Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List and Trade Shares of the Greenhaven Coal Fund Under NYSE Arca Equities Rule 8.200, Commentary .02, 57640-57648 [2014-22786]
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Federal Register / Vol. 79, No. 186 / Thursday, September 25, 2014 / Notices
risk across ISE and ISE Gemini. The
Exchange also provides that the
proposal will protect market makers
from inadvertent exposure to excessive
risk and thereby allow them to quote
aggressively and provide more liquidity
with greater size to both markets. The
Exchange further represents that its
proposal will operate consistently with
the firm quote obligations of a brokerdealer pursuant to Rule 602 of
Regulation NMS and that the
functionality is not mandatory.
III. Summary of Comment Letters
As noted above, the Commission
received five comment letters in
response to the Order Instituting
Proceedings.10 All of the commenters
support the proposal. Three of the five
commenters are registered options
market makers on ISE,11 while the other
two are registered options market
makers on both ISE and ISE Gemini.12
The commenters note that, while the
current risk protections on the Exchange
help manage risk, systems and other
issues that trigger such risk parameters
are normally not confined to a member
firm’s activity on a single exchange.13
Accordingly, the commenters believe
that the Exchange’s proposal to
aggregate curtailment events across both
ISE and ISE Gemini would allow market
makers to more effectively manage
risk.14 The commenters state that the
proposed rule change would allow
market makers to continue to actively
provide liquidity, while facilitating
effective management of the risks
associated with quoting a large number
of option series across multiple
exchanges.15 Further, the commenters
believe that allowing market makers to
better manage their risk would benefit
the broader market, as it would reduce
disruptive trading events.16
Two commenters who are registered
market makers on ISE but not on ISE
Gemini also believe that the proposal is
not unfairly discriminatory in violation
of Section 6(b)(5) of the Act.17 These
two commenters note that the proposal
is optional to market makers and is not
unfairly discriminatory to firms who
simply have no need for the proposal’s
additional protections by virtue of only
trading on either ISE or ISE Gemini.18
IV. Discussion and Commission
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of the
Act and the rules and regulations
thereunder applicable to a national
securities exchange.19 Specifically, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act,20 which requires,
among other things, that the rules of a
national securities exchange be
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 a national market
system and, not be designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Commission believes that the
proposal could assist ISE market makers
manage and reduce inadvertent
exposure to excessive risk across both
ISE and ISE Gemini. The Commission
notes that the proposed functionality is
not mandatory and must operate
consistent with the firm quote
obligations of Rule 602 of Regulation
NMS. The Commission also notes that
all five commenters expressed support
for the proposal.
For the foregoing reasons, the
Commission believes that the proposed
rule change is consistent with the Act.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act 21 that the
proposed rule change (SR–ISE–2014–09)
be, and it hereby is, approved.
11 See
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10 See
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–22784 Filed 9–24–14; 8:45 am]
supra note 7.
Akuna Letter; Hardcastle Letter; and Group
One Letter, supra note 7.
12 See Optiver Letter and IMC Letter, supra note
7.
13 See Akuna Letter; Group One Letter, Hardcastle
Letter; IMC Letter; and Optiver Letter, supra note
7.
14 See, e.g., Akuna Letter at 2; Hardcastle Letter
at 2; and Optiver Letter, supra note 7.
15 See Optiver Letter and IMC Letter, supra note
7.
16 See Akuna Letter at 2; Hardcastle Letter at 2;
and Optiver Letter, supra note 7.
17 See Akuna Letter at 2 and Hardcastle Letter at
2, supra note 7.
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BILLING CODE 8011–01–P
18 Id. One commenter also states that it does not
believe the proposal places any undue burden on
competition between options exchanges. See Group
One Letter at 2, supra note 7.
19 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
20 15 U.S.C. 78f(b)(5).
21 15 U.S.C. 78s(b)(2).
22 17 CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73149; File No. SR–
NYSEArca–2014–102]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change, as Modified by
Amendment No. 1 Thereto, To List and
Trade Shares of the Greenhaven Coal
Fund Under NYSE Arca Equities Rule
8.200, Commentary .02
September 19, 2014.
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
September 5, 2014, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. On September 18, 2014,
the Exchange filed Amendment No. 1,
which replaced and superseded the
proposal in its entirety. The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as modified by Amendment No.
1, from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares of the Greenhaven Coal
Fund under NYSE Arca Equities Rule
8.200, Commentary .02. The text of the
proposed rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Federal Register / Vol. 79, No. 186 / Thursday, September 25, 2014 / Notices
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
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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.4 The Exchange proposes to
list and trade shares (‘‘Shares’’) of the
Greenhaven Coal Fund (the ‘‘Fund’’),
pursuant to NYSE Arca Equities Rule
8.200, Commentary .02.5
The Exchange notes that the
Commission has previously approved
the listing and trading of other issues of
TIRs on the American Stock Exchange
LLC,6 and listing on NYSE Arca.7
Among these are the Teucrium Corn
Fund, Teucrium Wheat Fund, Teucrium
Soybean Fund and Teucrium Sugar
Fund, each a series of the Teucrium
Commodity Trust.8 In addition, the
Commission has approved other
exchange traded fund-like products
linked to the performance of underlying
commodities.9
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 This Amendment No. 1 to SR–NYSEArca–2014–
102 replaces SR–NYSEArca–2014–102 as originally
filed and supersedes such filing in its entirety.
6 See, e.g., Securities Exchange Act Release No.
58161 (July 15, 2008), 73 FR 42380 (July 21, 2008)
(SR–Amex–2008–39).
7 See, e.g., Securities Exchange Act Release No.
58457 (September 3, 2008), 73 FR 52711 (September
10, 2008) (SR–NYSEArca–2008–91).
8 See Securities Exchange Act Release Nos. 62213
(June 3, 2010), 75 FR 32828 (June 9, 2010) (SR–
NYSEArca–2010–22) (order approving listing on the
Exchange of Teucrium Corn Fund); 65344
(September 15, 2011), 76 FR 58549 (September 21,
2011) (SR–NYSEArca–2011–48) (order approving
listing on the Exchange of the Teucrium Wheat
Fund, Teucrium Soybean Fund, and Teucrium
Sugar Fund).
9 See, e.g., Securities Exchange Act Release Nos.
57456 (March 7, 2008), 73 FR 13599 (March 13,
2008) (SR–NYSEArca–2007–91) (order granting
accelerated approval for listing and trading on
NYSE Arca of the iShares GS Commodity Trusts);
58983 (November 20, 2008), 73 FR 73368
(December 2, 2008) (SR–NYSEArca–2008–126)
(order approving listing and trading on NYSE Arca
of GreenHaven Continuous Commodity Index
Fund); 59781 (April 17, 2009), 74 FR 18771 (April
24, 2009) (SR–NYSEArca–2009–28) (order granting
accelerated approval for NYSE Arca listing and
trading of the ETFS Silver Trust); 59895 (May 8,
2009), 74 FR 22993 (May 15, 2009)(SR–NYSEArca–
2009–40) (order granting accelerated approval for
NYSE Arca listing and trading of the ETFS Gold
Trust); 61219 (December 22, 2009), 74 FR 68886
(December 29, 2009) (SR–NYSEArca–2009–95)
(order approving listing and trading on NYSE Arca
of the ETFS Platinum Trust).
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17:25 Sep 24, 2014
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The Fund is a commodity pool that is
organized as a Delaware statutory
trust.10 The Fund’s trustee is Christiana
Trust, a division of Wilmington Savings
Fund Society, FSB (the ‘‘Trustee’’), and
the Fund’s sponsor is GreenHaven Coal
Services, LLC (the ‘‘Sponsor’’). Under
the Fund’s trust agreement, the Trustee
has delegated to the Sponsor the
exclusive power and authority to
manage the business and affairs of the
Fund. The Sponsor is registered with
the Commodity Futures Trading
Commission (the ‘‘CFTC’’) as a
commodity pool operator, and approved
as a member of the National Futures
Association. The Sponsor is a whollyowned subsidiary of GreenHaven
Group, LLC and affiliated with
GreenHaven Commodity Services, LLC,
a commodities trading firm. ALPS
Distributors, Inc. will be the Fund’s
marketing agent and distributor
(‘‘Marketing Agent’’). Bank of New York
Mellon will be the Fund’s administrator
and transfer agent (‘‘Administrator’’).
The business of the Fund will be
limited to (i) creating and redeeming
Baskets (as defined below) of Shares on
a continuous basis, and (ii) investing
proceeds in a portfolio of coal futures
and U.S. Treasuries (as further
described below).
Investment Objective
According to the Registration
Statement and as further described
below, the Fund will seek to provide
investors with exposure to the daily
change in the price of coal futures,
before expenses and liabilities of the
Fund. The Fund intends to achieve this
objective by investing substantially all
of its assets in a three month strip 11 of
the nearest calendar quarter of
Rotterdam coal futures contracts (‘‘Coal
Futures’’) traded via the CME Group,
Inc. (‘‘CME’’) (i) Globex (‘‘CME Globex’’)
and (ii) CME ClearPort clearing services
(‘‘CME ClearPort’’) trading platforms
(collectively, the ‘‘CME Facilities’’)
depending on liquidity and otherwise at
the Sponsor’s discretion. The Fund will
invest in Coal Futures on a non10 On September 5, 2014, the Fund filed with the
Commission a pre-effective amendment to its
registration statement on Form S–1 under the
Securities Act of 1933 (15 U.S.C. 77a) relating to the
Fund. (File No. 333–182301) (the ‘‘Registration
Statement’’). The description of the Fund and the
Shares herein is based, in part, on the Registration
Statement.
11 With respect to reference to a ‘‘three month
strip’’, ‘strip’ is a term used in futures markets to
describe a series of delivery months for an
individual futures contract. A calendar strip would
be a three month strip of one of the four calendar
quarters. For example, a three month calendar strip
for the third quarter 2014 would include July 2014,
August 2014, and September 2014 coal futures
contracts.
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57641
discretionary basis (i.e., without regard
to whether the value of the Fund is
rising or falling over any particular
period). The Fund may also realize
interest income from its holdings in
three month U.S. Treasuries.
According to the Registration
Statement, it is not the intent of the
Fund to be operated in a fashion such
that its net asset value (‘‘NAV’’) will
equal, in dollar terms, the coal spot
price, any spot price coal indexes, or
any particular coal futures contract. It is
also not the intent of the Fund to be
operated in a fashion such that its NAV
will reflect the percentage change of the
price of any particular coal futures
contract as measured over a period
greater than one day.
Investments in Coal Futures
Subject to margin and certain other
requirements and conditions described
below and in the Registration Statement,
the Fund, under normal market
conditions,12 will use available offering
proceeds to purchase Coal Futures that
are traded on CME Facilities, including
smaller sized ‘‘mini’’ contracts (if they
are available) to the greatest extent
possible, without being leveraged or
exceeding relevant position limits. The
Fund will place purchase or sale orders
for Coal Futures with a ‘‘Commodity
Broker’’ 13 and may use an ‘‘Execution
Broker’’ 14 to execute trades on CME
ClearPort. If the CME does not accept
the transaction for any reason, the
transaction will be considered null and
void and of no legal effect. As a result,
all of the Fund’s positions in Coal
Futures will be cleared by CME clearing
member firms, thereby minimizing
counterparty risk.
The Fund intends to hold the three
month strip of the nearest calendar
quarter of Coal Futures contracts traded
12 The term ‘‘under normal market conditions’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the coal futures
markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
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.
