Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Proposing To List and Trade Shares of Market Vectors Low Volatility Commodity ETF and Market Vectors Long/Short Commodity ETF Under NYSE Arca Equities Rule 8.200, 39810-39820 [2013-15779]
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Federal Register / Vol. 78, No. 127 / Tuesday, July 2, 2013 / Notices
B. impose any significant burden on
competition; and
C. become operative for 30 days from
the date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 13 and Rule 19b–4(f)(6) 14
thereunder.15 At any time within 60
days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–CBOE–2013–064 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File
Number SR–CBOE–2013–064. 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
13 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
15 In addition, Rule 19b–4(f)(6)(iii) requires the
Exchange to give the Commission written notice of
the Exchange’s intent to file the proposed rule
change along with a brief description and the text
of the proposed rule change, at least five business
days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this prefiling requirement.
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14 17
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with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
offices of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2013–064, and should be submitted on
or before July 23, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–15847 Filed 7–1–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69862; File No. SR–
NYSEArca–2013–60]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Proposing To List and
Trade Shares of Market Vectors Low
Volatility Commodity ETF and Market
Vectors Long/Short Commodity ETF
Under NYSE Arca Equities Rule 8.200
June 26, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 12,
2013, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
PO 00000
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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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 Market Vectors Low
Volatility Commodity ETF and Market
Vectors Long/Short Commodity ETF
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 (‘‘TIRs’’) either by
listing or pursuant to unlisted trading
privileges (‘‘UTP’’).4 The Exchange
proposes to list and trade the shares (the
‘‘Shares’’) of the Market Vectors Low
Volatility Commodity ETF (‘‘Low
Volatility ETF’’) and Market Vectors
Long/Short Commodity ETF (‘‘Long/
Short ETF’’, and, together with Low
Volatility ETF, the ‘‘Funds’’) under
NYSE Arca Equities Rule 8.200. Each
Fund is a series of the Market Vectors
Commodity Trust (the ‘‘Trust’’), a
Delaware statutory trust.5
4 Commentary .02 to NYSE Arca Equities Rule
8.200 applies to TIRs that invest in ‘‘Financial
Instruments’’. The term ‘‘Financial Instruments’’, as
defined in Commentary .02(b)(4) to NYSE Arca
Equities Rule 8.200, means any combination of
investments, including cash; securities; options on
securities and indices; futures contracts; options on
futures contracts; forward contracts; equity caps,
collars and floors; and swap agreements.
5 The Trust filed a pre-effective amendment to its
registration statements with respect to the Funds on
Form S–1 under the Securities Act of 1933 (‘‘1933
Act’’) on December 7, 2012 (File No. 333–179435
for the Low Volatility ETF (‘‘Low Volatility
Registration Statement’’)) and File No. 333–179432
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The Exchange notes that the
Commission has previously approved
the listing and trading of other issues of
TIRs on the American Stock Exchange
LLC (‘‘Amex’’),6 trading on NYSE Arca
pursuant to UTP,7 and listing on NYSE
Arca.8 In addition, the Commission has
approved other exchange-traded fundlike products linked to the performance
of underlying commodities.9
Van Eck Absolute Return Advisers
Corp. is the managing owner of the
Funds (‘‘Managing Owner’’).10 The
Managing Owner also serves as the
commodity pool operator and
commodity trading advisor of the
Funds. The Managing Owner is
registered as a commodity pool operator
and commodity trading advisor with the
Commodity Futures Trading
Commission (‘‘CFTC’’), and is a member
of National Futures Association.
Wilmington Trust, National Association
(‘‘Trustee’’), a national bank with its
principal place of business in Delaware,
is the sole trustee of the Trust. The Bank
of New York Mellon will be the
custodian, administrator and transfer
agent for the Funds.
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Overview of the Funds 11
According to the Low Volatility
Registration Statement, the Low
Volatility ETF will seek to track
changes, whether positive or negative,
for the Long/Short ETF (‘‘Long/Short Registration
Statement’’ and, together with the Low Volatility
Registration Statement, the ‘‘Registration
Statements’’). The descriptions of the Funds and the
Shares contained herein are based, in part, on the
Registration Statements.
6 See, e.g., Securities Exchange Act Release No.
58161 (July 15, 2008), 73 FR 42380 (July 21, 2008)
(SR–Amex–2008–39) (order approving amendments
to Amex Rule 1202, Commentary .07 and listing on
Amex of 14 funds of the Commodities and Currency
Trust).
7 See, e.g., Securities Exchange Act Release No.
58163 (July 15, 2008), 73 FR 42391 (July 21, 2008)
(SR–NYSEArca–2008–73) (order approving UTP
trading on NYSE Arca of 14 funds of the
Commodities and Currency Trust).
8 See, e.g., Securities Exchange Act Release No.
58457 (September 3, 2008), 73 FR 52711 (September
10, 2008) (SR–NYSEArca–2008–91) (order
approving listing on NYSE Arca of 14 funds of the
Commodities and Currency Trust).
9 See, e.g., Securities Exchange Act Release Nos.
56932 (December 7, 2007), 72 FR 71178 (December
14, 2007) (SR–NYSEArca–2007–112) (order granting
accelerated approval to list iShares S&P GSCI
Commodity-Indexed Trust); 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).
10 The Managing Owner is affiliated with a
broker-dealer and has implemented a ‘‘fire wall’’
with respect to such broker-dealer and has policies
and procedures in place regarding access to
information concerning the composition and/or
changes to the Funds’ portfolio composition.
11 Terms relating to the Funds, the Shares and the
Indexes (as defined below) referred to, but not
defined, herein are defined in the Registration
Statements.
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in the performance of the Morningstar®
Long/Flat Commodity IndexSM (the
‘‘Long/Flat Index’’) over time.
According to the Long/Short
Registration Statement, the Long/Short
ETF will seek to track changes, whether
positive or negative, in the performance
of the Morningstar® Long/Short
Commodity IndexSM (the ‘‘Long/Short
Index’’ and, together with the Long/Flat
Index, the ‘‘Indexes’’) over time.
Each Fund will seek to achieve its
respective investment objective by
investing principally in exchange-traded
futures contracts on commodities
(‘‘Index Commodity Contracts’’)
comprising the Long/Flat Index and the
Long/Short Index, respectively, and U.S.
Treasury bills maturing in eight weeks
or less to reflect ‘‘flat’’ positions, and, in
certain circumstances (as described
below), futures contracts other than
Index Commodity Contracts traded on
U.S. or foreign exchanges (‘‘Other
Commodity Contracts’’).12 In addition,
to a limited extent, the Funds may also
invest in swap agreements on Index
Commodity Contracts or Other
Commodity Contracts cleared through a
central clearing house or the clearing
house’s affiliate (‘‘Cleared Swaps’’),
forward contracts, exchange-traded
cash-settled options (including options
on one or more Index Commodity
Contracts, Other Commodity Contracts
or indexes that include any Index
Commodity Contracts or Other
Commodity Contracts), swaps other
than Cleared Swaps and other over-thecounter (‘‘OTC’’) transactions that
provide economic exposure to the
investment returns of the commodities
markets, as represented by the Indexes
and their constituents (collectively,
‘‘Other Commodity Instruments,’’ and,
together with Other Commodity
Contracts and Cleared Swaps, ‘‘Other
Instruments’’), as described below. The
Funds also may invest in U.S. Treasury
bonds, other U.S. Treasury bills, and
other U.S. government securities and
related securities, money market funds,
certificates of deposit, time deposits and
other high credit quality short-term
fixed income securities, as described in
the Registration Statements
(collectively, ‘‘Cash Instruments’’). The
Cash Instruments used to track flat
positions in the Indexes will be U.S.
Treasury bills.
Each Fund intends to invest first in
Index Commodity Contracts. Thereafter,
if a Fund reaches the position limits
12 The Managing Owner expects that Other
Commodity Contracts in which a Fund may invest
in the circumstances described below would
include futures contracts of different expirations, on
different commodities or traded on different
exchanges than Index Commodity Contracts.
PO 00000
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39811
applicable to one or more Index
Commodity Contracts or a ‘‘Futures
Exchange’’ 13 imposes limitations on the
Fund’s ability to maintain or increase its
positions in an Index Commodity
Contract after reaching accountability
levels or a price limit is in effect on an
Index Commodity Contract during the
last 30 minutes of its regular trading
session, the Fund’s intention is to invest
first in Cleared Swaps to the extent
permitted under the position limits
applicable to Cleared Swaps and
appropriate in light of the liquidity in
the Cleared Swaps market, and then,
using its commercially reasonable
judgment, in Other Commodity
Contracts or in Other Commodity
Instruments. By using certain or all of
these investments, the Managing Owner
will endeavor to cause a Fund’s
performance to closely track that of the
Long/Flat Index or Long/Short Index,
respectively, over time. The specific
circumstances under which investments
in Other Commodity Contracts and
Other Commodity Instruments may be
used are discussed below.
Consistent with seeking to achieve
each Fund’s investment objective, if a
Fund reaches position limits applicable
to one or more Index Commodity
Contracts or when a Futures Exchange
has imposed limitations on a Fund’s
ability to maintain or increase its
positions in an Index Commodity
Contract after reaching accountability
levels or a price limit is in effect on an
Index Commodity Contract during the
last 30 minutes of its regular trading
session, the Managing Owner may cause
a Fund to first enter into or hold Cleared
Swaps and then, if applicable, enter into
and hold Other Commodity Contracts or
Other Commodity Instruments. For
example, certain Cleared Swaps have
standardized terms similar to, and are
priced by reference to, a corresponding
Index Commodity Contract or Other
Commodity Contract. Additionally,
certain Other Commodity Instruments
can generally be structured as the
parties to the contract desire. Therefore,
a Fund might enter into multiple
Cleared Swaps and/or certain Other
Commodity Instruments intended to
13 The Futures Exchanges are the exchanges on
which the Index Commodity Contracts are traded,
and include the following: the Chicago Mercantile
Exchange, Inc. (‘‘CME’’), Chicago Board of Trade
(‘‘CBOT’’, a division of CME), NYMEX (a division
of CME), ICE Futures US (‘‘ICE–US’’), and ICE
Futures Europe (‘‘ICE–UK’’). Some of a Fund’s
futures trading may be conducted on commodity
futures exchanges outside the United States.
Trading on such exchanges is not regulated by any
U.S. governmental agency and may involve certain
risks not applicable to trading on U.S. exchanges,
including different or diminished investor
protections.
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tkelley on DSK3SPTVN1PROD with NOTICES
exactly replicate the performance of one
or more Index Commodity Contracts or
Other Commodity Contracts, or a single
Other Commodity Instrument designed
to replicate the performance of the
applicable Index as a whole.14 After
reaching position limits applicable to
one or more Index Commodity Contracts
or when a Futures Exchange has
imposed limitations on the Fund’s
ability to maintain or increase its
positions in an Index Commodity
Contract after reaching accountability
levels or a price limit is in effect on an
Index Commodity Contract during the
last 30 minutes of its regular trading
session, and after entering into or
holding Cleared Swaps, a Fund might
also enter into or hold Other
Commodity Contracts or Other
Commodity Instruments to facilitate
effective trading, consistent with a
Fund’s long/flat or long/short strategy,
as applicable. In addition, after reaching
position limits applicable to one or
more Index Commodity Contracts or
when a Futures Exchange has imposed
limitations on the Fund’s ability to
maintain or increase its positions in an
Index Commodity Contract after
reaching accountability levels or a price
limit is in effect on an Index Commodity
Contract during the last 30 minutes of
its regular trading session, and after
entering into or holding Cleared Swaps,
a Fund might enter into or hold Other
Commodity Contracts or Other
Commodity Instruments that would be
expected to alleviate overall deviation
between a Fund’s performance and that
of the Long/Flat Index or Long/Short
Index, as applicable, that may result
from certain market and trading
inefficiencies or other reasons.
According to the Registration
Statements, by using certain or all of
these investments, the Managing Owner
will endeavor to cause a Fund’s
performance to closely track that of the
Long/Flat Index or Long/Short Index, as
applicable, over time. Each Fund will
invest to the fullest extent possible in
Index Commodity Contracts and Other
Instruments without being leveraged
(i.e., without seeking performance that
is a multiple (e.g., 2X or 3X) or inverse
multiple of the Fund’s respective Index)
or unable to satisfy its expected current
or potential margin or collateral
obligations with respect to its
investments in Index Commodity
14 According to the Registration Statements,
assuming that there is no default by a counterparty
to an Other Commodity Instrument, the
performance of the Other Commodity Instrument
should positively correlate with the performance of
the Long/Flat Index or Long/Short Index, as
applicable, or the applicable Index Commodity
Contract.
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Contracts and Other Commodity
Contracts or Other Instruments.15
Each of the Indexes is currently
composed of long, flat or short (as
applicable) positions in Index
Commodity Contracts, each of which is
subject to speculative position limits
and other position limitations, as
applicable, which are imposed by either
the CFTC or the rules of the Futures
Exchanges on which the Index
Commodity Contracts are traded. These
position limits prohibit any person from
holding a position of more than a
specific number of such Index
Commodity Contracts. The purposes of
these limits are to diminish, eliminate
or prevent sudden or unreasonable
fluctuations or unwarranted changes in
the prices of futures contracts.16
15 According to the Registration Statements, the
Managing Owner will attempt to minimize these
market and credit risks by requiring the Funds to
abide by various trading limitations and policies,
which will include limiting margin accounts and
trading only in liquid markets. The Managing
Owner will implement procedures which will
include, but will not be limited to: Executing and
clearing trades with creditworthy counterparties;
limiting the amount of margin or premium required
for any Index Commodity Contract or Other
Commodity Contract or all Index Commodity
Contracts or Other Commodity Contracts combined;
and generally limiting transactions to Index
Commodity Contracts or Other Commodity
Contracts which will be traded in sufficient volume
to permit the taking and liquidating of positions.
