
Futures basket
weighting
(percent)
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* Trading ends on next calendar day.
** Non-U.S. Futures Contracts that are also cross-listed on the CME and trade during U.S. market hours.
*** A substantially similar, but not identical, physically settled Futures Contract trades in the U.S. on the CME.
The Sponsor believes that market
arbitrage opportunities will cause daily
changes in UAC’s Unit price on the
NYSE Arca to closely track daily
changes in UAC’s NAV per Unit. The
Sponsor believes that the net effect of
this expected relationship and the
expected relationship described above
between UAC’s NAV and the Futures
Basket will be that the daily changes in
the price of UAC’s Units on the NYSE
Arca will closely track in percentage
terms, changes in the Futures Basket
less UAC’s expenses.
The Sponsor will employ a ‘‘neutral’’
investment strategy intended to track
the changes in the Futures Basket
regardless of whether the price goes up
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or goes down. UAC’s ‘‘neutral’’
investment strategy is designed to
permit investors generally to purchase
and sell UAC’s Units for the purpose of
trading indirectly in the commodities
market in a cost-effective manner, and/
or to permit participants in the
commodities or other industries to
hedge the risk of losses in their Asian
Commodities Interests. Accordingly,
depending on the investment objective
of an individual investor, the risks
generally associated with investing in
the Asian commodities market and/or
the risks involved in hedging may exist.
In addition, an investment in UAC
involves the risk that the changes in the
price of UAC’s Units will not accurately
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track changes in the Futures Basket and
that changes in the Benchmark Futures
Contracts will not closely correlate with
changes in the prices of the
corresponding Asian Benchmark
Commodities. Furthermore, UAC will
also hold Treasuries, cash, and/or cash
equivalents to meet its current or
potential margin or collateral
requirements with respect to its
investments in Asian Commodities
Interests and invest cash not required to
be used as margin or collateral. UAC
does not expect there to be any
meaningful correlation between the
performance of UAC’s investments in
Treasuries, cash, and/or cash
equivalents and the changes in the
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prices of commodities or Asian
Commodities Interests. While the level
of interest earned on or the market price
of these investments may in some
respect correlate to changes in the prices
of commodities, this correlation is not
anticipated as part of UAC’s efforts to
meet its objective.
Each month, the Benchmark Futures
Contracts will change, starting four
business days prior to the end of the
month. Only the near month Benchmark
Futures Contracts that will be reaching
expiration in the upcoming month will
be sold. The next Benchmark Futures
Contract for the relevant Asian
Benchmark Commodity that expires
later than the upcoming month, the next
month contract, will be used to replace
the Benchmark Futures Contract being
sold. Near month Benchmark Futures
Contracts which are not reaching
expiration in the upcoming month will
not be ‘‘rolled’’ forward. During the first
three days of such period, the applicable
value of each Benchmark Futures
Contract being rolled forward will be
based on a combination of the
corresponding near month contract and
the ‘‘next month contract’’ as follows:
(1) Day 1 will consist of 75% of the
then near month contract’s total return
for the day, plus 25% of the total return
for the day of the next month contract,
(2) Day 2 will consist of 50% of the
then near month contract’s total return
for the day, plus 50% of the total return
for the day of the next month contract,
and
(3) Day 3 will consist of 25% of the
then near month contract’s total return
for the day, plus 75% of the total return
for the day of the next month contract.
On day 4, such Benchmark Futures
Contract will be the next month contract
to expire at that time. That contract will
remain the Benchmark Futures Contract
until the following month’s change in
the Benchmark Futures Contract, the
period for which begins four business
days prior to the end of the month.
The Sponsor will attempt to manage
the credit risk of UAC by following
certain trading limitations and policies.
In particular, UAC intends to post
margin and collateral and/or hold liquid
assets that will be equal to
approximately the face amount of the
Asian Commodity Interests it holds. The
Sponsor will implement procedures that
will include, but will not be limited to,
executing and clearing trades and
entering into over-the-counter
transactions only with parties it deems
creditworthy and/or requiring the
posting of collateral by such parties for
the benefit of UAC to limit its credit
exposure. To reduce the credit risk that
arises in connection with over-the-
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counter derivative contracts, UAC will
generally enter into an agreement with
each counterparty based on the Master
Agreement published by the
International Swaps and Derivatives
Association, Inc. that provides for the
netting of its overall exposure to its
counterparty.
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-thecounter contract pursuant to guidelines
approved by the Sponsor. Furthermore,
the Sponsor on behalf of UAC will only
enter into over-the-counter contracts
with counterparties who are, or are
affiliates of, (a) banks regulated by a
United States federal bank regulator, (b)
broker-dealers regulated by the
Commission, (c) insurance companies
domiciled in the United States, and (d)
producers, users, or traders of
commodities, whether or not regulated
by the CFTC. Existing counterparties
will be reviewed periodically by the
Sponsor. UAC also may require that the
counterparty be highly rated and/or
provide collateral or other credit
support.
Creation and Redemption of Units
UAC will create Units only in blocks
of 50,000 Units called ‘‘Creation
Baskets’’ and redeem Units only in
blocks of 50,000 Units called
‘‘Redemption Baskets.’’ Only authorized
purchasers may purchase or redeem
Creation Baskets or Redemption
Baskets, respectively. An authorized
purchaser is under no obligation to
create or redeem baskets, and an
authorized purchaser is under no
obligation to offer to the public Units of
any baskets it does create. Baskets are
generally created when there is a
demand for Units, including, but not
limited to, when the market price per
Unit is at a premium to the NAV per
Unit. Authorized purchasers will then
sell such Units, which will be listed on
NYSE Arca, to the public at per Unit
offering prices that are expected to
reflect, among other factors, the trading
price of the Units on NYSE Arca, the
NAV of UAC at the time the authorized
purchaser purchased the Creation
Baskets and the NAV at the time of the
offer of the Units to the public, the
supply of and demand for Units at the
time of sale, and the liquidity of the
Futures Contracts market and the
market for Other Asian CommoditiesRelated Investments. The prices of Units
offered by Authorized Purchasers are
expected to fall between UAC’s NAV
and the trading price of the Units on the
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NYSE Arca at the time of sale. Similarly,
baskets are generally redeemed when
the market price per Unit is at a
discount to the NAV per Unit. Retail
investors seeking to purchase or sell
Units on any day will effect such
transactions in the secondary market, on
NYSE Arca, at the market price per
Unit, rather than in connection with the
creation or redemption of baskets.
Purchase and redemption orders must
be placed by 10:30 a.m. Eastern Time
(‘‘E.T.’’) or the close of regular trading
on the NYSE Arca, whichever is earlier.
The creation and redemption of
baskets will only be made in exchange
for delivery to UAC or the distribution
by UAC of the amount of Treasuries
and/or cash equal to the combined NAV
of the number of Units included in the
baskets being created or redeemed
determined as of 4:00 p.m. E.T. on the
day the order to create or redeem
baskets is properly received.
All proceeds from the sale of Creation
Baskets will be invested in the
investments described in the
Registration Statement. Investments and
related margin or collateral are held
through the custodian for UAC, BBH &
Co., Inc., in accounts with UAC’s
futures commission merchant, UBS
USA, LLC, or other custodian.
UAC and the Units will meet the
initial and continued listing
requirements applicable to Trust Issued
Receipts in NYSE Arca Equities Rule
8.200 and Commentary .02 thereto. With
respect to application of Rule 10A–3
under the Act,20 the Trust relies on the
exception contained in Rule 10A–
3(c)(7).21 A minimum of 100,000 Units
for UAC will be outstanding as of the
start of trading on the Exchange.
A more detailed description of UAC’s
investments, as well as of the
investment risks, creation and
redemption procedures and fees, is set
forth in the Registration Statement. All
terms relating to UAC that are referred
to, but not defined in, this proposed rule
change are defined in the Registration
Statement.
Net Asset Value
UAC’s NAV will be calculated by:
• Taking the current market value of
its total assets, and
• Subtracting any liabilities.
BBH & Co., Inc, the Administrator,
will calculate the NAV of UAC once
each NYSE Arca trading day. The NAV
for a particular trading day will be
released after 4:00 p.m. E.T. Trading
during the Core Trading Session (9:30
a.m. E.T. to 4:00 p.m. E.T.) on the NYSE
20 17
21 17
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Arca typically closes at 4:00 p.m. E.T.
The Administrator will use the closing
prices on the relevant Futures
Exchanges of the Benchmark Futures
Contracts (determined at the earlier of
the close of such exchange or 2:30 p.m.
E.T.) for the contracts traded on the
Futures Exchanges, but will calculate or
determine the value of all other UAC
investments using market quotations, if
available, or other information
customarily used to determine the fair
value of such investments as of the
earlier of the close of the NYSE Arca or
4:00 p.m. E.T.