13 The Commodity Broker will execute and clear
trades via CME Facilities, whereby it becomes a
cleared futures transaction with the CME as the
counterparty.
14 The Execution Broker will execute trades of
block traded coal futures traded on CME ClearPort,
and the Commodity Broker will clear such trades.
A block trade is executed by an Execution Broker
who facilitates two parties reaching an agreement
on a price to buy and sell futures contracts. Once
the price is agreed upon the Execution Broker then
submits the block trade information to the CME via
the CME ClearPort order entry systems whereby it
becomes a cleared futures transaction with the CME
as the counterparty for the parties entering said
trade.
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on the CME Facilities. The four calendar
quarters are January, February, and
March (‘‘Q1’’); April, May, and June
(‘‘Q2’’); July, August, and September
(‘‘Q3’’); and October, November, and
December (‘‘Q4’’). The Fund intends to
invest an equal tonnage (equal number
of futures contracts) in each of the three
months comprising the nearby calendar
quarter.
Four times a year, the Fund will
attempt to roll its positions in the
nearby calendar quarter to the next
calendar quarter over 5 business days on
a pro-rata basis. The first roll day is the
second Monday of the month prior to
the nearby calendar quarter. For
example, if the Fund was currently
holding the Q1 calendar quarter it
would roll over a 5 business day period
starting on the second Monday in
December. Each day during the roll
period, the Fund would decrease the
percentage of its portfolio that is in Q1
by 20% and increase its percentage in
Q2 by 20%.
The Sponsor estimates that (i)
approximately 10% of the Fund’s NAV
will be held as margin deposits in
segregated accounts with the
Commodity Broker, in accordance with
applicable CFTC rules, and (ii)
approximately 90% of the Fund’s NAV
will be held to pay current obligations
and as reserves in the form of U.S.
Treasuries, cash and/or cash equivalents
in segregated accounts with the
Commodity Broker. The Fund will be
credited with all interest earned on its
deposits. All interest income earned on
these investments will be retained for
the Fund’s benefit.
The Sponsor does not anticipate that
the Fund’s Coal Futures positions will
be held until expiration, and does not
expect the Fund to take or make
delivery of any physical commodities.
Instead, the Sponsor expects to sell near
to expiry Coal Futures and reinvest the
proceeds in new Coal Futures to achieve
the Fund’s investment objective.
Positions may also be closed out to meet
orders for the redemption of Baskets (as
defined below), in which case the
proceeds from closing the positions will
not be reinvested.
Margin; Composition of Portfolio
According to the Registration
Statement, when the Fund purchases
Coal Futures, the Fund will be required
to deposit a portion of the value of the
contract or other interest as security to
ensure payment for the underlying
obligation. This deposit is known as
initial margin. Transactions traded
through CME ClearPort have the same
collateral requirements as CME Globex
futures transactions.
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17:25 Sep 24, 2014
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For example, the purchase of a
notional $10 million of Coal Futures
would require the Fund to make an
initial margin deposit representing only
a fraction of the notional amount. The
Fund would deposit the required initial
margin with a Commodity Broker in the
form of a mix of cash and U.S.
Treasuries. Fund assets in an amount
equal to the difference between the
initial margin and the notional value of
the Coal Futures will be held in U.S.
Treasuries, cash and/or cash equivalents
in a segregated account with a
Commodity Broker and used to meet
future margin payments, if any.
The Sponsor has the sole authority to
determine the percentage of assets that
will be held as margin or collateral and
held in U.S. Treasuries, cash and/or
cash equivalents to pay current
obligations and as reserves.
The assets deposited by the Fund
with a Commodity Broker as margin
must be segregated pursuant to the
regulations of the CFTC. Such
segregated funds may be invested only
in instruments approved by the CFTC,
which include (i) U.S. government
securities, (ii) municipal securities, (iii)
U.S. agency obligations, (iv) certificates
of deposit, (v) commercial paper
guaranteed by the U.S. government, (vi)
corporate notes or bonds guaranteed by
the U.S. government, and (vii) interests
in money market mutual funds;
however, the Sponsor anticipates that
the Fund’s margin deposit assets will be
invested only in U.S. Treasuries or
otherwise held as cash and/or cash
equivalents.
The Coal Market
General. According to the Registration
Statement, the following is a brief
introduction to the global coal industry.
The data presented below is derived
from information released by various
third-party sources, including the World
Coal Association, the U.S. Energy
Information Administration, the
American Coal Foundation and the
American Geosciences Institute.
Coal is a safe, reliable, easily stored
and readily available source of energy
produced in over 50 countries,
consumed in over 70 countries and
traded globally. Coal is a low-cost fossil
fuel used primarily for electric power
generation, and is typically significantly
less expensive than oil and generally
competitive with natural gas and
nuclear power generation. Coal is also
used to produce steel (coal is used in
nearly 70% of global steel production)
and by a variety of other industrial
consumers to heat and power foundries,
cement plants, paper mills, chemical
plants and other manufacturing and
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processing facilities. In general, coal is
characterized by end use as either steam
coal or metallurgical coal. Steam coal is
used primarily as fuel by utilities to
generate electrical power. It is also used
by industrial facilities to produce steam,
electricity or both. Metallurgical coal is
refined into coke, which is used in the
production of steel.
Coal is classified into four general
categories, or ‘‘ranks,’’ based on carbon
content. Carbon is the source of coal’s
heating value, but other factors also
influence the amount of coal’s energy
per unit of weight. The amount of
energy in coal is often expressed in
British thermal units (‘‘BTU’’) per
pound. A BTU is the amount of heat
required to raise the temperature of one
pound of water by one degree
Fahrenheit. The four ranks of coal
include:
• Lignite. Lignite is geologically
young coal that has the lowest carbon
content (approximately 25% to 35%),
and consequently the lowest energy
content, of the four ranks of coal. Lignite
has a heat value ranging between 4,000
and 8,300 BTUs-per-pound. Sometimes
called brown coal, lignite is mainly used
for electric power generation primarily
in power plants close in proximity to
the source.
• Sub-Bituminous. Sub-bituminous
coal contains about 35% to 45% carbon
and has a heat value between 8,300 and
13,000 BTUs-per-pound. Approximately
half of the coal produced within North
America is sub-bituminous. Although
the heat value of sub-bituminous coal is
lower than bituminous, it tends to be
lower in sulfur content and cleaner
burning.
• Bituminous. Bituminous, or black
coal, is the most abundant type of coal.
Bituminous contains approximately
45% to 86% carbon and has a heat value
between 10,500 and 15,500 BTUs-perpound. Bituminous has little water
content or other impurities except for
sulfur, and is easily ignited.
• Anthracite. Anthracite coal
contains approximately 92% to 98%
carbon and has a heat value of nearly
15,000 BTUs-per-pound. Anthracite has
a heat value greater than that of
Bituminous, but is hard to light, scarcer
and more expensive.
Production and Supply. China
remains the largest producer of coal in
the world, with an estimated production
of 3.991 billion metric tonnes (‘‘mt’’) in
2012. The United States and India
follow China with estimated hard coal
production of approximately 1.016
billion mt and 694 million mt,
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respectively, in 2012.15 Among the
nations principally supplying coal to
the global power and steel markets are
Australia, historically the world’s
largest coal exporter with exports of
approximately 332 million mt in 2012,
as well as Indonesia, Russia, United
States, Colombia and South Africa.
Total United States exports of coal
decreased in 2013 by approximately 6%
over 2012 to 118 million mt.16
Coal supply can be influenced by
changes in coal mining capacity,
productivity and depletion rates,
changes in government subsidization,
regulation, new capacity, climate events
(i.e., floods, rains), availability of
mining equipment and availability and
cost of skilled labor and railroad/river
barge/ocean bulk services.
Demand. Global coal consumption
grew by 3.0% in 2013 over 2012.17 In
2011, China, the United States and India
were the world’s largest consumers of
coal (ranked 1st, 2nd and 3rd,
respectively). In 2012 China was the
largest consumer of coal with
consumption of 4.151 billion mt. The
United States and India consumed 889
and 745 million mt in 2012,
respectively.18
Factors impacting coal demand
include the demand for electricity,
governmental regulation impacting
power generation, technological
developments, transportation costs,
climate events (i.e., floods and rains),
exchange rates and the location,
availability and cost of other fuels such
as natural gas, oil, nuclear and
hydroelectric power.
European Coal Markets. European
coal is often classified into two broad
categories: Hard coal and lignite or
brown coal. Hard coal is further
subdivided into two types of coal as
steam (or thermal) coal, used for power
generation and for industrial
applications; and coking coal which is
used by the iron and steel industry to
make coke. Hard coal has an energy
content above 4,500 kilocalories/
kilogram (‘‘kcal/kg’’) and water content
lower than 35%. Only hard coal is
15 Source: U.S. Energy Information
Administration: (https://www.eia.gov/cfapps/
ipdbproject/IEDIndex3.cfm?tid=1&pid=1&aid=24).
16 Source: U.S. Energy Administration
Association: (https://www.eia.gov/beta/coal/data/
browser/#/topic/41?agg=0,2,1&rank=g&freq=
A&start=2001&end=2012&ctype=map<ype=pin
&rtype=s&maptype=0&rse=0&pin=).
17 Source: BP Statistical Review of World Energy,
2013, page 33: (https://www.bp.com/content/dam/
bp/pdf/Energy-economics/statistical-review-2014/
BP-statistical-review-of-world-energy-2014-fullreport.pdf).
18 Source: US Energy Information Administration,
2014: (https://www.eia.gov/cfapps/ipdbproject/
IEDIndex3.cfm?tid=1&pid=1&aid=24).
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17:25 Sep 24, 2014
Jkt 232001
traded internationally because of its
higher energy content relative to freight
costs. The other broad category, lignite
or brown coal, has an energy content of
less than 4,500 kcal/kg, and water
content above 35%. It is mostly used in
local markets for power generation.19
Although coal is mined in many
European coal countries, as of 2013 only
about 35% of hard coal consumption
was covered by production in the
European Union (the ‘‘EU’’). Coal
consumption of hard coal in the EU
reached its lowest level in 2009 at 715
million tons. Since then, consumption
has resumed growing and the most
recent figures indicate an increase of
4.7% was recorded in 2013 from 2009
levels.20
Although economic slowdowns in the
EU in 2011 and 2012 reduced overall
electricity demand, coal demand by
utilities actually increased during this
period replacing the relatively more
expensive natural gas. This is thought to
be largely a result of relatively high
priced natural gas in Europe and low
priced coal as well as the collapse of the
price of carbon credits. The low priced
coal was in part caused by the ‘‘shale
revolution’’ of cheap natural gas in the
United States, which resulted in a surge
in coal imports from the United States
and Colombia that pressured coal prices
downward in Europe.
Within Europe, Germany is one of the
largest producers and importers of coal,
importing some 45 million tons of hard
coal in 2012 which represented 79% of
Germany’s national consumption.21 In
addition to Germany, major European
importing countries of coal also include
the United Kingdom, Spain, and Italy.22
One of the largest ports in Europe in
terms of total cargo is the port of
Rotterdam 23 which also often provides
benchmark prices for coal transactions
across Europe. The largest exporting
countries to Europe in order of tons
19 Source: Cornot-Gandolphe, Sylvie. ‘‘Global
Coal Trade From Tightness to Oversupply.’’
February 2013. Institut Francais des Relations
Internationales, page 11. (https://www.ifri.org/
?page=contribution-detail&id=7570&lang=uk).
