Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 2 Thereto, To List and Trade Shares of the Sit Rising Rate Fund Under NYSE Arca Equities Rule 8.200, 77583-77586 [2014-30105]
Download as PDF
Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices
if such Market Maker is designated as
the Preferred Market Maker.
The Exchange notes that this proposal
is similar to the rules of other
exchanges.10
For the foregoing reasons, the
Exchange believes this proposal is a
reasonable modification to its rules,
designed to facilitate increased
interaction of orders on the Exchange,
and to do so in a manner that ensures
a dynamic, real-time trading mechanism
that maximizes opportunities for trade
executions of orders. The Exchange
believes it is appropriate and consistent
with the Act to adopt the proposed rule
changes.
mstockstill on DSK4VPTVN1PROD with NOTICES
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe the
proposed rule change represents any
undue burden on competition or will
impose any burden on competition
among exchanges in the listed options
marketplace not necessary or
appropriate in furtherance of the
purposes of the Act. To the contrary, the
proposal is pro-competitive because it
will enable the Exchange to better
compete with other options exchanges
that provide similar allocation
preferences and algorithms.11
With respect to intra-market
competition, Preferenced Orders will be
available to all Participants. The
Exchange believes that the proposal
should encourage Market Makers that
desire to qualify as Preferred Market
Makers to regularly maintain quotes at
competitive price levels in order to
obtain execution percentages on
Preferenced Orders. As noted above, the
proposed preferred allocation
percentage for Preferred Market Makers
leaves a sizeable enough portion of the
incoming Preferenced Order for the
other Market Makers quoting at the
same price to encourage intra-market
price competition. Submitting a
Preferenced Order to the Exchange is
entirely voluntary and Participants will
determine whether they wish to submit
these orders to the Exchange. The
Exchange operates in a highly
competitive marketplace with other
competing exchanges and market
participants can readily direct their
order flow to other exchanges if they so
choose.
10 See
11 See
supra, note 3.
supra, note 3.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BOX–2014–28 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–BOX–2014–28. 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
Frm 00143
Fmt 4703
Sfmt 4703
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–BOX–
2014–28, and should be submitted on or
before January 14, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.12
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–30121 Filed 12–23–14; 8:45 am]
BILLING CODE 8011–01–P
IV. Solicitation of Comments
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77583
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73866; File No. SR–
NYSEArca–2014–120]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 2 Thereto, To List and
Trade Shares of the Sit Rising Rate
Fund Under NYSE Arca Equities Rule
8.200
December 17, 2014.
I. Introduction
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) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to list and trade
shares (‘‘Shares’’) of the Sit Rising Rate
Fund (‘‘Fund’’), pursuant to NYSE Arca
Equities Rule 8.200. The proposed rule
change was published for comment in
the Federal Register on November 4,
2014.3 On November 6, 2014, the
Exchange filed Amendment No. 2 to the
proposed rule change, which
superseded and replaced the proposed
12 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 73464
(Oct. 29, 2014), 79 FR 65437.
1 15
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Federal Register / Vol. 79, No. 247 / Wednesday, December 24, 2014 / Notices
rule change as originally filed.4 The
proposed rule change, as modified by
Amendment No. 2, was published for
comment in the Federal Register on
November 20, 2014.5 The Commission
received no comments on the proposal.
This order approves the proposed rule
change, as modified by Amendment No.
2.
mstockstill on DSK4VPTVN1PROD with NOTICES
II. Description of the Proposed Rule
Change
The Exchange proposes to list and
trade Shares of the Fund pursuant to
NYSE Arca Equities Rule 8.200,
Commentary .02, which permits the
listing of Trust Issued Receipts (‘‘TIRs’’).
