Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 to Proposed Rule Change Relating to Listing and Trading Shares of the Sit Rising Rate Fund Under NYSE Arca Equities Rule 8.200, 69173-69179 [2014-27456]
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Federal Register / Vol. 79, No. 224 / Thursday, November 20, 2014 / Notices
proposed rule change.6 The Commission
received no comments on the proposed
rule change.
Section 19(b)(2) of the Act 7 provides
that, after initiating disapproval
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of filing of the proposed rule
change. The Commission may, however,
extend the period for issuing an order
approving or disapproving the proposed
rule change by not more than 60 days
if the Commission determines that a
longer period is appropriate and
publishes the reasons for that
determination. The proposed rule
change was published for notice and
comment in the Federal Register on
May 21, 2014.8 The 180th day after
publication of the notice of the filing of
the proposed rule change in the Federal
Register is November 17, 2014, and the
240th day after publication of the notice
of the filing of the proposed rule change
in the Federal Register is January 16,
2015.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change.
Accordingly, the Commission,
pursuant to Section 19(b)(2) of the Act,9
designates January 16, 2015 as the date
by which the Commission shall either
approve or disapprove the proposed
rule change (File No. SR–NYSEArca–
2014–56).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–27447 Filed 11–19–14; 8:45 am]
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BILLING CODE 8011–01–P
6 See Securities Exchange Act Release No. 72867,
79 FR 50720 (Aug. 25, 2014). Specifically, the
Commission instituted proceedings to allow for
additional analysis of the proposed rule change’s
consistency with Section 6(b)(5) of the Act, 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,’’ and ‘‘to protect investors and the public
interest.’’ See id.
7 15 U.S.C. 78s(b)(2).
8 See supra note 3 and accompanying text.
9 15 U.S.C. 78s(b)(2).
10 17 CFR 200.30–3(a)(57).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73602; File No. SR–
NYSEArca–2014–120]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 2 to Proposed Rule
Change Relating to Listing and Trading
Shares of the Sit Rising Rate Fund
Under NYSE Arca Equities Rule 8.200
November 14, 2014.
On October 16, 2014, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1)1 of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 2 and Rule 19b–4 thereunder,3 a
proposed rule change to list and trade
shares of the Sit Rising Rate Fund under
NYSE Arca Equities Rule 8.200. The
proposed rule change was published for
comment in the Federal Register on
November 4, 2014.4 The Commission
received no comments on the proposal.
Pursuant to Section 19(b)(1) of the
Act 5 and Rule 19b–4 thereunder,6
notice is hereby given that, on
November 6, 2014, the Exchange filed
with the Commission Amendment No. 2
to the proposed rule change, as
described in Sections I and II below,
which Sections have been prepared by
the Exchange.7 The Commission is
publishing this notice to solicit
comments from interested persons on
the proposed rule change, as modified
by Amendment No. 2 thereto.
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 Sit Rising Rate Fund
under NYSE Arca Equities Rule 8.200.
The text of the proposed rule change is
available on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 73464
(Oct. 29, 2014), 79 FR 65437.
5 15 U.S.C. 78s(b)(1).
6 17 CFR 240.19b–4.
7 Amendment No. 2 replaces SR–NYSEArca–
2014–120 and supersedes such filing in its entirety.
Amendment No. 1 was filed on November 3, 2014
and withdrawn on November 6, 2014.
2 15
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69173
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NYSE Arca Equities Rule 8.200,
Commentary .02 permits the trading of
Trust Issued Receipts (‘‘TIRs’’) either by
listing or pursuant to unlisted trading
privileges (‘‘UTP’’).8 The Exchange
proposes to list and trade shares
(‘‘Shares’’) of the Sit Rising Rate Fund
(‘‘Fund’’) pursuant to NYSE Arca
Equities Rule 8.200. The Fund is a series
of the ETF Managers Group Commodity
Trust I (the ‘‘Trust’’), a Delaware
statutory trust.9
The Exchange notes that the
Commission has previously approved
the listing and trading of other issues of
TIRs on the American Stock Exchange
LLC,10 trading on NYSE Arca pursuant
to UTP,11 and listing on NYSE Arca.12
In addition, the Commission has
approved the listing and trading of other
exchange-traded fund-like products
linked to the performance of underlying
currencies and commodities.13
8 Commentary .02 to NYSE Arca Equities Rule
8.200 applies to Trust Issued Receipts that invest
in ‘‘Financial Instruments.’’ The term ‘‘Financial
Instruments,’’ as defined in Commentary .02(b)(4) to
NYSE Arca Equities Rule 8.200, means any
combination of investments, including cash;
securities; options on securities and indices; futures
contracts; options on futures contracts; forward
contracts; equity caps, collars and floors; and swap
agreements.
9 The Trust submitted a registration statement
with respect to the Fund on Form S–1 under the
Securities Act of 1933 (‘‘1933 Act’’) on October 7,
2014 (File No. 333–199190) (the ‘‘Registration
Statement’’). The description of the Fund and the
Shares contained herein are based, in part, on the
Registration Statement.
10 See, e.g., Securities Exchange Act Release No.
58161 (July 15, 2008), 73 FR 42380 (July 21, 2008)
(SR–Amex–2008–39).
11 See, e.g., Securities Exchange Act Release No.
58163 (July 15, 2008), 73 FR 42391 (July 21, 2008)
(SR–NYSEArca–2008–73).
12 See, e.g., Securities Exchange Act Release No.
70209 (August 15, 2013), 78 FR 51269 (June 24,
2013) (SR–NYSEArca–2013–60); Securities
Exchange Act Release No. 58457 (September 3,
2008), 73 FR 52711 (September 10, 2008) (SR–
NYSEArca–2008–91).
13 See, e.g., Securities Exchange Act Release Nos.
56131 (July 25, 2007), 77 FR 42212 (August 1, 2007)
(SR–NYSEArca–2007–57) (order approving listing
and trading on NYSE Arca of shares of eight issues
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Federal Register / Vol. 79, No. 224 / Thursday, November 20, 2014 / Notices
According to the Registration
Statement, the Fund’s sponsor and
investment manager is ETF Managers
Capital LLC (‘‘ETFMC’’ or the
‘‘Sponsor’’), a limited liability company
that is a commodity pool operator
(‘‘CPO’’) that is registered with the
Commodity Futures Trading
Commission (‘‘CFTC’’) 14 and is a
member of the National Futures
Association (‘‘NFA’’). U.S. Bancorp
Fund Services will be the transfer agent,
custodian and administrator for the
Fund (‘‘Custodian’’ or ‘‘Administrator’’).
Esposito Securities LLC (the
‘‘Distributor’’) will provide statutory
and wholesaling distribution services.15
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Fund’s Investment Objective and
Strategy
The Fund’s investment objective will
be to profit from rising interest rates by
tracking the performance of a portfolio
(the ‘‘Benchmark Portfolio’’) consisting
of exchange traded futures contracts and
options on futures on 2, 5 and 10-year
U.S. Treasury securities (‘‘Treasury
Instruments’’) weighted to achieve a
targeted negative 10-year average
effective portfolio duration (the
‘‘Benchmark Component Instruments’’).
The Fund will seek to achieve its
investment objective by investing in the
Benchmark Component Instruments
currently constituting the Benchmark
Portfolio. The Fund will invest in the
Treasury Instruments in the same
weighting as the Benchmark Portfolio.
The Benchmark Portfolio will be
maintained by Sit Fixed Income
Advisors II, LLC (‘‘Sit’’) 16 and will be
rebalanced, reconstituted, or both,
monthly, typically on the 15th of each
month and on the next business day if
the 15th is a holiday, weekend, or other
day on which the national exchanges
are closed, to maintain a negative 10of Commodity Trust Shares); 57456 (March 7,
2008), 73 FR 13599 (March 13, 2008) (SR–
NYSEArca–2007–91) (order granting accelerated
approval for NYSE Arca listing and trading of
shares of the iShares GS Commodity Trusts); 59781
(April 17, 2009), 74 FR 18771 (April 24, 2009) (SR–
NYSEArca–2009–28) (order granting accelerated
approval for NYSE Arca listing and trading of
shares 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 the ETFS Gold Trust); 62527
(July 19, 2010), 75 FR 43606 (July 26, 2010) (SR–
NYSEArca–2010–44) (order approving listing and
trading on NYSE Arca of shares of the United States
Commodity Index Fund).