‘‘Other information’’ customarily used
in determining fair value includes
information consisting of market data in
the relevant market supplied by one or
more third parties including, without
limitation, relevant rates, prices, yields,
yield curves, volatilities, spreads,
correlations or other market data in the
relevant market, or information of the
types described above from internal
sources if that information is of the
same type used by UAC in the regular
course of its business for the valuation
of similar transactions. The information
may include costs of funding, to the
extent costs of funding are not and
would not be a component of the other
information being utilized. Third parties
supplying quotations or market data
may include, without limitation, dealers
in the relevant markets, end-users of the
relevant product, information vendors,
brokers, and other sources of market
information.
srobinson on DSK4SPTVN1PROD with
Dissemination of Indicative Fund Value
In order to provide updated
information relating to UAC for use by
investors and market professionals, the
NYSE Arca will calculate and
disseminate throughout the Core
Trading Session on each trading day an
updated Indicative Fund Value (‘‘IFV’’).
The IFV will be calculated by using the
prior day’s closing NAV per Unit of
UAC as a base and updating that value
throughout the trading day to reflect
changes in the most recently reported
price level of the Benchmark Futures
Contracts as reported by Bloomberg, L.P.
or another reporting service.
The IFV disseminated during NYSE
Arca Core Trading Session hours should
not be viewed as an actual real time
update of the NAV, because NAV is
calculated only once at the end of each
trading day based upon the relevant end
of day values of UAC’s investments.
The IFV will be widely disseminated
by one or more major market data
vendors at least every 15 seconds during
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the NYSE Arca Core Trading Session.22
The normal trading hours of the Futures
Exchanges vary, with some Futures
Exchanges ending their trading hours
before the close of the Core Trading
Session on NYSE Arca (for example, the
normal trading hours of the NYMEX are
10:00 a.m. E.T. to 2:30 p.m. E.T.). When
UAC holds Futures Contracts from
Futures Exchanges with different
trading hours than the NYSE Arca there
will be a gap in time at the beginning
and/or the end of each day during
which UAC’s Units are traded on the
NYSE Arca, but real-time Futures
Exchange trading prices for Futures
Contracts traded on such Futures
Exchanges are not available. During
such gaps in time, the IFV will be
calculated based on the end of day price
of such Futures Contracts from the
relevant Futures Exchange’s
immediately previous trading session.
In addition, other Futures Contracts,
Other Asian Commodities-Related
Investments, and Treasuries held by
UAC will be valued by the
Administrator, using rates and points
received from client-approved third
party vendors (such as Reuters and WM
Company) and advisor quotes. These
investments will not be included in the
IFV.
Availability of Information Regarding
the Units
The NAV for UAC will be
disseminated daily to all market
participants at the same time. The
Exchange will make available on its
Web site daily trading volume of each
of the Units, closing prices of such
Units, and number of Units outstanding.
The intraday, closing prices, and
settlement prices of the Futures
Contracts and Futures Basket are or will
be readily available from the Web sites
of the relevant Futures Exchanges,
automated quotation systems, published
or other public sources, or on-line
information services such as Bloomberg
or Reuters, and the value of the Futures
Basket will be disseminated at least
every 15 seconds. Complete real-time
data for the Futures Contracts is
available by subscription from Reuters
and Bloomberg. The relevant Futures
Exchanges also provide delayed futures
information on current and past trading
sessions and market news free of charge
on their respective Web sites. The
specific contract specifications for the
Futures Contracts are also available on
such Web sites, as well as other
22 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IFV published on CTA or
other data feeds.
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67717
financial informational sources.
Information regarding exchange-traded
cash-settled options and cleared swap
contracts will be available from the
applicable exchanges and major market
data vendors. Quotation and last-sale
information regarding the Units will be
disseminated through the facilities of
the CTA. In addition, UAC’s Web site,
www.unitedstatesasiancommoditie
sbasketfund.com, will display the
applicable end of day closing NAV.
UAC’s total portfolio composition will
be disclosed each business day that the
NYSE Arca is open for trading, on
UAC’s Web site. The Web site
disclosure of portfolio holdings will be
made daily and will include, as
applicable, (i) the composite value of
the total portfolio, (ii) the name,
percentage weighting, and value of each
Benchmark Futures Contract, (iii) the
specific types, percentage weightings,
and values of Other Asian CommoditiesRelated Investments and characteristics
of such Other Asian CommoditiesRelated Investments, (iv) the name and
value of each Treasury security and cash
equivalent, and (v) the amount of cash
held in UAC’s portfolio. In addition, on
each business day that the NYSE Arca
is open for trading, the Web site
disclosure will include the contents and
percentage weighting of the Futures
Basket and the list and percentage
weighting of the Asian Benchmark
Commodities. The sources the Sponsor
uses to determine global production,
consumption, and economic tendencies
will be available on the Fund’s Web site.
UAC’s Web site is publicly accessible at
no charge.
This Web site disclosure of the
portfolio composition of UAC 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 UAC through UAC’s
Web site.
Trading Rules
The Exchange deems the Units to be
equity securities, thus rendering trading
in the Units subject to the Exchange’s
existing rules governing the trading of
equity securities. Units will trade on the
NYSE Arca Marketplace from 4:00 a.m.
to 8:00 p.m. E.T. The Exchange has
appropriate rules to facilitate
transactions in the Units during all
trading sessions. As provided in NYSE
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srobinson on DSK4SPTVN1PROD with
Arca Equities Rule 7.6, Commentary .03,
the minimum price variation (‘‘MPV’’)
for quoting and entry of orders in equity
securities traded on the NYSE Arca
Marketplace is $0.01, with the exception
of securities that are priced less than
$1.00 for which the MPV for order entry
is $0.0001.
The trading of the Units will be
subject to NYSE Arca Equities Rule
8.200, Commentary .02(e), which sets
forth certain restrictions on Equity
Trading Permit (‘‘ETP’’) Holders acting
as registered Market Makers in Trust
Issued Receipts to facilitate
surveillance. See ‘‘Surveillance’’ below
for more information.
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Units.
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Units inadvisable. These may
include: (1) The extent to which trading
is not occurring in the underlying
futures contracts, or (2) whether other
unusual conditions or circumstances
detrimental to the maintenance of a fair
and orderly market are present. In
addition, trading in Units will be subject
to trading halts caused by extraordinary
market volatility pursuant to the
Exchange’s ‘‘circuit breaker’’ rule 23 or
by the halt or suspension of trading of
the underlying futures contracts.
The Exchange may halt trading during
the day in which an interruption to the
dissemination of the IFV, the value of
the Futures Basket, or the value of the
underlying Futures Contracts occurs. If
the interruption to the dissemination of
the IFV, the value of the Futures Basket,
or the value of the underlying Futures
Contracts persists past the trading day
in which it occurred, the Exchange will
halt trading no later than the beginning
of the trading day following the
interruption. In addition, if the
Exchange becomes aware that the NAV
with respect to the Units is not
disseminated to all market participants
at the same time, it will halt trading in
the Units until such time as the NAV is
available to all market participants.
Surveillance
The Exchange intends to utilize its
existing surveillance procedures
applicable to derivative products,
including Trust Issued Receipts, to
monitor trading in the Units. The
Exchange represents that these
procedures are adequate to properly
monitor Exchange trading of the Units
in all trading sessions and to deter and
23 See
NYSE Arca Equities Rule 7.12.
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detect violations of Exchange rules and
applicable federal securities laws.
The Exchange’s current trading
surveillances focus on detecting
securities trading outside their normal
patterns. When such situations are
detected, surveillance analysis follows
and investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations. The Exchange is able
to obtain information regarding trading
in the Units, the physical commodities
included in, or options, futures, or
options on futures on, Units through
ETP Holders, in connection with such
ETP Holders’ proprietary trades or
customer trades through ETP Holders
which they effect on any relevant
market. The Exchange can obtain market
surveillance information, including
customer identity information, with
respect to transactions occurring on
exchanges that are members of the
Intermarket Surveillance Group (‘‘ISG’’),
including CME, COMEX, CBOT,
NYMEX, ICE US, ICE Canada, DME, and
Malaysia. In addition, the Exchange has
entered into comprehensive
surveillance sharing agreements with
ICE Europe and LME that apply with
respect to trading in the applicable
Futures Contracts. A list of ISG
members is available at
www.isgportal.org. 24
In addition, with respect to UAC’s
Futures Contracts traded on exchanges,
not more than 10% of the weight of
such Futures Contracts in the aggregate
shall consist of components whose
principal trading market is not a
member of ISG or is a market with
which the Exchange does not have a
comprehensive surveillance sharing
agreement.
The Exchange also has a general
policy prohibiting the distribution of
material, non-public information by its
employees.