The Exchange has represented that the
Fund will meet the initial and
continued listing requirements
applicable to TIRs in NYSE Arca
Equities Rule 8.200 and Commentary
.02 thereto.6 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.7
The Fund is a series of the ETF
Managers Group Commodity Trust I
(‘‘Trust’’), a Delaware statutory trust.8
The Fund’s sponsor and investment
manager is ETF Managers Capital LLC
(‘‘Sponsor’’), a limited liability company
that is a commodity pool operator that
is registered with the Commodity
Futures Trading Commission 9 and is a
member of the National Futures
Association. U.S. Bancorp Fund
Services will be the transfer agent,
custodian, and administrator for the
Fund. Esposito Securities LLC will
provide statutory and wholesaling
distribution services.
The Fund’s investment objective will
be to profit from rising interest rates by
tracking the performance of a portfolio
(‘‘Benchmark Portfolio’’) that consists of
exchange traded futures contracts and
options on futures on 2, 5 and 10-year
U.S. Treasury securities (‘‘Treasury
Instruments’’) and that is weighted to
achieve a targeted negative 10-year
average effective portfolio duration
(‘‘Benchmark Component Instruments’’).
4 Amendment No. 2 replaced SR–NYSEArca–
2014–120 and superseded such filing in its entirety.
Amendment No. 1 was filed on November 3, 2014,
and withdrawn on November 6, 2014.
5 See Securities Exchange Act Release No. 73602
(Nov. 14, 2014), 79 FR 69173 (‘‘Notice’’).
6 See id. at 69173.
7 See id. at 69177.
8 The Trust submitted a registration statement
with respect to the Fund on Form S–1 under the
Securities Act of 1933 on October 7, 2014 (File No.
333–199190) (‘‘Registration Statement’’).
9 The Sponsor is not a broker-dealer or affiliated
with a broker-dealer. See Notice, supra note 5, 79
FR at 69178.
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16:34 Dec 23, 2014
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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’’) 10 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 10year 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 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.11 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.
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 net asset value (‘‘NAV’’)
and changes in the Benchmark Portfolio,
10 Sit is not affiliated with the Sponsor. Sit is not
a broker-dealer or affiliated with a broker-dealer.
See id. at 69174 n. 14.
11 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. See id. at 69174 n. 17.
PO 00000
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Sfmt 4703
because the Benchmark Portfolio does
not reflect expenses or income.
Additional information regarding the
Fund, including the NAV calculation,
operation of the Fund, the Benchmark
Portfolio, restrictions, risks, fees,
expenses, and Share creations and
redemption can be found in the Notice
and the Registration Statement, as
applicable.12
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the Exchange’s proposal to list
and trade Shares of the Fund is
consistent with the Exchange Act and
the rules and regulations thereunder
applicable to a national securities
exchange.13 In particular, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Exchange Act,14 which
requires, among other things, that the
Exchange’s rules be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Commission finds that the
proposal is consistent with Section
11A(a)(1)(C)(iii) of the Exchange Act,15
which sets forth Congress’ finding that
it is in the public interest and
appropriate for the protection of
investors and the maintenance of fair
and orderly markets to assure the
availability to brokers, dealers, and
investors of information with respect to
quotations for, and transactions in,
securities. Quotation and last-sale
information regarding the Shares will be
disseminated through the facilities of
the Consolidated Tape Association
(‘‘CTA’’).16 The Exchange will make
available on its Web site daily trading
volume of the Shares and the closing
prices of the Shares.17 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.18
Information regarding the previous
day’s closing price and trading volume
12 See
supra notes 5 and 8, respectively.
approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
14 15 U.S.C. 78f(b)(5).
15 15 U.S.C. 78k–1(a)(1)(C)(iii).
16 See Notice, supra note 5, 79 FR at 69177.
17 See id.
18 See id. at 69176.
13 In
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information for the Shares will be
published daily in the financial section
of newspapers.19
The Intraday Indicative Value
(‘‘IIV’’) 20 per Share will be widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Core Trading
Session on the Exchange (9:30 a.m.,
Eastern Time, to 4:00 p.m., Eastern
Time).21 The Exchange disseminates the
IIV through the facilities of CTA/CQ
High Speed Lines.22 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.23
The NAV of the Fund will be
calculated daily and will be released
after 4:00 p.m. Eastern Time, the end of
the Core Trading Session on the
Exchange.24 The NAV for the Shares
will be disseminated to all market
participants at the same time.25 The
Fund’s Web site will display the
applicable end of day closing NAV and
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
19 See
id.