14 The Sponsor is not a broker-dealer or affiliated
with a broker-dealer.
15 This Amendment No. 2 to SR–NYSEArca–
2014–120 replaces SR–NYSEArca–2014–120 as
originally filed and supersedes such filing in its
entirety. The Exchange has withdrawn Amendment
No. 1 to SR–NYSEArca–2014–120.
16 Sit is not affiliated with the Sponsor. Sit is not
a broker-dealer or affiliated with a broker-dealer.
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margin to its futures commission
merchant (‘‘FCM’’), in an amount equal
to the margin required by the relevant
exchange, and transfer to its FCM any
additional amounts that may be
separately required by the FCM.17 Any
assets not required to be posted as
margin with the FCM will be held at the
Fund’s administrator in cash or cash
equivalents as discussed below.
The Benchmark Portfolio will be
invested in Benchmark Component
Instruments and rebalanced, as noted
above, to maintain a negative average
effective portfolio duration of
approximately 10 years. Duration is a
measure of estimated price sensitivity
relative to changes in interest rates.
Portfolios with longer durations are
typically more sensitive to changes in
interest rates. For example, if interest
rates rise by 1%, the market value of a
Treasury instrument
Percent of
security with an effective duration of 5
(%)
portfolio
years would decrease by 5%, with all
other factors being constant, and
2 Year U.S. Treasury Futures ..
45
likewise the market value of a security
5 Year U.S. Treasury Futures ..
30
with an effective duration of negative 5
5 Year U.S. Treasury Call Options .......................................
15 years would increase by 5%, with all
other factors being constant. Duration
10 Year U.S. Treasury Put Options .......................................
10 estimates are based on certain
assumptions by Sit and are subject to a
100 number of limitations. Duration is a
more accurate estimate of price
The relative weightings of the
sensitivity provided interest rate
Benchmark Component Instruments
changes are small and occur equally in
will be shifted between maturities only
short-term and long-term securities.
when there are material changes in the
Investments in debt securities typically
shape of the yield curve, for example, if decrease in value when interest rates
the Federal Reserve began raising short
rise. The risk is usually greater for
term interest rates more than long term
longer-term debt securities.
interest rates. In such an instance, Sit,
The Fund will incur certain expenses
which maintains the Benchmark
in connection with its operations. The
Portfolio, will increase the weightings of Fund will hold cash or cash equivalents
the 2-year and reduce the weighting in
such as U.S. Treasuries or other high
the 10-year maturity Treasury
credit quality, short-term fixed-income
Instruments. Conversely, Sit will do the or similar securities (such as shares of
opposite if the Federal Reserve began
money market funds) for direct
raising long term interest rates more
investment or as collateral for the
than short term interest rates.
Treasury Instruments and for other
Reconstitution and rebalancing each
liquidity purposes and to meet
will occur monthly, on the 15th, or on
redemptions that may be necessary on
the nest [sic] business day if the 15th is
an ongoing basis. These expenses and
a holiday, weekend, or other day on
income from the cash and cash
which the national exchanges are
equivalent holdings may cause
closed, unless there are radical changes
imperfect correlation between changes
in the yield curve such that effective
in the Fund’s NAV and changes in the
duration is outside of a range from
Benchmark Portfolio, because the
negative nine to negative 11-year
Benchmark Portfolio does not reflect
average effective duration, in which
expenses or income.
case Sit will adjust the maturities of the
17 When establishing positions in Treasury
Treasury Instruments before the next
Instruments, the Fund will be required to deposit
expected monthly reconstitution.
initial margin with a value of approximately 3% to
The Sponsor anticipates that
10% of the value of each Treasury Instrument
approximately 5% to 15% of the Fund’s position at the time it is established. These margin
assets will be used as payment for or
requirements are subject to change from time to
time by the exchange or the FCM. On a daily basis,
collateral for Treasury Instruments. In
the Fund will be obligated to pay, or entitled to
order to collateralize its Treasury
receive, variation margin in an amount equal to the
Instrument positions the Fund will hold change in the daily settlement level of its Treasury
such assets, from which it will post
Instruments positions.
year average effective duration. The
Benchmark Portfolio and the Fund will
each maintain a short position in
Treasury Instruments. The Fund will
not use futures contracts or options to
obtain leveraged investment results. The
Benchmark Component Instruments
constituting the Benchmark Portfolio
and anticipated rebalancing dates, as
well as the daily holdings of the Fund,
will be available on the Fund’s Web site
at www.risingratefund.com.
The weightings of the Treasury
Instruments constituting the Benchmark
Portfolio and the Fund will be based on
each maturity’s duration contribution.
Longer duration treasuries will account
for a more meaningful portion of the
Fund’s price sensitivity to changes in
interest rates. As of October 9, 2014, the
Benchmark Portfolio consisted of:
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Federal Register / Vol. 79, No. 224 / Thursday, November 20, 2014 / Notices
Net Asset Value
According to the Registration
Statement, the net asset value (‘‘NAV’’)
of the Fund will be calculated by taking
the current market value of its total
assets, subtracting any liabilities, and
dividing that total by the total number
of outstanding Shares.
The Administrator will calculate the
NAV daily and the NAV will be released
after 4:00 p.m. Eastern Time (‘‘E.T.’’),
the end of the Core Trading Session on
the Exchange. For purposes of
calculating NAV, the Administrator will
use the closing price of the Treasury
Instruments on the U.S. exchanges on
which the Treasury Instruments are
traded (primarily on the exchanges
within the Chicago Mercantile Exchange
Group of exchanges and other national
exchanges (collectively, the ‘‘Futures
Exchanges’’)). The Administrator will
value all other holdings of the Fund at
(1) current market value, if quotations
for such property are readily available,
or (2) fair value, as reasonably
determined by the Administrator, if the
current market value cannot be
determined. Once the value of the
Treasury Instruments and interest
earned on the Fund’s cash and cash
equivalents has been determined, the
Administrator will subtract all accrued
expenses and liabilities of the Fund as
of the time of calculation in order to
calculate the net asset value of the
Fund.
rmajette on DSK2VPTVN1PROD with NOTICES
Intraday Indicative Value (‘‘IIV’’)
According to the Registration
Statement, the Exchange will calculate
and disseminate throughout the core
trading session on each trading day an
updated IIV for the Fund. The IIV will
be calculated by using the Fund’s prior
day’s closing NAV per share as a base
and updating that value throughout the
trading day to reflect changes in the
most recently reported trade price for
the Benchmark Component Instruments.
The net asset value of the Fund’s cash
and cash equivalent holdings, on the
other hand, will not be updated
throughout the day.
The IIV will be calculated on a per
share basis every 15 seconds during the
Core Trading Session (9:30 a.m. E.T. to
4:00 p.m. E.T.) on the Exchange. The
normal trading hours of the Futures
Exchanges are 10:00 a.m. to 2:30 p.m.
E.T. This means that there is a gap in
time at the beginning and the end of
each day during which the Fund’s
Shares are traded on the Exchange but
real-time Futures Exchanges trading
prices for contracts traded on the
Futures Exchanges are unavailable.
During such gaps in time the IIV will be
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13:37 Nov 19, 2014
Jkt 235001
calculated based on the end of day price
of such contracts from the Futures
Exchanges’ immediately preceding
trading session.
According to the Registration
Statement, the Fund will provide the
independent third party calculator with
information to calculate the IIV, but the
Fund will not be involved in the actual
calculation of the IIV and is not
responsible for the calculation or
dissemination of the IIV. The Fund
makes no warranty as to the accuracy of
the IIV. The IIV should not be viewed
as a ‘‘real-time’’ update of NAV because
the IIV is not calculated in the same
manner as NAV, which will be
computed once per day.
The Exchange disseminates the IIV
through the facilities of CTA/CQ High
Speed Lines. In addition, the IIV is
published on the NYSE Arca’s Web site
and is available through on-line
information services such as Bloomberg
and Reuters.
According to the Registration
Statement, dissemination of the IIV
provides additional information that is
not otherwise available to the public
and is useful to investors and market
professionals in connection with the
trading of the Fund Shares on the
Exchange. Investors and market
professionals are able throughout the
trading day to compare the market price
of the Fund and the IIV. If the market
price of the Fund Shares diverges
significantly from the IIV, market
professionals will have an incentive to
execute arbitrage trades. Such arbitrage
trades can tighten the tracking between
the market price of the Fund and the IIV
and thus can be beneficial to all market
participants.