The Fund will enter into Other Commodity
Instruments traded OTC (if any) with counterparties
selected by the Managing Owner. The Managing
Owner will select such Other Commodity
Instrument (if any) counterparties giving due
consideration to such factors as it deems
appropriate, including, without limitation,
creditworthiness, familiarity with the applicable
Index, and price. Under no circumstances will the
Funds enter into an Other Commodity Instrument
traded OTC (if any) with any counterparty whose
credit rating is lower than investment-grade at the
time a contract is entered into. The Funds expect
that investments in OTC Other Commodity
Instruments (if any) will be made on terms that are
standard in the market for such OTC Other
Commodity Instruments. In connection with such
OTC Other Commodity Instruments, the Funds may
post or receive collateral in the form of Cash
Instruments, which will be marked to market daily.
16 According to the Registration Statements,
pursuant to the statutory mandate of the DoddFrank Wall Street Reform and Consumer Protection
Act (the ‘‘Dodd-Frank Act’’), which was signed into
law on July 21, 2010, on October 18, 2011, the
CFTC adopted regulations that impose new federal
position limits on futures and options on a subset
of energy, metal, and agricultural commodities (the
‘‘Referenced Contracts’’) and economically
equivalent swap transactions. In a lawsuit filed
against the CFTC by the International Swaps and
Derivatives Association (‘‘ISDA’’) and the Securities
Industry and Financial Markets Association
(‘‘SIFMA’’), the U.S. District Court for the District
of Columbia vacated the new position limit
regulations and remanded the matter to the CFTC
for further consideration consistent with the court’s
opinion. The CFTC may appeal the court’s decision
and seek a stay of the decision pending appeal, and
the new position limit regulations, or other
regulations with similar effect, could still become
effective in the future. The regulations that were the
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According to the Registration
Statement, under current regulations,
subject to any relevant exemptions,
traders, such as each Fund, may not
exceed speculative position limits,
either individually, or in the aggregate
with other persons with whom they are
under common control or ownership.
Under the proposed regulations
challenged by SIFMA, the CFTC
requires certain persons to aggregate
exchange listed futures and
economically equivalent swap positions
owned or controlled by such persons.
In addition, exchanges may establish
daily price fluctuation limits on futures
contracts. The daily price fluctuation
limit establishes the maximum amount
that the price of futures contracts 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. Futures
Exchanges may also establish
accountability levels applicable to
futures contracts. A Futures Exchange
may order a person who holds or
controls aggregate positions in excess of
specified position accountability levels
not to further increase the positions, to
comply with any prospective limit
which exceeds the size of the position
owned or controlled, or to reduce any
open position which exceeds position
accountability levels if the Futures
Exchange determines that such action is
necessary to maintain an orderly
market. Position limits, accountability
levels, and daily price fluctuation limits
set by the Futures Exchanges have the
potential to cause tracking error, which
could cause changes in the net asset
value (‘‘NAV’’) per Share to
substantially vary from changes in the
level of the Index and prevent an
investor from being able to effectively
use the Fund as a way to indirectly
invest in the global commodity markets.
Although the Managing Owner does
not expect the Funds to have a
significant exposure to Other
Commodity Instruments that trade OTC,
the Trust’s Declaration of Trust does not
limit the amount of funds that the
subject of this decision are referred to herein as the
‘‘proposed regulations.’’ The proposed regulations
would apply to each of the Funds’ combined
positions across these products. The Referenced
Contracts subject to the proposed regulations
represent approximately 68% of the Index
Commodity Contracts as of February 28, 2013. The
proposed regulations are extremely complex and, if
ultimately implemented, whether in their current
form or an alternative form, may require further
guidance and interpretation by the CFTC to
determine in all respects how they apply to the
Funds. The Funds’ investment strategy could be
negatively affected by these regulations.
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Funds may invest in such Other
Commodity Instruments. Therefore, as
the amount of funds invested in Other
Commodity Instruments that trade OTC
increases, the applicable risks described
in the Registration Statements increase
correspondingly.17
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The Long/Flat Index
According to the Low Volatility
Registration Statement, the Long/Flat
Index is a rules-based, fully
collateralized commodity futures index
that employs a momentum rule to
determine if exposure to a particular
commodity should be maintained with
its prescribed weighting (a ‘‘long
position’’) or moved to cash (a ‘‘flat
position’’).18 For each Index Commodity
Contract represented by the Long/Flat
Index, Morningstar®, Inc.
(‘‘Morningstar’’) 19 calculates a ‘‘linked
price’’ 20 that incorporates both price
changes and roll yield.21 Whether a
17 According to the Registration Statements,
markets in which a Fund may effect a transaction
in certain Other Commodity Instruments may be in
the OTC markets. The participants and dealers in
such markets are typically not subject to the same
level of credit evaluation and regulatory oversight
as are members of the exchange-based markets. This
exposes a Fund to the risk that a counterparty will
not settle a transaction in accordance with its terms
and conditions because of a credit or liquidity
problem or a dispute over the terms of the contract
(whether or not bona fide), thus causing the Fund
to suffer a loss. See note 15, supra.
18 A long position is a position that will increase
in market price if the price of the commodities
comprising the Long/Flat Index, in the aggregate,
are rising during the period when the position is
open. A flat position is a position that will not
increase in market price whether the price of the
commodities comprising the Long/Flat Index, in the
aggregate, is rising or falling.
19 Morningstar, Inc. is the index provider (‘‘Index
Provider’’ or ‘‘Morningstar’’) with respect to the
Indexes. Morningstar is not registered as a brokerdealer. Morningstar Investment Services (‘‘MIS’’), a
wholly-owned subsidiary of the Index Provider, is
a broker-dealer and a registered investment adviser
under the Investment Advisers Act of 1940.
Morningstar has implemented procedures designed
to prevent the illicit use and dissemination of
material, non-public information regarding the
Indexes and has implemented a ‘‘fire wall’’ with
respect to its affiliated broker-dealer regarding the
Indexes.
20 A ‘‘linking’’ factor is defined for each
commodity that converts the price of the contract
in effect at each point in time to a value that
accounts for contract rolls, i.e., the ‘‘linked price.’’
Each time a contract is rolled, the ‘‘linking’’ factor
is adjusted by the ratio of the closing price of the
current contract to the closing price of the new
contract.
21 According to the Registration Statements, roll
yield is the amount of return generated (either
positive or negative) by rolling a short-term contract
into a longer-term contract and profiting or losing
money from the convergence toward a higher or
lower spot price. The linked price is determined on
the basis of price changes and roll yields. Rolling
a futures contract means closing out a position on
near-dated (i.e., commodity futures contracts that
are nearing expiration) commodity futures contracts
before they expire and establishing an equivalent
position in a longer-dated futures contract (i.e.,
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position will be long or flat is
determined, at the time of a monthly
repositioning, by comparing the linked
price of each Index Commodity Contract
to its 12-month moving average. For
example, if, at a monthly repositioning,
the linked price for an Index
Commodity Contract exceeds its 12month moving average, the Long/Flat
Index takes the long position in the
subsequent month. Conversely, if the
linked price for an Index Commodity
Contract is below its 12-month moving
average, the Long/Flat Index moves the
position to cash, i.e., flat.
To be considered for inclusion in the
Long/Flat Index, a commodity future
must be listed on a U.S. futures
exchange, be denominated in U.S.
dollars and rank in the top 95% by total
U.S. dollar value of the total open
interest pool of all eligible commodities.
The weight of each Index Commodity
Contract is the product of two factors:
magnitude and the direction of the
momentum signal (i.e., 1 for long, 0 for
flat, or -1 for short). On the annual
reconstitution date, the magnitude is the
open interest weight of the Index
Commodity Contract, calculated on the
second Friday of December, using data
through the last trading day of
November. Individual contract weights
are capped at 10%. Between
reconstitution dates, the weights vary
based on the performance of the
individual commodity positions. The
Long/Flat Index is reconstituted
annually and directions (i.e., whether
long or flat) of each Index Commodity
Contract are determined monthly on the
second Friday of each month, which is
one week prior to the monthly
repositioning. As of February 28, 2013,
the sector weightings of the Long/Flat
Index were Agriculture (29.44%),
Energy (50.37%), Livestock (4.48%) and
Metals (15.71%).
The Long/Short Index
According to the Long/Short
Registration Statement, the Long/Short
Index is a rules-based, fully
collateralized commodity futures index
that employs a momentum rule to
determine if exposure to a particular
Index Commodity Contract should be
maintained with its prescribed
weighting (a ‘‘long position’’) or moved
commodity futures contracts that have an
expiration date further in the future) on the same
commodity. Futures contacts can be in
‘‘backwardation,’’ which means that futures
contracts with longer-term expirations are priced
lower than those with shorter-term expirations, or
can exhibit ‘‘contango,’’ which means that futures
contacts with longer-term expirations are priced
higher than those with shorter-term expirations. In
backwardation, market roll yields are positive. In
contango, market roll yields are negative.
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39813
to a short weighting (a ‘‘short
position’’).22 For each Index Commodity
Contract represented by the Long/Short
Index, Morningstar calculates a ‘‘linked
price’’ 23 that incorporates both price
changes and roll yield.24 Whether a
position will be long or short (or cash,
i.e., flat in the case of energy futures
contracts, as described below) is
determined, at the time of a monthly
repositioning, by comparing the linked
price of each Index Commodity Contract
to its 12-month moving average. For
example, if, at a monthly repositioning,
the linked price for an Index
Commodity Contract exceeds its 12month moving average, the Long/Short
Index takes a long position in the
subsequent month. Conversely, if the
linked price for an Index Commodity
Contract is below its 12-month moving
average, the Long/Short Index takes a
short position. An exception is made for
commodities in the energy sector. If the
signal for an Index Commodity Contract
in the energy sector is short, the weight
of that Index Commodity Contract is
moved to cash (i.e., flat). According to
the Long/Short Registration Statement,
energy is unique in that its price is
extremely sensitive to geopolitical
events and not necessarily driven purely
by demand-supply imbalances.
To be considered for inclusion in the
Long/Short Index, a commodity future
must be listed on a U.S. futures
exchange, be denominated in U.S.
dollars and rank in the top 95% by total
U.S. dollar value of the total open
interest pool of all eligible commodities.
22 A short position is a position that will increase
in market price if the price of the Index Commodity
Contracts comprising the Long/Short Index, in the
aggregate, are falling during the period when the
position is open. The Long/Short Index includes
short positions in Index Commodity Contracts. The
Long/Short ETF may also obtain a short position
relative to certain Index Commodity Contracts by
establishing a short position with a counterparty by
investing in Other Instruments. According to the
Long/Short Registration Statement, the Long/Short
ETF will profit if the price of a short position in
an Index Commodity Contract or Other Instrument
that provides exposure to a short position in such
Index Commodity Contract falls while the position
is open and the Long/Short ETF will suffer loss if
the price of a short position in an Index Commodity
Contract or Other Instrument that provides
exposure to a short position in such Index
Commodity Contract rises while the position is
open. Because the value of the Index Commodity
Contract or Other Instrument could rise an
unlimited amount, a short position in an Index
Commodity Contract or Other Instrument that
provides exposure to a short position in such Index
Commodity Contract theoretically will expose the
Long/Short ETF to unlimited losses. In
circumstances where a market has reached its
maximum price limits imposed by the applicable
exchange, the Long/Short ETF may be unable to
offset its short position until the next trading day,
when prices could expand again in rapid trading.
23 See note 20, supra.
24 See note 21, supra.
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The weight of each individual Index
Commodity Contract is the product of
two factors: Magnitude and the
direction of the momentum signal (i.e.,
1 for long, 0 for flat, or -1 for short). On
the annual reconstitution date, the
magnitude is the open interest weight of
the Index Commodity Contract,
calculated on the second Friday of
December, using data through the last
trading day of November. Individual
contract weights are capped at 10%.
Between reconstitution dates, the
weights vary based on the performance
of the individual Index Commodity
Contract positions. The Long/Short
Index is reconstituted annually and
directions (i.e., whether long, flat or
short) of each Index Commodity
Contract are determined monthly on the
second Friday of each month, which is
one week prior to the monthly
repositioning. As of February 28, 2013,
the sector weightings of the Long/Short
Index were Agriculture (29.40%),
Energy (49.57%), Livestock (4.69%) and
Metals (16.34%). The inception date of
the Index was December 21, 1979.
Composition of the Indexes
The following chart provides the
composition of the Indexes as of
February 28, 2013:
Long/flat index
Futures
exchange 25
Commodity
Long/short index
Index
weight
(percent)
Signal
Index
weight
(percent)
Signal
Agricultural:
Coffee ‘C’/Colombian ..................................
Corn/No. 2 Yellow .......................................
Cotton/1–1/16″ ............................................
Soybean Meal/48% Protein ........................
Soybean Oil/Crude ......................................
Soybeans/No. 2 Yellow ...............................
Sugar #11/World Raw .................................
Wheat/No. 2 Soft Red .................................
ICE–US ......
CBOT .........
ICE–US ......
CBOT .........
CBOT .........
CBOT .........
ICE–US ......
CBOT .........
Flat ...............................
Long .............................
Long .............................
Long .............................
Flat ...............................
Long .............................
Flat ...............................
Flat ...............................
Total Long ....................
Total Short ...................
Total Flat ......................
Total Agricultural ..........
1.71
7.42
1.34
1.79
1.93
9.00
3.11
3.137
19.55
N/A
9.88
29.44
Short ............................
Long .............................
Long .............................
Long .............................
Short ............................
Long .............................
Short ............................
Short ............................
Total Long ....................
Total Short ...................
Total Flat ......................
Total Agricultural ..........
1.72
7.30
1.21
1.76
1.90
8.87
3.21
3.43
0
10.27
19.14
29.40
Energy:
Crude Oil WTI/Global Spot .........................
Crude Oil Brent/Global Spot .......................
Gas-Oil-Petroleum .......................................
Natural Gas Henry Hub ..............................
Heating Oil #2/Fuel Oil ................................
Gasoline Blendstock ...................................
NYMEX
ICE–UK
ICE–UK
NYMEX
NYMEX
NYMEX
Flat ...............................
Long .............................
Long .............................
Flat ...............................
Long .............................
Long .............................
Total Long ....................
9.88
10.20
9.634
6.81
6.91
6.95
33.69
9.72
10.03
9.48
6.70
6.79
6.84
Total Flat ......................