Exchange represents that 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 Treasury
Instruments. The net asset value of the Fund’s cash
and cash equivalent holdings will not be updated
throughout the day. See id. at 69175. The Exchange
states 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
trading prices for contracts traded on the futures
exchanges are unavailable and that, 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.
See id.
21 See id. at 69175.
22 See id.
23 See id.
24 See id. The Fund’s NAV 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. 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. 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. See
id.
25 See id. at 69177.
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20 The
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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.26
The Fund will provide Web site
disclosure of its portfolio holdings
daily, which 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; the characteristics
of such instruments and cash
equivalents; and the amount of cash
held in the portfolio of the Fund.27 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.28 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.29
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.30 The intraday value of
the Benchmark Portfolio, updated every
15 seconds, will also be available
through major market data vendors.31
The Benchmark Component Instruments
constituting the Benchmark Portfolio
and anticipated rebalancing dates,
information relating to the weighting of
Treasury Instruments in the Benchmark
Portfolio, and the Benchmark Portfolio
methodology will be available on the
Web site for Fund.32
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.33 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.34 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 the
Treasury Instruments are traded.35 The
relevant futures exchanges trading
Treasury Instruments also provide
delayed futures price (and volume)
information on current and past trading
sessions and market news free-of-charge
on their Web sites.36 The specific
contract specifications for such
contracts are available at the futures
exchanges Web sites, as well as other
financial informational sources.37 The
price of Treasury Instruments also is
available on a 24-hour basis from major
market data vendors.38 Similar
information regarding the Treasury
securities underlying the Treasury
Instruments will be publicly available
from various financial information
service providers.39 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 fixedincome or similar securities (such as
shares of money market funds).40
The Commission believes that the
proposal to list and trade Shares is
reasonably designed to promote fair
disclosure of information that may be
necessary to price Shares appropriately
and to prevent trading when a
reasonable degree of transparency
cannot be assured. The Exchange
represents that it 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.41 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.42 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
34 See
26 See
id. at 69176 and 69177.
27 See id. at 69176.
28 See id.
29 See id.
30 See id. at 69177.
31 See id.
32 See id. at 69174 and 69177.
33 See id. at 69176.
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Sfmt 4703
77585
id.
id. at 69177.
36 See id.
37 See id. at 69176.
38 See id.
39 See id. at 69177.
40 See id.
41 See id.
42 See id.
35 See
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mstockstill on DSK4VPTVN1PROD with NOTICES
the NAV is available to all market
participants.43
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares.44
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 45 or by the halt or
suspension of trading of the underlying
Treasury Instruments.46
The Exchange states that it has a
general policy prohibiting the
distribution of material, non-public
information by its employees.47
Moreover, 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.48 The Financial
Industry Regulatory Authority
(‘‘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.49 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.50
FINRA, on behalf of the Exchange, is
able to access, as needed, trade
43 See
id.