The IIV should not be viewed as an
actual real time update of the NAV,
because the NAV is calculated only
once at the end of each trading day
based upon the relevant end of day
values of the Fund’s investments. The
IIV also should not be viewed as a
precise value of the Shares.
In addition to the IIV, the value of the
Benchmark Portfolio (excluding the
cash and cash equivalent holdings) will
be calculated every 15 seconds on a
delayed basis and disseminated through
similar means as the IIV.
Creation and Redemption of Shares
The Fund will offer and issue Shares
only in aggregations of a specified
number of Shares (each, a ‘‘Creation
Unit’’). Creation Unit sizes will be
25,000 Shares per Creation Unit. The
Creation Unit size for the Fund may
change. The Fund will create and
redeem Shares from time to time in one
or more ‘‘Creation Baskets’’ or
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Fmt 4703
Sfmt 4703
69175
‘‘Redemption Baskets’’ as described
below. The creation and redemption of
baskets will only made in exchange for
delivery to the Fund or the distribution
by the Fund of the amount of Treasuries
and any cash represented by the baskets
being created or redeemed, the amount
of which is based on the combined NAV
of the number of Shares included in the
baskets being created or redeemed
determined as of 4:00 p.m. E.T. on the
day the order to create or redeem
baskets is properly received.
On any business day other than a day
when any of the NYSE Arca, the Futures
Exchanges or the New York Stock
Exchange are closed for regular trading
(‘‘Business Day’’), an Authorized
Purchaser 18 may place an order with
the Distributor to create one or more
baskets. Purchase orders must be placed
by 12:00 p.m. E.T. or the close of regular
trading on the NYSE Arca, whichever is
earlier. The day on which the
Distributor receives a valid purchase
order is referred to as the purchase order
date. By placing a purchase order, an
Authorized Purchaser agrees to deposit
Treasuries, cash or a combination of
Treasuries and cash, as described below.
Prior to the delivery of baskets for a
purchase order, the Authorized
Purchaser must also have wired to the
Custodian the non-refundable
transaction fee due for the purchase
order.
The total deposit required to create
each basket (‘‘Creation Basket Deposit’’)
is the amount of Treasuries and/or cash
that is in the same proportion to the
total assets of the Fund (net of estimated
accrued but unpaid fees, expenses and
other liabilities) on the purchase order
date as the number of Shares to be
created under the purchase order is in
proportion to the total number of Shares
outstanding on the purchase order
dates. ETFMC determines, directly in its
sole discretion or in consultation with
the Administrator, the requirements for
Treasuries and the amount of cash,
including the maximum permitted
remaining maturity of a Treasury and
proportions of Treasury and cash that
18 Authorized Purchasers will be the only persons
that may place orders to create and redeem baskets.
Authorized Purchasers must be (1) registered
broker-dealers or other securities market
participants, and (2) have an account with the
Depository Trust Company. To become an
Authorized Purchaser, a person must enter into an
Authorized Purchaser Agreement with ETFMC. The
Authorized Purchaser Agreement provides the
procedures for the creation and redemption of
baskets and for the delivery of the Treasuries and
any cash required for such creation and
redemptions. The Authorized Purchaser Agreement
and the related procedures attached thereto may be
amended by the Fund, without the consent of any
limited partner or shareholder or Authorized
Purchaser.
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rmajette on DSK2VPTVN1PROD with NOTICES
69176
Federal Register / Vol. 79, No. 224 / Thursday, November 20, 2014 / Notices
may be included in deposits to create
baskets. The Distributor will publish
such requirements at the beginning of
each Business Day. The amount of cash
deposit required is the difference
between the aggregate market value of
the Treasuries required to be included
in a Creation Basket Deposit as of 4:00
p.m. E.T. on the date the order to
purchase is properly received and the
total required deposit.
The procedures by which an
Authorized Purchaser can redeem one
or more baskets mirror the procedures
for the creation of baskets. On any
Business Day, an Authorized Purchaser
may place an order with the Distributor
to redeem one or more baskets.
Redemption orders must be placed by
12:00 p.m. E.T. or the close of regular
trading on the NYSE Arca, whichever is
earlier. A redemption order so received
will be effective on the date it is
received in satisfactory form by the
Distributor. The redemption procedures
allow Authorized Purchasers to redeem
baskets and do not entitle an individual
shareholder to redeem any Shares in an
amount less than a Redemption Basket,
or to redeem baskets other than through
an Authorized Purchaser.
The redemption distribution due from
the Fund will be delivered to the
Authorized Purchaser by 3:00 p.m. E.T.
on the third business day following the
redemption order date if, by 3:00 p.m.
E.T. on such third business day, the
Fund’s account at the Depositary Trust
Company (‘‘DTC’’) 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 received. Any
remainder of the redemption
distribution will be delivered on the
next business day to the extent of
remaining whole baskets received if the
Fund receives the fee applicable to the
extension of the redemption distribution
date which ETFMC may, from time to
time, determine and the remaining
baskets to be redeemed are credited to
the Fund’s DTC account by 3:00 p.m.
E.T. on such next business day. Any
further outstanding amount of the
redemption order shall be cancelled.
The Exchange will obtain a
representation prior to listing of the
Fund from the Trust that the NAV per
Share will be calculated daily and made
available to all market participants at
the same time.
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
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13:37 Nov 19, 2014
Jkt 235001
of Rule 10A–3 19 under the Act, the
Fund will rely on the exception
contained in Rule 10A–3(c)(7).20 A
minimum of 100,000 Shares of the Fund
will be outstanding as of the start of
trading on the Exchange.
The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage. That is, the Fund’s
investments will not be used to seek
performance that is a multiple (e.g., 2X
or 3X) or inverse multiple of the Fund’s
Benchmark Portfolio.
A more detailed description of the
Fund as well as investment risks,
creation and redemption procedures
and fees is set forth in the Registration
Statement.
Availability of Information Regarding
the Shares
The Fund’s Web site,
www.risingratefund.com, will be
publicly accessible at no charge prior to
the public offering of Shares and will
include a form of the prospectus for that
may be downloaded. The Web site will
include additional quantitative
information updated on a daily basis,
including (a) the current NAV per Share
daily and the prior Business Day’s NAV
and the reported closing price; (b) the
mid-point 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.
In addition, a basket composition file,
which includes the security names and
share quantities required to be delivered
in exchange for Fund Shares, together
with estimates and actual cash
components, will be publicly
disseminated daily prior to the opening
of the Exchange via the National
Securities Clearing Corporation. The
basket represents one Creation Unit of
the Fund.
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), Shareholder Reports and Form
N–CSR. The Trust’s SAI and
Shareholder Reports are available free
upon request from the Trust, and those
19 17
20 17
PO 00000
CFR 240.10A–3.
CFR 240.10A–3(c)(7).
Frm 00081
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Sfmt 4703
documents and the Form N–CSR may be
viewed on-screen or downloaded from
the Commission’s Web site at
www.sec.gov. Information regarding
market price and trading volume of the
Shares will be continually available on
a real-time basis throughout the day on
brokers’ computer screens and other
electronic services. Information
regarding the previous day’s closing
price and trading volume information
for the Shares will be published daily in
the financial section of newspapers.
The Exchange represents that
quotation and last sale information for
the Treasury Instruments will be widely
disseminated through a variety of major
market data vendors worldwide, such as
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 Futures Exchanges also
provide delayed futures price (and
volume) information on current and
past trading sessions and market news
free of charge on their Web sites for
Treasury Instruments. The specific
contract specifications for such
contracts are also available at the
Futures Exchanges Web sites, as well as
other financial informational sources.
The price of Treasury Instruments also
is available on a 24-hour basis from
major market data vendors. Information
relating to trading, including price and
volume information, in Treasury
Instruments will be available from major
market data vendors and from the
exchanges on which Treasury
Instruments 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 Treasury
Instruments held by the Fund and other
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. This 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.
The IIV will be calculated by using
the Fund’s prior day’s closing NAV per
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share as a base and updating that value
throughout the trading day to reflect
changes in the most recently reported
trade price for the Treasury Instruments.