Total Energy ................
16.68
50.37
Flat ...............................
Long .............................
Long .............................
Flat ...............................
Long .............................
Long .............................
Total.
Long .............................
Total Flat ......................
Total Energy ................
CME ...........
Flat ...............................
Short ............................
4.48 ............
Total
Total
Total
Total
Long ....................
Short ...................
Flat ......................
Livestock .............
2.98
1.50
0.00
N/A
4.48
4.48
Long ....................
Short ...................
Flat ......................
Livestock .............
3.11
1.58
0
4.69
0
4.69
Long .............................
Flat ...............................
Long .............................
Total Long ....................
Total Short ...................
Total Flat ......................
Total Metals .................
2.40
9.82
3.49
5.89
N/A
9.82
15.71
Long .............................
Short ............................
Long .............................
Total Long ....................
Total Short ...................
Total Flat ......................
Total Metals .................
2.36
10.32
3.66
6.02
10.32
0
16.34
Livestock:
Cattle Live/Choice Average ........................
Hogs Lean/Average Iowa/S Minn ...............
Metals:
Copper High Grade/Scrap No. 2 Wire ........
Gold .............................................................
Silver ...........................................................
The following chart provides the
Futures Exchanges, trading symbol and
......
......
......
......
......
......
NYMEX ......
NYMEX ......
NYMEX ......
Total
Total
Total
Total
33.15
16.42
49.57
trading hours (Eastern time (‘‘E.T.’’)) for
the Index components:
tkelley on DSK3SPTVN1PROD with NOTICES
Exchange
Agricultural:
Coffee ‘C’/Colombian ....................................................................................................
Corn/No. 2 Yellow .........................................................................................................
Cotton/1–1/16″ ...............................................................................................................
Soybean Meal/48 Protein ..............................................................................................
Soybean Oil/Crude ........................................................................................................
Soybeans/No. 2 Yellow .................................................................................................
Sugar #11/World Raw ...................................................................................................
25 See
Symbol
Trading hours E.T.
ICE–US .......
CBOT ..........
ICE–US .......
CBOT ..........
CBOT ..........
CBOT ..........
ICE–US .......
KC ...............
C .................
CT ...............
SM ...............
BO ...............
S ..................
SB ...............
3:30 a.m.–2:00 p.m.
10:30 a.m.–3:00 p.m.
9:00 p.m.–2:30 p.m.
10:30 a.m.–3:00 p.m.
10:30 a.m.–3:00 p.m.
10:30 a.m.–3:00 p.m.
2:30 a.m.–2:00 p.m.
note 13, supra.
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39815
Symbol
Trading hours E.T.
Wheat/No. 2 Soft Red ...................................................................................................
Energy:
Crude Oil WTI/Global Spot ...........................................................................................
Crude Oil Brent/Global Spot .........................................................................................
CBOT ..........
W .................
10:30 a.m.–3:00 p.m.
NYMEX .......
ICE–UK .......
CL ................
B ..................
Gas-Oil-Petroleum .........................................................................................................
ICE–UK .......
G .................
Natural Gas Henry Hub .................................................................................................
Heating Oil #2/Fuel Oil ..................................................................................................
Gasoline Blendstock ......................................................................................................
Livestock:
Cattle Live/Choice Average ...........................................................................................
Hogs Lean/Average Iowa/S Minn .................................................................................
Metals:
Copper High Grade/Scrap No. 2 Wire ..........................................................................
Gold ...............................................................................................................................
Silver ..............................................................................................................................
tkelley on DSK3SPTVN1PROD with NOTICES
Exchange
NYMEX .......
NYMEX .......
NYMEX .......
NG ...............
HO ...............
RB ...............
9:00 a.m.–2:30
8:00 p.m.–6:00
next day.
8:00 p.m.–6:00
next day.
9:00 a.m.–2:30
9:00 a.m.–2:30
9:00 a.m.–2:30
CME ............
CME ............
LC ................
LH ................
10:05 a.m.–2:00 p.m.
10:05 a.m.–2:00 p.m.
NYMEX .......
NYMEX .......
NYMEX .......
HG ...............
GC ...............
SI .................
8:10 a.m.–1:00 p.m.
8:20 a.m.–1:30 p.m.
8:25 a.m.–1:25 p.m.
With respect to each of the Indexes,
the following are excluded:
(1) Financial futures contracts (e.g.,
securities, currencies, interest rates,
etc.).
(2) Commodity futures contracts not
denominated in U.S. dollars.
(3) Commodity futures contracts with
less than twelve months of pricing.
Morningstar sorts all commodity
futures contracts that meet the above
eligibility requirements in descending
order by the total U.S. dollar value of
open interest. All commodity futures
contracts that make up the top 95% of
the total open interest pool of all eligible
commodity futures contracts, starting
with the one with the largest open
interest value, will be included in each
of the Indexes.
The weight of each Index Commodity
Contract in the Indexes is the product of
two factors: magnitude and the direction
of the momentum signal. Morningstar
initially sets the magnitude based on the
12-month average of the dollar value of
open interest of each Index Commodity
Contract. Morningstar then caps the top
magnitude at 10%, redistributing any
overage to the magnitudes of the
remaining Index Commodity Contracts.
Morningstar chooses this capped openinterest weighting system in order to
reflect the importance of each Index
Commodity Contract in a global
economy and to keep the Indexes
diversified across commodities.
Each of the Indexes is reconstituted
and rebalanced—i.e., the Indexes’
membership and constituent weights are
reset—annually, on the third Friday of
December after the day’s closing values
of the Indexes have been determined.
The reconstitution is effective at the
open of trading on first trading day after
the third Friday of December.
Morningstar implements all futures
contract rolls on the third Friday of each
month to coincide with portfolio
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Jkt 229001
repositioning and the rolling of the U.S.
Treasury bills used for collateral. If the
third Friday of the month is a trading
holiday, Morningstar rolls and
rebalances or reconstitutes on the
trading day prior to the third Friday. To
ensure that contracts are rolled before
becoming committed to receive physical
delivery, contracts are selected so that
the delivery month is at least two
months away from the upcoming
month. On each potential roll date, the
delivery month of the current contract is
compared to the delivery month of the
nearest contract whose delivery month
is at least two months away from the
upcoming month. If the latter is further
into the future than the former, the
contract is rolled.
Net Asset Value
According to the Registration
Statements, NAV means the total assets
of each Fund including, but not limited
to, all cash and cash equivalents or
other debt securities less total liabilities
of a Fund, each determined on the basis
of generally accepted accounting
principles. In particular, NAV includes
any unrealized profit or loss on open
Index Commodity Contracts, Other
Instruments and any Cash Instruments
or other credit or debit accruing to a
Fund but unpaid or not received by a
Fund. The amount of any distribution
will be a liability of a Fund from the day
when the distribution is declared until
it is paid. All open commodity futures
contracts traded on a U.S. or non-U.S.
exchange will be calculated at their then
current market value, which will be
based upon the settlement price for that
particular commodity futures contract
traded on the applicable U.S. or nonU.S. exchange on the date with respect
to which NAV is being determined;
provided, that if a commodity futures
contract traded on a U.S. or on a nonU.S. exchange could not be liquidated
PO 00000
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p.m.
p.m.—
p.m.—
p.m.
p.m.
p.m.
on such day, due to the operation of
daily limits (if applicable) or other rules
of the exchange upon which that
position is traded or otherwise, the
settlement price on the most recent day
on which the position could have been
liquidated will be the basis for
determining the market value of such
position for such day. The Managing
Owner may in its discretion (and under
extraordinary circumstances, including,
but not limited to, periods during which
a settlement price of a futures contract
is not available due to exchange limit
orders 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)
value any asset of a Fund pursuant to
such other principles as the Managing
Owner deems fair and equitable so long
as such principles are consistent with
normal industry standards.
The value of Cleared Swaps will be
determined based on the value of the
Index Commodity Contract in
connection with each specific Cleared
Swap. In calculating the NAV of a Fund,
the settlement value of a Cleared Swap
(if any) and an OTC Other Commodity
Instrument (if any) will be determined
by either applying the then-current
disseminated value for the related Index
Commodity Contracts or the terms as
provided under the applicable Cleared
Swap or OTC Other Commodity
Instrument, as applicable. However, in
the event that one or more of the related
Index Commodity Contracts are not
trading due to the operation of daily
limits or otherwise, the Managing
Owner may in its sole discretion choose
to value the applicable Fund’s Cleared
Swaps or OTC Other Commodity
Instruments (if any) on a fair value basis
in order to calculate such Fund’s NAV.
These fair value prices would be
generally determined based on available
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Federal Register / Vol. 78, No. 127 / Tuesday, July 2, 2013 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
inputs about the current value of the
Index Commodity Contract to which the
Cleared Swap or OTC Other Commodity
Instrument relates and would be based
on principles that the Managing Owner
deems fair and equitable so long as such
principles are consistent with normal
industry standards. Exchange-traded
Other Commodity Instruments will be
valued at their market prices on the
exchanges on which such instruments
trade.
NAV per Share will be the NAV of
each Fund divided by the number of its
outstanding Shares.
Creation and Redemption Procedures
With respect to each of the Funds, on
any business day, an authorized
participant may place an order with the
Managing Owner to create one or more
blocks of 50,000 Shares (‘‘Baskets’’).
Purchase orders must be placed by 1:00
p.m., E.T. The day on which the
Managing Owner receives a valid
purchase order is the purchase order
date. Purchase orders are irrevocable.
The total cash payment required to
create each Basket is the NAV of 50,000
Shares of a Fund as of the closing time
of NYSE Arca or the last to close of the
Futures Exchanges on which Index
Commodity Contracts are traded,
whichever is latest, on the purchase
order date. Baskets are issued on the
business day immediately following the
purchase order date at the applicable
NAV as of the closing time of NYSE
Arca or the last to close of the Futures
Exchanges on which the corresponding
Index Commodity Contracts are traded,
whichever is latest, on the purchase
order date, but only if the required
payment has been timely received.
The procedures by which an
authorized participant can redeem one
or more Baskets mirror the procedures
for the creation of Baskets. On any
business day, an authorized participant
may place an order with the Managing
Owner to redeem one or more Baskets.
Redemption orders must be placed by
1:00 p.m., E.T. The day on which the
Managing Owner receives a valid
redemption order is the redemption
order date. Redemption orders are
irrevocable.
The redemption proceeds from a
Fund will consist of the cash
redemption amount. The cash
redemption amount is equal to the NAV
of the number of Baskets of the Fund
requested in the authorized participant’s
redemption order as of the closing time
of NYSE Arca or the last to close of the
Futures Exchanges on which the Index
Commodity Contracts are traded,
whichever is latest, on the redemption
order date. The Managing Owner will
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16:48 Jul 01, 2013
Jkt 229001
distribute the cash redemption amount
on the business day immediately
following the redemption order date
through Depository Trust Company
(‘‘DTC’’) to the account of the
authorized participant as recorded on
DTC’s book-entry system.
Because the Funds are subject to
speculative position limits,
accountability levels and other position
limitations, as applicable, the Funds’
ability to issue new Baskets or to
reinvest income in additional Index
Commodity Contracts may be limited to
the extent these activities would cause
a Fund to exceed its applicable limits
unless a Fund trades Other Instruments
(if any) in addition to and as a proxy for
Index Commodity Contracts.
The Exchange will obtain a
representation (prior to listing of each
Fund) from the Trust that the NAV per
Share will be calculated daily and made
available to all market participants at
the same time.
Each Fund will meet the initial and
continued listing requirements
applicable to TIRs in NYSE Arca
Equities Rule 8.200 and Commentary
.02 thereto. With respect to application
of Rule 10A–3 26 under the Act, the
Funds rely on the exception contained
in Rule 10A–3(c)(7).27 A minimum of
100,000 Shares of each Fund will be
outstanding as of the start of trading on
the Exchange.
Each Fund’s investments will be
consistent with such Fund’s investment
objective and will not be used to
enhance leverage. That is, a Fund’s
investments will not be used to seek
performance that is a multiple (e.g., 2X
or 3X) or inverse multiple of the Fund’s
respective Index.
A more detailed description of the
Shares, the Funds, the Indexes and the
Index Commodity Contracts, as well as
investment risks, creation and
redemption procedures and fees is set
forth in the Registration Statements.
Availability of Information Regarding
the Shares
The Web site for the Funds and/or the
Exchange’s Web site, which will be
publicly accessible at no charge, will
contain the following information: (a)
The prior business day’s NAV per Share
and the reported closing price; (b) the
prospectus; and (c) other applicable
quantitative information. Each Fund
will also disseminate its respective
holdings on a daily basis on the Funds’
Web site, which will include, as
applicable, the names, quantity, price
and market value of Index Commodity
PO 00000
26 17
27 17
CFR 240.10A–3.
CFR 240.10A–3(c)(7).
Frm 00113
Fmt 4703
Sfmt 4703
Contracts, Other Instruments (including
forward contracts, OTC swaps and other
OTC transactions) and Cash
Instruments.
This Web site disclosure of the
portfolio composition of the Funds will
occur at the same time as the disclosure
by the Managing Owner of the portfolio
composition to authorized participants
so that all market participants are
provided portfolio composition
information at the same time. Therefore,
the same portfolio information will be
provided on the public Web site as well
as in electronic files provided to
authorized participants. Accordingly,
each investor will have access to the
current portfolio composition of the
Funds through the Funds’ Web site. The
prices of the Index Commodity
Contracts, Other Instruments (except as
described below) and Cash Instruments
will be available from the applicable
exchanges and market data vendors. The
Managing Owner will publish the NAV
of each Fund and the NAV per Share
daily. Disclosure regarding the
components of each Index, the
percentage weightings of the
components of each Index, and the long,
short or flat positions therein is
available at https://corporate.
morningstar.com/US/asp/
subject.aspx?page=2649&filter=
Commodity&xmlfile=2738.xml.
The intra-day level and the most
recent end-of-day closing level of each
Index will be published by NYSE Arca
once every 15 seconds throughout the
Exchange’s Core Trading Session and as
of the close of business for NYSE Arca,
respectively.