Baskets and Redemption Baskets (and
that Units are not individually
redeemable); (3) NYSE Arca Equities
Rule 9.2(a), which imposes a duty of
due diligence on its ETP Holders to
learn the essential facts relating to every
customer prior to trading the Units; (4)
how information regarding the IFV is
disseminated; (5) that a static IFV will
be disseminated, between the close of
trading on the applicable Futures
Exchange and the close of the NYSE
Arca Core Trading Session; (6) the
requirement that ETP Holders deliver a
prospectus to investors purchasing
newly issued Units prior to or
concurrently with the confirmation of a
transaction; and (7) trading information.
In addition, the Information Bulletin
will advise ETP Holders, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to UAC. The Exchange notes
that investors purchasing Units directly
from UAC will receive a prospectus.
ETP Holders purchasing Units from
UAC for resale to investors will deliver
a prospectus to such investors. The
Information Bulletin will also discuss
any exemptive, no-action, and
interpretive relief granted by the
Commission from any rules under the
Act.
In addition, the Information Bulletin
will reference that UAC is subject to
various fees and expenses described in
the Registration Statement. The
Information Bulletin will also reference
that the CFTC has regulatory
jurisdiction over the trading of Futures
Contracts traded on U.S. markets.
The Information Bulletin will also
disclose the trading hours of the Units
of UAC and that the NAV for the Units
is calculated after 4:00 p.m. E.T. each
trading day. The Information Bulletin
will disclose that information about the
Units of UAC is publicly available on
UAC’s Web site.
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Units.
Specifically, the Information Bulletin
will discuss the following: (1) The risks
involved in trading the Units during the
Opening and Late Trading Sessions
when an updated IFV will not be
calculated or publicly disseminated; (2)
the procedures for purchases and
redemptions of Units in Creation
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 25 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 Units will
be listed and traded on the Exchange
24 The Exchange notes that not all Other Asian
Commodities-Related Investments may trade on
markets that are members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
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pursuant to the initial and continued
listing criteria in NYSE Arca Equities
Rule 8.200 and Commentary .02 thereto.
The Sponsor is not a broker-dealer or a
registered investment adviser. The
Sponsor represents that it will
implement and maintain procedures
designed to prevent the use and
dissemination of material non-public
information regarding the Futures
Basket. UAC will invest in Benchmark
Futures Contracts to the fullest extent
possible, turning next to investments in
other Futures Contracts, and finally to
Other Asian Commodities-Related
Investments only if required to by
applicable regulatory requirements or in
adverse market conditions.26 The
Exchange has in place surveillance
procedures that are adequate to properly
monitor trading in the Units in all
trading sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws. With
respect to UAC’s Futures Contracts
traded on exchanges, not more than
10% of the weight of such Futures
Contracts in the aggregate shall consist
of components whose principal trading
market is not a member of ISG or is a
market with which the Exchange does
not have a comprehensive surveillance
sharing agreement. The Exchange 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. The intraday, closing
prices, and settlement prices of the
Futures Contracts held by UAC are
readily available from the Web sites of
the relevant Futures Exchanges,
automated quotation systems, published
or other public sources, or on-line
information services such as Bloomberg
or Reuters. The relevant Futures
Exchanges also provide delayed futures
information on current and past trading
sessions and market news free of charge
on their respective Web sites. Quotation
and last-sale information for the Units
will be available via CTA. In addition,
UAC’s Web site will display the
applicable end of day closing NAV.
UAC’s total portfolio composition will
be disclosed on its Web site.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that a large amount of
information is publicly available
regarding UAC and the Units, thereby
promoting market transparency. The
IFV and value of the Futures Basket will
be disseminated by one or more major
market data vendors at least every 15
seconds during the regular NYSE Arca
26 See
note 17, supra.
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Core Trading Session. Trading in Units
of UAC 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 Units
inadvisable. Moreover, prior to the
commencement of trading, the Exchange
will inform its ETP Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Units. UAC’s total portfolio
composition will be disclosed each
business day that the NYSE Arca is
open for trading, on UAC’s Web site at
www.unitedstatesasiancommodities
basketfund.com. The Web site
disclosure of portfolio holdings will be
made daily and will include, as
applicable, (i) the composite value of
the total portfolio, (ii) the name,
percentage weighting, and value of each
Benchmark Futures Contract, (iii) the
specific types, percentage weightings,
and values of Other Asian CommoditiesRelated Investments and characteristics
of such Other Asian CommoditiesRelated Investments, (iv) the name and
value of each Treasury security and cash
equivalent, and (v) the amount of cash
held in UAC’s portfolio. In addition, on
each business day that the NYSE Arca
is open for trading, the Web site
disclosure will include the contents and
percentage weighting of the Futures
Basket and the list and percentage
weighting of the Asian Benchmark
Commodities.
The Exchange may halt trading during
the day in which an interruption to the
dissemination of the IFV, the value of
the Futures Basket, or the value of the
underlying Futures Contracts occurs. If
the interruption to the dissemination of
the IFV, value of the Futures Basket, or
the value of the underlying Futures
Contracts persists past the trading day
in which it occurred, the Exchange will
halt trading no later than the beginning
of the trading day following the
interruption. In addition, if the
Exchange becomes aware that the NAV
with respect to the Units is not
disseminated to all market participants
at the same time, it will halt trading in
the Units until such time as the NAV is
available to all market participants.
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 an additional type of trust issued
receipts 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
PO 00000
Frm 00093
Fmt 4703
Sfmt 4703
67719
trading in the Units 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 UAC’s
holdings, IFV, and quotation and lastsale information for the Units.
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
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding, or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2012–120 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.
E:\FR\FM\13NON1.SGM
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67720
Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices
All submissions should refer to File
Number SR–NYSEArca–2012–120. 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 Section, 100 F Street NE.,
Washington, DC 20549–1090, on official
business days between 10:00 a.m. and
3:00 p.m. Copies of the filing will also
be available for inspection and copying
at the NYSE’s principal office and on its
Internet Web site at www.nyse.com. 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–2012–120 and
should be submitted on or before
December 4, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–27551 Filed 11–9–12; 8:45 am]
srobinson on DSK4SPTVN1PROD with
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68162; File No. SR–
NYSEMKT–2012–62]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend the Temporary
Suspension of Those Aspects of Rules
36.20—Equities, 36.21—Equities, and
36.30—Equities That Would Not Permit
Designated Market Makers and Floor
Brokers To Use Personal Portable
Phone Devices on the Trading Floor
Following the Aftermath of Hurricane
Sandy From November 5, 2012 Until
the Earlier of When Phone Service Is
Fully Restored or Friday, November 9,
2012
November 5, 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 November
5, 2012, NYSE MKT LLC (‘‘NYSE MKT’’
or ‘‘Exchange’’) 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 self-regulatory organization. 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 extend the
temporary suspension of those aspects
of Rules 36.20—Equities, 36.21—
Equities, and 36.30—Equities that
would not permit Designated Market
Makers (‘‘DMMs’’) and Floor brokers to
use personal portable phone devices on
the Trading Floor following the
aftermath of Hurricane Sandy from
November 5, 2012 until the earlier of
when phone service is fully restored or
Friday, November 9, 2012. 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
statements concerning the purpose of,
and basis for, the proposed rule change
1 15
27 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
17:08 Nov 09, 2012
2 17
Jkt 229001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00094
Fmt 4703
Sfmt 4703
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
On Thursday, November 1, 2012, the
Exchange filed a rule proposal to
temporarily suspend those aspects of
Rules 36.20—Equities, 36.21—Equities,
and 36.30—Equities that would not
permit Floor brokers and Designated
Market Makers (‘‘DMMs’’) to use
personal portable phone devices on the
Trading Floor 3 following the aftermath
of Hurricane Sandy and during the
period that phone service was not fully
functional.4 Pursuant to that filing, all
other aspects of those rules remained
applicable and the temporary
suspensions of Rule 36 requirements
were in effect beginning the first day
trading resumed following Hurricane
Sandy until Friday, November 2, 2012.
As of Monday, November 5, 2012,
although power has been restored to the
downtown Manhattan vicinity, other
services are not yet fully operational.
Among other things, the telephone
services provided by third-party carriers
to the Exchange are still not fully
operational on the Trading Floor, which
impacts the ability of Floor members to
communicate from the Trading Floor as
permitted by Rule 36—Equities.