The IIV per Share will be widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Core Trading
Session.21
The NAV for the Shares will be
disseminated to all market participants
at the same time. The Exchange will
also make available on its Web site daily
trading volume of the Shares and the
closing prices of such Shares. The intraday closing prices and settlement prices
of the Treasury Instruments are or will
be readily available from the Web sites
of the Futures Exchanges on which
Treasury Instruments are traded. The
relevant exchanges trading Treasury
Instruments also provide delayed
futures information on current and past
trading sessions and market news free of
charge on their respective Web sites.
Quotation information from brokers
and dealers or major market data
vendors will be available for U.S.
Treasuries or other high credit quality,
short-term fixed-income or similar
securities (such as shares of money
market funds).
Quotation and last-sale information
regarding the Shares will be
disseminated through the facilities of
the CTA. In addition, the Fund’s Web
site, www.risingratefund.com, will
display the applicable end of day
closing NAV.
rmajette on DSK2VPTVN1PROD with NOTICES
Availability of Information About the
Benchmark Portfolio
The daily closing Benchmark
Portfolio level and the percentage
change in the daily closing level for the
Benchmark Portfolio will be publicly
available from one or more major market
data vendors. The intraday value of the
Benchmark Portfolio, updated every 15
seconds, will also be available through
major market data vendors.
Pricing information regarding the
Treasury Instruments will also be
available from the Futures Exchanges
Web sites. Similar information regarding
the Treasury securities underlying the
Treasury Instruments will be publicly
available from various financial
information service providers.
Information relating to the weighting of
Treasury Instruments and the
Benchmark Portfolio methodology is
also available on the Web site for Fund
at www.risingratefund.com.
21 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IIVs taken from the CTA
or other data feeds.
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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. in accordance
with NYSE Arca Equities Rule 7.34
(Opening, Core, and Late Trading
Sessions). 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 Shares will conform to the initial
and continued listing criteria under
NYSE Arca Equities Rule 8.200. The
Exchange represents that, for initial
and/or continued listing, the Fund will
be in compliance with Rule 10A–3 22
under the Act, as provided by NYSE
Arca Equities Rule 5.3. A minimum of
100,000 Shares for the Fund will be
outstanding at the commencement of
trading on the Exchange.
The trading of the Shares will be
subject to NYSE Arca Equities Rule
8.200, Commentary .02(e), which sets
forth certain restrictions on Equity
Trading Permit (‘‘ETP’’) Holders acting
as registered Market Makers in TIRs to
facilitate surveillance. See
‘‘Surveillance’’ below for more
information.
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares.
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the underlying
Treasury Instruments, (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 23 or by the halt or
22 17
CFR 240.10A–3.
NYSE Arca Equities Rule 7.12.
23 See
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69177
suspension of trading of the underlying
Treasury Instruments.
The Exchange represents that the
Exchange may halt trading during the
day in which an interruption to the
dissemination of the IIV, the Benchmark
Portfolio or the value of the underlying
Treasury Instruments occurs. If an
interruption to the dissemination of the
IIV, the Benchmark Portfolio or the
value of the underlying Treasury
Instruments persists past the trading day
in which it occurred, the Exchange will
halt trading no later than the beginning
of the trading day following the
interruption. In addition, if the
Exchange becomes aware that the NAV
with respect to the Shares is not
disseminated to all market participants
at the same time, it will halt trading in
the Shares until such time as the NAV
is available to all market participants.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.24 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
trading in the Shares and underlying
Treasury Instruments with other
markets and entities that are members of
the Intermarket Surveillance Group
(‘‘ISG’’), and FINRA, on behalf of the
Exchange, may obtain trading
information regarding trading in the
Shares and underlying Treasury
Instruments from such markets and
other entities. In addition, the Exchange
may obtain information regarding
24 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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rmajette on DSK2VPTVN1PROD with NOTICES
trading in the Shares and underlying
Treasury Instruments from markets and
other entities that are members of ISG or
with which the Exchange has in place
a comprehensive surveillance sharing
agreement.25 FINRA, on behalf of the
Exchange, is able to access, as needed,
trade information for certain fixed
income securities held by the Fund
reported to FINRA’s Trade Reporting
and Compliance Engine (‘‘TRACE’’).
For components traded on exchanges,
not more than 10% of the components
traded on exchanges shall consist of
components whose principal trading
market is not a member of ISG or is a
market with which the Exchange does
not have a comprehensive surveillance
sharing agreement.
In addition, 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
(‘‘Bulletin’’) of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Bulletin will discuss the following: (1)
The procedures for purchases and
redemptions of Shares in Creation
Basket aggregations (and that Shares are
not individually redeemable); (2) 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; (3) the risks involved
in trading the Shares during the
Opening and Late Trading Sessions
when an updated IIV will not be
calculated or publicly disseminated; (4)
how information regarding the IIV is
disseminated; (5) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
In addition, the Bulletin will
reference that the Fund is subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
Commission from any rules under the
Act. The Bulletin will also disclose that
the NAV for the Shares will be
calculated after 4:00 p.m. E.T. each
trading day.
25 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
instruments traded by the Fund may trade on
markets that are members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.
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13:37 Nov 19, 2014
Jkt 235001
The Information Circular will disclose
that information about the Shares of the
Fund will be 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) 26 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 Fund will seek to achieve its
investment objective by tracking the
performance of the Benchmark
Portfolio. The Fund will invest in the
Treasury Instruments in the same
weighting as the Benchmark Portfolio.
The Sponsor represents that the Fund
will invest in Treasury Instruments in a
manner consistent with the Fund’s
investment objective and will not use
futures contracts or options to obtain
leveraged investment results. The
Sponsor is not broker-dealer or affiliated
with a broker-dealer. The Sponsor
represents that it will implement and
maintain procedures designed to
prevent the use and dissemination of
material non-public information. Sit,
which maintains the Benchmark
Portfolio, is not affiliated with the
Sponsor and is not a broker-dealer or
affiliated with a broker-dealer.
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 underlying
Treasury Instruments with other
markets and other entities that are
members of the ISG, and FINRA, on
behalf of the Exchange, may obtain
trading information regarding trading in
the Shares and underlying Treasury
Instruments from such markets and
other entities. In addition, the Exchange
may obtain information regarding
trading in the Shares and underlying
Treasury Instruments from markets and
26 15
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Frm 00083
Fmt 4703
Sfmt 4703
other entities that are members of ISG or
with which the Exchange has in place
a comprehensive surveillance sharing
agreement. FINRA, on behalf of the
Exchange, is able to access, as needed,
trade information for certain fixed
income securities held by the Fund
reported to TRACE. For components
traded on exchanges, not more than
10% of the components traded on
exchanges shall consist of components
whose principal trading market is not a
member of ISG or is a market with
which the Exchange does not have a
comprehensive surveillance sharing
agreement. The NAV for the Shares will
be disseminated to all market
participants at the same time. The
Exchange will also make available on its
Web site daily trading volume of the
Shares and the closing prices of such
Shares. The intra-day closing prices and
settlement prices of the Treasury
Instruments are or will be readily
available from the Web sites of the
Futures Exchanges on which Treasury
Instruments are traded. The Futures
Exchanges trading Treasury Instruments
also provide delayed futures
information on current and past trading
sessions and market news free of charge
on their respective Web sites.
In addition, quotation information
from brokers and dealers or major
market data vendors will be available
for U.S. Treasuries or other high credit
quality, short-term fixed-income or
similar securities (such as shares of
money market funds).
Quotation and last-sale information
regarding the Shares will be
disseminated through the facilities of
the CTA. In addition, the Fund’s Web
site, www.risingratefund.com, will
display the applicable end of day
closing NAV.
The daily closing Benchmark
Portfolio level and the percentage
change in the daily closing level for the
Benchmark Portfolio will be publicly
available from one or more major market
data vendors. The intraday value of the
Benchmark Portfolio, updated every 15
seconds, will also available on a major
market data vendor. Pricing information
regarding the Treasury Instruments will
also available from the Futures
Exchanges Web sites. Similar
information regarding the Treasury
securities underlying the Treasury
Instruments will be publicly available
from various financial information
service providers. Information relating
to the weighting of Treasury
Instruments and the Benchmark
Portfolio methodology is also available
on the Web site for Fund at
www.risingratefund.com.