Any adjustments made to an Index
will be published on Morningstar’s
(which serves as the Index Provider)
Web site noted above.
The intra-day indicative value (‘‘IIV’’)
per Share of each Fund will be based on
the prior day’s final NAV per Share,
adjusted every 15 seconds during the
Core Trading Session to reflect the
continuous price changes of a Fund’s
Index Commodity Contracts and other
holdings. The IIV per Share will be
widely disseminated by one or more
major market data vendors at least every
15 seconds during the Core Trading
Session.28
The normal trading hours for Index
Commodity Contracts may begin after
9:30 a.m. and end before 4:00 p.m. E.T.,
and there will be a gap in time at the
beginning and the end of each day
during which the Funds’ Shares will be
28 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IIVs taken from
Consolidated Tape Association (‘‘CTA’’) or other
data feeds.
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tkelley on DSK3SPTVN1PROD with NOTICES
traded on the NYSE Arca, but real-time
trading prices for at least some of the
Index Commodity Contracts held by the
Funds are not available. As a result,
during those gaps the IIVs will be
updated but will reflect the closing
prices for such Index Commodity
Contracts that have stopped trading
before the NAV is calculated.
The final NAV of each Fund and the
final NAV per Share will be calculated
as of the closing time of NYSE Arca
Core Trading Session or the last to close
of the Futures Exchanges on which the
Index Commodity Contracts or Other
Commodity Contracts (which are listed
on futures exchanges other than Futures
Exchanges) are traded, whichever is
later, and posted in the same manner.
Although a time gap may exist between
the close of the NYSE Arca Core Trading
Session and the close of the Futures
Exchanges on which the Index
Commodity Contracts or Other
Commodity Contracts are traded, there
will be no effect on the NAV
calculations as a result.
The value of the Shares may be
influenced by non-concurrent trading
hours between NYSE Arca and the
various Futures Exchanges on which the
Index Commodity Contracts are traded.
The trading hours for the Futures
Exchanges may not necessarily coincide
during the times that the Shares trade
on NYSE Arca.29
The NAV for each Fund will be
disseminated to all market participants
at the same time. The Exchange will
also make available on its Web site daily
trading volume of the Shares, closing
prices of such Shares, and the
corresponding NAV. The closing prices
and settlement prices of Index
Commodity Contracts or Other
Commodity Contracts are also readily
available from the Web sites of the
applicable Futures Exchanges, other
futures exchanges, automated quotation
systems, published or other public
sources, or on-line information services
such as Bloomberg or Reuters. The
relevant futures exchanges on which the
Index Commodity Contracts or Other
Commodity Contracts are listed also
provide delayed futures information on
current and past trading sessions and
29 For example, while the Shares generally will
trade on NYSE Arca until 8:00 p.m. E.T., NYMEX
closes at 1:30 p.m. E.T. As a result, during periods
when NYSE Arca is open and the futures exchanges
on which the gold Index Commodity Contracts or
Other Commodity Contracts are traded (such as
NYMEX) are closed, liquidity in the applicable
Index Commodity Contracts or Other Commodity
Contracts will be reduced or extremely limited. As
a result, trading spreads and the resulting premium
or discount on the Shares may widen, increasing
the difference between the price of the Shares and
the NAV of such Shares.
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16:48 Jul 01, 2013
Jkt 229001
market news free of charge on their
respective Web sites. The specific
contract specifications for the Index
Commodity Contracts or Other
Commodity Contracts are also available
on such Web sites, as well as other
financial informational sources. The
prices of forward agreements, swaps and
other OTC transactions are not available
from the exchanges, but will be
available from major market data
vendors and financial information
service providers such as Reuters and
Bloomberg and will be included in: (i)
The calculation of the NAV for the
Shares, which is disseminated daily;
and (ii) the IIV for the Shares, which is
widely disseminated at least every 15
seconds during the Core Trading
Session by one or more market data
vendors. Quotation and last-sale
information regarding the Shares will be
disseminated through the facilities of
the CTA.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00
a.m. to 8:00 p.m. E.T. The Exchange has
appropriate rules to facilitate
transactions in the Shares during all
trading sessions.
The trading of the Shares 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 TIRs to
facilitate surveillance. See
‘‘Surveillance’’ below for more
information.
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares.
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the Index
Commodity Contracts or Other
Instruments, or (2) whether other
unusual conditions or circumstances
detrimental to the maintenance of a fair
and orderly market are present. In
addition, trading in Shares will be
subject to trading halts caused by
extraordinary market volatility pursuant
to the Exchange’s ‘‘circuit breaker’’
rule 30 or by the halt or suspension of
PO 00000
30 See
NYSE Arca Equities Rule 7.12.
Frm 00114
Fmt 4703
Sfmt 4703
39817
trading of the underlying futures
contracts.
The Exchange represents that the
Exchange may halt trading during the
day in which an interruption to the
dissemination of the IIV, an Index value
or the value of the Index Commodity
Contracts or Other Instruments occurs.
If the interruption to the dissemination
of the IIV, an Index value or the value
of the Index Commodity Contracts or
Other Instruments persists past the
trading day in which it occurred, the
Exchange will halt trading no later than
the beginning of the trading day
following the interruption. In addition,
if the Exchange becomes aware that the
NAV with respect to the Shares is not
disseminated to all market participants
at the same time, it will halt trading in
the Shares until such time as the NAV
is available to all market participants.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.31 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
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.
FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares, futures contracts
and exchange-traded options with other
markets and other entities that are
members of the Intermarket
Surveillance Group (‘‘ISG’’) and FINRA
may obtain trading information
regarding trading in the Shares, futures
contracts and exchange-traded options
from such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares, futures contracts and exchange31 FINRA surveils trading on the Exchange
pursuant to a regulatory services agreement. The
Exchange is responsible for FINRA’s performance
under this regulatory services agreement.
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traded options from markets and other
entities that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement.32 CME Group, Inc., (which
includes CME, CBOT, and NYMEX),
and ICE–US are members of ISG. In
addition, the Exchange has entered into
a comprehensive surveillance sharing
agreement with ICE–UK that applies
with respect to trading in Index
Commodity Contracts. A list of ISG
members is available at
www.isgportal.org.
In addition, with respect to assets of
the Funds traded on exchanges, not
more than 10% of the weight of such
assets in the aggregate shall consist of
components whose principal trading
market is not a member of ISG or is a
market with which the Exchange does
not have a comprehensive surveillance
sharing agreement.
The Exchange also has a general
policy prohibiting the distribution of
material, non-public information by its
employees.
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
Specifically, the Information Bulletin
will discuss the following: (1) The risks
involved in trading the Shares during
the Opening and Late Trading Sessions
when an updated IIV will not be
calculated or publicly disseminated, as
well as during the Core Trading Session
where the IIV may be based in part on
static underlying values; (2) the
procedures for purchases and
redemptions of Shares in Baskets (and
that Shares are not individually
redeemable); (3) NYSE Arca Equities
Rule 9.2(a), which imposes a duty of
due diligence on its ETP Holders to
learn the essential facts relating to every
customer prior to trading the Shares; (4)
how information regarding the IIV is
disseminated; (5) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
In addition, the Information Bulletin
will advise ETP Holders, prior to the
commencement of trading, of the
prospectus delivery requirements
applicable to the Funds. The Exchange
notes that investors purchasing Shares
32 The Exchange notes that not all instruments
held by the Funds 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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16:48 Jul 01, 2013
Jkt 229001
directly from the Funds will receive a
prospectus. ETP Holders purchasing
Shares from the Funds for resale to
investors will deliver a prospectus to
such investors. The Information Bulletin
will also discuss any exemptive, noaction and interpretive relief granted by
the Commission from any rules under
the Act.
In addition, the Information Bulletin
will reference that the Funds are subject
to various fees and expenses described
in the Registration Statements. The
Information Bulletin will also reference
that the CFTC has regulatory
jurisdiction over the futures contracts
traded on U.S. markets.
The Information Bulletin will also
disclose the trading hours of the Shares
of the Funds and that the NAV for the
Shares will be calculated as of 4:00 p.m.
E.T. each trading day. The Bulletin will
disclose that information about the
Shares of the Funds is publicly available
on the Funds’ Web site.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 33 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in NYSE Arca Equities
Rule 8.200 and Commentary .02 thereto.
The Managing Owner is affiliated with
a broker-dealer and has implemented a
‘‘fire wall’’ with respect to such brokerdealer and has policies and procedures
in place regarding access to information
concerning the composition and/or
changes to the Funds’ portfolio
composition. The Index Provider is not
registered as a broker-dealer and has
implemented procedures designed to
prevent the illicit use and dissemination
of material, non-public information
regarding the Indexes and has
implemented a ‘‘fire wall’’ with respect
to its affiliated broker-dealer regarding
the Indexes. The Exchange has in place
surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
PO 00000
33 15
U.S.C. 78f(b)(5).
Frm 00115
Fmt 4703
Sfmt 4703
laws. FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares, futures contracts
and exchange-traded options with other
markets and other entities that are
members of the ISG and FINRA may
obtain trading information regarding
trading in the Shares, futures contracts
and exchange-traded options from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in the Shares, futures
contracts and exchange-traded options
from markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. With
respect to assets of the Funds traded on
exchanges, not more than 10% of the
weight of such assets 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. Each Fund will also
disseminate each Fund’s holdings on a
daily basis on the Funds’ Web site,
which will include, as applicable, the
names, quantity, price and market value
of Index Commodity Contracts, Other
Instruments and Cash Instruments. This
Web site disclosure of the portfolio
composition of the Funds will occur at
the same time as the disclosure by the
Managing Owner of the portfolio
composition to authorized participants
so that all market participants are
provided portfolio composition
information at the same time. The prices
of the Index Commodity Contracts,
Other Instruments and Cash Instruments
will be available from the applicable
exchanges and market data vendors. The
Managing Owner will publish the NAV
of each Fund and the NAV per Share
daily. There will be publicly available
Web site disclosure regarding the
components of each Index and the long,
short or flat positions therein. Trading
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) the extent to which trading
is not occurring in the underlying
futures contracts, or (2) whether other
unusual conditions or circumstances
detrimental to the maintenance of a fair
and orderly market are present. Trading
in Shares will be subject to trading halts
caused by extraordinary market
volatility pursuant to the Exchange’s
‘‘circuit breaker’’ rule or by the halt or
suspension of trading of the Index
Commodity Contracts. The Exchange
may halt trading during the day in
which an interruption to the
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Federal Register / Vol. 78, No. 127 / Tuesday, July 2, 2013 / Notices
dissemination of the IIV, an Index value
or the value of the Index Commodity
Contracts or Other Instruments occurs.
If the interruption to the dissemination
of the IIV, an Index value or the value
of the Index Commodity Contracts or
Other Instruments persists past the
trading day in which it occurred, the
Exchange will halt trading no later than
the beginning of the trading day
following the interruption. In addition,
if the Exchange becomes aware that the
NAV with respect to the Shares is not
disseminated to all market participants
at the same time, it will halt trading in
the Shares until such time as the NAV
is available to all market participants.
Disclosure regarding the components of
each Index, the percentage weightings of
the components of each Index, and the
long, short or flat positions therein is
publicly available [sic]. The NAV for
each Fund will be disseminated to all
market participants at the same time. If
the Exchange becomes aware that the
NAV with respect to the Shares is not
disseminated to all market participants
at the same time, it will halt trading in
the Shares until such time as the NAV
is available to all market participants.
Each Fund intends to invest first in
Index Commodity Contracts. Thereafter,
if a Fund reaches the position limits
applicable to one or more Index
Commodity Contracts or a Futures
Exchange imposes limitations on the
Fund’s ability to maintain or increase its
positions in an Index Commodity
Contract after reaching accountability
levels or a price limit is in effect on an
Index Commodity Contract during the
last 30 minutes of its regular trading
session, each Fund’s intention is to
invest first in Cleared Swaps to the
extent permitted under the position
limits applicable to Cleared Swaps and
appropriate in light of the liquidity in
the Cleared Swaps market, and then,
using its commercially reasonable
judgment, in Other Commodity
Contracts or in Other Commodity
Instruments.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that a large amount of
information is publicly available
regarding the Funds and the Shares,
thereby promoting market transparency.
The NAV for each Fund will be
disseminated to all market participants
at the same time. The IIV per Share will
be widely disseminated by one or more
major market data vendors at least every
15 seconds during the Core Trading
Session and on the Managing Owner’s
Web site. Trading in Shares of the
Funds will be halted if the circuit
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16:48 Jul 01, 2013
Jkt 229001
breaker parameters in NYSE Arca
Equities Rule 7.12 have been reached or
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. Moreover, prior to the
commencement of trading, the Exchange
will inform its ETP Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of additional types of exchange-traded
products that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
As noted above, the Exchange has in
place surveillance procedures relating to
trading in the Shares and may obtain
information via ISG from other
exchanges that are members of ISG or
with which the Exchange has entered
into a comprehensive surveillance
sharing agreement. In addition, as noted
above, investors will have ready access
to information regarding the Funds’
holdings, IIV, and quotation and last
sale information for the Shares.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange notes that the proposed rule
change will facilitate the listing and
trading of additional types of exchangetraded products that will enhance
competition among market participants,
to the benefit of investors and the
marketplace.
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:
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
39819
(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–2013–60 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington DC
20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2013–60. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml ). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing will also be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–NYSEArca–
2013–60 and should be submitted on or
before July 23, 2013.
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Federal Register / Vol. 78, No. 127 / Tuesday, July 2, 2013 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.34
Kevin M. O’Neill,
Deputy Secretary.
SMALL BUSINESS ADMINISTRATION
ACTION:
Salem Halifax Capital Partners, L.P.
SUMMARY:
[FR Doc. 2013–15779 Filed 7–1–13; 8:45 am]
Notice Seeking Exemption Under the
Small Business Investment Act,
Conflicts of Interest
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
Reporting and Recordkeeping
Requirements Under OMB Review
Small Business Administration.
Notice of 30 day Reporting
Requirements Submitted for OMB
Review.
AGENCY:
ACTION:
Under the provisions of the
Paperwork Reduction Act (44 U.S.C.