Because of intermittent cell phone
service, many Exchange authorized and
provided portable phones continue to
not be functional and therefore Floor
brokers still cannot use the Exchange
authorized and provided portable
phones, pursuant to Rules 36.20—
Equities and 36.21—Equities. In certain
instances, however, the personal cell
phones of Floor brokers are operational
on the Trading Floor. The Exchange
believes that because communications
with customers is a vital part of a Floor
broker’s role as agent and therefore
contributes to maintaining a fair and
orderly market, during the period when
phone service continues to be
intermittent, Floor brokers should be
3 Pursuant to Rule 6A—Equities, the Trading
Floor is defined as the restricted-access physical
areas designated by the Exchange for the trading of
securities, but does not include the physical
locations where NYSE Amex Options are traded.
4 See Securities Exchange Act Release No. 68138
(Nov. 1, 2012) (SR–NYSEMKT–2012–59).
E:\FR\FM\13NON1.SGM
13NON1
]]>Agencies
[Federal Register Volume 77, Number 219 (Tuesday, November 13, 2012)]
[Notices]
[Pages 67712-67720]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27551]
[[Page 67712]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68173; File No. SR-NYSEArca-2012-120]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the United States
Asian Commodities Basket Fund Under NYSE Arca Equities Rule 8.200
November 6, 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 October 25, 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, II,
and III 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 list and trade shares of the United States
Asian Commodities Basket Fund (``UAC'' or ``Fund'') under NYSE Arca
Equities Rule 8.200. 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 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 either by listing or pursuant to unlisted
trading privileges (``UTP'').\3\ The Exchange proposes to list and
trade shares (``Units'') of UAC pursuant to NYSE Arca Equities Rule
8.200.
---------------------------------------------------------------------------
\3\ 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.
---------------------------------------------------------------------------
The Exchange notes that the Commission has previously approved the
listing and trading of other issues of Trust Issued Receipts on the
American Stock Exchange LLC,\4\ trading on NYSE Arca pursuant to
UTP,\5\ and listing on NYSE Arca.\6\ In addition, the Commission has
approved the listing and trading of other exchange-traded fund-like
products linked to the performance of underlying commodities.\7\
---------------------------------------------------------------------------
\4\ See, e.g., Securities Exchange Act Release No. 58161 (July
15, 2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39).
\5\ See, e.g., Securities Exchange Act Release No. 58163 (July
15, 2008), 73 FR 42391 (July 21, 2008) (SR-NYSEArca-2008-73).
\6\ See, e.g., Securities Exchange Act Release No. 58457
(September 3, 2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-
2008-91).
\7\ See, e.g., Securities Exchange Act Release Nos. 57456 (March
7, 2008), 73 FR 13599 (March 13, 2008) (SR-NYSEArca-2007-91) (order
granting accelerated approval for NYSE Arca listing the iShares GS
Commodity Trusts); 59781 (April 17, 2009), 74 FR 18771 (April 24,
2009) (SR-NYSEArca-2009-28) (order granting accelerated approval for
NYSE Arca listing the ETFS Silver Trust); 59895 (May 8, 2009), 74 FR
22993 (May 15, 2009) (SR-NYSEArca-2009-40) (order granting
accelerated approval for NYSE Arca listing the ETFS Gold Trust); and
62527 (July 19, 2010), 75 FR 43606 (July 26, 2010) (SR-NYSEArca-
2010-44) (order approving listing on NYSE Arca of the United States
Commodity Index Fund).
---------------------------------------------------------------------------
The Units represent beneficial ownership interests in UAC, as
described in the Registration Statement.\8\ UAC is a commodity pool
that is a series of the United States Commodity Funds Trust I
(``Trust''), a Delaware statutory trust. UAC is managed and controlled
by United States Commodity Funds LLC (``Sponsor''). The Sponsor 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. Brown Brothers
Harriman & Co. Inc. (``BBH & Co., Inc.'') is the administrator for the
Trust (``Administrator'').
---------------------------------------------------------------------------
\8\ See Amendment No. 2 to the registration statement on Form S-
1 for the United States Commodity Funds Trust I, dated June 18, 2012
(File No. 333-177188) relating to UAC (``Registration Statement'').
The discussion herein relating to the Trust and the Units is based,
in part, on the Registration Statement.
---------------------------------------------------------------------------
According to the Registration Statement, the net assets of UAC will
consist of (a) investments in futures contracts for Asian commodities
that are traded on the Chicago Mercantile Exchange (``CME''), Chicago
Board of Trade (``CBOT''), the New York Mercantile Exchange
(``NYMEX''), Commodity Exchange, Inc. (``COMEX''), ICE Futures US
(``ICE US''), ICE Futures Canada (``ICE Canada''), ICE Futures Europe
(``ICE Europe''), London Metal Exchange (``LME''), Tokyo Commodity
Exchange (``TOCOM''), Dubai Mercantile Exchange (``DME''), and Bursa
Malaysia (``Malaysia'') \9\ (collectively, ``Futures Contracts'') and
(b) if applicable, other Asian commodities-related investments such as
exchange-listed cash-settled options on Futures Contracts, forward
contracts for Asian commodities, cleared swap contracts, and over-the-
counter transactions that are based on the price of Asian commodities,
Futures Contracts and indices based on the foregoing (collectively,
``Other Asian Commodities-Related Investments''). Futures Contracts and
Other Asian Commodities-Related Investments collectively are referred
to as ``Asian Commodities Interests.'' UAC will also invest in short-
term obligations of the United States of two years or less
(``Treasuries''), cash, and cash equivalents for margining purposes and
as collateral.\10\
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\9\ CME, CBOT, NYMEX, COMEX, ICE US, ICE Canada, ICE Europe,
LME, TOCOM, DME, and Malaysia are each referred to herein as a
``Futures Exchange.''
\10\ Pursuant to the Dodd-Frank Wall Street Reform and Consumer
Protection Act, the CFTC has been tasked with implementing rules and
regulations that are expected to impact position limits and
visibility levels and other regulatory requirements that will be
applicable to the Fund and its holdings.
---------------------------------------------------------------------------
According to the Registration Statement, UAC will invest in Asian
Commodities Interests, to the fullest extent possible, without being
leveraged or unable to satisfy its current or potential margin and/or
collateral obligations with respect to its investments in Futures
Contracts and Other Asian Commodities-Related Investments.\11\ The
primary focus of the Sponsor will be the investment in Futures
Contracts and the management of UAC's investments in Treasuries, cash,
and cash equivalents for margining purposes and as collateral.
---------------------------------------------------------------------------
\11\ The Sponsor represents that the Fund will invest in Asian
Commodities Interests in a manner consistent with the Fund's
investment objective and not to achieve additional leverage.
---------------------------------------------------------------------------
According to the Registration Statement, the investment objective
of
[[Page 67713]]
UAC (before fees and expenses) will be to have the daily changes in
percentage terms of its net asset value (``NAV'') reflect the daily
changes in percentage terms of the price of a basket of Futures
Contracts, each of which tracks one of the Asian Benchmark Commodities
(``Futures Basket''). The ``Asian Benchmark Commodities'' will be
commodities selected by the Sponsor. The Futures Contracts designated
for inclusion in the Futures Basket will be selected by the Sponsor,
and are referred to as the ``Benchmark Futures Contracts.''
According to the Registration Statement, the Asian Benchmark
Commodities will be selected by the Sponsor \12\ based on either their
systemic importance to Asian economies, including the three major Asian
economies of China, Japan, and India, or the fact that there are
futures contracts relating to the commodity or commodities that trade
on an Asian domiciled futures exchange. The Sponsor will select the
Asian Benchmark Commodities based on the following four criteria:
---------------------------------------------------------------------------
\12\ The Sponsor is not a broker-dealer or a registered
investment adviser. The Sponsor represents that it will implement
and maintain procedures designed to prevent the use and
dissemination of material, non-public information regarding the
Futures Basket.
---------------------------------------------------------------------------
First, the physical commodity must be one in which the
economies of China, Japan, and India annually consume 10% or more of
global consumption based on publically available industry and
government statistics.
Second, the physical commodity must be one in which, based
on publically available industry and government statistics, China,
Japan, and India annually produce less of the commodity than they
typically consume, indicating that they are likely to be net importers
of the commodity and not net exporters.
Third, the Futures Contracts on the physical commodity
must be traded on a regulated Futures Exchange in the United States,
Canada, the United Kingdom, Japan, Dubai, Malaysia, or other domicile
which allows a U.S. domiciled passive investment fund to buy and sell
such contracts.
Fourth and finally, the Futures Contracts traded on such
commodities must have average open interest measured in U.S. dollars in
excess of $150 million at the time of the commodity's selection. In the
event the same or substantially similar physical contract is traded on
more than one Futures Exchange, the minimum liquidity test will be
applied to the exchange with the largest open interest US dollar terms
in that particular commodity.