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Federal Register / Vol. 79, No. 224 / Thursday, November 20, 2014 / Notices
Trading may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the underlying
Treasury Instruments, (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. Trading in Shares
will be subject to trading halts caused
by extraordinary market volatility
pursuant to the Exchange’s ‘‘circuit
breaker’’ rule or by the halt or
suspension of trading of the Treasury
Instruments. The Exchange represents
that the Exchange may halt trading
during the day in which an interruption
to the dissemination of the IIV, the
Benchmark Portfolio or the value of the
underlying Treasury Instruments
occurs. If an interruption to the
dissemination of the IIV, the Benchmark
Portfolio or the value of the underlying
Treasury Instruments persists past the
trading day in which it occurred, the
Exchange will halt trading no later than
the beginning of the trading day
following the interruption. In addition,
if the Exchange becomes aware that the
NAV with respect to the Shares is not
disseminated to all market participants
at the same time, it will halt trading in
the Shares until such time as the NAV
is available to all market participants.
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 Shares, thereby promoting
market transparency. The Fund’s NAV
will be disseminated to all market
participants at the same time. The IIV
will be disseminated at least every 15
seconds during the Core Trading
Session. Trading in the Shares will be
halted if the circuit breaker parameters
in NYSE Arca Equities Rule 7.12 have
been reached or because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. Moreover, prior
to the commencement of trading, the
Exchange will inform its ETP Holders in
an Information Bulletin of the special
characteristics and risks associated with
trading the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of trust issued
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13:37 Nov 19, 2014
Jkt 235001
receipts that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
As noted above, FINRA, on the
Exchange’s behalf, has in place
surveillance procedures relating to
trading in the Shares and underlying
Treasury Instruments 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, IIV, and quotation and last
sale information for the Shares.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of an
additional type of Trust Issued Receipts
product that will principally hold fixed
income securities and derivatives
thereon, and that will enhance
competition among market participants,
to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of November 4, 2014
(the date of publication in the Federal
Register of notice of the proposed rule
change as initially filed with the
Commission), or within such longer
period up to 90 days of that 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 selfregulatory 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
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Sfmt 9990
69179
change, as modified by Amendment No.
2, is consistent with the Act. Comments
may be submitted by any of the
following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2014–120 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–2014–120. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site https://www.sec.gov/
rules/sro.shtml. Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference 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–2014–120 and
should be submitted on or before
December 11, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–27456 Filed 11–19–14; 8:45 am]
BILLING CODE 8011–01–P
27 17
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]]>Agencies
[Federal Register Volume 79, Number 224 (Thursday, November 20, 2014)]
[Notices]
[Pages 69173-69179]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27456]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73602; File No. SR-NYSEArca-2014-120]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 2 to Proposed Rule Change Relating to Listing and
Trading Shares of the Sit Rising Rate Fund Under NYSE Arca Equities
Rule 8.200
November 14, 2014.
On October 16, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1)\1\ of the Securities
Exchange Act of 1934 (``Exchange Act'') \2\ and Rule 19b-4
thereunder,\3\ a proposed rule change to list and trade shares of the
Sit Rising Rate Fund under NYSE Arca Equities Rule 8.200. The proposed
rule change was published for comment in the Federal Register on
November 4, 2014.\4\ The Commission received no comments on the
proposal.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 73464 (Oct. 29,
2014), 79 FR 65437.
---------------------------------------------------------------------------
Pursuant to Section 19(b)(1) of the Act \5\ and Rule 19b-4
thereunder,\6\ notice is hereby given that, on November 6, 2014, the
Exchange filed with the Commission Amendment No. 2 to the proposed rule
change, as described in Sections I and II below, which Sections have
been prepared by the Exchange.\7\ The Commission is publishing this
notice to solicit comments from interested persons on the proposed rule
change, as modified by Amendment No. 2 thereto.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(1).
\6\ 17 CFR 240.19b-4.
\7\ Amendment No. 2 replaces SR-NYSEArca-2014-120 and supersedes
such filing in its entirety. Amendment No. 1 was filed on November
3, 2014 and withdrawn on November 6, 2014.
---------------------------------------------------------------------------
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 Sit Rising
Rate Fund under NYSE Arca Equities Rule 8.200. The text of the proposed
rule change is available on the Exchange's Web site at www.nyse.com, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE Arca Equities Rule 8.200, Commentary .02 permits the trading
of Trust Issued Receipts (``TIRs'') either by listing or pursuant to
unlisted trading privileges (``UTP'').\8\ The Exchange proposes to list
and trade shares (``Shares'') of the Sit Rising Rate Fund (``Fund'')
pursuant to NYSE Arca Equities Rule 8.200. The Fund is a series of the
ETF Managers Group Commodity Trust I (the ``Trust''), a Delaware
statutory trust.\9\
---------------------------------------------------------------------------
\8\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to
Trust Issued Receipts that invest in ``Financial Instruments.'' The
term ``Financial Instruments,'' as defined in Commentary .02(b)(4)
to NYSE Arca Equities Rule 8.200, means any combination of
investments, including cash; securities; options on securities and
indices; futures contracts; options on futures contracts; forward
contracts; equity caps, collars and floors; and swap agreements.
\9\ The Trust submitted a registration statement with respect to
the Fund on Form S-1 under the Securities Act of 1933 (``1933 Act'')
on October 7, 2014 (File No. 333-199190) (the ``Registration
Statement''). The description of the Fund and the Shares contained
herein are based, in part, on the Registration Statement.
---------------------------------------------------------------------------
The Exchange notes that the Commission has previously approved the
listing and trading of other issues of TIRs on the American Stock
Exchange LLC,\10\ trading on NYSE Arca pursuant to UTP,\11\ and listing
on NYSE Arca.\12\ In addition, the Commission has approved the listing
and trading of other exchange-traded fund-like products linked to the
performance of underlying currencies and commodities.\13\
---------------------------------------------------------------------------
\10\ See, e.g., Securities Exchange Act Release No. 58161 (July
15, 2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39).
\11\ See, e.g., Securities Exchange Act Release No. 58163 (July
15, 2008), 73 FR 42391 (July 21, 2008) (SR-NYSEArca-2008-73).
\12\ See, e.g., Securities Exchange Act Release No. 70209
(August 15, 2013), 78 FR 51269 (June 24, 2013) (SR-NYSEArca-2013-
60); Securities Exchange Act Release No. 58457 (September 3, 2008),
73 FR 52711 (September 10, 2008) (SR-NYSEArca-2008-91).
\13\ See, e.g., Securities Exchange Act Release Nos. 56131 (July
25, 2007), 77 FR 42212 (August 1, 2007) (SR-NYSEArca-2007-57) (order
approving listing and trading on NYSE Arca of shares of eight issues
of Commodity Trust Shares); 57456 (March 7, 2008), 73 FR 13599
(March 13, 2008) (SR-NYSEArca-2007-91) (order granting accelerated
approval for NYSE Arca listing and trading of shares of the iShares
GS Commodity Trusts); 59781 (April 17, 2009), 74 FR 18771 (April 24,
2009) (SR-NYSEArca-2009-28) (order granting accelerated approval for
NYSE Arca listing and trading of shares 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 the
ETFS Gold Trust); 62527 (July 19, 2010), 75 FR 43606 (July 26, 2010)
(SR-NYSEArca-2010-44) (order approving listing and trading on NYSE
Arca of shares of the United States Commodity Index Fund).
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[[Page 69174]]
According to the Registration Statement, the Fund's sponsor and
investment manager is ETF Managers Capital LLC (``ETFMC'' or the
``Sponsor''), a limited liability company that is a commodity pool
operator (``CPO'') that is registered with the Commodity Futures
Trading Commission (``CFTC'') \14\ and is a member of the National
Futures Association (``NFA''). U.S. Bancorp Fund Services will be the
transfer agent, custodian and administrator for the Fund (``Custodian''
or ``Administrator''). Esposito Securities LLC (the ``Distributor'')
will provide statutory and wholesaling distribution services.\15\
---------------------------------------------------------------------------
\14\ The Sponsor is not a broker-dealer or affiliated with a
broker-dealer.
\15\ This Amendment No. 2 to SR-NYSEArca-2014-120 replaces SR-
NYSEArca-2014-120 as originally filed and supersedes such filing in
its entirety. The Exchange has withdrawn Amendment No. 1 to SR-
NYSEArca-2014-120.