Chapter 35), agencies are required to
submit proposed reporting and
recordkeeping requirements to OMB for
review and approval, and to publish a
notice in the Federal Register notifying
the public that the agency has made
such a submission.
DATES: Submit comments on or before
August 1, 2013. If you intend to
comment but cannot prepare comments
promptly, please advise the OMB
Reviewer and the Agency Clearance
Officer before the deadline.
Copies: Request for clearance (OMB
83–1), supporting statement, and other
documents submitted to OMB for
review may be obtained from the
Agency Clearance Officer.
ADDRESSES: Address all comments
concerning this notice to: Agency
Clearance Officer, Curtis Rich, Small
Business Administration, 409 3rd Street
SW., 5th Floor, Washington, DC 20416;
and OMB Reviewer, Office of
Information and Regulatory Affairs,
Office of Management and Budget, New
Executive Office Building, Washington,
DC 20503.
FOR FURTHER INFORMATION CONTACT:
Curtis Rich, Agency Clearance Officer,
(202) 205–7030 curtis.rich@sba.gov
SUPPLEMENTARY INFORMATION:
Title: HUBZone Electronic Data
Survey Form.
Frequency: On Occasion.
SBA Form Number: 2298.
Description of Respondents: Small
Business concerns.
Responses: 4926.
Annual Burden: 2463.
tkelley on DSK3SPTVN1PROD with NOTICES
SUMMARY:
[License No. 04/04–0300]
Notice is hereby given that Salem
Halifax Capital Partners, L.P., 2849
Paces Ferry Road, Overlook I, Suite 660,
Atlanta, GA 30339, a Federal Licensee
under the Small Business Investment
Act of 1958, as amended (‘‘the Act’’), in
connection with the financing of a small
concern, has sought an exemption under
Section 312 of the Act and Section
107.730, Financings which Constitute
Conflicts of Interest of the Small
Business Administration (‘‘SBA’’) Rules
and Regulations (13 CFR 107.730).
Salem Halifax Capital Partners, L.P. is
seeking post-financing approval from
SBA for a debt and equity financing it
made to XL Associates, Inc., 1650
Tysons Boulevard, Suite 720, McLean,
VA 22102 (‘‘XL’’).
The financing is brought within the
purview of § 107.730(a)(1) and
§ 107.730(d)(1) of the Regulations
because Salem Halifax Capital Partners,
L.P. invested in XL, which is considered
an Associate of Salem Halifax Capital
Partners, L.P., through Halifax Capital
Partners’, an Associate of Salem Halifax
Capital Partners, L.P., ownership of
more than 10% of XL’s equity.
Therefore this transaction is considered
a financing constituting a conflict of
interest requiring prior SBA approval.
Salem Halifax Capital Partners, L.P. has
already made its investment in XL and
is seeking post-financing SBA approval.
Notice is hereby given that any
interested person may submit written
comments on the transaction, within
fifteen days of the date of this
publication, to the Associate
Administrator for Investment, U.S.
Small Business Administration, 409
Third Street SW., Washington, DC
20416.
Harry Haskins,
Acting Associate Administrator for
Investment.
[FR Doc. 2013–15864 Filed 7–1–13; 8:45 am]
A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW., Suite 6050,
Washington, DC 20416.
FOR FURTHER INFORMATION CONTACT:
Notice is
hereby given that as a result of the
President’s major disaster declaration on
06/25/2013, Private Non-Profit
organizations that provide essential
services of governmental nature may file
disaster loan applications at the address
listed above or other locally announced
locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Area: Standing Rock Indian
Reservation.
The Interest Rates are:
SUPPLEMENTARY INFORMATION:
Percent
For Physical Damage:
Non-Profit Organizations With
Credit Available Elsewhere .....
Non-Profit Organizations Without
Credit Available Elsewhere .....
For Economic Injury:
Non-Profit Organizations Without
Credit Available Elsewhere .....
2.875
2.875
SMALL BUSINESS ADMINISTRATION
(Catalog of Federal Domestic Assistance
Numbers 59002 and 59008)
Standing Rock Sioux Tribe Disaster
#SD–00058
U.S. Small Business
Administration.
Jkt 229001
2.875
The number assigned to this disaster
for physical damage is 13639B and for
economic injury is 13640B.
AGENCY:
CFR 200.30–3(a)(12).
16:48 Jul 01, 2013
Submit completed loan
applications to: U.S. Small Business
Administration, Processing And
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
ADDRESSES:
BILLING CODE 8025–01–P
[FR Doc. 2013–15653 Filed 7–1–13; 8:45 am]
BILLING CODE 8025–01–P
VerDate Mar<15>2010
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the Standing Rock Indian Reservation
(FEMA–4123–DR), dated 06/25/2013.
Incident: Severe Storms and Flooding.
Incident Period: 05/25/2013 through
06/01/2013.
Effective Date: 06/25/2013.
Physical Loan Application Deadline
Date: 08/26/2013.
Economic Injury (EIDL) Loan
Application Deadline Date: 03/25/2014.
[Disaster Declaration #13639 and #13640]
Curtis Rich,
Management Analyst.
34 17
Notice.
PO 00000
Frm 00117
Fmt 4703
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James E. Rivera,
Associate Administrator for Disaster
Assistance.
[FR Doc. 2013–15857 Filed 7–1–13; 8:45 am]
BILLING CODE 8025–01–P
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]]>Agencies
[Federal Register Volume 78, Number 127 (Tuesday, July 2, 2013)]
[Notices]
[Pages 39810-39820]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-15779]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69862; File No. SR-NYSEArca-2013-60]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Proposing To List and Trade Shares of Market
Vectors Low Volatility Commodity ETF and Market Vectors Long/Short
Commodity ETF Under NYSE Arca Equities Rule 8.200
June 26, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on June 12, 2013, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, 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\ 15 U.S.C. 78a.
\3\ 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 Market Vectors
Low Volatility Commodity ETF and Market Vectors Long/Short Commodity
ETF 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 (``TIRs'') either by listing or pursuant to
unlisted trading privileges (``UTP'').\4\ The Exchange proposes to list
and trade the shares (the ``Shares'') of the Market Vectors Low
Volatility Commodity ETF (``Low Volatility ETF'') and Market Vectors
Long/Short Commodity ETF (``Long/Short ETF'', and, together with Low
Volatility ETF, the ``Funds'') under NYSE Arca Equities Rule 8.200.
Each Fund is a series of the Market Vectors Commodity Trust (the
``Trust''), a Delaware statutory trust.\5\
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\4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to
TIRs that invest in ``Financial Instruments''. The term ``Financial
Instruments'', as defined in Commentary .02(b)(4) to NYSE Arca
Equities Rule 8.200, means any combination of investments, including
cash; securities; options on securities and indices; futures
contracts; options on futures contracts; forward contracts; equity
caps, collars and floors; and swap agreements.
\5\ The Trust filed a pre-effective amendment to its
registration statements with respect to the Funds on Form S-1 under
the Securities Act of 1933 (``1933 Act'') on December 7, 2012 (File
No. 333-179435 for the Low Volatility ETF (``Low Volatility
Registration Statement'')) and File No. 333-179432 for the Long/
Short ETF (``Long/Short Registration Statement'' and, together with
the Low Volatility Registration Statement, the ``Registration
Statements''). The descriptions of the Funds and the Shares
contained herein are based, in part, on the Registration Statements.
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[[Page 39811]]
The Exchange notes that the Commission has previously approved the
listing and trading of other issues of TIRs on the American Stock
Exchange LLC (``Amex''),\6\ trading on NYSE Arca pursuant to UTP,\7\
and listing on NYSE Arca.\8\ In addition, the Commission has approved
other exchange-traded fund-like products linked to the performance of
underlying commodities.\9\
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\6\ See, e.g., Securities Exchange Act Release No. 58161 (July
15, 2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39) (order
approving amendments to Amex Rule 1202, Commentary .07 and listing
on Amex of 14 funds of the Commodities and Currency Trust).
\7\ See, e.g., Securities Exchange Act Release No. 58163 (July
15, 2008), 73 FR 42391 (July 21, 2008) (SR-NYSEArca-2008-73) (order
approving UTP trading on NYSE Arca of 14 funds of the Commodities
and Currency Trust).
\8\ See, e.g., Securities Exchange Act Release No. 58457
(September 3, 2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-
2008-91) (order approving listing on NYSE Arca of 14 funds of the
Commodities and Currency Trust).
\9\ See, e.g., Securities Exchange Act Release Nos. 56932
(December 7, 2007), 72 FR 71178 (December 14, 2007) (SR-NYSEArca-
2007-112) (order granting accelerated approval to list iShares S&P
GSCI Commodity-Indexed Trust); 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).
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Van Eck Absolute Return Advisers Corp. is the managing owner of the
Funds (``Managing Owner'').\10\ The Managing Owner also serves as the
commodity pool operator and commodity trading advisor of the Funds. The
Managing Owner is registered as a commodity pool operator and commodity
trading advisor with the Commodity Futures Trading Commission
(``CFTC''), and is a member of National Futures Association. Wilmington
Trust, National Association (``Trustee''), a national bank with its
principal place of business in Delaware, is the sole trustee of the
Trust. The Bank of New York Mellon will be the custodian, administrator
and transfer agent for the Funds.
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\10\ The Managing Owner is affiliated with a broker-dealer and
has implemented a ``fire wall'' with respect to such broker-dealer
and has policies and procedures in place regarding access to
information concerning the composition and/or changes to the Funds'
portfolio composition.
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Overview of the Funds \11\
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\11\ Terms relating to the Funds, the Shares and the Indexes (as
defined below) referred to, but not defined, herein are defined in
the Registration Statements.
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According to the Low Volatility Registration Statement, the Low
Volatility ETF will seek to track changes, whether positive or
negative, in the performance of the Morningstar[supreg] Long/Flat
Commodity Index\SM\ (the ``Long/Flat Index'') over time. According to
the Long/Short Registration Statement, the Long/Short ETF will seek to
track changes, whether positive or negative, in the performance of the
Morningstar[supreg] Long/Short Commodity Index\SM\ (the ``Long/Short
Index'' and, together with the Long/Flat Index, the ``Indexes'') over
time.
Each Fund will seek to achieve its respective investment objective
by investing principally in exchange-traded futures contracts on
commodities (``Index Commodity Contracts'') comprising the Long/Flat
Index and the Long/Short Index, respectively, and U.S. Treasury bills
maturing in eight weeks or less to reflect ``flat'' positions, and, in
certain circumstances (as described below), futures contracts other
than Index Commodity Contracts traded on U.S. or foreign exchanges
(``Other Commodity Contracts'').\12\ In addition, to a limited extent,
the Funds may also invest in swap agreements on Index Commodity
Contracts or Other Commodity Contracts cleared through a central
clearing house or the clearing house's affiliate (``Cleared Swaps''),
forward contracts, exchange-traded cash-settled options (including
options on one or more Index Commodity Contracts, Other Commodity
Contracts or indexes that include any Index Commodity Contracts or
Other Commodity Contracts), swaps other than Cleared Swaps and other
over-the-counter (``OTC'') transactions that provide economic exposure
to the investment returns of the commodities markets, as represented by
the Indexes and their constituents (collectively, ``Other Commodity
Instruments,'' and, together with Other Commodity Contracts and Cleared
Swaps, ``Other Instruments''), as described below. The Funds also may
invest in U.S. Treasury bonds, other U.S. Treasury bills, and other
U.S. government securities and related securities, money market funds,
certificates of deposit, time deposits and other high credit quality
short-term fixed income securities, as described in the Registration
Statements (collectively, ``Cash Instruments''). The Cash Instruments
used to track flat positions in the Indexes will be U.S. Treasury
bills.
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\12\ The Managing Owner expects that Other Commodity Contracts
in which a Fund may invest in the circumstances described below
would include futures contracts of different expirations, on
different commodities or traded on different exchanges than Index
Commodity Contracts.
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Each Fund intends to invest first in Index Commodity Contracts.
Thereafter, if a Fund reaches the position limits applicable to one or
more Index Commodity Contracts or a ``Futures Exchange'' \13\ imposes
limitations on the Fund's ability to maintain or increase its positions
in an Index Commodity Contract after reaching accountability levels or
a price limit is in effect on an Index Commodity Contract during the
last 30 minutes of its regular trading session, the Fund's intention is
to invest first in Cleared Swaps to the extent permitted under the
position limits applicable to Cleared Swaps and appropriate in light of
the liquidity in the Cleared Swaps market, and then, using its
commercially reasonable judgment, in Other Commodity Contracts or in
Other Commodity Instruments. By using certain or all of these
investments, the Managing Owner will endeavor to cause a Fund's
performance to closely track that of the Long/Flat Index or Long/Short
Index, respectively, over time. The specific circumstances under which
investments in Other Commodity Contracts and Other Commodity
Instruments may be used are discussed below.
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\13\ The Futures Exchanges are the exchanges on which the Index
Commodity Contracts are traded, and include the following: the
Chicago Mercantile Exchange, Inc. (``CME''), Chicago Board of Trade
(``CBOT'', a division of CME), NYMEX (a division of CME), ICE
Futures US (``ICE-US''), and ICE Futures Europe (``ICE-UK''). Some
of a Fund's futures trading may be conducted on commodity futures
exchanges outside the United States. Trading on such exchanges is
not regulated by any U.S. governmental agency and may involve
certain risks not applicable to trading on U.S. exchanges, including
different or diminished investor protections.
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Consistent with seeking to achieve each Fund's investment
objective, if a Fund reaches position limits applicable to one or more
Index Commodity Contracts or when a Futures Exchange has imposed
limitations on a Fund's ability to maintain or increase its positions
in an Index Commodity Contract after reaching accountability levels or
a price limit is in effect on an Index Commodity Contract during the
last 30 minutes of its regular trading session, the Managing Owner may
cause a Fund to first enter into or hold Cleared Swaps and then, if
applicable, enter into and hold Other Commodity Contracts or Other
Commodity Instruments. For example, certain Cleared Swaps have
standardized terms similar to, and are priced by reference to, a
corresponding Index Commodity Contract or Other Commodity Contract.