The Asian Benchmark Commodities will be selected by the Sponsor in
accordance with the above specific quantitative data. Then, according
to the Registration Statement, in the first quarter of each calendar
year, the Sponsor will reevaluate the selection of commodities based on
the prior year's data. As a result of changes in Asian commodity
production, commodity consumption, net imports or exports of
commodities, and changes in commodity futures contract liquidity and in
strict accordance with the criteria and factors listed above, the
Sponsor may elect to add or delete a commodity from the list of Asian
Benchmark Commodities, and thus the Futures Basket.\13\ Under normal
circumstances,\14\ the Sponsor anticipates that any changes in either
the list of Asian Benchmark Commodities, the list of Benchmark Futures
Contracts in the Futures Basket, or their weightings, would be made as
part of the annual review process and disclosed to investors with no
less than 30 days advanced notice of the change.
---------------------------------------------------------------------------
\13\ In making any such change, the Sponsor will file a
prospectus supplement informing investors of the proposed changes no
less than 30 days prior to the first month in which the commodity or
commodities added will become part of the Asian Benchmark
Commodities, or 30 days prior to the first month in which the
commodity or commodities deleted will no longer be part of the Asian
Benchmark Commodities. Any changes to the eligible Asian Benchmark
Commodities will also be published on the Web site for the Fund.
\14\ ``Normal circumstances'' as used herein 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.
---------------------------------------------------------------------------
From time to time throughout the year, it is possible that the
Sponsor may determine that a Futures Contract that is currently a
Benchmark Futures Contract is no longer suitable due to changes in the
liquidity of the Futures Contract or due to changes in the rules
regarding that particular Futures Contract on its regulated Futures
Exchange.\15\ In such cases the Sponsor would first attempt to select
another Futures Contract based on the same commodity that trades on
either the current regulated Futures Exchange, or trades on another
regulated Futures Exchange, and disclose on the Fund's Web site and in
a prospectus supplement that the new Futures Contract will become a
Benchmark Futures Contract for the relevant Asian Benchmark Commodity
and the prior Benchmark Futures Contract for such Asian Benchmark
Commodity would be deleted. In the event that the Sponsor determined
that no other existing Futures Contract is a suitable replacement, then
the Sponsor would file a prospectus supplement and post on the Web site
indicating that the relevant Benchmark Futures Contract would no longer
be included as part of the Futures Basket. In cases where a suitable
Benchmark Futures Contract no longer exists, the Sponsor will also
remove the underlying commodity from the list of Asian Benchmark
Commodities.\16\ Although the Sponsor would normally seek to provide at
least 30 days' notice of any such change, specific circumstances could
mean that the Sponsor would be unable to provide that amount of
advanced notice.
---------------------------------------------------------------------------
\15\ According to the Sponsor, an example would be a case where
a Futures Contract has decreased average liquidity under $150
million.
\16\ According to the Sponsor, in a case where an underlying
commodity is removed from the list of Asian Benchmark Commodities as
described, if a Futures Contract in such commodity becomes available
at some later date, the underlying commodity would be eligible for
selection as an Asian Benchmark Commodity in the annual review
process.
---------------------------------------------------------------------------
The Benchmark Futures Contracts may trade on any of the Futures
Exchanges. It is not the intent of UAC to be operated in a fashion such
that its NAV will equal, in dollar terms, the spot price of any
particular commodity or any particular Benchmark Futures Contract. It
is not the intent of UAC to be operated in a fashion such that its NAV
will reflect the percentage change of the price of the Futures Basket
as measured over a time period greater than one day. The Sponsor does
not believe that is an achievable goal due to the potential impact of
backwardation and contango on returns of any portfolio of futures
contracts.
According to the Registration Statement, UAC will seek to achieve
its investment objective by investing in Futures Contracts and, if
applicable, Other Asian Commodities-Related Investments such that the
daily changes in UAC's NAV will closely track changes in the daily
price of the Futures Basket. The Sponsor believes changes in the price
of the Benchmark Futures Contracts have historically exhibited a close
correlation with the changes in the price of the corresponding Asian
Benchmark Commodities. On any valuation day (a valuation day is any
NYSE Arca trading day as of which UAC calculates its NAV, as described
herein), each Benchmark Futures Contract will be the near month
contract for the corresponding Asian Benchmark
[[Page 67714]]
Commodity traded on the Futures Exchange where such Benchmark Futures
Contract is listed, unless the near month contract will expire within 4
business days prior to the end of the month. Only the Benchmark Futures
Contracts that will be reaching expiration in the upcoming month will
be sold and the next Futures Contract for that commodity that expires
later than the upcoming month, the next month contract, will be used to
replace the contract being sold. Benchmark Futures Contracts which are
not reaching expiration in the upcoming month will not be ``rolled''
forward.
UAC will invest in Benchmark Futures Contracts to the fullest
extent possible, turning next to investments in other Futures
Contracts, and finally to Other Asian Commodities-Related Investments
only if required to by applicable regulatory requirements or under
adverse market conditions.\17\ The types of regulatory requirements and
market conditions that would cause UAC to invest in this manner are of
a limited nature. An example of a regulatory requirement that would
cause UAC to invest in Futures Contracts or Other Asian Commodities-
Related Investments other than Benchmark Futures Contracts would be
where UAC received payment from an Authorized Purchaser for the
issuance of a Creation Basket, but could not invest the payment in
Benchmark Futures Contracts because doing so would cause UAC to exceed
the position limits applicable to such Benchmark Futures Contracts.
Imposition of other regulatory requirements, such as accountability
levels, daily price fluctuation limits, or the imposition of capital
controls on foreign investments, may cause UAC to invest in Futures
Contracts or Other Asian Commodities-Related Investments other than
Benchmark Futures Contracts.\18\ Adverse market conditions that the
Sponsor currently anticipates could cause UAC to invest in Futures
Contracts and Other Asian Commodities-Related Investments would be
those allowing UAC to obtain greater liquidity or to execute
transactions with more favorable pricing.
---------------------------------------------------------------------------
\17\ ``Adverse market conditions'' as used herein includes, but
is not limited to, those conditions whereby the Sponsor believes the
price of the Benchmark Futures Contract appears adversely impacted
or economically dislocated compared to substantially similar Futures
Contracts, i.e., those futures contracts of the same commodity as
the Benchmark Futures Contract, but traded on a different exchange.
\18\ According to the Registration Statement, U.S. designated
contract markets such as the CME, CBOT, COMEX, NYMEX, and ICE US
have established accountability levels and position limits on the
maximum net long or net short futures contracts in commodity
interests that any person or group of persons under common trading
control (other than as a hedge, which an investment by UAC is not)
may hold, own, or control.
In addition to accountability levels and position limits, the
regulated Futures Exchanges may also set daily price fluctuation
limits on futures contracts. The daily price fluctuation limit
establishes the maximum amount that the price of a futures contract
may vary either up or down from the previous day's settlement price.
Once the daily price fluctuation limit has been reached in a
particular futures contract, no trades may be made at a price beyond
that limit.
Imposition of, or changes in, accountability levels, position
limits or fluctuation limits on futures contracts could constitute a
regulatory requirement that would cause UAC to invest in Futures
Contracts or Other Asian Commodities-Related Investments other than
Benchmark Futures Contracts. All of these limits may potentially
cause a tracking error between the price of the Units and the price
of the Futures Basket. This may in turn prevent investors from being
able to effectively use UAC as a way to hedge against Asian
commodities-related losses or as a way to indirectly invest in Asian
commodities.
---------------------------------------------------------------------------
More specifically, if applicable regulatory requirements or adverse
market conditions make investing in Benchmark Futures Contracts
impracticable, UAC would then invest to the fullest extent possible in
other Futures Contracts that, while relating to the same commodity and
trading on the same Futures Exchange as a Benchmark Futures Contract,
have a different expiration date. If and when investing in such other
Futures Contracts becomes impracticable because of regulatory
requirements or adverse market conditions, UAC would then invest to the
fullest extent possible in Futures Contracts that, while relating to
the same commodity as the corresponding Benchmark Futures Contract, are
traded on a different futures exchange. Only when UAC has invested in
Benchmark Futures Contracts and other Futures Contracts to the fullest
extent possible in the manner described above, will it then invest in
Other Asian Commodities-Related Investments.\19\
---------------------------------------------------------------------------
\19\ UAC anticipates that, to the extent it invests in Futures
Contracts other than the Benchmark Futures Contracts and Other Asian
Commodities-Related Investments that are not economically equivalent
to the Benchmark Futures Contracts, it will enter into various non-
exchange-traded derivative contracts to hedge the short-term price
movements of such Futures Contracts and Other Asian Commodities-
Related Investments against the current Benchmark Futures Contracts.
---------------------------------------------------------------------------
According to the Registration Statement, the Sponsor will endeavor
to place UAC's trades in Asian Commodities Interests and otherwise
manage UAC's investments so that ``A'' will be within plus/minus 10
percent of ``B,'' where:
A is the average daily percentage change in UAC's NAV for
any period of 30 successive valuation days, i.e., any NYSE Arca trading
day as of which UAC calculates its NAV; and
B is the average daily percentage change in the price of
the Futures Basket over the same period.