20 Source: EuroStat, February 2014: (https://
epp.eurostat.ec.europa.eu/statistics_explained/
index.php/Coal_consumption_statistics).
21 Source: ‘‘Coal Industry Across Europe.’’ 5th
Edition 2013. European Association for Coal and
Lignite, page 31. (https://www.euracoal.org/pages/
medien.php?idpage=1410).
22 Source: Cornot-Gandolphe, Sylvie. ‘‘Global
Coal Trade From Tightness to Oversupply.’’
February 2013. Institut Francais des Relations
Internationales, page 32. (https://www.ifri.org/
?page=contribution-detail&id=7570&lang=uk).
23 Source: Port of Rotterdam Web site. February
2014: (https://www.portofrotterdam.com/en/Port/
port-in-general/Pages/default.aspx).
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57643
exported are Russia, Colombia, and the
United States as of 2013.24
Rotterdam Coal Futures. The CME
lists ‘‘Rotterdam Coal Futures’’ under
the symbol ‘‘MTF’’. The trading unit for
the Rotterdam contract is 1,000 tons.
Rotterdam Coal Futures are financially
settled against the Argus/McCloskey
Coal Price Index (‘‘API 2 Index’’) 25 as
published in the Argus/McCloskey Coal
Price Index Report and are subject to
CME position and accountability limits.
The API 2 Index is calculated by Argus
Media.26 Coal included in the API 2
Index calculation must generally be
delivered to the ports of Antwerp,
Rotterdam, or Amsterdam with certain
exceptions for coal that is delivered to
North West European countries and
netted back to a Rotterdam delivery
equivalent using freight differentials
between discharge ports. Coal included
in the API 2 Index must be bituminous
and meet several criteria to qualify
including having an energy value of
6,000 kcal/kg, a maximum sulfur
content of 1.00%, and be part of a cargo
with a minimum quantity of 50,000 tons
of coal on the most economic vessel
from the port of origin.27
Trading of Rotterdam Coal Futures
contracts terminates on the last Friday
of the delivery month. Trading can
occur in any of up to 84 consecutive
months. Contracts for each new year are
added following the termination of
trading in the December contract of the
current year.
The Fund’s Investments
According to the Registration
Statement, the Fund will attempt to
invest in an equal amount of contracts
(an equal amount of tonnage) across the
nearest calendar quarter of Coal Futures
resulting in three delivery months of
Coal Futures price exposure. The
Sponsor will seek to invest the Fund’s
cash collateral in 13 week U.S. Treasury
Bills.
Currently, due to liquidity concerns
with respect to futures contracts for
other ‘‘types’’ of coal (such as Central
Appalachian or ‘‘CAPP’’), the Sponsor
anticipates that the Fund will only
24 Source: EuroStat, February 2014: (https://
epp.eurostat.ec.europa.eu/statistics_explained/
index.php/File:Hard_coal_imports_into_EU–28_by_
country_of_origin,_2013_(%25_based_on_kt).png).
25 Neither the Fund, the Sponsor, nor any of their
affiliates are sponsored, endorsed or promoted by,
or otherwise associated with, Argus Media Inc., IHS
Global Ltd., or the CME Group.
26 Source: Argus Media: (https://www.argusmedia.
com/Coal/Argus-McCloskeys-Coal-Price-IndexReport).
27 Source: IHS McCloskey, November 2010:
(https://cr.mccloskeycoal.com/journals/McCloskey/
McCloskeyCR/Issue_249_-_26_November_2010/
attachments/Methodology_May%202012_
(October%202013%20Edited%20Version).pdf).
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Federal Register / Vol. 79, No. 186 / Thursday, September 25, 2014 / Notices
invest in Coal Futures. However, if the
liquidity of other exchange- traded coal
futures increases in the future, the
Sponsor may consider amending the
Registration Statement and to revise the
description of the Fund’s investment
strategy to include futures contracts for
other types of coal.28
Commodity futures contracts
normally specify a certain date for the
delivery of the underlying physical
commodity. To avoid expiration and
maintain a long futures position,
contracts nearing a delivery date must
be sold and contracts that have not yet
reached delivery must be purchased.
This process is known as ‘‘rolling’’ a
futures position. The Fund will employ
the strategy of rolling futures as it will
replace futures contracts as they
approach maturity by notionally selling
and purchasing offsetting contracts to
avoid delivery and maintain long
futures positions. Four times each year,
the Fund will roll the nearby calendar
quarter contracts over five days on a pro
rata basis. The five day rolling period
starts on the second Monday of the
month just prior to the nearby full
calendar quarter with an equal amount
of tonnage, or 1⁄5th of the contracts in
the portfolio, rolled each of the five days
from the front month calendar quarter to
the next available calendar quarter. For
example, the Fund would start rolling
out of the first calendar quarter (January,
February, March) on the second Monday
of December into the second calendar
quarter consisting of April, May, and
June.
The Sponsor anticipates that the
Fund’s position in each of the Coal
Futures contract months represented,
outside of roll periods, will contain an
equal number of contracts (an equal
tonnage per coal future delivery month).
mstockstill on DSK4VPTVN1PROD with NOTICES
Net Asset Value
The NAV for the Shares will equal the
market value of the Fund’s total assets
less total liabilities calculated in
accordance with Generally Accepted
Accounting Principles (‘‘GAAP’’). Under
the Fund’s proposed operational
procedures, the Administrator will
calculate the NAV once each NYSE Arca
trading day. To calculate the NAV, the
Administrator will use the CME
settlement prices (typically determined
after 5:00 p.m. Eastern Time (‘‘E.T.’’))
for the Coal Futures traded on the CME
Facilities plus the value of any United
States Treasury Bills and cash
equivalents. The NAV for a particular
28 In such event, the Exchange would file a
proposed rule change pursuant to Rule 19b–4 under
the Act to permit the Fund to invest in other
exchange-traded coal futures contracts.
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trading day will be released after 5:00
p.m. E.T. and will be posted at
www.greenhavenfunds.com.
Creation and Redemption Procedures
On any business day, an ‘‘Authorized
Participant’’ may place an order with
the Fund’s ‘‘Marketing Agent’’ 29 to
create one or more aggregations of
25,000 Shares (each, a ‘‘Basket’’).30
Creation orders will be accepted only on
a business day during which the NYSE
Arca is open for regular trading.
Purchase orders must be placed no later
than 10:00 a.m. E.T., on each business
day the NYSE Arca is open for regular
trading. The day on which the
Marketing Agent receives a valid
purchase order is the purchase order
date. Purchase orders are irrevocable. By
placing a purchase order, and prior to
delivery of the applicable Baskets, an
Authorized Participant’s DTC account
will be charged a non-refundable
transaction fee due for the purchase
order.31
29 The Marketing Agent will be a broker-dealer
registered with FINRA and a member of the
Securities Investor Protection Corporation.
30 Baskets may be created or redeemed only by
Authorized Participants. Each Authorized
Participant must (1) be a registered broker-dealer or
other securities market participant, such as a bank
or other financial institution that is not required to
register as a broker-dealer to engage in securities
transactions, (2) be a participant in the Depository
Trust Company (‘‘DTC’’), and (3) have entered into
a ‘‘Participant Agreement’’ with the Fund and the
Sponsor, a form of which is available from the
Sponsor, Administrator or Marketing Agent. The
Participant Agreement sets forth the procedures for
the creation and redemption of Baskets and the
delivery of cash required for such creations or
redemptions.
31 The Exchange notes that the Commission
previously has approved representations relating to
issues of Trust Issued Receipts whereby the cut-off
time for placing orders to create or redeem shares
of an issue of Trust Issued Receipts is earlier than
4:00 p.m. E.T. See, e.g., Securities Exchange Act
Release Nos. 63915 (February 15, 2011), 76 FR 9843
(February 22, 2011) (SR–NYSEArca–2010–121)
(order approving listing and trading on the
Exchange of FactorShares Funds); 63753 (January
21, 2011), 76 FR 4963 (January 27, 2011) (SR–
NYSEArca–2010–110) (order approving listing and
trading of shares of Teucrium Natural Gas Fund
under NYSE Arca Equities Rule 8.200); 63869
(February 8, 2011), 76 FR 8799 (February 15, 2011)
(SR–NYSEArca–2010–119) (order approving listing
and trading of shares of Teucrium WTI Crude Oil
Fund). See also Securities Exchange Act Release
No. 71909 (April 9, 2014), 79 FR 21337 (April 15,
2014) (SR–NYSEArca–2014–28) (notice of filing and
immediate effectiveness of proposed rule change to
change to 11:00 a.m. E.T. the time by which
purchase and redemptions orders must be placed
with respect to the Market Vectors Low Volatility
Commodity ETF and Market Vectors Long/Short
Commodity ETF). The Sponsor represents that a
10:00 a.m. E.T. cut-off time for purchase and
redemption orders could permit the Sponsor to
more efficiently engage in transactions in Coal
Futures in connection with orders to create or
redeem Shares, which may help reduce the
premium or discount on the Shares, and reduce the
difference between the price of the Shares and the
NAV of such Shares.
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The total payment required to create
each Basket will be the NAV of 25,000
Shares on the purchase order date, but
only if the required payment is timely
received. Because orders to purchase
Baskets must be placed no later than
10:00 a.m. E.T., but the total payment
required to create a Basket typically will
not be determined until after 5:00 p.m.
E.T., on the date the purchase order is
received, Authorized Participants will
not know the total amount of the
payment required to create a Basket at
the time they submit an irrevocable
purchase order.
An Authorized Participant who places
a purchase order shall transfer to the
Administrator the required amount of
U.S. Treasuries and/or cash by the end
of the next business day following the
purchase order date. Upon receipt of the
deposit amount, the Administrator will
direct DTC to credit the number of
Baskets ordered to the Authorized
Participant’s DTC account on the next
business day following the purchase
order date.
The Sponsor acting by itself or
through the Administrator or the
Marketing Agent may suspend the right
of purchase, or postpone the purchase
settlement date, for any period during
which the NYSE Arca is closed other
than customary weekend or holiday
closings, or for any period when trading
on the NYSE Arca is suspended.
The Sponsor acting by itself or
through the Administrator or the
Marketing Agent may reject a purchase
order if (1) it determines that the
purchase order is not in proper form, (2)
circumstances outside the control of the
Sponsor make it, for all practical
purposes, not feasible to process
creations of Baskets such as during force
majeure events, or (3) the Sponsor
believes that it or the Fund would be in
violation of any securities or
commodities rules or regulations
regarding position limits or otherwise
by accepting a creation.
Redemption Procedures
According to the Registration
Statement, the procedures by which an
Authorized Participant can redeem one
or more Baskets will mirror in reverse
the procedures for the creation of
Baskets. On any business day, an
Authorized Participant may place an
order with the Marketing Agent to
redeem one or more Baskets.
Redemption orders must be placed no
later than 10:00 a.m. E.T., on each
business day. The day on which the
Marketing Agent receives a valid
redemption order is the redemption
order date. Redemption orders are
irrevocable.
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Federal Register / Vol. 79, No. 186 / Thursday, September 25, 2014 / Notices
By placing a redemption order, an
Authorized Participant agrees to deliver
the Baskets to be redeemed through
DTC’s book-entry system to the Fund
not later than 12:00 p.m. E.T., on the
next business day immediately
following the redemption order date. By
placing a redemption order, and prior to
receipt of the redemption proceeds, an
Authorized Participant’s DTC account
will be charged the non-refundable
transaction fee due for the redemption
order.