---------------------------------------------------------------------------
Fund's Investment Objective and Strategy
The Fund's investment objective will be to profit from rising
interest rates by tracking the performance of a portfolio (the
``Benchmark Portfolio'') consisting of exchange traded futures
contracts and options on futures on 2, 5 and 10-year U.S. Treasury
securities (``Treasury Instruments'') weighted to achieve a targeted
negative 10-year average effective portfolio duration (the ``Benchmark
Component Instruments''). The Fund will seek to achieve its investment
objective by investing in the Benchmark Component Instruments currently
constituting the Benchmark Portfolio. The Fund will invest in the
Treasury Instruments in the same weighting as the Benchmark Portfolio.
The Benchmark Portfolio will be maintained by Sit Fixed Income
Advisors II, LLC (``Sit'') \16\ and will be rebalanced, reconstituted,
or both, monthly, typically on the 15th of each month and on the next
business day if the 15th is a holiday, weekend, or other day on which
the national exchanges are closed, to maintain a negative 10-year
average effective duration. The Benchmark Portfolio and the Fund will
each maintain a short position in Treasury Instruments. The Fund will
not use futures contracts or options to obtain leveraged investment
results. The Benchmark Component Instruments constituting the Benchmark
Portfolio and anticipated rebalancing dates, as well as the daily
holdings of the Fund, will be available on the Fund's Web site at
www.risingratefund.com.
---------------------------------------------------------------------------
\16\ Sit is not affiliated with the Sponsor. Sit is not a
broker-dealer or affiliated with a broker-dealer.
---------------------------------------------------------------------------
The weightings of the Treasury Instruments constituting the
Benchmark Portfolio and the Fund will be based on each maturity's
duration contribution. Longer duration treasuries will account for a
more meaningful portion of the Fund's price sensitivity to changes in
interest rates. As of October 9, 2014, the Benchmark Portfolio
consisted of:
------------------------------------------------------------------------
Percent of
Treasury instrument (%) portfolio
------------------------------------------------------------------------
2 Year U.S. Treasury Futures............................... 45
5 Year U.S. Treasury Futures............................... 30
5 Year U.S. Treasury Call Options.......................... 15
10 Year U.S. Treasury Put Options.......................... 10
------------
100
------------------------------------------------------------------------
The relative weightings of the Benchmark Component Instruments will
be shifted between maturities only when there are material changes in
the shape of the yield curve, for example, if the Federal Reserve began
raising short term interest rates more than long term interest rates.
In such an instance, Sit, which maintains the Benchmark Portfolio, will
increase the weightings of the 2-year and reduce the weighting in the
10-year maturity Treasury Instruments. Conversely, Sit will do the
opposite if the Federal Reserve began raising long term interest rates
more than short term interest rates. Reconstitution and rebalancing
each will occur monthly, on the 15th, or on the nest [sic] business day
if the 15th is a holiday, weekend, or other day on which the national
exchanges are closed, unless there are radical changes in the yield
curve such that effective duration is outside of a range from negative
nine to negative 11-year average effective duration, in which case Sit
will adjust the maturities of the Treasury Instruments before the next
expected monthly reconstitution.
The Sponsor anticipates that approximately 5% to 15% of the Fund's
assets will be used as payment for or collateral for Treasury
Instruments. In order to collateralize its Treasury Instrument
positions the Fund will hold such assets, from which it will post
margin to its futures commission merchant (``FCM''), in an amount equal
to the margin required by the relevant exchange, and transfer to its
FCM any additional amounts that may be separately required by the
FCM.\17\ Any assets not required to be posted as margin with the FCM
will be held at the Fund's administrator in cash or cash equivalents as
discussed below.
---------------------------------------------------------------------------
\17\ When establishing positions in Treasury Instruments, the
Fund will be required to deposit initial margin with a value of
approximately 3% to 10% of the value of each Treasury Instrument
position at the time it is established. These margin requirements
are subject to change from time to time by the exchange or the FCM.
On a daily basis, the Fund will be obligated to pay, or entitled to
receive, variation margin in an amount equal to the change in the
daily settlement level of its Treasury Instruments positions.
---------------------------------------------------------------------------
The Benchmark Portfolio will be invested in Benchmark Component
Instruments and rebalanced, as noted above, to maintain a negative
average effective portfolio duration of approximately 10 years.
Duration is a measure of estimated price sensitivity relative to
changes in interest rates. Portfolios with longer durations are
typically more sensitive to changes in interest rates. For example, if
interest rates rise by 1%, the market value of a security with an
effective duration of 5 years would decrease by 5%, with all other
factors being constant, and likewise the market value of a security
with an effective duration of negative 5 years would increase by 5%,
with all other factors being constant. Duration estimates are based on
certain assumptions by Sit and are subject to a number of limitations.
Duration is a more accurate estimate of price sensitivity provided
interest rate changes are small and occur equally in short-term and
long-term securities. Investments in debt securities typically decrease
in value when interest rates rise. The risk is usually greater for
longer-term debt securities.
The Fund will incur certain expenses in connection with its
operations. The Fund will hold cash or cash equivalents such as U.S.
Treasuries or other high credit quality, short-term fixed-income or
similar securities (such as shares of money market funds) for direct
investment or as collateral for the Treasury Instruments and for other
liquidity purposes and to meet redemptions that may be necessary on an
ongoing basis. These expenses and income from the cash and cash
equivalent holdings may cause imperfect correlation between changes in
the Fund's NAV and changes in the Benchmark Portfolio, because the
Benchmark Portfolio does not reflect expenses or income.
[[Page 69175]]
Net Asset Value
According to the Registration Statement, the net asset value
(``NAV'') of the Fund will be calculated by taking the current market
value of its total assets, subtracting any liabilities, and dividing
that total by the total number of outstanding Shares.
The Administrator will calculate the NAV daily and the NAV will be
released after 4:00 p.m. Eastern Time (``E.T.''), the end of the Core
Trading Session on the Exchange. For purposes of calculating NAV, the
Administrator will use the closing price of the Treasury Instruments on
the U.S. exchanges on which the Treasury Instruments are traded
(primarily on the exchanges within the Chicago Mercantile Exchange
Group of exchanges and other national exchanges (collectively, the
``Futures Exchanges'')). The Administrator will value all other
holdings of the Fund at (1) current market value, if quotations for
such property are readily available, or (2) fair value, as reasonably
determined by the Administrator, if the current market value cannot be
determined. Once the value of the Treasury Instruments and interest
earned on the Fund's cash and cash equivalents has been determined, the
Administrator will subtract all accrued expenses and liabilities of the
Fund as of the time of calculation in order to calculate the net asset
value of the Fund.
Intraday Indicative Value (``IIV'')
According to the Registration Statement, the Exchange will
calculate and disseminate throughout the core trading session on each
trading day an updated IIV for the Fund. The IIV will be calculated by
using the Fund's prior day's closing NAV per share as a base and
updating that value throughout the trading day to reflect changes in
the most recently reported trade price for the Benchmark Component
Instruments. The net asset value of the Fund's cash and cash equivalent
holdings, on the other hand, will not be updated throughout the day.
The IIV will be calculated on a per share basis every 15 seconds
during the Core Trading Session (9:30 a.m. E.T. to 4:00 p.m. E.T.) on
the Exchange. The normal trading hours of the Futures Exchanges are
10:00 a.m. to 2:30 p.m. E.T. This means that there is a gap in time at
the beginning and the end of each day during which the Fund's Shares
are traded on the Exchange but real-time Futures Exchanges trading
prices for contracts traded on the Futures Exchanges are unavailable.
During such gaps in time the IIV will be calculated based on the end of
day price of such contracts from the Futures Exchanges' immediately
preceding trading session.
According to the Registration Statement, the Fund will provide the
independent third party calculator with information to calculate the
IIV, but the Fund will not be involved in the actual calculation of the
IIV and is not responsible for the calculation or dissemination of the
IIV. The Fund makes no warranty as to the accuracy of the IIV. The IIV
should not be viewed as a ``real-time'' update of NAV because the IIV
is not calculated in the same manner as NAV, which will be computed
once per day.
The Exchange disseminates the IIV through the facilities of CTA/CQ
High Speed Lines. In addition, the IIV is published on the NYSE Arca's
Web site and is available through on-line information services such as
Bloomberg and Reuters.