A list of the current Asian Benchmark Commodities is shown in the
table below. Included with the list is the Sponsor's estimate of the
percentage of global production and consumption for each commodity that
is attributable to China, Japan, and India combined. Finally, the
current assigned base weight of each commodity for use in the Futures
Basket is listed.
Asian Benchmark Commodities
[As of December 31, 2011]
----------------------------------------------------------------------------------------------------------------
China, Japan, China, Japan,
and India's and India's
Commodity share of global share of global Current base
production consumption weight (percent)
(percent) (percent)
----------------------------------------------------------------------------------------------------------------
Crude Oil................................................. 5.9 19.0 22
Gasoil.................................................... 5.9 19.0 2
Corn...................................................... 23.3 24.6 10
Soybeans.................................................. 9.1 32.1 10
Wheat..................................................... 32.3 32.6 10
Copper.................................................... 4.8 60.9 10
Zinc...................................................... 34.5 48.9 5
Nickel.................................................... 4.3 41.6 5
Sugar..................................................... 24.4 26.2 5
[[Page 67715]]
Platinum.................................................. 0 41.9 5
Gold...................................................... 13.1 63.8 5
Silver.................................................... 15.1 66.8 5
Canola Oil................................................ 15 44.7 2
Palm Oil.................................................. 0 40.1 2
Rubber.................................................... 14.6 47.3 2
-----------------------------------------------------
Total................................................. ................ ................ 100
----------------------------------------------------------------------------------------------------------------
A list of the current Benchmark Futures Contracts and their
weighting in the Futures Basket is shown in the table below.
Benchmark Futures Contracts
--------------------------------------------------------------------------------------------------------------------------------------------------------
Futures basket
Commodity Primary futures Trading hours Contract ticker Contract size Pricing convention weighting
exchange (eastern time) or code (percent)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Crude Oil-Light/Sweet-Brent...... ICE Europe......... 8 p.m.-6 p.m.*..... CO............... 1,000 USD/bbl................. 20.0
Crude Oil-Medium-DME/Oman........ DME/CME **......... 6 p.m.-5:15 p.m.*.. OQD.............. 1,000 USD/bbl................. 2.0
Gasoil........................... ICE Europe......... 8 p.m.-6 p.m.*..... QS............... 100 USD/Tonne............... 2.0
Corn............................. CBOT............... 8:30 a.m.-12:15 p.m ZC............... 5,000 c/bu.................... 10.0
Soybeans......................... CBOT............... 8:30 a.m.-12:15 p.m ZS............... 5,000 c/bu.................... 10.0
Wheat............................ CBOT............... 8:30 a.m.-12:15 p.m ZW............... 5,000 c/bu.................... 10.0
Copper........................... COMEX.............. 8:10 a.m.-1 p.m.... HG............... 25,000 USD/lb.................. 10.0
Zinc............................. LME................ 8 p.m.-2 p.m....... LX............... 25 USD/Tonne............... 5.0
Nickel........................... LME................ 8 p.m.-2 p.m....... LN............... 6 USD/Tonne............... 5.0
Sugar............................ ICE US............. 3:30 a.m.-2 p.m.... SB............... 112,000 c/lb.................... 5.0
Platinum......................... TOCOM ***.......... 7 p.m.-1:30 a.m. *. JA............... 500 JPY/g................... 5.0
Gold............................. COMEX.............. 8:20 a.m.-1:30 p.m. GC............... 100 USD/T.Oz................ 5.0
Silver........................... COMEX.............. 8:25 a.m.-1:25 p.m. SI............... 5,000 USD/T.Oz................ 5.0
Canola Oil....................... ICE Canada......... 8 p.m.-2:15 p.m.... RS............... 20 CAD/Tonne............... 2.0
Palm Oil......................... Bursa Malaysia/CME 7 p.m.-3:50 a.m.*.. KO............... 25 MYR/Tonne............... 2.0
**.
Rubber........................... TOCOM.............. 7 p.m.-1:30 a.m.*.. JN............... 5,000 JPY/kg.................. 2.0
----------------------------------------------------------------------------------------------------------------------
Total........................ ................... ................... ................. .............. ........................ 100
--------------------------------------------------------------------------------------------------------------------------------------------------------
* Trading ends on next calendar day.
** Non-U.S. Futures Contracts that are also cross-listed on the CME and trade during U.S. market hours.
*** A substantially similar, but not identical, physically settled Futures Contract trades in the U.S. on the CME.
The Sponsor believes that market arbitrage opportunities will cause
daily changes in UAC's Unit price on the NYSE Arca to closely track
daily changes in UAC's NAV per Unit. The Sponsor believes that the net
effect of this expected relationship and the expected relationship
described above between UAC's NAV and the Futures Basket will be that
the daily changes in the price of UAC's Units on the NYSE Arca will
closely track in percentage terms, changes in the Futures Basket less
UAC's expenses.
The Sponsor will employ a ``neutral'' investment strategy intended
to track the changes in the Futures Basket regardless of whether the
price goes up or goes down. UAC's ``neutral'' investment strategy is
designed to permit investors generally to purchase and sell UAC's Units
for the purpose of trading indirectly in the commodities market in a
cost-effective manner, and/or to permit participants in the commodities
or other industries to hedge the risk of losses in their Asian
Commodities Interests. Accordingly, depending on the investment
objective of an individual investor, the risks generally associated
with investing in the Asian commodities market and/or the risks
involved in hedging may exist. In addition, an investment in UAC
involves the risk that the changes in the price of UAC's Units will not
accurately track changes in the Futures Basket and that changes in the
Benchmark Futures Contracts will not closely correlate with changes in
the prices of the corresponding Asian Benchmark Commodities.
Furthermore, UAC will also hold Treasuries, cash, and/or cash
equivalents to meet its current or potential margin or collateral
requirements with respect to its investments in Asian Commodities
Interests and invest cash not required to be used as margin or
collateral. UAC does not expect there to be any meaningful correlation
between the performance of UAC's investments in Treasuries, cash, and/
or cash equivalents and the changes in the
[[Page 67716]]
prices of commodities or Asian Commodities Interests. While the level
of interest earned on or the market price of these investments may in
some respect correlate to changes in the prices of commodities, this
correlation is not anticipated as part of UAC's efforts to meet its
objective.
Each month, the Benchmark Futures Contracts will change, starting
four business days prior to the end of the month. Only the near month
Benchmark Futures Contracts that will be reaching expiration in the
upcoming month will be sold. The next Benchmark Futures Contract for
the relevant Asian Benchmark Commodity that expires later than the
upcoming month, the next month contract, will be used to replace the
Benchmark Futures Contract being sold. Near month Benchmark Futures
Contracts which are not reaching expiration in the upcoming month will
not be ``rolled'' forward. During the first three days of such period,
the applicable value of each Benchmark Futures Contract being rolled
forward will be based on a combination of the corresponding near month
contract and the ``next month contract'' as follows:
(1) Day 1 will consist of 75% of the then near month contract's
total return for the day, plus 25% of the total return for the day of
the next month contract,
(2) Day 2 will consist of 50% of the then near month contract's
total return for the day, plus 50% of the total return for the day of
the next month contract, and
(3) Day 3 will consist of 25% of the then near month contract's
total return for the day, plus 75% of the total return for the day of
the next month contract.
On day 4, such Benchmark Futures Contract will be the next month
contract to expire at that time. That contract will remain the
Benchmark Futures Contract until the following month's change in the
Benchmark Futures Contract, the period for which begins four business
days prior to the end of the month.
The Sponsor will attempt to manage the credit risk of UAC by
following certain trading limitations and policies. In particular, UAC
intends to post margin and collateral and/or hold liquid assets that
will be equal to approximately the face amount of the Asian Commodity
Interests it holds. The Sponsor will implement procedures that will
include, but will not be limited to, executing and clearing trades and
entering into over-the-counter transactions only with parties it deems
creditworthy and/or requiring the posting of collateral by such parties
for the benefit of UAC to limit its credit exposure. To reduce the
credit risk that arises in connection with over-the-counter derivative
contracts, UAC will generally enter into an agreement with each
counterparty based on the Master Agreement published by the
International Swaps and Derivatives Association, Inc. that provides for
the netting of its overall exposure to its counterparty.
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. Furthermore, the Sponsor on behalf of UAC will
only enter into over-the-counter contracts with counterparties who are,
or are affiliates of, (a) banks regulated by a United States federal
bank regulator, (b) broker-dealers regulated by the Commission, (c)
insurance companies domiciled in the United States, and (d) producers,
users, or traders of commodities, whether or not regulated by the CFTC.