The redemption proceeds from the
Fund will consist of a cash redemption
amount equal to the NAV of the number
of Baskets requested in the Authorized
Participant’s redemption order on the
redemption order date.
Because orders to redeem Baskets
must be placed no later than 10:00 a.m.
E.T., but the total amount of redemption
proceeds typically will not be
determined until after 5:00 p.m. E.T., on
the date the redemption order is
received, Authorized Participants will
not know the total amount of the
redemption proceeds at the time they
submit an irrevocable redemption order.
The redemption proceeds due from
the Fund will be delivered to the
Authorized Participant at 12:00 p.m.
E.T., on the next business day
immediately following the redemption
order date if, by such time, the Fund’s
DTC account has been credited with the
Baskets to be redeemed. If the Fund’s
DTC account has not been credited with
all of the Baskets to be redeemed by
such time, the redemption distribution
will be delivered to the extent of whole
Baskets are received.
The Sponsor, acting by itself or
through the Administrator or the
Marketing Agent, may suspend the right
of redemption, or postpone the
redemption settlement date, (1) for any
period during which the NYSE Arca is
closed other than customary weekend or
holiday closings, or trading on the
NYSE Arca is suspended or restricted,
(2) for any period during which an
emergency exists as a result of which
the redemption distribution is not
reasonably practicable, or (3) in the
event any price limits imposed by the
CME or the CFTC are reached and the
Sponsor believes that permitting
redemptions under such circumstances
may adversely impact investors.
The Sponsor acting by itself or
through the Marketing Agent or the
Administrator may reject a redemption
order if the order is not in proper form
as described in the Participant
Agreement or if the fulfillment of the
order, in the opinion of the Sponsor’s
counsel, might be unlawful.
VerDate Sep<11>2014
17:25 Sep 24, 2014
Jkt 232001
Availability of Information
According to the Registration
Statement, to provide updated
information relating to the Fund for use
by investors and market professionals,
NYSE Arca will calculate and
disseminate during the NYSE Arca Core
Trading Session (normally, 9:30 a.m.
E.T. to 4:00 p.m. E.T.) an updated
‘‘Indicative Fund Value’’ (‘‘IFV’’).32 The
IFV will be calculated by using the prior
day’s closing NAV per Share as a base
and updating that value during the
NYSE Arca Core Trading Session to
reflect changes in the value of the
Fund’s Coal Futures during the trading
day. The IFV disseminated during NYSE
Arca trading hours should not be
viewed as an actual real time update of
the NAV, which will be calculated only
once at the end of each trading day.
The IFV will be widely disseminated
on a per Share basis every 15 seconds
during the NYSE Arca Core Trading
Session by one or more major market
data vendors. The normal trading hours
for Coal Futures on the CME Facilities
are 6:00 p.m. E.T. Sunday through 6:00
p.m. E.T. Friday, with a 45 minute break
each day from 5:15 p.m. E.T. to 6:00
p.m. E.T. In addition, the IFV will be
published on the NYSE Euronext Global
Index Feed and will be available
through on-line information services
such as Bloomberg and Reuters.
The 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 33 under the Act, the
Trust will rely on the exception
contained in Rule 10A–3(c)(7).34 A
minimum of 100,000 Shares for the
Fund will be outstanding as of the start
of trading on the Exchange.
The Web site for the Fund and/or the
Exchange, which will be publicly
accessible at no charge, will contain the
following information: (a) The current
NAV per Share daily and the prior
business day’s NAV and the reported
closing price; (b) the midpoint of the
bid-ask price in relation to the NAV as
of the time the NAV is calculated (the
‘‘Bid-Ask Price’’); (c) calculation of the
premium or discount of such price
against such NAV; (d) the bid-ask price
of Shares determined using the highest
bid and lowest offer as of the time of
calculation of the NAV; (e) data in chart
32 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IFVs taken from
Consolidated Tape Association (‘‘CTA’’) or other
data feeds.
33 17 CFR 240.10A–3.
34 17 CFR 240.10A–3(c)(7).
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57645
form displaying the frequency
distribution of discounts and premiums
of the Bid-Ask Price against the NAV,
within appropriate ranges for each of
the four (4) previous calendar quarters;
(f) the prospectus; and (g) other
applicable quantitative information. The
Fund will also disseminate the Fund’s
holdings on a daily basis on the Fund’s
Web site. The combined value of the
applicable three month strip and U.S.
Treasuries, will be made available by
one or more major market data vendors,
updated at least every 15 seconds
during the Exchange’s Core Trading
Session.
The NAV for the Fund will be
calculated by the Administrator once a
day and will be disseminated daily 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 the Shares,
and the corresponding NAV for the
Fund. The closing price and settlement
prices of Coal Futures are also readily
available from the CME. In addition,
such prices are available from
automated quotation systems, published
or other public sources, or on-line
information services such as Bloomberg
or Reuters. Quotation and last-sale
information regarding the Shares will be
disseminated through the facilities of
the CTA.
The Exchange represents that
quotation and last sale information for
the Coal Futures will be widely
disseminated through a variety of major
market data vendors worldwide,
including Bloomberg and Reuters. In
addition, the Exchange further
represents that complete real-time price
(and volume) data for such contracts is
available by subscription from Reuters
and Bloomberg. The CME also provides
delayed futures price (and volume)
information on current and past trading
sessions and market news free of charge
on its Web site for Coal Futures. The
specific contract specifications for such
contracts are also available at the CME
Web site, as well as other financial
informational sources. CME also makes
available real time futures pricing
information for a fee. The spot price of
coal also is available on a 24-hour basis
from major market data vendors.
Information relating to trading,
including price and volume
information, in Coal Futures will be
available from major market data
vendors and from the exchanges on
which Coal Futures trade.
The Fund will provide Web site
disclosure of its portfolio holdings daily
and will include the names, quantity,
price and market value of the Coal
Futures held by the Fund and other
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mstockstill on DSK4VPTVN1PROD with NOTICES
financial instruments such as Treasury
Bills, if any, and the characteristics of
such instruments and cash equivalents,
and amount of cash held in the portfolio
of the Fund. The Web site disclosure of
the portfolio composition of the Fund
will occur at the same time as the
disclosure by the Sponsor of the
portfolio composition to Authorized
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 Fund through the
Fund’s Web site.
A more detailed description of the
Fund, Coal Futures and other aspects of
the applicable commodities markets, as
well as investment risks, are set forth in
the Registration Statement. All terms
relating to the Fund that are referred to,
but not defined in, this proposed rule
change are defined in the Registration
Statement.
detrimentally impact Exchange trading
of the Shares, or (3) 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 35 or by the halt or suspension of
trading of the Coal Futures.
The Exchange represents that the
Exchange may halt trading during the
day in which an interruption to the
dissemination of the IFV or the value of
Coal Futures occurs. If the interruption
to the dissemination of the IFV or the
value of Coal Futures 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.36 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.
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. As provided in NYSE
Arca Equities Rule 7.6, Commentary .03,
the minimum price variation (‘‘MPV’’)
for quoting and entry of orders in equity
securities traded on the NYSE Arca
Marketplace is $0.01, with the exception
of securities that are priced less than
$1.00 for which the MPV for order entry
is $0.0001.
The trading of the Shares will be
subject to NYSE Arca Equities Rule
8.200, Commentary .02(e), which sets
forth certain restrictions on Equity
Trading Permit (‘‘ETP’’) Holders acting
as registered Market Makers in TIRs to
facilitate surveillance.
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 Coal Futures, (2)
if the creation or redemption of Shares
is suspended for a period that, in the
judgment of the Exchange, may
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.37 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 federal
securities laws applicable to trading on
the Exchange.
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
VerDate Sep<11>2014
17:25 Sep 24, 2014
Jkt 232001
35 See
NYSE Arca Equities Rule 7.12.
Exchange notes that the Exchange may halt
trading during the day in which an interruption to
the dissemination of the IFV or the value of the
applicable futures contracts occurs.
37 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.
36 The
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trading in the Shares and Coal Futures
with other markets that are members of
the Intermarket Surveillance Group
(‘‘ISG’’), and FINRA may obtain trading
information regarding trading in the
Shares and Coal Futures from such
markets. In addition, the Exchange may
obtain information regarding trading in
the Shares, and Coal Futures from
markets that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement. CME is a member of the ISG.
A list of ISG members is available at
www.isgportal.org.
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,
or a portion of the Core Trading Session,
when an updated IFV will not be
calculated or publicly disseminated; (2)
the procedures for purchases and
redemptions of Shares in Basket size
(and that Shares are not individually
redeemable); (3) NYSE Arca Equities
Rule 9.2(a), which imposes a duty of
due diligence on its ETP Holders to
learn the essential facts relating to every
customer prior to trading the Shares; (4)
how information regarding the IFV is
disseminated; (5) 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 Fund. The Exchange
notes that investors purchasing Shares
directly from the Fund will receive a
prospectus. ETP Holders purchasing
Shares from the Fund 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 Fund is subject
to various fees and expenses described
in the Registration Statement. The
Information Bulletin will also reference
that the CFTC has regulatory
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jurisdiction over the trading of coal
futures contracts traded on U.S.
markets.
The Information Bulletin will also
disclose the trading hours of the Shares
of the Fund and that the NAV for the
Shares is calculated after 5:00 p.m. E.T.
each trading day. The Bulletin will
disclose that information about the
Shares of the Fund is publicly available
on the Fund’s Web site.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 38 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in NYSE Arca Equities
Rule 8.200 and Commentary .02 thereto.
The Exchange has in place surveillance
procedures that are adequate to properly
monitor trading in the Shares in all
trading sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
FINRA, on behalf of the Exchange, will
communicate as needed regarding
trading in the Shares and Coal Futures
with other markets that are members of
the ISG, and FINRA may obtain trading
information regarding trading in the
Shares and Coal Futures from such
markets. In addition, the Exchange may
obtain information regarding trading in
the Shares and Coal Futures from
markets that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement. CME is a member of the ISG.
The closing price and settlement
prices of Coal Futures are readily
available from the CME. In addition,
such prices are available from
automated quotation systems, published
or other public sources, or on-line
information services such as Bloomberg
or Reuters. The Fund will provide Web
site disclosure of its portfolio holdings
daily. Quotation and last-sale
information regarding the Shares will be
disseminated through the facilities of
the CTA. The IFV will be widely
disseminated on a per Share basis every
15 seconds during the NYSE Arca Core
38 15
U.S.C. 78f(b)(5).
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17:25 Sep 24, 2014
Jkt 232001
Trading Session (normally 9:30 a.m.
E.T. to 4:00 p.m. E.T.) by one or more
major market data vendors. In addition,
the IFV will be published on the NYSE
Euronext Global Index Feed and will be
available through on-line information
services such as Bloomberg and Reuters.
The Exchange represents that the
Exchange may halt trading during the
day in which an interruption to the
dissemination of the IFV or the value of
Coal Futures occurs. If the interruption
to the dissemination of the IFV or the
value of Coal Futures 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.
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 Fund and the Shares,
thereby promoting market transparency.
The NAV per Share will be calculated
daily and made available to all market
participants at the same time. One or
more major market data vendors will
disseminate for the Fund on a daily
basis information with respect to the
recent NAV per Share and Shares
outstanding.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of commodity
futures-related exchange-traded product
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 Fund’s
holdings, IFV, and quotation and last
sale information for the Shares.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
PO 00000
Frm 00145
Fmt 4703
Sfmt 4703
57647
Exchange notes that the proposed rule
change will facilitate the listing and
trading of an additional type of
commodity futures-related exchangetraded product, and the first such
product based on coal futures, which
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
up to 90 days of such date (i) as the
Commission may designate 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, as modified by Amendment No.