Additionally, certain Other Commodity Instruments can generally be
structured as the parties to the contract desire. Therefore, a Fund
might enter into multiple Cleared Swaps and/or certain Other Commodity
Instruments intended to
[[Page 39812]]
exactly replicate the performance of one or more Index Commodity
Contracts or Other Commodity Contracts, or a single Other Commodity
Instrument designed to replicate the performance of the applicable
Index as a whole.\14\ After reaching position limits applicable to one
or more Index Commodity Contracts or when a Futures Exchange has
imposed limitations on the Fund's ability to maintain or increase its
positions in an Index Commodity Contract after reaching accountability
levels or a price limit is in effect on an Index Commodity Contract
during the last 30 minutes of its regular trading session, and after
entering into or holding Cleared Swaps, a Fund might also enter into or
hold Other Commodity Contracts or Other Commodity Instruments to
facilitate effective trading, consistent with a Fund's long/flat or
long/short strategy, as applicable. In addition, after reaching
position limits applicable to one or more Index Commodity Contracts or
when a Futures Exchange has imposed limitations on the Fund's ability
to maintain or increase its positions in an Index Commodity Contract
after reaching accountability levels or a price limit is in effect on
an Index Commodity Contract during the last 30 minutes of its regular
trading session, and after entering into or holding Cleared Swaps, a
Fund might enter into or hold Other Commodity Contracts or Other
Commodity Instruments that would be expected to alleviate overall
deviation between a Fund's performance and that of the Long/Flat Index
or Long/Short Index, as applicable, that may result from certain market
and trading inefficiencies or other reasons.
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\14\ According to the Registration Statements, assuming that
there is no default by a counterparty to an Other Commodity
Instrument, the performance of the Other Commodity Instrument should
positively correlate with the performance of the Long/Flat Index or
Long/Short Index, as applicable, or the applicable Index Commodity
Contract.
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According to the Registration Statements, by using certain or all
of these investments, the Managing Owner will endeavor to cause a
Fund's performance to closely track that of the Long/Flat Index or
Long/Short Index, as applicable, over time. Each Fund will invest to
the fullest extent possible in Index Commodity Contracts and Other
Instruments without being leveraged (i.e., without seeking performance
that is a multiple (e.g., 2X or 3X) or inverse multiple of the Fund's
respective Index) or unable to satisfy its expected current or
potential margin or collateral obligations with respect to its
investments in Index Commodity Contracts and Other Commodity Contracts
or Other Instruments.\15\
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\15\ According to the Registration Statements, the Managing
Owner will attempt to minimize these market and credit risks by
requiring the Funds to abide by various trading limitations and
policies, which will include limiting margin accounts and trading
only in liquid markets. The Managing Owner will implement procedures
which will include, but will not be limited to: Executing and
clearing trades with creditworthy counterparties; limiting the
amount of margin or premium required for any Index Commodity
Contract or Other Commodity Contract or all Index Commodity
Contracts or Other Commodity Contracts combined; and generally
limiting transactions to Index Commodity Contracts or Other
Commodity Contracts which will be traded in sufficient volume to
permit the taking and liquidating of positions.
The Fund will enter into Other Commodity Instruments traded OTC
(if any) with counterparties selected by the Managing Owner. The
Managing Owner will select such Other Commodity Instrument (if any)
counterparties giving due consideration to such factors as it deems
appropriate, including, without limitation, creditworthiness,
familiarity with the applicable Index, and price. Under no
circumstances will the Funds enter into an Other Commodity
Instrument traded OTC (if any) with any counterparty whose credit
rating is lower than investment-grade at the time a contract is
entered into. The Funds expect that investments in OTC Other
Commodity Instruments (if any) will be made on terms that are
standard in the market for such OTC Other Commodity Instruments. In
connection with such OTC Other Commodity Instruments, the Funds may
post or receive collateral in the form of Cash Instruments, which
will be marked to market daily.
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Each of the Indexes is currently composed of long, flat or short
(as applicable) positions in Index Commodity Contracts, each of which
is subject to speculative position limits and other position
limitations, as applicable, which are imposed by either the CFTC or the
rules of the Futures Exchanges on which the Index Commodity Contracts
are traded. These position limits prohibit any person from holding a
position of more than a specific number of such Index Commodity
Contracts. The purposes of these limits are to diminish, eliminate or
prevent sudden or unreasonable fluctuations or unwarranted changes in
the prices of futures contracts.\16\
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\16\ According to the Registration Statements, pursuant to the
statutory mandate of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (the ``Dodd-Frank Act''), which was signed into law
on July 21, 2010, on October 18, 2011, the CFTC adopted regulations
that impose new federal position limits on futures and options on a
subset of energy, metal, and agricultural commodities (the
``Referenced Contracts'') and economically equivalent swap
transactions. In a lawsuit filed against the CFTC by the
International Swaps and Derivatives Association (``ISDA'') and the
Securities Industry and Financial Markets Association (``SIFMA''),
the U.S. District Court for the District of Columbia vacated the new
position limit regulations and remanded the matter to the CFTC for
further consideration consistent with the court's opinion. The CFTC
may appeal the court's decision and seek a stay of the decision
pending appeal, and the new position limit regulations, or other
regulations with similar effect, could still become effective in the
future. The regulations that were the subject of this decision are
referred to herein as the ``proposed regulations.'' The proposed
regulations would apply to each of the Funds' combined positions
across these products. The Referenced Contracts subject to the
proposed regulations represent approximately 68% of the Index
Commodity Contracts as of February 28, 2013. The proposed
regulations are extremely complex and, if ultimately implemented,
whether in their current form or an alternative form, may require
further guidance and interpretation by the CFTC to determine in all
respects how they apply to the Funds. The Funds' investment strategy
could be negatively affected by these regulations.
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According to the Registration Statement, under current regulations,
subject to any relevant exemptions, traders, such as each Fund, may not
exceed speculative position limits, either individually, or in the
aggregate with other persons with whom they are under common control or
ownership. Under the proposed regulations challenged by SIFMA, the CFTC
requires certain persons to aggregate exchange listed futures and
economically equivalent swap positions owned or controlled by such
persons.
In addition, exchanges may establish daily price fluctuation limits
on futures contracts. The daily price fluctuation limit establishes the
maximum amount that the price of futures contracts 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. Futures Exchanges may
also establish accountability levels applicable to futures contracts. A
Futures Exchange may order a person who holds or controls aggregate
positions in excess of specified position accountability levels not to
further increase the positions, to comply with any prospective limit
which exceeds the size of the position owned or controlled, or to
reduce any open position which exceeds position accountability levels
if the Futures Exchange determines that such action is necessary to
maintain an orderly market. Position limits, accountability levels, and
daily price fluctuation limits set by the Futures Exchanges have the
potential to cause tracking error, which could cause changes in the net
asset value (``NAV'') per Share to substantially vary from changes in
the level of the Index and prevent an investor from being able to
effectively use the Fund as a way to indirectly invest in the global
commodity markets.
Although the Managing Owner does not expect the Funds to have a
significant exposure to Other Commodity Instruments that trade OTC, the
Trust's Declaration of Trust does not limit the amount of funds that
the
[[Page 39813]]
Funds may invest in such Other Commodity Instruments. Therefore, as the
amount of funds invested in Other Commodity Instruments that trade OTC
increases, the applicable risks described in the Registration
Statements increase correspondingly.\17\
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\17\ According to the Registration Statements, markets in which
a Fund may effect a transaction in certain Other Commodity
Instruments may be in the OTC markets. The participants and dealers
in such markets are typically not subject to the same level of
credit evaluation and regulatory oversight as are members of the
exchange-based markets. This exposes a Fund to the risk that a
counterparty will not settle a transaction in accordance with its
terms and conditions because of a credit or liquidity problem or a
dispute over the terms of the contract (whether or not bona fide),
thus causing the Fund to suffer a loss. See note 15, supra.
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The Long/Flat Index
According to the Low Volatility Registration Statement, the Long/
Flat Index is a rules-based, fully collateralized commodity futures
index that employs a momentum rule to determine if exposure to a
particular commodity should be maintained with its prescribed weighting
(a ``long position'') or moved to cash (a ``flat position'').\18\ For
each Index Commodity Contract represented by the Long/Flat Index,
Morningstar[supreg], Inc. (``Morningstar'') \19\ calculates a ``linked
price'' \20\ that incorporates both price changes and roll yield.\21\
Whether a position will be long or flat is determined, at the time of a
monthly repositioning, by comparing the linked price of each Index
Commodity Contract to its 12-month moving average. For example, if, at
a monthly repositioning, the linked price for an Index Commodity
Contract exceeds its 12-month moving average, the Long/Flat Index takes
the long position in the subsequent month. Conversely, if the linked
price for an Index Commodity Contract is below its 12-month moving
average, the Long/Flat Index moves the position to cash, i.e., flat.
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\18\ A long position is a position that will increase in market
price if the price of the commodities comprising the Long/Flat
Index, in the aggregate, are rising during the period when the
position is open. A flat position is a position that will not
increase in market price whether the price of the commodities
comprising the Long/Flat Index, in the aggregate, is rising or
falling.
\19\ Morningstar, Inc. is the index provider (``Index Provider''
or ``Morningstar'') with respect to the Indexes. Morningstar is not
registered as a broker-dealer. Morningstar Investment Services
(``MIS''), a wholly-owned subsidiary of the Index Provider, is a
broker-dealer and a registered investment adviser under the
Investment Advisers Act of 1940. Morningstar has implemented
procedures designed to prevent the illicit use and dissemination of
material, non-public information regarding the Indexes and has
implemented a ``fire wall'' with respect to its affiliated broker-
dealer regarding the Indexes.
\20\ A ``linking'' factor is defined for each commodity that
converts the price of the contract in effect at each point in time
to a value that accounts for contract rolls, i.e., the ``linked
price.'' Each time a contract is rolled, the ``linking'' factor is
adjusted by the ratio of the closing price of the current contract
to the closing price of the new contract.
\21\ According to the Registration Statements, roll yield is the
amount of return generated (either positive or negative) by rolling
a short-term contract into a longer-term contract and profiting or
losing money from the convergence toward a higher or lower spot
price. The linked price is determined on the basis of price changes
and roll yields. Rolling a futures contract means closing out a
position on near-dated (i.e., commodity futures contracts that are
nearing expiration) commodity futures contracts before they expire
and establishing an equivalent position in a longer-dated futures
contract (i.e., commodity futures contracts that have an expiration
date further in the future) on the same commodity. Futures contacts
can be in ``backwardation,'' which means that futures contracts with
longer-term expirations are priced lower than those with shorter-
term expirations, or can exhibit ``contango,'' which means that
futures contacts with longer-term expirations are priced higher than
those with shorter-term expirations. In backwardation, market roll
yields are positive. In contango, market roll yields are negative.
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To be considered for inclusion in the Long/Flat Index, a commodity
future must be listed on a U.S. futures exchange, be denominated in
U.S. dollars and rank in the top 95% by total U.S. dollar value of the
total open interest pool of all eligible commodities. The weight of
each Index Commodity Contract is the product of two factors: magnitude
and the direction of the momentum signal (i.e., 1 for long, 0 for flat,
or -1 for short). On the annual reconstitution date, the magnitude is
the open interest weight of the Index Commodity Contract, calculated on
the second Friday of December, using data through the last trading day
of November. Individual contract weights are capped at 10%. Between
reconstitution dates, the weights vary based on the performance of the
individual commodity positions. The Long/Flat Index is reconstituted
annually and directions (i.e., whether long or flat) of each Index
Commodity Contract are determined monthly on the second Friday of each
month, which is one week prior to the monthly repositioning. As of
February 28, 2013, the sector weightings of the Long/Flat Index were
Agriculture (29.44%), Energy (50.37%), Livestock (4.48%) and Metals
(15.71%).
The Long/Short Index
According to the Long/Short Registration Statement, the Long/Short
Index is a rules-based, fully collateralized commodity futures index
that employs a momentum rule to determine if exposure to a particular
Index Commodity Contract should be maintained with its prescribed
weighting (a ``long position'') or moved to a short weighting (a
``short position'').\22\ For each Index Commodity Contract represented
by the Long/Short Index, Morningstar calculates a ``linked price'' \23\
that incorporates both price changes and roll yield.\24\ Whether a
position will be long or short (or cash, i.e., flat in the case of
energy futures contracts, as described below) is determined, at the
time of a monthly repositioning, by comparing the linked price of each
Index Commodity Contract to its 12-month moving average. For example,
if, at a monthly repositioning, the linked price for an Index Commodity
Contract exceeds its 12-month moving average, the Long/Short Index
takes a long position in the subsequent month. Conversely, if the
linked price for an Index Commodity Contract is below its 12-month
moving average, the Long/Short Index takes a short position. An
exception is made for commodities in the energy sector. If the signal
for an Index Commodity Contract in the energy sector is short, the
weight of that Index Commodity Contract is moved to cash (i.e., flat).
According to the Long/Short Registration Statement, energy is unique in
that its price is extremely sensitive to geopolitical events and not
necessarily driven purely by demand-supply imbalances.
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\22\ A short position is a position that will increase in market
price if the price of the Index Commodity Contracts comprising the
Long/Short Index, in the aggregate, are falling during the period
when the position is open. The Long/Short Index includes short
positions in Index Commodity Contracts. The Long/Short ETF may also
obtain a short position relative to certain Index Commodity
Contracts by establishing a short position with a counterparty by
investing in Other Instruments. According to the Long/Short
Registration Statement, the Long/Short ETF will profit if the price
of a short position in an Index Commodity Contract or Other
Instrument that provides exposure to a short position in such Index
Commodity Contract falls while the position is open and the Long/
Short ETF will suffer loss if the price of a short position in an
Index Commodity Contract or Other Instrument that provides exposure
to a short position in such Index Commodity Contract rises while the
position is open. Because the value of the Index Commodity Contract
or Other Instrument could rise an unlimited amount, a short position
in an Index Commodity Contract or Other Instrument that provides
exposure to a short position in such Index Commodity Contract
theoretically will expose the Long/Short ETF to unlimited losses. In
circumstances where a market has reached its maximum price limits
imposed by the applicable exchange, the Long/Short ETF may be unable
to offset its short position until the next trading day, when prices
could expand again in rapid trading.