According to the Registration Statement, dissemination of the IIV
provides additional information that is not otherwise available to the
public and is useful to investors and market professionals in
connection with the trading of the Fund Shares on the Exchange.
Investors and market professionals are able throughout the trading day
to compare the market price of the Fund and the IIV. If the market
price of the Fund Shares diverges significantly from the IIV, market
professionals will have an incentive to execute arbitrage trades. Such
arbitrage trades can tighten the tracking between the market price of
the Fund and the IIV and thus can be beneficial to all market
participants.
The IIV should not be viewed as an actual real time update of the
NAV, because the NAV is calculated only once at the end of each trading
day based upon the relevant end of day values of the Fund's
investments. The IIV also should not be viewed as a precise value of
the Shares.
In addition to the IIV, the value of the Benchmark Portfolio
(excluding the cash and cash equivalent holdings) will be calculated
every 15 seconds on a delayed basis and disseminated through similar
means as the IIV.
Creation and Redemption of Shares
The Fund will offer and issue Shares only in aggregations of a
specified number of Shares (each, a ``Creation Unit''). Creation Unit
sizes will be 25,000 Shares per Creation Unit. The Creation Unit size
for the Fund may change. The Fund will create and redeem Shares from
time to time in one or more ``Creation Baskets'' or ``Redemption
Baskets'' as described below. The creation and redemption of baskets
will only made in exchange for delivery to the Fund or the distribution
by the Fund of the amount of Treasuries and any cash represented by the
baskets being created or redeemed, the amount of which is based on the
combined NAV of the number of Shares included in the baskets being
created or redeemed determined as of 4:00 p.m. E.T. on the day the
order to create or redeem baskets is properly received.
On any business day other than a day when any of the NYSE Arca, the
Futures Exchanges or the New York Stock Exchange are closed for regular
trading (``Business Day''), an Authorized Purchaser \18\ may place an
order with the Distributor to create one or more baskets. Purchase
orders must be placed by 12:00 p.m. E.T. or the close of regular
trading on the NYSE Arca, whichever is earlier. The day on which the
Distributor receives a valid purchase order is referred to as the
purchase order date. By placing a purchase order, an Authorized
Purchaser agrees to deposit Treasuries, cash or a combination of
Treasuries and cash, as described below. Prior to the delivery of
baskets for a purchase order, the Authorized Purchaser must also have
wired to the Custodian the non-refundable transaction fee due for the
purchase order.
---------------------------------------------------------------------------
\18\ Authorized Purchasers will be the only persons that may
place orders to create and redeem baskets. Authorized Purchasers
must be (1) registered broker-dealers or other securities market
participants, and (2) have an account with the Depository Trust
Company. To become an Authorized Purchaser, a person must enter into
an Authorized Purchaser Agreement with ETFMC. The Authorized
Purchaser Agreement provides the procedures for the creation and
redemption of baskets and for the delivery of the Treasuries and any
cash required for such creation and redemptions. The Authorized
Purchaser Agreement and the related procedures attached thereto may
be amended by the Fund, without the consent of any limited partner
or shareholder or Authorized Purchaser.
---------------------------------------------------------------------------
The total deposit required to create each basket (``Creation Basket
Deposit'') is the amount of Treasuries and/or cash that is in the same
proportion to the total assets of the Fund (net of estimated accrued
but unpaid fees, expenses and other liabilities) on the purchase order
date as the number of Shares to be created under the purchase order is
in proportion to the total number of Shares outstanding on the purchase
order dates. ETFMC determines, directly in its sole discretion or in
consultation with the Administrator, the requirements for Treasuries
and the amount of cash, including the maximum permitted remaining
maturity of a Treasury and proportions of Treasury and cash that
[[Page 69176]]
may be included in deposits to create baskets. The Distributor will
publish such requirements at the beginning of each Business Day. The
amount of cash deposit required is the difference between the aggregate
market value of the Treasuries required to be included in a Creation
Basket Deposit as of 4:00 p.m. E.T. on the date the order to purchase
is properly received and the total required deposit.
The procedures by which an Authorized Purchaser can redeem one or
more baskets mirror the procedures for the creation of baskets. On any
Business Day, an Authorized Purchaser may place an order with the
Distributor to redeem one or more baskets. Redemption orders must be
placed by 12:00 p.m. E.T. or the close of regular trading on the NYSE
Arca, whichever is earlier. A redemption order so received will be
effective on the date it is received in satisfactory form by the
Distributor. The redemption procedures allow Authorized Purchasers to
redeem baskets and do not entitle an individual shareholder to redeem
any Shares in an amount less than a Redemption Basket, or to redeem
baskets other than through an Authorized Purchaser.
The redemption distribution due from the Fund will be delivered to
the Authorized Purchaser by 3:00 p.m. E.T. on the third business day
following the redemption order date if, by 3:00 p.m. E.T. on such third
business day, the Fund's account at the Depositary Trust Company
(``DTC'') 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 received. Any remainder of the redemption
distribution will be delivered on the next business day to the extent
of remaining whole baskets received if the Fund receives the fee
applicable to the extension of the redemption distribution date which
ETFMC may, from time to time, determine and the remaining baskets to be
redeemed are credited to the Fund's DTC account by 3:00 p.m. E.T. on
such next business day. Any further outstanding amount of the
redemption order shall be cancelled.
The Exchange will obtain a representation prior to listing of the
Fund from the Trust that the NAV per Share will be calculated daily and
made available to all market participants at the same time.
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 \19\ under the Act,
the Fund will rely on the exception contained in Rule 10A-3(c)(7).\20\
A minimum of 100,000 Shares of the Fund will be outstanding as of the
start of trading on the Exchange.
---------------------------------------------------------------------------
\19\ 17 CFR 240.10A-3.
\20\ 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------
The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage. That is,
the Fund's investments will not be used to seek performance that is a
multiple (e.g., 2X or 3X) or inverse multiple of the Fund's Benchmark
Portfolio.
A more detailed description of the Fund as well as investment
risks, creation and redemption procedures and fees is set forth in the
Registration Statement.
Availability of Information Regarding the Shares
The Fund's Web site, www.risingratefund.com, will be publicly
accessible at no charge prior to the public offering of Shares and will
include a form of the prospectus for that may be downloaded. The Web
site will include additional quantitative information updated on a
daily basis, including (a) the current NAV per Share daily and the
prior Business Day's NAV and the reported closing price; (b) the mid-
point 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.
In addition, a basket composition file, which includes the security
names and share quantities required to be delivered in exchange for
Fund Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the Exchange via
the National Securities Clearing Corporation. The basket represents one
Creation Unit of the Fund.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), Shareholder Reports and Form N-CSR. The Trust's
SAI and Shareholder Reports are available free upon request from the
Trust, and those documents and the Form N-CSR may be viewed on-screen
or downloaded from the Commission's Web site at www.sec.gov.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers.
The Exchange represents that quotation and last sale information
for the Treasury Instruments will be widely disseminated through a
variety of major market data vendors worldwide, such as 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 Futures Exchanges also
provide delayed futures price (and volume) information on current and
past trading sessions and market news free of charge on their Web sites
for Treasury Instruments. The specific contract specifications for such
contracts are also available at the Futures Exchanges Web sites, as
well as other financial informational sources. The price of Treasury
Instruments also is available on a 24-hour basis from major market data
vendors. Information relating to trading, including price and volume
information, in Treasury Instruments will be available from major
market data vendors and from the exchanges on which Treasury
Instruments 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 Treasury Instruments held by the Fund and other 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. This 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.
The IIV will be calculated by using the Fund's prior day's closing
NAV per
[[Page 69177]]
share as a base and updating that value throughout the trading day to
reflect changes in the most recently reported trade price for the
Treasury Instruments. The IIV per Share will be widely disseminated by
one or more major market data vendors at least every 15 seconds during
the Core Trading Session.\21\
---------------------------------------------------------------------------
\21\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IIVs
taken from the CTA or other data feeds.
---------------------------------------------------------------------------
The NAV for the Shares will be disseminated to all market
participants at the same time. The Exchange will also make available on
its Web site daily trading volume of the Shares and the closing prices
of such Shares. The intra-day closing prices and settlement prices of
the Treasury Instruments are or will be readily available from the Web
sites of the Futures Exchanges on which Treasury Instruments are
traded. The relevant exchanges trading Treasury Instruments also
provide delayed futures information on current and past trading
sessions and market news free of charge on their respective Web sites.