Existing counterparties will be reviewed periodically by the Sponsor.
UAC also may require that the counterparty be highly rated and/or
provide collateral or other credit support.
Creation and Redemption of Units
UAC will create Units only in blocks of 50,000 Units called
``Creation Baskets'' and redeem Units only in blocks of 50,000 Units
called ``Redemption Baskets.'' Only authorized purchasers may purchase
or redeem Creation Baskets or Redemption Baskets, respectively. An
authorized purchaser is under no obligation to create or redeem
baskets, and an authorized purchaser is under no obligation to offer to
the public Units of any baskets it does create. Baskets are generally
created when there is a demand for Units, including, but not limited
to, when the market price per Unit is at a premium to the NAV per Unit.
Authorized purchasers will then sell such Units, which will be listed
on NYSE Arca, to the public at per Unit offering prices that are
expected to reflect, among other factors, the trading price of the
Units on NYSE Arca, the NAV of UAC at the time the authorized purchaser
purchased the Creation Baskets and the NAV at the time of the offer of
the Units to the public, the supply of and demand for Units at the time
of sale, and the liquidity of the Futures Contracts market and the
market for Other Asian Commodities-Related Investments. The prices of
Units offered by Authorized Purchasers are expected to fall between
UAC's NAV and the trading price of the Units on the NYSE Arca at the
time of sale. Similarly, baskets are generally redeemed when the market
price per Unit is at a discount to the NAV per Unit. Retail investors
seeking to purchase or sell Units on any day will effect such
transactions in the secondary market, on NYSE Arca, at the market price
per Unit, rather than in connection with the creation or redemption of
baskets.
Purchase and redemption orders must be placed by 10:30 a.m. Eastern
Time (``E.T.'') or the close of regular trading on the NYSE Arca,
whichever is earlier.
The creation and redemption of baskets will only be made in
exchange for delivery to UAC or the distribution by UAC of the amount
of Treasuries and/or cash equal to the combined NAV of the number of
Units included in the baskets being created or redeemed determined as
of 4:00 p.m. E.T. on the day the order to create or redeem baskets is
properly received.
All proceeds from the sale of Creation Baskets will be invested in
the investments described in the Registration Statement. Investments
and related margin or collateral are held through the custodian for
UAC, BBH & Co., Inc., in accounts with UAC's futures commission
merchant, UBS USA, LLC, or other custodian.
UAC and the Units will meet the initial and continued listing
requirements applicable to Trust Issued Receipts in NYSE Arca Equities
Rule 8.200 and Commentary .02 thereto. With respect to application of
Rule 10A-3 under the Act,\20\ the Trust relies on the exception
contained in Rule 10A-3(c)(7).\21\ A minimum of 100,000 Units for UAC
will be outstanding as of the start of trading on the Exchange.
---------------------------------------------------------------------------
\20\ 17 CFR 240.10A-3.
\21\ 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------
A more detailed description of UAC's investments, as well as of the
investment risks, creation and redemption procedures and fees, is set
forth in the Registration Statement. All terms relating to UAC that are
referred to, but not defined in, this proposed rule change are defined
in the Registration Statement.
Net Asset Value
UAC's NAV will be calculated by:
Taking the current market value of its total assets, and
Subtracting any liabilities.
BBH & Co., Inc, the Administrator, will calculate the NAV of UAC
once each NYSE Arca trading day. The NAV for a particular trading day
will be released after 4:00 p.m. E.T. Trading during the Core Trading
Session (9:30 a.m. E.T. to 4:00 p.m. E.T.) on the NYSE
[[Page 67717]]
Arca typically closes at 4:00 p.m. E.T. The Administrator will use the
closing prices on the relevant Futures Exchanges of the Benchmark
Futures Contracts (determined at the earlier of the close of such
exchange or 2:30 p.m. E.T.) for the contracts traded on the Futures
Exchanges, but will calculate or determine the value of all other UAC
investments using market quotations, if available, or other information
customarily used to determine the fair value of such investments as of
the earlier of the close of the NYSE Arca or 4:00 p.m. E.T.
``Other information'' customarily used in determining fair value
includes information consisting of market data in the relevant market
supplied by one or more third parties including, without limitation,
relevant rates, prices, yields, yield curves, volatilities, spreads,
correlations or other market data in the relevant market, or
information of the types described above from internal sources if that
information is of the same type used by UAC in the regular course of
its business for the valuation of similar transactions. The information
may include costs of funding, to the extent costs of funding are not
and would not be a component of the other information being utilized.
Third parties supplying quotations or market data may include, without
limitation, dealers in the relevant markets, end-users of the relevant
product, information vendors, brokers, and other sources of market
information.
Dissemination of Indicative Fund Value
In order to provide updated information relating to UAC for use by
investors and market professionals, the NYSE Arca will calculate and
disseminate throughout the Core Trading Session on each trading day an
updated Indicative Fund Value (``IFV''). The IFV will be calculated by
using the prior day's closing NAV per Unit of UAC as a base and
updating that value throughout the trading day to reflect changes in
the most recently reported price level of the Benchmark Futures
Contracts as reported by Bloomberg, L.P. or another reporting service.
The IFV disseminated during NYSE Arca Core Trading Session hours
should not be viewed as an actual real time update of the NAV, because
NAV is calculated only once at the end of each trading day based upon
the relevant end of day values of UAC's investments.
The IFV will be widely disseminated by one or more major market
data vendors at least every 15 seconds during the NYSE Arca Core
Trading Session.\22\ The normal trading hours of the Futures Exchanges
vary, with some Futures Exchanges ending their trading hours before the
close of the Core Trading Session on NYSE Arca (for example, the normal
trading hours of the NYMEX are 10:00 a.m. E.T. to 2:30 p.m. E.T.). When
UAC holds Futures Contracts from Futures Exchanges with different
trading hours than the NYSE Arca there will be a gap in time at the
beginning and/or the end of each day during which UAC's Units are
traded on the NYSE Arca, but real-time Futures Exchange trading prices
for Futures Contracts traded on such Futures Exchanges are not
available. During such gaps in time, the IFV will be calculated based
on the end of day price of such Futures Contracts from the relevant
Futures Exchange's immediately previous trading session. In addition,
other Futures Contracts, Other Asian Commodities-Related Investments,
and Treasuries held by UAC will be valued by the Administrator, using
rates and points received from client-approved third party vendors
(such as Reuters and WM Company) and advisor quotes. These investments
will not be included in the IFV.
---------------------------------------------------------------------------
\22\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IFV
published on CTA or other data feeds.
---------------------------------------------------------------------------
Availability of Information Regarding the Units
The NAV for UAC will be disseminated daily to all market
participants at the same time. The Exchange will make available on its
Web site daily trading volume of each of the Units, closing prices of
such Units, and number of Units outstanding.
The intraday, closing prices, and settlement prices of the Futures
Contracts and Futures Basket are or will be readily available from the
Web sites of the relevant Futures Exchanges, automated quotation
systems, published or other public sources, or on-line information
services such as Bloomberg or Reuters, and the value of the Futures
Basket will be disseminated at least every 15 seconds. Complete real-
time data for the Futures Contracts is available by subscription from
Reuters and Bloomberg. The relevant Futures Exchanges also provide
delayed futures information on current and past trading sessions and
market news free of charge on their respective Web sites. The specific
contract specifications for the Futures Contracts are also available on
such Web sites, as well as other financial informational sources.
Information regarding exchange-traded cash-settled options and cleared
swap contracts will be available from the applicable exchanges and
major market data vendors. Quotation and last-sale information
regarding the Units will be disseminated through the facilities of the
CTA. In addition, UAC's Web site,
www.unitedstatesasiancommoditiesbasketfund.com, will display the
applicable end of day closing NAV.
UAC's total portfolio composition will be disclosed each business
day that the NYSE Arca is open for trading, on UAC's Web site. The Web
site disclosure of portfolio holdings will be made daily and will
include, as applicable, (i) the composite value of the total portfolio,
(ii) the name, percentage weighting, and value of each Benchmark
Futures Contract, (iii) the specific types, percentage weightings, and
values of Other Asian Commodities-Related Investments and
characteristics of such Other Asian Commodities-Related Investments,
(iv) the name and value of each Treasury security and cash equivalent,
and (v) the amount of cash held in UAC's portfolio. In addition, on
each business day that the NYSE Arca is open for trading, the Web site
disclosure will include the contents and percentage weighting of the
Futures Basket and the list and percentage weighting of the Asian
Benchmark Commodities. The sources the Sponsor uses to determine global
production, consumption, and economic tendencies will be available on
the Fund's Web site. UAC's Web site is publicly accessible at no
charge.