1 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–2014–102 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2014–102. 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
E:\FR\FM\25SEN1.SGM
25SEN1
57648
Federal Register / Vol. 79, No. 186 / Thursday, September 25, 2014 / Notices
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 also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2014–102, and should be
submitted on or before October 16,
2014.
have been prepared by SCCP. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
SCCP is filing this proposed rule
change with respect to amendments of
the Amended and Restated Certificate of
Incorporation (the ‘‘Charter’’) and ByLaws (the ‘‘By-Laws’’) of its parent
corporation, The NASDAQ OMX Group,
Inc. (‘‘NASDAQ OMX’’ or the
‘‘Company’’). The proposed
amendments will be implemented on a
date designated by NASDAQ OMX
following approval by the Commission.
The text of the proposed rule change is
available on SCCP’s Web site at https://
nasdaqomxphlx.cchwallstreet.com/
nasdaqomxphlx/sccp/, at the principal
office of SCCP, and at the Commission’s
Public Reference Room.
BILLING CODE 8011–01–P
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
In its filing with the Commission,
SCCP included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. SCCP has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
SECURITIES AND EXCHANGE
COMMISSION
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.39
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–22786 Filed 9–24–14; 8:45 am]
[Release No. 34–73145; File No. SR–SCCP–
2014–01]
Self-Regulatory Organizations; Stock
Clearing Corporation of Philadelphia;
Notice of Filing of Proposed Rule
Change To Amend the Amended and
Restated Certificate of Incorporation
and By-Laws of The NASDAQ OMX
Group, Inc.
mstockstill on DSK4VPTVN1PROD with NOTICES
September 19, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’)1 and Rule 19b–4 thereunder,2
notice is hereby given that on
September 10, 2014, Stock Clearing
Corporation of Philadelphia (‘‘SCCP’’)
filed with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II and III below, which Items
39 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:25 Sep 24, 2014
Jkt 232001
1. Purpose
NASDAQ OMX is proposing to make
certain amendments to its Charter and
By-Laws.
(i) Background
Article Fourth, Paragraph C of
NASDAQ OMX’s Charter includes a
voting limitation that generally
prohibits a stockholder from voting
shares beneficially owned, directly or
indirectly, by such stockholder in
excess of 5% of the then-outstanding
shares of capital stock of NASDAQ
OMX entitled to vote as of the record
date in respect of any matter. Pursuant
to Article Fourth, Paragraph C(6) of the
Charter, NASDAQ OMX’s Board may
grant exemptions to this limitation prior
to the time a stockholder beneficially
owns more than 5% of the outstanding
shares of stock entitled to vote on the
election of a majority of directors at
such time. NASDAQ OMX’s Board has
never granted an exemption to the 5%
PO 00000
Frm 00146
Fmt 4703
Sfmt 4703
voting limitation and has no current
plans to do so. However, in the event
the Board decides to grant such an
exemption in the future, Article Fourth,
Paragraph C(6) of the Charter and
Section 12.5 of the By-Laws limit the
Board’s authority to grant the
exemption. These provisions, which are
intended to be substantively identical,
currently contain some language
differences. Following discussions with
the SEC staff,3 NASDAQ OMX proposes
the amendments described below to the
Charter and By-Laws to conform these
provisions and remove any ambiguity
that may exist because of the current
language differences.
(ii) Proposed Amendments to Charter
First, unlike the Charter, the By-Laws
state that for so long as NASDAQ OMX
shall control, directly or indirectly, any
self-regulatory subsidiary, a resolution
of the Board to approve an exemption
for any person under Article Fourth,
Paragraph C(6) of the Charter shall not
be permitted to become effective until
such resolution has been filed with and
approved by the SEC under Section 19
of the Act. NASDAQ OMX proposes that
this requirement be added to the Charter
and that ‘‘self-regulatory subsidiary,’’
which is currently not a defined term in
the Charter, be defined as any
subsidiary of NASDAQ OMX that is a
‘‘self-regulatory organization’’ as
defined under Section 3(a)(26) of the
Act.4 At present, this defined term
would include NASDAQ, BX and Phlx,
which are national securities exchanges,
and BSECC and SCCP, which are
registered clearing agencies that are both
currently dormant.
Second, both the Charter and the ByLaws state that the Board may not
approve an exemption to the 5% voting
limitation for: (i) a registered broker or
dealer or an affiliate thereof or (ii) an
individual or entity that is subject to a
statutory disqualification under Section
3(a)(39) of the Act. The By-Laws include
a further proviso stating that, for these
purposes, an ‘‘affiliate’’ shall not be
deemed to include an entity that either
owns 10% or less of the equity of a
broker or dealer, or receives 1% or less
of its consolidated gross revenues from
a broker or dealer. This proviso, which
is not currently included in the Charter,
allows NASDAQ OMX’s Board to grant
3 See Securities Exchange Act Release No. 71353
(January 17, 2014), 79 FR 4209 (January 24, 2014)
(SR–BSECC–2013–001, SR–BX–2013–057, SR–
NASDAQ–2013–148, SR–Phlx–2013–115, SR–
SCCP–2013–01), at note 14.
4 Under Section 3(a)(26) of the Act, a ‘‘selfregulatory organization’’ is ‘‘any national securities
exchange, registered securities association, or
registered clearing agency . . .’’ 15 U.S.C.
78c(a)(26).
E:\FR\FM\25SEN1.SGM
25SEN1
]]>Agencies
[Federal Register Volume 79, Number 186 (Thursday, September 25, 2014)]
[Notices]
[Pages 57640-57648]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-22786]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73149; File No. SR-NYSEArca-2014-102]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To
List and Trade Shares of the Greenhaven Coal Fund Under NYSE Arca
Equities Rule 8.200, Commentary .02
September 19, 2014.
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 September 5, 2014, NYSE Arca, Inc. (``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. On September 18, 2014, the Exchange filed Amendment No.
1, which replaced and superseded the proposal in its entirety. The
Commission is publishing this notice to solicit comments on the
proposed rule change, as modified by Amendment No. 1, 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 the Greenhaven
Coal Fund under NYSE Arca Equities Rule 8.200, Commentary .02. The text
of the proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included 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.
[[Page 57641]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE Arca Equities Rule 8.200, Commentary .02 permits the trading
of Trust Issued Receipts (``TIRs'') either by listing or pursuant to
unlisted trading privileges.\4\ The Exchange proposes to list and trade
shares (``Shares'') of the Greenhaven Coal Fund (the ``Fund''),
pursuant to NYSE Arca Equities Rule 8.200, Commentary .02.\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\ This Amendment No. 1 to SR-NYSEArca-2014-102 replaces SR-
NYSEArca-2014-102 as originally filed and supersedes such filing in
its entirety.
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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,\6\ and listing on NYSE Arca.\7\ Among these are the
Teucrium Corn Fund, Teucrium Wheat Fund, Teucrium Soybean Fund and
Teucrium Sugar Fund, each a series of the Teucrium Commodity Trust.\8\
In addition, the Commission has approved other exchange traded fund-
like products linked to the performance of underlying commodities.\9\
---------------------------------------------------------------------------
\6\ See, e.g., Securities Exchange Act Release No. 58161 (July
15, 2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39).
\7\ See, e.g., Securities Exchange Act Release No. 58457
(September 3, 2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-
2008-91).
\8\ See Securities Exchange Act Release Nos. 62213 (June 3,
2010), 75 FR 32828 (June 9, 2010) (SR-NYSEArca-2010-22) (order
approving listing on the Exchange of Teucrium Corn Fund); 65344
(September 15, 2011), 76 FR 58549 (September 21, 2011) (SR-NYSEArca-
2011-48) (order approving listing on the Exchange of the Teucrium
Wheat Fund, Teucrium Soybean Fund, and Teucrium Sugar Fund).
\9\ See, e.g., Securities Exchange Act Release Nos. 57456 (March
7, 2008), 73 FR 13599 (March 13, 2008) (SR-NYSEArca-2007-91) (order
granting accelerated approval for listing and trading on NYSE Arca
of the iShares GS Commodity Trusts); 58983 (November 20, 2008), 73
FR 73368 (December 2, 2008) (SR-NYSEArca-2008-126) (order approving
listing and trading on NYSE Arca of GreenHaven Continuous Commodity
Index Fund); 59781 (April 17, 2009), 74 FR 18771 (April 24, 2009)
(SR-NYSEArca-2009-28) (order granting accelerated approval for NYSE
Arca listing and trading of the ETFS Silver Trust); 59895 (May 8,
2009), 74 FR 22993 (May 15, 2009)(SR-NYSEArca-2009-40) (order
granting accelerated approval for NYSE Arca listing and trading of
the ETFS Gold Trust); 61219 (December 22, 2009), 74 FR 68886
(December 29, 2009) (SR-NYSEArca-2009-95) (order approving listing
and trading on NYSE Arca of the ETFS Platinum Trust).
---------------------------------------------------------------------------
The Fund is a commodity pool that is organized as a Delaware
statutory trust.\10\ The Fund's trustee is Christiana Trust, a division
of Wilmington Savings Fund Society, FSB (the ``Trustee''), and the
Fund's sponsor is GreenHaven Coal Services, LLC (the ``Sponsor'').
Under the Fund's trust agreement, the Trustee has delegated to the
Sponsor the exclusive power and authority to manage the business and
affairs of the Fund. The Sponsor is registered with the Commodity
Futures Trading Commission (the ``CFTC'') as a commodity pool operator,
and approved as a member of the National Futures Association. The
Sponsor is a wholly-owned subsidiary of GreenHaven Group, LLC and
affiliated with GreenHaven Commodity Services, LLC, a commodities
trading firm. ALPS Distributors, Inc. will be the Fund's marketing
agent and distributor (``Marketing Agent''). Bank of New York Mellon
will be the Fund's administrator and transfer agent
(``Administrator'').
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\10\ On September 5, 2014, the Fund filed with the Commission a
pre-effective amendment to its registration statement on Form S-1
under the Securities Act of 1933 (15 U.S.C. 77a) relating to the
Fund. (File No. 333-182301) (the ``Registration Statement''). The
description of the Fund and the Shares herein is based, in part, on
the Registration Statement.
---------------------------------------------------------------------------
The business of the Fund will be limited to (i) creating and
redeeming Baskets (as defined below) of Shares on a continuous basis,
and (ii) investing proceeds in a portfolio of coal futures and U.S.
Treasuries (as further described below).
Investment Objective
According to the Registration Statement and as further described
below, the Fund will seek to provide investors with exposure to the
daily change in the price of coal futures, before expenses and
liabilities of the Fund. The Fund intends to achieve this objective by
investing substantially all of its assets in a three month strip \11\
of the nearest calendar quarter of Rotterdam coal futures contracts
(``Coal Futures'') traded via the CME Group, Inc. (``CME'') (i) Globex
(``CME Globex'') and (ii) CME ClearPort clearing services (``CME
ClearPort'') trading platforms (collectively, the ``CME Facilities'')
depending on liquidity and otherwise at the Sponsor's discretion. The
Fund will invest in Coal Futures on a non-discretionary basis (i.e.,
without regard to whether the value of the Fund is rising or falling
over any particular period). The Fund may also realize interest income
from its holdings in three month U.S. Treasuries.