Quotation information from brokers and dealers or major market data
vendors will be available for U.S. Treasuries or other high credit
quality, short-term fixed-income or similar securities (such as shares
of money market funds).
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA. In addition, the Fund's
Web site, www.risingratefund.com, will display the applicable end of
day closing NAV.
Availability of Information About the Benchmark Portfolio
The daily closing Benchmark Portfolio level and the percentage
change in the daily closing level for the Benchmark Portfolio will be
publicly available from one or more major market data vendors. The
intraday value of the Benchmark Portfolio, updated every 15 seconds,
will also be available through major market data vendors.
Pricing information regarding the Treasury Instruments will also be
available from the Futures Exchanges Web sites. Similar information
regarding the Treasury securities underlying the Treasury Instruments
will be publicly available from various financial information service
providers. Information relating to the weighting of Treasury
Instruments and the Benchmark Portfolio methodology is also available
on the Web site for Fund at www.risingratefund.com.
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. in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). 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 Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.200. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \22\ under the Act, as provided by NYSE Arca
Equities Rule 5.3. A minimum of 100,000 Shares for the Fund will be
outstanding at the commencement of trading on the Exchange.
---------------------------------------------------------------------------
\22\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
The trading of the Shares will be subject to NYSE Arca Equities
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on
Equity Trading Permit (``ETP'') Holders acting as registered Market
Makers in TIRs to facilitate surveillance. See ``Surveillance'' below
for more information.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. These may include: (1) The extent to
which trading is not occurring in the underlying Treasury Instruments,
(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 \23\ or by the halt or suspension
of trading of the underlying Treasury Instruments.
---------------------------------------------------------------------------
\23\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------
The Exchange represents that the Exchange may halt trading during
the day in which an interruption to the dissemination of the IIV, the
Benchmark Portfolio or the value of the underlying Treasury Instruments
occurs. If an interruption to the dissemination of the IIV, the
Benchmark Portfolio or the value of the underlying Treasury Instruments
persists past the trading day in which it occurred, the Exchange will
halt trading no later than the beginning of the trading day following
the interruption. In addition, if the Exchange becomes aware that the
NAV with respect to the Shares is not disseminated to all market
participants at the same time, it will halt trading in the Shares until
such time as the NAV is available to all market participants.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\24\ 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.
---------------------------------------------------------------------------
\24\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------
The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and underlying Treasury Instruments
with other markets and entities that are members of the Intermarket
Surveillance Group (``ISG''), and FINRA, on behalf of the Exchange, may
obtain trading information regarding trading in the Shares and
underlying Treasury Instruments from such markets and other entities.
In addition, the Exchange may obtain information regarding
[[Page 69178]]
trading in the Shares and underlying Treasury Instruments from markets
and other entities that are members of ISG or with which the Exchange
has in place a comprehensive surveillance sharing agreement.\25\ FINRA,
on behalf of the Exchange, is able to access, as needed, trade
information for certain fixed income securities held by the Fund
reported to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
---------------------------------------------------------------------------
\25\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all instruments
traded by the Fund may trade on markets that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
---------------------------------------------------------------------------
For components traded on exchanges, not more than 10% of the
components traded on exchanges shall consist of components whose
principal trading market is not a member of ISG or is a market with
which the Exchange does not have a comprehensive surveillance sharing
agreement.
In addition, 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 (``Bulletin'') of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares in Creation Basket
aggregations (and that Shares are not individually redeemable); (2)
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; (3) the risks involved in trading
the Shares during the Opening and Late Trading Sessions when an updated
IIV will not be calculated or publicly disseminated; (4) how
information regarding the IIV is disseminated; (5) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. E.T. each trading day.
The Information Circular will disclose that information about the
Shares of the Fund will be 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) \26\ 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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\26\ 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 Fund will seek to achieve its
investment objective by tracking the performance of the Benchmark
Portfolio. The Fund will invest in the Treasury Instruments in the same
weighting as the Benchmark Portfolio. The Sponsor represents that the
Fund will invest in Treasury Instruments in a manner consistent with
the Fund's investment objective and will not use futures contracts or
options to obtain leveraged investment results. The Sponsor is not
broker-dealer or affiliated with a broker-dealer. The Sponsor
represents that it will implement and maintain procedures designed to
prevent the use and dissemination of material non-public information.
Sit, which maintains the Benchmark Portfolio, is not affiliated with
the Sponsor and is not a broker-dealer or affiliated with a broker-
dealer.
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 underlying Treasury
Instruments with other markets and other entities that are members of
the ISG, and FINRA, on behalf of the Exchange, may obtain trading
information regarding trading in the Shares and underlying Treasury
Instruments from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in the Shares and
underlying Treasury Instruments from markets and other entities that
are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. FINRA, on behalf of the
Exchange, is able to access, as needed, trade information for certain
fixed income securities held by the Fund reported to TRACE. For
components traded on exchanges, not more than 10% of the components
traded on exchanges shall consist of components whose principal trading
market is not a member of ISG or is a market with which the Exchange
does not have a comprehensive surveillance sharing agreement. The NAV
for the Shares will be disseminated to all market participants at the
same time. The Exchange will also make available on its Web site daily
trading volume of the Shares and the closing prices of such Shares. The
intra-day closing prices and settlement prices of the Treasury
Instruments are or will be readily available from the Web sites of the
Futures Exchanges on which Treasury Instruments are traded. The Futures
Exchanges trading Treasury Instruments also provide delayed futures
information on current and past trading sessions and market news free
of charge on their respective Web sites.
In addition, quotation information from brokers and dealers or
major market data vendors will be available for U.S. Treasuries or
other high credit quality, short-term fixed-income or similar
securities (such as shares of money market funds).
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA. In addition, the Fund's
Web site, www.risingratefund.com, will display the applicable end of
day closing NAV.
The daily closing Benchmark Portfolio level and the percentage
change in the daily closing level for the Benchmark Portfolio will be
publicly available from one or more major market data vendors. The
intraday value of the Benchmark Portfolio, updated every 15 seconds,
will also available on a major market data vendor. Pricing information
regarding the Treasury Instruments will also available from the Futures
Exchanges Web sites. Similar information regarding the Treasury
securities underlying the Treasury Instruments will be publicly
available from various financial information service providers.
Information relating to the weighting of Treasury Instruments and the
Benchmark Portfolio methodology is also available on the Web site for
Fund at www.risingratefund.com.
[[Page 69179]]
Trading may be halted because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) The extent to which trading is not
occurring in the underlying Treasury Instruments, (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. Trading in Shares will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule or by the halt or suspension of trading of the Treasury
Instruments. The Exchange represents that the Exchange may halt trading
during the day in which an interruption to the dissemination of the
IIV, the Benchmark Portfolio or the value of the underlying Treasury
Instruments occurs. If an interruption to the dissemination of the IIV,
the Benchmark Portfolio or the value of the underlying Treasury
Instruments persists past the trading day in which it occurred, the
Exchange will halt trading no later than the beginning of the trading
day following the interruption. In addition, if the Exchange becomes
aware that the NAV with respect to the Shares is not disseminated to
all market participants at the same time, it will halt trading in the
Shares until such time as the NAV is available to all market
participants.
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
Shares, thereby promoting market transparency. The Fund's NAV will be
disseminated to all market participants at the same time. The IIV will
be disseminated at least every 15 seconds during the Core Trading
Session. Trading in the Shares will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule 7.12 have been reached or because
of market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. Moreover, prior to the
commencement of trading, the Exchange will inform its ETP Holders in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of trust issued receipts that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, FINRA, on the Exchange's behalf, has
in place surveillance procedures relating to trading in the Shares and
underlying Treasury Instruments 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, IIV, and quotation and last
sale information for the Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of Trust Issued Receipts product that will principally
hold fixed income securities and derivatives thereon, and that will
enhance competition among market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of November 4, 2014 (the date of publication in the
Federal Register of notice of the proposed rule change as initially
filed with the Commission), or within such longer period up to 90 days
of that 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. 2, 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-2014-120 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-2014-120. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site https://www.sec.gov/rules/sro.shtml.
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference 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-2014-120
and should be submitted on or before December 11, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27456 Filed 11-19-14; 8:45 am]
BILLING CODE 8011-01-P