\23\ See note 20, supra.
\24\ See note 21, supra.
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To be considered for inclusion in the Long/Short Index, a commodity
future must be listed on a U.S. futures exchange, be denominated in
U.S. dollars and rank in the top 95% by total U.S. dollar value of the
total open interest pool of all eligible commodities.
[[Page 39814]]
The weight of each individual Index Commodity Contract is the product
of two factors: Magnitude and the direction of the momentum signal
(i.e., 1 for long, 0 for flat, or -1 for short). On the annual
reconstitution date, the magnitude is the open interest weight of the
Index Commodity Contract, calculated on the second Friday of December,
using data through the last trading day of November. Individual
contract weights are capped at 10%. Between reconstitution dates, the
weights vary based on the performance of the individual Index Commodity
Contract positions. The Long/Short Index is reconstituted annually and
directions (i.e., whether long, flat or short) of each Index Commodity
Contract are determined monthly on the second Friday of each month,
which is one week prior to the monthly repositioning. As of February
28, 2013, the sector weightings of the Long/Short Index were
Agriculture (29.40%), Energy (49.57%), Livestock (4.69%) and Metals
(16.34%). The inception date of the Index was December 21, 1979.
Composition of the Indexes
The following chart provides the composition of the Indexes as of
February 28, 2013:
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Long/flat index Long/short index
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Commodity Futures exchange Index Index
\25\ Signal weight Signal weight
(percent) (percent)
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Agricultural:
Coffee `C'/Colombian...... ICE-US........... Flat............. 1.71 Short........... 1.72
Corn/No. 2 Yellow......... CBOT............. Long............. 7.42 Long............ 7.30
Cotton/1-1/16''........... ICE-US........... Long............. 1.34 Long............ 1.21
Soybean Meal/48% Protein.. CBOT............. Long............. 1.79 Long............ 1.76
Soybean Oil/Crude......... CBOT............. Flat............. 1.93 Short........... 1.90
Soybeans/No. 2 Yellow..... CBOT............. Long............. 9.00 Long............ 8.87
Sugar 11/World ICE-US........... Flat............. 3.11 Short........... 3.21
Raw.
Wheat/No. 2 Soft Red...... CBOT............. Flat............. 3.137 Short........... 3.43
Total Long....... 19.55 Total Long...... 0
Total Short...... N/A Total Short..... 10.27
Total Flat....... 9.88 Total Flat...... 19.14
Total 29.44 Total 29.40
Agricultural. Agricultural.
Energy:
Crude Oil WTI/Global Spot. NYMEX............ Flat............. 9.88 Flat............ 9.72
Crude Oil Brent/Global ICE-UK........... Long............. 10.20 Long............ 10.03
Spot.
Gas-Oil-Petroleum......... ICE-UK........... Long............. 9.634 Long............ 9.48
Natural Gas Henry Hub..... NYMEX............ Flat............. 6.81 Flat............ 6.70
Heating Oil 2/ NYMEX............ Long............. 6.91 Long............ 6.79
Fuel Oil.
Gasoline Blendstock....... NYMEX............ Long............. 6.95 Long............ 6.84
Total Long....... 33.69 Total...........
Long............ 33.15
Total Flat....... 16.68 Total Flat...... 16.42
Total Energy..... 50.37 Total Energy.... 49.57
Livestock:
Cattle Live/Choice Average CME.............. Flat............. 2.98 Short........... 3.11
Hogs Lean/Average Iowa/S 1.50 1.58
Minn.
Total Long....... 0.00 Total Long...... 0
Total Short...... N/A Total Short..... 4.69
Total Flat....... 4.48 Total Flat...... 0
4.48............. Total Livestock.. 4.48 Total Livestock. 4.69
Metals:
Copper High Grade/Scrap NYMEX............ Long............. 2.40 Long............ 2.36
No. 2 Wire.
Gold...................... NYMEX............ Flat............. 9.82 Short........... 10.32
Silver.................... NYMEX............ Long............. 3.49 Long............ 3.66
Total Long....... 5.89 Total Long...... 6.02
Total Short...... N/A Total Short..... 10.32
Total Flat....... 9.82 Total Flat...... 0
Total Metals..... 15.71 Total Metals.... 16.34
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The following chart provides the Futures Exchanges, trading symbol
and trading hours (Eastern time (``E.T.'')) for the Index components:
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\25\ See note 13, supra.
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Exchange Symbol Trading hours E.T.
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Agricultural:
Coffee `C'/Colombian......... ICE-US............... KC................... 3:30 a.m.-2:00 p.m.
Corn/No. 2 Yellow............ CBOT................. C.................... 10:30 a.m.-3:00 p.m.
Cotton/1-1/16''.............. ICE-US............... CT................... 9:00 p.m.-2:30 p.m.
Soybean Meal/48 Protein...... CBOT................. SM................... 10:30 a.m.-3:00 p.m.
Soybean Oil/Crude............ CBOT................. BO................... 10:30 a.m.-3:00 p.m.
Soybeans/No. 2 Yellow........ CBOT................. S.................... 10:30 a.m.-3:00 p.m.
Sugar 11/World Raw.. ICE-US............... SB................... 2:30 a.m.-2:00 p.m.
[[Page 39815]]
Wheat/No. 2 Soft Red......... CBOT................. W.................... 10:30 a.m.-3:00 p.m.
Energy:
Crude Oil WTI/Global Spot.... NYMEX................ CL................... 9:00 a.m.-2:30 p.m.
Crude Oil Brent/Global Spot.. ICE-UK............... B.................... 8:00 p.m.-6:00 p.m.--next day.
Gas-Oil-Petroleum............ ICE-UK............... G.................... 8:00 p.m.-6:00 p.m.--next day.
Natural Gas Henry Hub........ NYMEX................ NG................... 9:00 a.m.-2:30 p.m.
Heating Oil 2/Fuel NYMEX................ HO................... 9:00 a.m.-2:30 p.m.
Oil.
Gasoline Blendstock.......... NYMEX................ RB................... 9:00 a.m.-2:30 p.m.
Livestock:
Cattle Live/Choice Average... CME.................. LC................... 10:05 a.m.-2:00 p.m.
Hogs Lean/Average Iowa/S Minn CME.................. LH................... 10:05 a.m.-2:00 p.m.
Metals:
Copper High Grade/Scrap No. 2 NYMEX................ HG................... 8:10 a.m.-1:00 p.m.
Wire.
Gold......................... NYMEX................ GC................... 8:20 a.m.-1:30 p.m.
Silver....................... NYMEX................ SI................... 8:25 a.m.-1:25 p.m.
----------------------------------------------------------------------------------------------------------------
With respect to each of the Indexes, the following are excluded:
(1) Financial futures contracts (e.g., securities, currencies,
interest rates, etc.).
(2) Commodity futures contracts not denominated in U.S. dollars.
(3) Commodity futures contracts with less than twelve months of
pricing.
Morningstar sorts all commodity futures contracts that meet the
above eligibility requirements in descending order by the total U.S.
dollar value of open interest. All commodity futures contracts that
make up the top 95% of the total open interest pool of all eligible
commodity futures contracts, starting with the one with the largest
open interest value, will be included in each of the Indexes.
The weight of each Index Commodity Contract in the Indexes is the
product of two factors: magnitude and the direction of the momentum
signal. Morningstar initially sets the magnitude based on the 12-month
average of the dollar value of open interest of each Index Commodity
Contract. Morningstar then caps the top magnitude at 10%,
redistributing any overage to the magnitudes of the remaining Index
Commodity Contracts. Morningstar chooses this capped open-interest
weighting system in order to reflect the importance of each Index
Commodity Contract in a global economy and to keep the Indexes
diversified across commodities.
Each of the Indexes is reconstituted and rebalanced--i.e., the
Indexes' membership and constituent weights are reset--annually, on the
third Friday of December after the day's closing values of the Indexes
have been determined. The reconstitution is effective at the open of
trading on first trading day after the third Friday of December.
Morningstar implements all futures contract rolls on the third
Friday of each month to coincide with portfolio repositioning and the
rolling of the U.S. Treasury bills used for collateral. If the third
Friday of the month is a trading holiday, Morningstar rolls and
rebalances or reconstitutes on the trading day prior to the third
Friday. To ensure that contracts are rolled before becoming committed
to receive physical delivery, contracts are selected so that the
delivery month is at least two months away from the upcoming month. On
each potential roll date, the delivery month of the current contract is
compared to the delivery month of the nearest contract whose delivery
month is at least two months away from the upcoming month. If the
latter is further into the future than the former, the contract is
rolled.
Net Asset Value
According to the Registration Statements, NAV means the total
assets of each Fund including, but not limited to, all cash and cash
equivalents or other debt securities less total liabilities of a Fund,
each determined on the basis of generally accepted accounting
principles. In particular, NAV includes any unrealized profit or loss
on open Index Commodity Contracts, Other Instruments and any Cash
Instruments or other credit or debit accruing to a Fund but unpaid or
not received by a Fund. The amount of any distribution will be a
liability of a Fund from the day when the distribution is declared
until it is paid. All open commodity futures contracts traded on a U.S.
or non-U.S. exchange will be calculated at their then current market
value, which will be based upon the settlement price for that
particular commodity futures contract traded on the applicable U.S. or
non-U.S. exchange on the date with respect to which NAV is being
determined; provided, that if a commodity futures contract traded on a
U.S. or on a non-U.S. exchange could not be liquidated on such day, due
to the operation of daily limits (if applicable) or other rules of the
exchange upon which that position is traded or otherwise, the
settlement price on the most recent day on which the position could
have been liquidated will be the basis for determining the market value
of such position for such day. The Managing Owner may in its discretion
(and under extraordinary circumstances, including, but not limited to,
periods during which a settlement price of a futures contract is not
available due to exchange limit orders 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) value any asset of a Fund pursuant to
such other principles as the Managing Owner deems fair and equitable so
long as such principles are consistent with normal industry standards.
The value of Cleared Swaps will be determined based on the value of
the Index Commodity Contract in connection with each specific Cleared
Swap. In calculating the NAV of a Fund, the settlement value of a
Cleared Swap (if any) and an OTC Other Commodity Instrument (if any)
will be determined by either applying the then-current disseminated
value for the related Index Commodity Contracts or the terms as
provided under the applicable Cleared Swap or OTC Other Commodity
Instrument, as applicable. However, in the event that one or more of
the related Index Commodity Contracts are not trading due to the
operation of daily limits or otherwise, the Managing Owner may in its
sole discretion choose to value the applicable Fund's Cleared Swaps or
OTC Other Commodity Instruments (if any) on a fair value basis in order
to calculate such Fund's NAV. These fair value prices would be
generally determined based on available
[[Page 39816]]
inputs about the current value of the Index Commodity Contract to which
the Cleared Swap or OTC Other Commodity Instrument relates and would be
based on principles that the Managing Owner deems fair and equitable so
long as such principles are consistent with normal industry standards.
Exchange-traded Other Commodity Instruments will be valued at their
market prices on the exchanges on which such instruments trade.
NAV per Share will be the NAV of each Fund divided by the number of
its outstanding Shares.
Creation and Redemption Procedures
With respect to each of the Funds, on any business day, an
authorized participant may place an order with the Managing Owner to
create one or more blocks of 50,000 Shares (``Baskets''). Purchase
orders must be placed by 1:00 p.m., E.T. The day on which the Managing
Owner receives a valid purchase order is the purchase order date.
Purchase orders are irrevocable.
The total cash payment required to create each Basket is the NAV of
50,000 Shares of a Fund as of the closing time of NYSE Arca or the last
to close of the Futures Exchanges on which Index Commodity Contracts
are traded, whichever is latest, on the purchase order date. Baskets
are issued on the business day immediately following the purchase order
date at the applicable NAV as of the closing time of NYSE Arca or the
last to close of the Futures Exchanges on which the corresponding Index
Commodity Contracts are traded, whichever is latest, on the purchase
order date, but only if the required payment has been timely received.
The procedures by which an authorized participant can redeem one or
more Baskets mirror the procedures for the creation of Baskets. On any
business day, an authorized participant may place an order with the
Managing Owner to redeem one or more Baskets. Redemption orders must be
placed by 1:00 p.m., E.T. The day on which the Managing Owner receives
a valid redemption order is the redemption order date. Redemption
orders are irrevocable.
The redemption proceeds from a Fund will consist of the cash
redemption amount. The cash redemption amount is equal to the NAV of
the number of Baskets of the Fund requested in the authorized
participant's redemption order as of the closing time of NYSE Arca or
the last to close of the Futures Exchanges on which the Index Commodity
Contracts are traded, whichever is latest, on the redemption order
date. The Managing Owner will distribute the cash redemption amount on
the business day immediately following the redemption order date
through Depository Trust Company (``DTC'') to the account of the
authorized participant as recorded on DTC's book-entry system.
Because the Funds are subject to speculative position limits,
accountability levels and other position limitations, as applicable,
the Funds' ability to issue new Baskets or to reinvest income in
additional Index Commodity Contracts may be limited to the extent these
activities would cause a Fund to exceed its applicable limits unless a
Fund trades Other Instruments (if any) in addition to and as a proxy
for Index Commodity Contracts.
The Exchange will obtain a representation (prior to listing of each
Fund) from the Trust that the NAV per Share will be calculated daily
and made available to all market participants at the same time.
Each Fund will meet the initial and continued listing requirements
applicable to TIRs in NYSE Arca Equities Rule 8.200 and Commentary .02
thereto. With respect to application of Rule 10A-3 \26\ under the Act,
the Funds rely on the exception contained in Rule 10A-3(c)(7).\27\ A
minimum of 100,000 Shares of each Fund will be outstanding as of the
start of trading on the Exchange.
---------------------------------------------------------------------------
\26\ 17 CFR 240.10A-3.
\27\ 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------
Each Fund's investments will be consistent with such Fund's
investment objective and will not be used to enhance leverage. That is,
a Fund's investments will not be used to seek performance that is a
multiple (e.g., 2X or 3X) or inverse multiple of the Fund's respective
Index.