---------------------------------------------------------------------------
\11\ With respect to reference to a ``three month strip'',
`strip' is a term used in futures markets to describe a series of
delivery months for an individual futures contract. A calendar strip
would be a three month strip of one of the four calendar quarters.
For example, a three month calendar strip for the third quarter 2014
would include July 2014, August 2014, and September 2014 coal
futures contracts.
---------------------------------------------------------------------------
According to the Registration Statement, it is not the intent of
the Fund to be operated in a fashion such that its net asset value
(``NAV'') will equal, in dollar terms, the coal spot price, any spot
price coal indexes, or any particular coal futures contract. It is also
not the intent of the Fund to be operated in a fashion such that its
NAV will reflect the percentage change of the price of any particular
coal futures contract as measured over a period greater than one day.
Investments in Coal Futures
Subject to margin and certain other requirements and conditions
described below and in the Registration Statement, the Fund, under
normal market conditions,\12\ will use available offering proceeds to
purchase Coal Futures that are traded on CME Facilities, including
smaller sized ``mini'' contracts (if they are available) to the
greatest extent possible, without being leveraged or exceeding relevant
position limits. The Fund will place purchase or sale orders for Coal
Futures with a ``Commodity Broker'' \13\ and may use an ``Execution
Broker'' \14\ to execute trades on CME ClearPort. If the CME does not
accept the transaction for any reason, the transaction will be
considered null and void and of no legal effect. As a result, all of
the Fund's positions in Coal Futures will be cleared by CME clearing
member firms, thereby minimizing counterparty risk.
---------------------------------------------------------------------------
\12\ The term ``under normal market conditions'' includes, but
is not limited to, the absence of extreme volatility or trading
halts in the coal futures markets or the financial markets
generally; operational issues causing dissemination of inaccurate
market information; or force majeure 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.
\13\ The Commodity Broker will execute and clear trades via CME
Facilities, whereby it becomes a cleared futures transaction with
the CME as the counterparty.
\14\ The Execution Broker will execute trades of block traded
coal futures traded on CME ClearPort, and the Commodity Broker will
clear such trades. A block trade is executed by an Execution Broker
who facilitates two parties reaching an agreement on a price to buy
and sell futures contracts. Once the price is agreed upon the
Execution Broker then submits the block trade information to the CME
via the CME ClearPort order entry systems whereby it becomes a
cleared futures transaction with the CME as the counterparty for the
parties entering said trade.
---------------------------------------------------------------------------
The Fund intends to hold the three month strip of the nearest
calendar quarter of Coal Futures contracts traded
[[Page 57642]]
on the CME Facilities. The four calendar quarters are January,
February, and March (``Q1''); April, May, and June (``Q2''); July,
August, and September (``Q3''); and October, November, and December
(``Q4''). The Fund intends to invest an equal tonnage (equal number of
futures contracts) in each of the three months comprising the nearby
calendar quarter.
Four times a year, the Fund will attempt to roll its positions in
the nearby calendar quarter to the next calendar quarter over 5
business days on a pro-rata basis. The first roll day is the second
Monday of the month prior to the nearby calendar quarter. For example,
if the Fund was currently holding the Q1 calendar quarter it would roll
over a 5 business day period starting on the second Monday in December.
Each day during the roll period, the Fund would decrease the percentage
of its portfolio that is in Q1 by 20% and increase its percentage in Q2
by 20%.
The Sponsor estimates that (i) approximately 10% of the Fund's NAV
will be held as margin deposits in segregated accounts with the
Commodity Broker, in accordance with applicable CFTC rules, and (ii)
approximately 90% of the Fund's NAV will be held to pay current
obligations and as reserves in the form of U.S. Treasuries, cash and/or
cash equivalents in segregated accounts with the Commodity Broker. The
Fund will be credited with all interest earned on its deposits. All
interest income earned on these investments will be retained for the
Fund's benefit.
The Sponsor does not anticipate that the Fund's Coal Futures
positions will be held until expiration, and does not expect the Fund
to take or make delivery of any physical commodities. Instead, the
Sponsor expects to sell near to expiry Coal Futures and reinvest the
proceeds in new Coal Futures to achieve the Fund's investment
objective. Positions may also be closed out to meet orders for the
redemption of Baskets (as defined below), in which case the proceeds
from closing the positions will not be reinvested.
Margin; Composition of Portfolio
According to the Registration Statement, when the Fund purchases
Coal Futures, the Fund will be required to deposit a portion of the
value of the contract or other interest as security to ensure payment
for the underlying obligation. This deposit is known as initial margin.
Transactions traded through CME ClearPort have the same collateral
requirements as CME Globex futures transactions.
For example, the purchase of a notional $10 million of Coal Futures
would require the Fund to make an initial margin deposit representing
only a fraction of the notional amount. The Fund would deposit the
required initial margin with a Commodity Broker in the form of a mix of
cash and U.S. Treasuries. Fund assets in an amount equal to the
difference between the initial margin and the notional value of the
Coal Futures will be held in U.S. Treasuries, cash and/or cash
equivalents in a segregated account with a Commodity Broker and used to
meet future margin payments, if any.
The Sponsor has the sole authority to determine the percentage of
assets that will be held as margin or collateral and held in U.S.
Treasuries, cash and/or cash equivalents to pay current obligations and
as reserves.
The assets deposited by the Fund with a Commodity Broker as margin
must be segregated pursuant to the regulations of the CFTC. Such
segregated funds may be invested only in instruments approved by the
CFTC, which include (i) U.S. government securities, (ii) municipal
securities, (iii) U.S. agency obligations, (iv) certificates of
deposit, (v) commercial paper guaranteed by the U.S. government, (vi)
corporate notes or bonds guaranteed by the U.S. government, and (vii)
interests in money market mutual funds; however, the Sponsor
anticipates that the Fund's margin deposit assets will be invested only
in U.S. Treasuries or otherwise held as cash and/or cash equivalents.
The Coal Market
General. According to the Registration Statement, the following is
a brief introduction to the global coal industry. The data presented
below is derived from information released by various third-party
sources, including the World Coal Association, the U.S. Energy
Information Administration, the American Coal Foundation and the
American Geosciences Institute.
Coal is a safe, reliable, easily stored and readily available
source of energy produced in over 50 countries, consumed in over 70
countries and traded globally. Coal is a low-cost fossil fuel used
primarily for electric power generation, and is typically significantly
less expensive than oil and generally competitive with natural gas and
nuclear power generation. Coal is also used to produce steel (coal is
used in nearly 70% of global steel production) and by a variety of
other industrial consumers to heat and power foundries, cement plants,
paper mills, chemical plants and other manufacturing and processing
facilities. In general, coal is characterized by end use as either
steam coal or metallurgical coal. Steam coal is used primarily as fuel
by utilities to generate electrical power. It is also used by
industrial facilities to produce steam, electricity or both.
Metallurgical coal is refined into coke, which is used in the
production of steel.
Coal is classified into four general categories, or ``ranks,''
based on carbon content. Carbon is the source of coal's heating value,
but other factors also influence the amount of coal's energy per unit
of weight. The amount of energy in coal is often expressed in British
thermal units (``BTU'') per pound. A BTU is the amount of heat required
to raise the temperature of one pound of water by one degree
Fahrenheit. The four ranks of coal include:
Lignite. Lignite is geologically young coal that has the
lowest carbon content (approximately 25% to 35%), and consequently the
lowest energy content, of the four ranks of coal. Lignite has a heat
value ranging between 4,000 and 8,300 BTUs-per-pound. Sometimes called
brown coal, lignite is mainly used for electric power generation
primarily in power plants close in proximity to the source.
Sub-Bituminous. Sub-bituminous coal contains about 35% to
45% carbon and has a heat value between 8,300 and 13,000 BTUs-per-
pound. Approximately half of the coal produced within North America is
sub-bituminous. Although the heat value of sub-bituminous coal is lower
than bituminous, it tends to be lower in sulfur content and cleaner
burning.
Bituminous. Bituminous, or black coal, is the most
abundant type of coal. Bituminous contains approximately 45% to 86%
carbon and has a heat value between 10,500 and 15,500 BTUs-per-pound.
Bituminous has little water content or other impurities except for
sulfur, and is easily ignited.
Anthracite. Anthracite coal contains approximately 92% to
98% carbon and has a heat value of nearly 15,000 BTUs-per-pound.
Anthracite has a heat value greater than that of Bituminous, but is
hard to light, scarcer and more expensive.
Production and Supply. China remains the largest producer of coal
in the world, with an estimated production of 3.991 billion metric
tonnes (``mt'') in 2012. The United States and India follow China with
estimated hard coal production of approximately 1.016 billion mt and
694 million mt,
[[Page 57643]]
respectively, in 2012.\15\ Among the nations principally supplying coal
to the global power and steel markets are Australia, historically the
world's largest coal exporter with exports of approximately 332 million
mt in 2012, as well as Indonesia, Russia, United States, Colombia and
South Africa. Total United States exports of coal decreased in 2013 by
approximately 6% over 2012 to 118 million mt.\16\
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\15\ Source: U.S. Energy Information Administration: (https://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=1&pid=1&aid=24).
\16\ Source: U.S. Energy Administration Association: (https://www.eia.gov/beta/coal/data/browser/#/topic/41?agg=0,2,1&rank=g&freq=A&start=2001&end=2012&ctype=map<ype=pin&rtype=s&maptype=0&rse=0&pin=).
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Coal supply can be influenced by changes in coal mining capacity,
productivity and depletion rates, changes in government subsidization,
regulation, new capacity, climate events (i.e., floods, rains),
availability of mining equipment and availability and cost of skilled
labor and railroad/river barge/ocean bulk services.
Demand. Global coal consumption grew by 3.0% in 2013 over 2012.\17\
In 2011, China, the United States and India were the world's largest
consumers of coal (ranked 1st, 2nd and 3rd, respectively). In 2012
China was the largest consumer of coal with consumption of 4.151
billion mt. The United States and India consumed 889 and 745 million mt
in 2012, respectively.\18\
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\17\ Source: BP Statistical Review of World Energy, 2013, page
33: (https://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2014/BP-statistical-review-of-world-energy-2014-full-report.pdf).
\18\ Source: US Energy Information Administration, 2014: (https://www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=1&pid=1&aid=24).
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Factors impacting coal demand include the demand for electricity,
governmental regulation impacting power generation, technological
developments, transportation costs, climate events (i.e., floods and
rains), exchange rates and the location, availability and cost of other
fuels such as natural gas, oil, nuclear and hydroelectric power.
European Coal Markets. European coal is often classified into two
broad categories: Hard coal and lignite or brown coal. Hard coal is
further subdivided into two types of coal as steam (or thermal) coal,
used for power generation and for industrial applications; and coking
coal which is used by the iron and steel industry to make coke. Hard
coal has an energy content above 4,500 kilocalories/kilogram (``kcal/
kg'') and water content lower than 35%. Only hard coal is traded
internationally because of its higher energy content relative to
freight costs. The other broad category, lignite or brown coal, has an
energy content of less than 4,500 kcal/kg, and water content above 35%.
It is mostly used in local markets for power generation.\19\
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\19\ Source: Cornot-Gandolphe, Sylvie. ``Global Coal Trade From
Tightness to Oversupply.'' February 2013. Institut Francais des
Relations Internationales, page 11. (https://www.ifri.org/?page=contribution-detail&id=7570&lang=uk).