44 See id.
45 See NYSE Arca Equities Rule 7.12.
46 See Notice, supra note 5, 79 FR at 69177.
47 See id. at 69178.
48 See id. at 69177.
49 See id.
50 See id. at 69177–78.
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information for certain fixed income
securities held by the Fund reported to
FINRA’s Trade Reporting and
Compliance Engine.51 Furthermore, the
Sponsor is not a broker-dealer or
affiliated with a broker-dealer and the
Sponsor represents that it will
implement and maintain procedures
designed to prevent the use and
dissemination of material non-public
information.52 Sit, which maintains the
Benchmark Portfolio, is not affiliated
with the Sponsor and is not a brokerdealer or affiliated with a brokerdealer.53
In support of this proposal, the
Exchange has made the following
representations:
(1) The Fund will meet the initial and
continued listing requirements
applicable to TIRs in NYSE Arca
Equities Rule 8.200 and Commentary
.02 thereto.54
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.55
(3) Trading in the Shares will be
subject to the existing trading
surveillances, administered by the
FINRA on behalf of the Exchange,
which are designed to detect violations
of Exchange rules and applicable federal
securities laws, and 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.56
(4) Prior to the commencement of
trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
Specifically, the Bulletin will discuss
the following: (a) The procedures for
purchases and redemptions of Shares in
Creation Basket aggregations (and that
Shares are not individually redeemable);
(b) 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; (c) 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; (d)
how information regarding the IIV is
disseminated; (e) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
51 See
id. at 69178.
id.
53 See id.
54 See id. at 69176.
55 See id. at 69177.
56 See id.
52 See
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Sfmt 9990
Shares prior to or concurrently with the
confirmation of a transaction; and (f)
trading information.57
(5) For initial and continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Act,58 as
provided by NYSE Arca Equities Rule
5.3.59
(6) For components traded on
exchanges, not more than 10% of such
components 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.60
(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.61
(8) A minimum of 100,000 Shares for
the Fund will be outstanding at the
commencement of trading on the
Exchange.62
This order is based on the Exchange’s
representations above, as well as those
in the Notice.63
For the forgoing reasons, the
Commission believes the Exchange’s
proposal to list and trade the Shares is
consistent with the Exchange Act.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,64
that the proposed rule change (SR–
NYSEArca–2014–120), as modified by
Amendment No. 2 thereto, be, and it
hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.65
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–30105 Filed 12–23–14; 8:45 am]
BILLING CODE 8011–01–P
57 See
id. at 69178.
CFR 240.10A–3.
59 See Notice, supra note 5, 79 FR at 69177.
60 See id. at 69178.
61 See id. at 69176.
62 See id. at 69177.
63 See supra note 5.
64 15 U.S.C. 78s(b)(2).
65 17 CFR 200.30–3(a)(12).
58 17
E:\FR\FM\24DEN1.SGM
24DEN1
Agencies
[Federal Register Volume 79, Number 247 (Wednesday, December 24, 2014)]
[Notices]
[Pages 77583-77586]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30105]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73866; File No. SR-NYSEArca-2014-120]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by Amendment No. 2 Thereto, To List
and Trade Shares of the Sit Rising Rate Fund Under NYSE Arca Equities
Rule 8.200
December 17, 2014.
I. Introduction
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) of the Securities
Exchange Act of 1934 (``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade shares
(``Shares'') of the Sit Rising Rate Fund (``Fund''), pursuant to NYSE
Arca Equities Rule 8.200. The proposed rule change was published for
comment in the Federal Register on November 4, 2014.\3\ On November 6,
2014, the Exchange filed Amendment No. 2 to the proposed rule change,
which superseded and replaced the proposed
[[Page 77584]]
rule change as originally filed.\4\ The proposed rule change, as
modified by Amendment No. 2, was published for comment in the Federal
Register on November 20, 2014.\5\ The Commission received no comments
on the proposal. This order approves the proposed rule change, as
modified by Amendment No. 2.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 73464 (Oct. 29,
2014), 79 FR 65437.
\4\ Amendment No. 2 replaced SR-NYSEArca-2014-120 and superseded
such filing in its entirety. Amendment No. 1 was filed on November
3, 2014, and withdrawn on November 6, 2014.
\5\ See Securities Exchange Act Release No. 73602 (Nov. 14,
2014), 79 FR 69173 (``Notice'').
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II. Description of the Proposed Rule Change
The Exchange proposes to list and trade Shares of the Fund pursuant
to NYSE Arca Equities Rule 8.200, Commentary .02, which permits the
listing of Trust Issued Receipts (``TIRs''). The Exchange has
represented that the Fund will meet the initial and continued listing
requirements applicable to TIRs in NYSE Arca Equities Rule 8.200 and
Commentary .02 thereto.\6\ 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.\7\
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\6\ See id. at 69173.