A more detailed description of the Shares, the Funds, the Indexes
and the Index Commodity Contracts, as well as investment risks,
creation and redemption procedures and fees is set forth in the
Registration Statements.
Availability of Information Regarding the Shares
The Web site for the Funds and/or the Exchange's Web site, which
will be publicly accessible at no charge, will contain the following
information: (a) The prior business day's NAV per Share and the
reported closing price; (b) the prospectus; and (c) other applicable
quantitative information. Each Fund will also disseminate its
respective holdings on a daily basis on the Funds' Web site, which will
include, as applicable, the names, quantity, price and market value of
Index Commodity Contracts, Other Instruments (including forward
contracts, OTC swaps and other OTC transactions) and Cash Instruments.
This Web site disclosure of the portfolio composition of the Funds
will occur at the same time as the disclosure by the Managing Owner of
the portfolio composition to authorized participants so that all market
participants are provided portfolio composition information at the same
time. Therefore, the same portfolio information will be provided on the
public Web site as well as in electronic files provided to authorized
participants. Accordingly, each investor will have access to the
current portfolio composition of the Funds through the Funds' Web site.
The prices of the Index Commodity Contracts, Other Instruments (except
as described below) and Cash Instruments will be available from the
applicable exchanges and market data vendors. The Managing Owner will
publish the NAV of each Fund and the NAV per Share daily. Disclosure
regarding the components of each Index, the percentage weightings of
the components of each Index, and the long, short or flat positions
therein is available at https://corporate.morningstar.com/US/asp/subject.aspx?page=2649&filter=Commodity&xmlfile=2738.xml.
The intra-day level and the most recent end-of-day closing level of
each Index will be published by NYSE Arca once every 15 seconds
throughout the Exchange's Core Trading Session and as of the close of
business for NYSE Arca, respectively.
Any adjustments made to an Index will be published on Morningstar's
(which serves as the Index Provider) Web site noted above.
The intra-day indicative value (``IIV'') per Share of each Fund
will be based on the prior day's final NAV per Share, adjusted every 15
seconds during the Core Trading Session to reflect the continuous price
changes of a Fund's Index Commodity Contracts and other holdings. The
IIV per Share will be widely disseminated by one or more major market
data vendors at least every 15 seconds during the Core Trading
Session.\28\
---------------------------------------------------------------------------
\28\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IIVs
taken from Consolidated Tape Association (``CTA'') or other data
feeds.
---------------------------------------------------------------------------
The normal trading hours for Index Commodity Contracts may begin
after 9:30 a.m. and end before 4:00 p.m. E.T., and there will be a gap
in time at the beginning and the end of each day during which the
Funds' Shares will be
[[Page 39817]]
traded on the NYSE Arca, but real-time trading prices for at least some
of the Index Commodity Contracts held by the Funds are not available.
As a result, during those gaps the IIVs will be updated but will
reflect the closing prices for such Index Commodity Contracts that have
stopped trading before the NAV is calculated.
The final NAV of each Fund and the final NAV per Share will be
calculated as of the closing time of NYSE Arca Core Trading Session or
the last to close of the Futures Exchanges on which the Index Commodity
Contracts or Other Commodity Contracts (which are listed on futures
exchanges other than Futures Exchanges) are traded, whichever is later,
and posted in the same manner. Although a time gap may exist between
the close of the NYSE Arca Core Trading Session and the close of the
Futures Exchanges on which the Index Commodity Contracts or Other
Commodity Contracts are traded, there will be no effect on the NAV
calculations as a result.
The value of the Shares may be influenced by non-concurrent trading
hours between NYSE Arca and the various Futures Exchanges on which the
Index Commodity Contracts are traded. The trading hours for the Futures
Exchanges may not necessarily coincide during the times that the Shares
trade on NYSE Arca.\29\
---------------------------------------------------------------------------
\29\ For example, while the Shares generally will trade on NYSE
Arca until 8:00 p.m. E.T., NYMEX closes at 1:30 p.m. E.T. As a
result, during periods when NYSE Arca is open and the futures
exchanges on which the gold Index Commodity Contracts or Other
Commodity Contracts are traded (such as NYMEX) are closed, liquidity
in the applicable Index Commodity Contracts or Other Commodity
Contracts will be reduced or extremely limited. As a result, trading
spreads and the resulting premium or discount on the Shares may
widen, increasing the difference between the price of the Shares and
the NAV of such Shares.
---------------------------------------------------------------------------
The NAV for each Fund will be disseminated to all market
participants at the same time. The Exchange will also make available on
its Web site daily trading volume of the Shares, closing prices of such
Shares, and the corresponding NAV. The closing prices and settlement
prices of Index Commodity Contracts or Other Commodity Contracts are
also readily available from the Web sites of the applicable Futures
Exchanges, other futures exchanges, automated quotation systems,
published or other public sources, or on-line information services such
as Bloomberg or Reuters. The relevant futures exchanges on which the
Index Commodity Contracts or Other Commodity Contracts are listed 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 Index Commodity Contracts
or Other Commodity Contracts are also available on such Web sites, as
well as other financial informational sources. The prices of forward
agreements, swaps and other OTC transactions are not available from the
exchanges, but will be available from major market data vendors and
financial information service providers such as Reuters and Bloomberg
and will be included in: (i) The calculation of the NAV for the Shares,
which is disseminated daily; and (ii) the IIV for the Shares, which is
widely disseminated at least every 15 seconds during the Core Trading
Session by one or more market data vendors. Quotation and last-sale
information regarding the Shares will be disseminated through the
facilities of the CTA.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. The Exchange
has appropriate rules to facilitate transactions in the Shares during
all trading sessions.
The trading of the Shares 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 TIRs to facilitate surveillance. See ``Surveillance'' below
for more information.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. These may include: (1) The extent to
which trading is not occurring in the Index Commodity Contracts or
Other Instruments, or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. In addition, trading in Shares will be subject to
trading halts caused by extraordinary market volatility pursuant to the
Exchange's ``circuit breaker'' rule \30\ or by the halt or suspension
of trading of the underlying futures contracts.
---------------------------------------------------------------------------
\30\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------
The Exchange represents that the Exchange may halt trading during
the day in which an interruption to the dissemination of the IIV, an
Index value or the value of the Index Commodity Contracts or Other
Instruments occurs. If the interruption to the dissemination of the
IIV, an Index value or the value of the Index Commodity Contracts or
Other Instruments persists past the trading day in which it occurred,
the Exchange will halt trading no later than the beginning of the
trading day following the interruption. In addition, if the Exchange
becomes aware that the NAV with respect to the Shares is not
disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\31\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and applicable federal securities laws.
---------------------------------------------------------------------------
\31\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------
The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. 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.
FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, futures contracts and exchange-traded
options with other markets and other entities that are members of the
Intermarket Surveillance Group (``ISG'') and FINRA may obtain trading
information regarding trading in the Shares, futures contracts and
exchange-traded options from such markets and other entities. In
addition, the Exchange may obtain information regarding trading in the
Shares, futures contracts and exchange-
[[Page 39818]]
traded options from markets and other entities that are members of ISG
or with which the Exchange has in place a comprehensive surveillance
sharing agreement.\32\ CME Group, Inc., (which includes CME, CBOT, and
NYMEX), and ICE-US are members of ISG. In addition, the Exchange has
entered into a comprehensive surveillance sharing agreement with ICE-UK
that applies with respect to trading in Index Commodity Contracts. A
list of ISG members is available at www.isgportal.org.
---------------------------------------------------------------------------
\32\ The Exchange notes that not all instruments held by the
Funds 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 assets of the Funds traded on
exchanges, not more than 10% of the weight of such assets in the
aggregate shall consist of components whose principal trading market is
not a member of ISG or is a market with which the Exchange does not
have a comprehensive surveillance sharing agreement.
The Exchange also has a general policy prohibiting the distribution
of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Bulletin will discuss the following: (1) The risks involved
in trading the Shares during the Opening and Late Trading Sessions when
an updated IIV will not be calculated or publicly disseminated, as well
as during the Core Trading Session where the IIV may be based in part
on static underlying values; (2) the procedures for purchases and
redemptions of Shares in Baskets (and that Shares are not individually
redeemable); (3) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (4) how
information regarding the IIV is disseminated; (5) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
In addition, the Information Bulletin will advise ETP Holders,
prior to the commencement of trading, of the prospectus delivery
requirements applicable to the Funds. The Exchange notes that investors
purchasing Shares directly from the Funds will receive a prospectus.
ETP Holders purchasing Shares from the Funds for resale to investors
will deliver a prospectus to such investors. The Information Bulletin
will also discuss any exemptive, no-action and interpretive relief
granted by the Commission from any rules under the Act.
In addition, the Information Bulletin will reference that the Funds
are subject to various fees and expenses described in the Registration
Statements. The Information Bulletin will also reference that the CFTC
has regulatory jurisdiction over the futures contracts traded on U.S.
markets.
The Information Bulletin will also disclose the trading hours of
the Shares of the Funds and that the NAV for the Shares will be
calculated as of 4:00 p.m. E.T. each trading day. The Bulletin will
disclose that information about the Shares of the Funds is publicly
available on the Funds' Web site.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \33\ 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.
---------------------------------------------------------------------------
\33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule 8.200
and Commentary .02 thereto. The Managing Owner is affiliated with a
broker-dealer and has implemented a ``fire wall'' with respect to such
broker-dealer and has policies and procedures in place regarding access
to information concerning the composition and/or changes to the Funds'
portfolio composition. The Index Provider is not registered as a
broker-dealer and has implemented procedures designed to prevent the
illicit use and dissemination of material, non-public information
regarding the Indexes and has implemented a ``fire wall'' with respect
to its affiliated broker-dealer regarding the Indexes. The Exchange has
in place surveillance procedures that are adequate to properly monitor
trading in the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
FINRA, on behalf of the Exchange, will communicate as needed regarding
trading in the Shares, futures contracts and exchange-traded options
with other markets and other entities that are members of the ISG and
FINRA may obtain trading information regarding trading in the Shares,
futures contracts and exchange-traded options from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in the Shares, futures contracts and exchange-traded
options from markets and other entities that are members of ISG or with
which the Exchange has in place a comprehensive surveillance sharing
agreement. With respect to assets of the Funds traded on exchanges, not
more than 10% of the weight of such assets 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. Each Fund will also
disseminate each Fund's holdings on a daily basis on the Funds' Web
site, which will include, as applicable, the names, quantity, price and
market value of Index Commodity Contracts, Other Instruments and Cash
Instruments. This Web site disclosure of the portfolio composition of
the Funds will occur at the same time as the disclosure by the Managing
Owner of the portfolio composition to authorized participants so that
all market participants are provided portfolio composition information
at the same time. The prices of the Index Commodity Contracts, Other
Instruments and Cash Instruments will be available from the applicable
exchanges and market data vendors. The Managing Owner will publish the
NAV of each Fund and the NAV per Share daily. There will be publicly
available Web site disclosure regarding the components of each Index
and the long, short or flat positions therein. Trading may be halted
because of market conditions or for reasons that, in the view of the
Exchange, make trading in the Shares inadvisable. These may include:
(1) the extent to which trading is not occurring in the underlying
futures contracts, or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present. Trading in Shares will be subject to trading halts
caused by extraordinary market volatility pursuant to the Exchange's
``circuit breaker'' rule or by the halt or suspension of trading of the
Index Commodity Contracts. The Exchange may halt trading during the day
in which an interruption to the
[[Page 39819]]
dissemination of the IIV, an Index value or the value of the Index
Commodity Contracts or Other Instruments occurs. If the interruption to
the dissemination of the IIV, an Index value or the value of the Index
Commodity Contracts or Other Instruments persists past the trading day
in which it occurred, the Exchange will halt trading no later than the
beginning of the trading day following the interruption. In addition,
if the Exchange becomes aware that the NAV with respect to the Shares
is not disseminated to all market participants at the same time, it
will halt trading in the Shares until such time as the NAV is available
to all market participants. Disclosure regarding the components of each
Index, the percentage weightings of the components of each Index, and
the long, short or flat positions therein is publicly available [sic].
The NAV for each Fund will be disseminated to all market participants
at the same time. If the Exchange becomes aware that the NAV with
respect to the Shares is not disseminated to all market participants at
the same time, it will halt trading in the Shares until such time as
the NAV is available to all market participants. Each Fund intends to
invest first in Index Commodity Contracts. Thereafter, if a Fund
reaches the position limits applicable to one or more Index Commodity
Contracts or a Futures Exchange imposes limitations on the Fund's
ability to maintain or increase its positions in an Index Commodity
Contract after reaching accountability levels or a price limit is in
effect on an Index Commodity Contract during the last 30 minutes of its
regular trading session, each Fund's intention is to invest first in
Cleared Swaps to the extent permitted under the position limits
applicable to Cleared Swaps and appropriate in light of the liquidity
in the Cleared Swaps market, and then, using its commercially
reasonable judgment, in Other Commodity Contracts or in Other Commodity
Instruments.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that a large amount of information is publicly available regarding the
Funds and the Shares, thereby promoting market transparency. The NAV
for each Fund will be disseminated to all market participants at the
same time. The IIV per Share will be widely disseminated by one or more
major market data vendors at least every 15 seconds during the Core
Trading Session and on the Managing Owner's Web site. Trading in Shares
of the Funds will be halted if the circuit breaker parameters in NYSE
Arca Equities Rule 7.12 have been reached or because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. Moreover, prior to the commencement
of trading, the Exchange will inform its ETP Holders in an Information
Bulletin of the special characteristics and risks associated with
trading the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
additional types of exchange-traded products that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, the Exchange has in place surveillance
procedures relating to trading in the Shares and may obtain information
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, as noted above, investors will have ready
access to information regarding the Funds' holdings, IIV, and quotation
and last sale information for the Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of
additional types of exchange-traded products that will enhance
competition among market participants, to the benefit of investors and
the marketplace.
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-2013-60 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2013-60. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml
). Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing will also be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File No. SR-NYSEArca-2013-60 and should be
submitted on or before July 23, 2013.
[[Page 39820]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
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\34\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-15779 Filed 7-1-13; 8:45 am]
BILLING CODE 8011-01-P