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Although coal is mined in many European coal countries, as of 2013
only about 35% of hard coal consumption was covered by production in
the European Union (the ``EU''). Coal consumption of hard coal in the
EU reached its lowest level in 2009 at 715 million tons. Since then,
consumption has resumed growing and the most recent figures indicate an
increase of 4.7% was recorded in 2013 from 2009 levels.\20\
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\20\ Source: EuroStat, February 2014: (https://
epp.eurostat.ec.europa.eu/statisticsexplained/index.php/
Coalconsumptionstatistics).
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Although economic slowdowns in the EU in 2011 and 2012 reduced
overall electricity demand, coal demand by utilities actually increased
during this period replacing the relatively more expensive natural gas.
This is thought to be largely a result of relatively high priced
natural gas in Europe and low priced coal as well as the collapse of
the price of carbon credits. The low priced coal was in part caused by
the ``shale revolution'' of cheap natural gas in the United States,
which resulted in a surge in coal imports from the United States and
Colombia that pressured coal prices downward in Europe.
Within Europe, Germany is one of the largest producers and
importers of coal, importing some 45 million tons of hard coal in 2012
which represented 79% of Germany's national consumption.\21\ In
addition to Germany, major European importing countries of coal also
include the United Kingdom, Spain, and Italy.\22\
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\21\ Source: ``Coal Industry Across Europe.'' 5th Edition 2013.
European Association for Coal and Lignite, page 31. (https://www.euracoal.org/pages/medien.php?idpage=1410).
\22\ Source: Cornot-Gandolphe, Sylvie. ``Global Coal Trade From
Tightness to Oversupply.'' February 2013. Institut Francais des
Relations Internationales, page 32. (https://www.ifri.org/?page=contribution-detail&id=7570&lang=uk).
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One of the largest ports in Europe in terms of total cargo is the
port of Rotterdam \23\ which also often provides benchmark prices for
coal transactions across Europe. The largest exporting countries to
Europe in order of tons exported are Russia, Colombia, and the United
States as of 2013.\24\
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\23\ Source: Port of Rotterdam Web site. February 2014: (https://www.portofrotterdam.com/en/Port/port-in-general/Pages/default.aspx).
\24\ Source: EuroStat, February 2014: (https://
epp.eurostat.ec.europa.eu/statisticsexplained/index.php/
File:HardcoalimportsintoEU-
28bycountryoforigin,2013
(%25basedonkt).png).
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Rotterdam Coal Futures. The CME lists ``Rotterdam Coal Futures''
under the symbol ``MTF''. The trading unit for the Rotterdam contract
is 1,000 tons. Rotterdam Coal Futures are financially settled against
the Argus/McCloskey Coal Price Index (``API 2 Index'') \25\ as
published in the Argus/McCloskey Coal Price Index Report and are
subject to CME position and accountability limits. The API 2 Index is
calculated by Argus Media.\26\ Coal included in the API 2 Index
calculation must generally be delivered to the ports of Antwerp,
Rotterdam, or Amsterdam with certain exceptions for coal that is
delivered to North West European countries and netted back to a
Rotterdam delivery equivalent using freight differentials between
discharge ports. Coal included in the API 2 Index must be bituminous
and meet several criteria to qualify including having an energy value
of 6,000 kcal/kg, a maximum sulfur content of 1.00%, and be part of a
cargo with a minimum quantity of 50,000 tons of coal on the most
economic vessel from the port of origin.\27\
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\25\ Neither the Fund, the Sponsor, nor any of their affiliates
are sponsored, endorsed or promoted by, or otherwise associated
with, Argus Media Inc., IHS Global Ltd., or the CME Group.
\26\ Source: Argus Media: (https://www.argusmedia. com/Coal/
Argus-McCloskeys-Coal-Price-Index-Report).
\27\ Source: IHS McCloskey, November 2010: (https://
cr.mccloskeycoal.com/journals/McCloskey/McCloskeyCR/
Issue249-
26November2010/attachments/
MethodologyMay%202012(October%202013%20Edited%20Ver
sion).pdf).
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Trading of Rotterdam Coal Futures contracts terminates on the last
Friday of the delivery month. Trading can occur in any of up to 84
consecutive months. Contracts for each new year are added following the
termination of trading in the December contract of the current year.
The Fund's Investments
According to the Registration Statement, the Fund will attempt to
invest in an equal amount of contracts (an equal amount of tonnage)
across the nearest calendar quarter of Coal Futures resulting in three
delivery months of Coal Futures price exposure. The Sponsor will seek
to invest the Fund's cash collateral in 13 week U.S. Treasury Bills.
Currently, due to liquidity concerns with respect to futures
contracts for other ``types'' of coal (such as Central Appalachian or
``CAPP''), the Sponsor anticipates that the Fund will only
[[Page 57644]]
invest in Coal Futures. However, if the liquidity of other exchange-
traded coal futures increases in the future, the Sponsor may consider
amending the Registration Statement and to revise the description of
the Fund's investment strategy to include futures contracts for other
types of coal.\28\
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\28\ In such event, the Exchange would file a proposed rule
change pursuant to Rule 19b-4 under the Act to permit the Fund to
invest in other exchange-traded coal futures contracts.
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Commodity futures contracts normally specify a certain date for the
delivery of the underlying physical commodity. To avoid expiration and
maintain a long futures position, contracts nearing a delivery date
must be sold and contracts that have not yet reached delivery must be
purchased. This process is known as ``rolling'' a futures position. The
Fund will employ the strategy of rolling futures as it will replace
futures contracts as they approach maturity by notionally selling and
purchasing offsetting contracts to avoid delivery and maintain long
futures positions. Four times each year, the Fund will roll the nearby
calendar quarter contracts over five days on a pro rata basis. The five
day rolling period starts on the second Monday of the month just prior
to the nearby full calendar quarter with an equal amount of tonnage, or
\1/5\th of the contracts in the portfolio, rolled each of the five days
from the front month calendar quarter to the next available calendar
quarter. For example, the Fund would start rolling out of the first
calendar quarter (January, February, March) on the second Monday of
December into the second calendar quarter consisting of April, May, and
June.
The Sponsor anticipates that the Fund's position in each of the
Coal Futures contract months represented, outside of roll periods, will
contain an equal number of contracts (an equal tonnage per coal future
delivery month).
Net Asset Value
The NAV for the Shares will equal the market value of the Fund's
total assets less total liabilities calculated in accordance with
Generally Accepted Accounting Principles (``GAAP''). Under the Fund's
proposed operational procedures, the Administrator will calculate the
NAV once each NYSE Arca trading day. To calculate the NAV, the
Administrator will use the CME settlement prices (typically determined
after 5:00 p.m. Eastern Time (``E.T.'')) for the Coal Futures traded on
the CME Facilities plus the value of any United States Treasury Bills
and cash equivalents. The NAV for a particular trading day will be
released after 5:00 p.m. E.T. and will be posted at
www.greenhavenfunds.com.
Creation and Redemption Procedures
On any business day, an ``Authorized Participant'' may place an
order with the Fund's ``Marketing Agent'' \29\ to create one or more
aggregations of 25,000 Shares (each, a ``Basket'').\30\ Creation orders
will be accepted only on a business day during which the NYSE Arca is
open for regular trading. Purchase orders must be placed no later than
10:00 a.m. E.T., on each business day the NYSE Arca is open for regular
trading. The day on which the Marketing Agent receives a valid purchase
order is the purchase order date. Purchase orders are irrevocable. By
placing a purchase order, and prior to delivery of the applicable
Baskets, an Authorized Participant's DTC account will be charged a non-
refundable transaction fee due for the purchase order.\31\
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\29\ The Marketing Agent will be a broker-dealer registered with
FINRA and a member of the Securities Investor Protection
Corporation.
\30\ Baskets may be created or redeemed only by Authorized
Participants. Each Authorized Participant must (1) be a registered
broker-dealer or other securities market participant, such as a bank
or other financial institution that is not required to register as a
broker-dealer to engage in securities transactions, (2) be a
participant in the Depository Trust Company (``DTC''), and (3) have
entered into a ``Participant Agreement'' with the Fund and the
Sponsor, a form of which is available from the Sponsor,
Administrator or Marketing Agent. The Participant Agreement sets
forth the procedures for the creation and redemption of Baskets and
the delivery of cash required for such creations or redemptions.
\31\ The Exchange notes that the Commission previously has
approved representations relating to issues of Trust Issued Receipts
whereby the cut-off time for placing orders to create or redeem
shares of an issue of Trust Issued Receipts is earlier than 4:00
p.m. E.T. See, e.g., Securities Exchange Act Release Nos. 63915
(February 15, 2011), 76 FR 9843 (February 22, 2011) (SR-NYSEArca-
2010-121) (order approving listing and trading on the Exchange of
FactorShares Funds); 63753 (January 21, 2011), 76 FR 4963 (January
27, 2011) (SR-NYSEArca-2010-110) (order approving listing and
trading of shares of Teucrium Natural Gas Fund under NYSE Arca
Equities Rule 8.200); 63869 (February 8, 2011), 76 FR 8799 (February
15, 2011) (SR-NYSEArca-2010-119) (order approving listing and
trading of shares of Teucrium WTI Crude Oil Fund). See also
Securities Exchange Act Release No. 71909 (April 9, 2014), 79 FR
21337 (April 15, 2014) (SR-NYSEArca-2014-28) (notice of filing and
immediate effectiveness of proposed rule change to change to 11:00
a.m. E.T. the time by which purchase and redemptions orders must be
placed with respect to the Market Vectors Low Volatility Commodity
ETF and Market Vectors Long/Short Commodity ETF). The Sponsor
represents that a 10:00 a.m. E.T. cut-off time for purchase and
redemption orders could permit the Sponsor to more efficiently
engage in transactions in Coal Futures in connection with orders to
create or redeem Shares, which may help reduce the premium or
discount on the Shares, and reduce the difference between the price
of the Shares and the NAV of such Shares.
---------------------------------------------------------------------------
The total payment required to create each Basket will be the NAV of
25,000 Shares on the purchase order date, but only if the required
payment is timely received. Because orders to purchase Baskets must be
placed no later than 10:00 a.m. E.T., but the total payment required to
create a Basket typically will not be determined until after 5:00 p.m.
E.T., on the date the purchase order is received, Authorized
Participants will not know the total amount of the payment required to
create a Basket at the time they submit an irrevocable purchase order.
An Authorized Participant who places a purchase order shall
transfer to the Administrator the required amount of U.S. Treasuries
and/or cash by the end of the next business day following the purchase
order date. Upon receipt of the deposit amount, the Administrator will
direct DTC to credit the number of Baskets ordered to the Authorized
Participant's DTC account on the next business day following the
purchase order date.
The Sponsor acting by itself or through the Administrator or the
Marketing Agent may suspend the right of purchase, or postpone the
purchase settlement date, for any period during which the NYSE Arca is
closed other than customary weekend or holiday closings, or for any
period when trading on the NYSE Arca is suspended.
The Sponsor acting by itself or through the Administrator or the
Marketing Agent may reject a purchase order if (1) it determines that
the purchase order is not in proper form, (2) circumstances outside the
control of the Sponsor make it, for all practical purposes, not
feasible to process creations of Baskets such as during force majeure
events, or (3) the Sponsor believes that it or the Fund would be in
violation of any securities or commodities rules or regulations
regarding position limits or otherwise by accepting a creation.
Redemption Procedures
According to the Registration Statement, the procedures by which an
Authorized Participant can redeem one or more Baskets will mirror in
reverse the procedures for the creation of Baskets. On any business
day, an Authorized Participant may place an order with the Marketing
Agent to redeem one or more Baskets. Redemption orders must be placed
no later than 10:00 a.m. E.T., on each business day. The day on which
the Marketing Agent receives a valid redemption order is the redemption
order date. Redemption orders are irrevocable.