This Web site disclosure of the portfolio composition of UAC 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 UAC through UAC's Web site.
Trading Rules
The Exchange deems the Units to be equity securities, thus
rendering trading in the Units subject to the Exchange's existing rules
governing the trading of equity securities. Units will trade on the
NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. The Exchange has
appropriate rules to facilitate transactions in the Units during all
trading sessions. As provided in NYSE
[[Page 67718]]
Arca Equities Rule 7.6, Commentary .03, the minimum price variation
(``MPV'') for quoting and entry of orders in equity securities traded
on the NYSE Arca Marketplace is $0.01, with the exception of securities
that are priced less than $1.00 for which the MPV for order entry is
$0.0001.
The trading of the Units will be subject to NYSE Arca Equities Rule
8.200, Commentary .02(e), which sets forth certain restrictions on
Equity Trading Permit (``ETP'') Holders acting as registered Market
Makers in Trust Issued Receipts to facilitate surveillance. See
``Surveillance'' below for more information.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Units. Trading may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Units inadvisable. These may include: (1) The extent to
which trading is not occurring in the underlying futures contracts, or
(2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. In addition,
trading in Units will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule \23\ or by the halt or suspension of trading of the
underlying futures contracts.
---------------------------------------------------------------------------
\23\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------
The Exchange may halt trading during the day in which an
interruption to the dissemination of the IFV, the value of the Futures
Basket, or the value of the underlying Futures Contracts occurs. If the
interruption to the dissemination of the IFV, the value of the Futures
Basket, or the value of the underlying Futures Contracts persists past
the trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the trading day following the interruption.
In addition, if the Exchange becomes aware that the NAV with respect to
the Units is not disseminated to all market participants at the same
time, it will halt trading in the Units until such time as the NAV is
available to all market participants.
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products, including Trust Issued
Receipts, to monitor trading in the Units. The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Units in all trading sessions and to deter and detect violations of
Exchange rules and applicable federal securities laws.
The Exchange's current trading surveillances focus on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations. The Exchange is able to
obtain information regarding trading in the Units, the physical
commodities included in, or options, futures, or options on futures on,
Units through ETP Holders, in connection with such ETP Holders'
proprietary trades or customer trades through ETP Holders which they
effect on any relevant market. The Exchange can obtain market
surveillance information, including customer identity information, with
respect to transactions occurring on exchanges that are members of the
Intermarket Surveillance Group (``ISG''), including CME, COMEX, CBOT,
NYMEX, ICE US, ICE Canada, DME, and Malaysia. In addition, the Exchange
has entered into comprehensive surveillance sharing agreements with ICE
Europe and LME that apply with respect to trading in the applicable
Futures Contracts. A list of ISG members is available at
www.isgportal.org. \24\
---------------------------------------------------------------------------
\24\ The Exchange notes that not all Other Asian Commodities-
Related Investments may trade on markets that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
---------------------------------------------------------------------------
In addition, with respect to UAC's Futures Contracts traded on
exchanges, not more than 10% of the weight of such Futures Contracts in
the aggregate shall consist of components whose principal trading
market is not a member of ISG or is a market with which the Exchange
does not have a comprehensive surveillance sharing agreement.
The Exchange also has a general policy prohibiting the distribution
of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Units. Specifically, the
Information Bulletin will discuss the following: (1) The risks involved
in trading the Units during the Opening and Late Trading Sessions when
an updated IFV will not be calculated or publicly disseminated; (2) the
procedures for purchases and redemptions of Units in Creation Baskets
and Redemption Baskets (and that Units are not individually
redeemable); (3) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Units; (4) how
information regarding the IFV is disseminated; (5) that a static IFV
will be disseminated, between the close of trading on the applicable
Futures Exchange and the close of the NYSE Arca Core Trading Session;
(6) the requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Units prior to or concurrently with the
confirmation of a transaction; and (7) trading information.
In addition, the Information Bulletin will advise ETP Holders,
prior to the commencement of trading, of the prospectus delivery
requirements applicable to UAC. The Exchange notes that investors
purchasing Units directly from UAC will receive a prospectus. ETP
Holders purchasing Units from UAC for resale to investors will deliver
a prospectus to such investors. The Information Bulletin will also
discuss any exemptive, no-action, and interpretive relief granted by
the Commission from any rules under the Act.
In addition, the Information Bulletin will reference that UAC is
subject to various fees and expenses described in the Registration
Statement. The Information Bulletin will also reference that the CFTC
has regulatory jurisdiction over the trading of Futures Contracts
traded on U.S. markets.
The Information Bulletin will also disclose the trading hours of
the Units of UAC and that the NAV for the Units is calculated after
4:00 p.m. E.T. each trading day. The Information Bulletin will disclose
that information about the Units of UAC is publicly available on UAC's
Web site.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \25\ 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.
---------------------------------------------------------------------------
\25\ 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
Units will be listed and traded on the Exchange
[[Page 67719]]
pursuant to the initial and continued listing criteria in NYSE Arca
Equities Rule 8.200 and Commentary .02 thereto. The Sponsor is not a
broker-dealer or a registered investment adviser. The Sponsor
represents that it will implement and maintain procedures designed to
prevent the use and dissemination of material non-public information
regarding the Futures Basket. UAC will invest in Benchmark Futures
Contracts to the fullest extent possible, turning next to investments
in other Futures Contracts, and finally to Other Asian Commodities-
Related Investments only if required to by applicable regulatory
requirements or in adverse market conditions.\26\ The Exchange has in
place surveillance procedures that are adequate to properly monitor
trading in the Units in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
With respect to UAC's Futures Contracts traded on exchanges, not more
than 10% of the weight of such Futures Contracts in the aggregate shall
consist of components whose principal trading market is not a member of
ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement. The Exchange 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. The intraday, closing prices, and settlement prices
of the Futures Contracts held by UAC are readily available from the Web
sites of the relevant Futures Exchanges, automated quotation systems,
published or other public sources, or on-line information services such
as Bloomberg or Reuters. The relevant Futures Exchanges also provide
delayed futures information on current and past trading sessions and
market news free of charge on their respective Web sites. Quotation and
last-sale information for the Units will be available via CTA. In
addition, UAC's Web site will display the applicable end of day closing
NAV. UAC's total portfolio composition will be disclosed on its Web
site.
---------------------------------------------------------------------------
\26\ See note 17, supra.
---------------------------------------------------------------------------
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 UAC
and the Units, thereby promoting market transparency. The IFV and value
of the Futures Basket will be disseminated by one or more major market
data vendors at least every 15 seconds during the regular NYSE Arca
Core Trading Session. Trading in Units of UAC 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 Units inadvisable. Moreover,
prior to the commencement of trading, the Exchange will inform its ETP
Holders in an Information Bulletin of the special characteristics and
risks associated with trading the Units. UAC's total portfolio
composition will be disclosed each business day that the NYSE Arca is
open for trading, on UAC's Web site at
www.unitedstatesasiancommoditiesbasketfund.com. The Web site disclosure
of portfolio holdings will be made daily and will include, as
applicable, (i) the composite value of the total portfolio, (ii) the
name, percentage weighting, and value of each Benchmark Futures
Contract, (iii) the specific types, percentage weightings, and values
of Other Asian Commodities-Related Investments and characteristics of
such Other Asian Commodities-Related Investments, (iv) the name and
value of each Treasury security and cash equivalent, and (v) the amount
of cash held in UAC's portfolio. In addition, on each business day that
the NYSE Arca is open for trading, the Web site disclosure will include
the contents and percentage weighting of the Futures Basket and the
list and percentage weighting of the Asian Benchmark Commodities.
The Exchange may halt trading during the day in which an
interruption to the dissemination of the IFV, the value of the Futures
Basket, or the value of the underlying Futures Contracts occurs. If the
interruption to the dissemination of the IFV, value of the Futures
Basket, or the value of the underlying Futures Contracts persists past
the trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the trading day following the interruption.
In addition, if the Exchange becomes aware that the NAV with respect to
the Units is not disseminated to all market participants at the same
time, it will halt trading in the Units until such time as the NAV is
available to all market participants.
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
an additional type of trust issued receipts 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 Units 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 UAC's holdings, IFV, and quotation and
last-sale information for the Units.
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
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding, or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2012-120 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.
[[Page 67720]]
All submissions should refer to File Number SR-NYSEArca-2012-120. 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 Section, 100 F Street
NE., Washington, DC 20549-1090, on official business days between 10:00
a.m. and 3:00 p.m. Copies of the filing will also be available for
inspection and copying at the NYSE's principal office and on its
Internet Web site at www.nyse.com. 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-2012-120 and should be submitted on or before
December 4, 2012.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27551 Filed 11-9-12; 8:45 am]
BILLING CODE 8011-01-P