[[Page 57645]]
By placing a redemption order, an Authorized Participant agrees to
deliver the Baskets to be redeemed through DTC's book-entry system to
the Fund not later than 12:00 p.m. E.T., on the next business day
immediately following the redemption order date. By placing a
redemption order, and prior to receipt of the redemption proceeds, an
Authorized Participant's DTC account will be charged the non-refundable
transaction fee due for the redemption order.
The redemption proceeds from the Fund will consist of a cash
redemption amount equal to the NAV of the number of Baskets requested
in the Authorized Participant's redemption order on the redemption
order date.
Because orders to redeem Baskets must be placed no later than 10:00
a.m. E.T., but the total amount of redemption proceeds typically will
not be determined until after 5:00 p.m. E.T., on the date the
redemption order is received, Authorized Participants will not know the
total amount of the redemption proceeds at the time they submit an
irrevocable redemption order.
The redemption proceeds due from the Fund will be delivered to the
Authorized Participant at 12:00 p.m. E.T., on the next business day
immediately following the redemption order date if, by such time, the
Fund's DTC account has been credited with the Baskets to be redeemed.
If the Fund's DTC account has not been credited with all of the Baskets
to be redeemed by such time, the redemption distribution will be
delivered to the extent of whole Baskets are received.
The Sponsor, acting by itself or through the Administrator or the
Marketing Agent, may suspend the right of redemption, or postpone the
redemption settlement date, (1) for any period during which the NYSE
Arca is closed other than customary weekend or holiday closings, or
trading on the NYSE Arca is suspended or restricted, (2) for any period
during which an emergency exists as a result of which the redemption
distribution is not reasonably practicable, or (3) in the event any
price limits imposed by the CME or the CFTC are reached and the Sponsor
believes that permitting redemptions under such circumstances may
adversely impact investors.
The Sponsor acting by itself or through the Marketing Agent or the
Administrator may reject a redemption order if the order is not in
proper form as described in the Participant Agreement or if the
fulfillment of the order, in the opinion of the Sponsor's counsel,
might be unlawful.
Availability of Information
According to the Registration Statement, to provide updated
information relating to the Fund for use by investors and market
professionals, NYSE Arca will calculate and disseminate during the NYSE
Arca Core Trading Session (normally, 9:30 a.m. E.T. to 4:00 p.m. E.T.)
an updated ``Indicative Fund Value'' (``IFV'').\32\ The IFV will be
calculated by using the prior day's closing NAV per Share as a base and
updating that value during the NYSE Arca Core Trading Session to
reflect changes in the value of the Fund's Coal Futures during the
trading day. The IFV disseminated during NYSE Arca trading hours should
not be viewed as an actual real time update of the NAV, which will be
calculated only once at the end of each trading day.
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\32\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IFVs
taken from Consolidated Tape Association (``CTA'') or other data
feeds.
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The IFV will be widely disseminated on a per Share basis every 15
seconds during the NYSE Arca Core Trading Session by one or more major
market data vendors. The normal trading hours for Coal Futures on the
CME Facilities are 6:00 p.m. E.T. Sunday through 6:00 p.m. E.T. Friday,
with a 45 minute break each day from 5:15 p.m. E.T. to 6:00 p.m. E.T.
In addition, the IFV will be published on the NYSE Euronext Global
Index Feed and will be available through on-line information services
such as Bloomberg and Reuters.
The 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 \33\ under the Act,
the Trust will rely on the exception contained in Rule 10A-3(c)(7).\34\
A minimum of 100,000 Shares for the Fund will be outstanding as of the
start of trading on the Exchange.
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\33\ 17 CFR 240.10A-3.
\34\ 17 CFR 240.10A-3(c)(7).
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The Web site for the Fund and/or the Exchange, which will be
publicly accessible at no charge, will contain the following
information: (a) The current NAV per Share daily and the prior business
day's NAV and the reported closing price; (b) the midpoint of the bid-
ask price in relation to the NAV as of the time the NAV is calculated
(the ``Bid-Ask Price''); (c) calculation of the premium or discount of
such price against such NAV; (d) the bid-ask price of Shares determined
using the highest bid and lowest offer as of the time of calculation of
the NAV; (e) data in chart form displaying the frequency distribution
of discounts and premiums of the Bid-Ask Price against the NAV, within
appropriate ranges for each of the four (4) previous calendar quarters;
(f) the prospectus; and (g) other applicable quantitative information.
The Fund will also disseminate the Fund's holdings on a daily basis on
the Fund's Web site. The combined value of the applicable three month
strip and U.S. Treasuries, will be made available by one or more major
market data vendors, updated at least every 15 seconds during the
Exchange's Core Trading Session.
The NAV for the Fund will be calculated by the Administrator once a
day and will be disseminated daily 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 the Shares, and the
corresponding NAV for the Fund. The closing price and settlement prices
of Coal Futures are also readily available from the CME. In addition,
such prices are available from automated quotation systems, published
or other public sources, or on-line information services such as
Bloomberg or Reuters. Quotation and last-sale information regarding the
Shares will be disseminated through the facilities of the CTA.
The Exchange represents that quotation and last sale information
for the Coal Futures will be widely disseminated through a variety of
major market data vendors worldwide, including Bloomberg and Reuters.
In addition, the Exchange further represents that complete real-time
price (and volume) data for such contracts is available by subscription
from Reuters and Bloomberg. The CME also provides delayed futures price
(and volume) information on current and past trading sessions and
market news free of charge on its Web site for Coal Futures. The
specific contract specifications for such contracts are also available
at the CME Web site, as well as other financial informational sources.
CME also makes available real time futures pricing information for a
fee. The spot price of coal also is available on a 24-hour basis from
major market data vendors. Information relating to trading, including
price and volume information, in Coal Futures will be available from
major market data vendors and from the exchanges on which Coal Futures
trade.
The Fund will provide Web site disclosure of its portfolio holdings
daily and will include the names, quantity, price and market value of
the Coal Futures held by the Fund and other
[[Page 57646]]
financial instruments such as Treasury Bills, if any, and the
characteristics of such instruments and cash equivalents, and amount of
cash held in the portfolio of the Fund. The Web site disclosure of the
portfolio composition of the Fund will occur at the same time as the
disclosure by the Sponsor of the portfolio composition to Authorized
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
Fund through the Fund's Web site.
A more detailed description of the Fund, Coal Futures and other
aspects of the applicable commodities markets, as well as investment
risks, are set forth in the Registration Statement. All terms relating
to the Fund that are referred to, but not defined in, this proposed
rule change are defined in the Registration Statement.
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. As provided in NYSE Arca Equities Rule 7.6,
Commentary .03, the minimum price variation (``MPV'') for quoting and
entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00 for which the MPV for order entry is $0.0001.
The trading of the Shares will be subject to NYSE Arca Equities
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on
Equity Trading Permit (``ETP'') Holders acting as registered Market
Makers in TIRs to facilitate surveillance.
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 Coal Futures, (2) if the creation
or redemption of Shares is suspended for a period that, in the judgment
of the Exchange, may detrimentally impact Exchange trading of the
Shares, or (3) 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 \35\ or by the halt or suspension
of trading of the Coal Futures.
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\35\ See NYSE Arca Equities Rule 7.12.
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The Exchange represents that the Exchange may halt trading during
the day in which an interruption to the dissemination of the IFV or the
value of Coal Futures occurs. If the interruption to the dissemination
of the IFV or the value of Coal Futures 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.\36\ 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.
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\36\ The Exchange notes that the Exchange may halt trading
during the day in which an interruption to the dissemination of the
IFV or the value of the applicable futures contracts occurs.
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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.\37\ 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 federal securities laws applicable to trading on
the Exchange.
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\37\ 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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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 and Coal Futures with other markets
that are members of the Intermarket Surveillance Group (``ISG''), and
FINRA may obtain trading information regarding trading in the Shares
and Coal Futures from such markets. In addition, the Exchange may
obtain information regarding trading in the Shares, and Coal Futures
from markets that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement. CME is a member
of the ISG. A list of ISG members is available at www.isgportal.org.
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, or
a portion of the Core Trading Session, when an updated IFV will not be
calculated or publicly disseminated; (2) the procedures for purchases
and redemptions of Shares in Basket size (and that Shares are not
individually redeemable); (3) NYSE Arca Equities Rule 9.2(a), which
imposes a duty of due diligence on its ETP Holders to learn the
essential facts relating to every customer prior to trading the Shares;
(4) how information regarding the IFV is disseminated; (5) 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 Fund. The Exchange notes that investors
purchasing Shares directly from the Fund will receive a prospectus. ETP
Holders purchasing Shares from the Fund 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 Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Bulletin will also reference that the CFTC
has regulatory
[[Page 57647]]
jurisdiction over the trading of coal futures contracts traded on U.S.
markets.
The Information Bulletin will also disclose the trading hours of
the Shares of the Fund and that the NAV for the Shares is calculated
after 5:00 p.m. E.T. each trading day. The Bulletin will disclose that
information about the Shares of the Fund is publicly available on the
Fund's Web site.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \38\ 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.
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\38\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule 8.200
and Commentary .02 thereto. The Exchange has in place surveillance
procedures that are adequate to properly monitor trading in the Shares
in all trading sessions and to deter and detect violations of Exchange
rules and applicable federal securities laws. FINRA, on behalf of the
Exchange, will communicate as needed regarding trading in the Shares
and Coal Futures with other markets that are members of the ISG, and
FINRA may obtain trading information regarding trading in the Shares
and Coal Futures from such markets. In addition, the Exchange may
obtain information regarding trading in the Shares and Coal Futures
from markets that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement. CME is a member
of the ISG.
The closing price and settlement prices of Coal Futures are readily
available from the CME. In addition, such prices are available from
automated quotation systems, published or other public sources, or on-
line information services such as Bloomberg or Reuters. The Fund will
provide Web site disclosure of its portfolio holdings daily. Quotation
and last-sale information regarding the Shares will be disseminated
through the facilities of the CTA. The IFV will be widely disseminated
on a per Share basis every 15 seconds during the NYSE Arca Core Trading
Session (normally 9:30 a.m. E.T. to 4:00 p.m. E.T.) by one or more
major market data vendors. In addition, the IFV will be published on
the NYSE Euronext Global Index Feed and will be available through on-
line information services such as Bloomberg and Reuters. The Exchange
represents that the Exchange may halt trading during the day in which
an interruption to the dissemination of the IFV or the value of Coal
Futures occurs. If the interruption to the dissemination of the IFV or
the value of Coal Futures 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.
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
Fund and the Shares, thereby promoting market transparency. The NAV per
Share will be calculated daily and made available to all market
participants at the same time. One or more major market data vendors
will disseminate for the Fund on a daily basis information with respect
to the recent NAV per Share and Shares outstanding.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of commodity futures-related exchange-traded product
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 Fund's holdings,
IFV, and quotation and last sale information for the Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of commodity futures-related exchange-traded product,
and the first such product based on coal futures, which 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 up to 90 days of such
date (i) as the Commission may designate 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, as modified by Amendment No. 1 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-2014-102 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-102.
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
[[Page 57648]]
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 also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2014-102, and
should be submitted on or before October 16, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\39\
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\39\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-22786 Filed 9-24-14; 8:45 am]
BILLING CODE 8011-01-P