\7\ See id. at 69177.
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The Fund is a series of the ETF Managers Group Commodity Trust I
(``Trust''), a Delaware statutory trust.\8\ The Fund's sponsor and
investment manager is ETF Managers Capital LLC (``Sponsor''), a limited
liability company that is a commodity pool operator that is registered
with the Commodity Futures Trading Commission \9\ and is a member of
the National Futures Association. U.S. Bancorp Fund Services will be
the transfer agent, custodian, and administrator for the Fund. Esposito
Securities LLC will provide statutory and wholesaling distribution
services.
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\8\ The Trust submitted a registration statement with respect to
the Fund on Form S-1 under the Securities Act of 1933 on October 7,
2014 (File No. 333-199190) (``Registration Statement'').
\9\ The Sponsor is not a broker-dealer or affiliated with a
broker-dealer. See Notice, supra note 5, 79 FR at 69178.
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The Fund's investment objective will be to profit from rising
interest rates by tracking the performance of a portfolio (``Benchmark
Portfolio'') that consists of exchange traded futures contracts and
options on futures on 2, 5 and 10-year U.S. Treasury securities
(``Treasury Instruments'') and that is weighted to achieve a targeted
negative 10-year average effective portfolio duration (``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'') \10\ 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.
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\10\ Sit is not affiliated with the Sponsor. Sit is not a
broker-dealer or affiliated with a broker-dealer. See id. at 69174
n. 14.
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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.\11\ 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.
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\11\ 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. See
id. at 69174 n. 17.
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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 net asset value (``NAV'') and changes in the Benchmark
Portfolio, because the Benchmark Portfolio does not reflect expenses or
income.
Additional information regarding the Fund, including the NAV
calculation, operation of the Fund, the Benchmark Portfolio,
restrictions, risks, fees, expenses, and Share creations and redemption
can be found in the Notice and the Registration Statement, as
applicable.\12\
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\12\ See supra notes 5 and 8, respectively.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade Shares of the Fund is consistent with the
Exchange Act and the rules and regulations thereunder applicable to a
national securities exchange.\13\ In particular, the Commission finds
that the proposed rule change is consistent with Section 6(b)(5) of the
Exchange Act,\14\ which requires, among other things, that the
Exchange's rules be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general, to protect
investors and the public interest.
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\13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\14\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the proposal is consistent with Section
11A(a)(1)(C)(iii) of the Exchange Act,\15\ which sets forth Congress'
finding that it is in the public interest and appropriate for the
protection of investors and the maintenance of fair and orderly markets
to assure the availability to brokers, dealers, and investors of
information with respect to quotations for, and transactions in,
securities. Quotation and last-sale information regarding the Shares
will be disseminated through the facilities of the Consolidated Tape
Association (``CTA'').\16\ The Exchange will make available on its Web
site daily trading volume of the Shares and the closing prices of the
Shares.\17\ 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.\18\ Information regarding the previous day's closing price
and trading volume
[[Page 77585]]
information for the Shares will be published daily in the financial
section of newspapers.\19\
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\15\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\16\ See Notice, supra note 5, 79 FR at 69177.
\17\ See id.
\18\ See id. at 69176.
\19\ See id.
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The Intraday Indicative Value (``IIV'') \20\ per Share will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Core Trading Session on the Exchange (9:30
a.m., Eastern Time, to 4:00 p.m., Eastern Time).\21\ The Exchange
disseminates the IIV through the facilities of CTA/CQ High Speed
Lines.\22\ 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.\23\
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\20\ The Exchange represents that 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 Treasury Instruments.
The net asset value of the Fund's cash and cash equivalent holdings
will not be updated throughout the day. See id. at 69175. The
Exchange states 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 trading prices for contracts traded on the
futures exchanges are unavailable and that, 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. See id.
\21\ See id. at 69175.
\22\ See id.
\23\ See id.
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The NAV of the Fund will be calculated daily and will be released
after 4:00 p.m. Eastern Time, the end of the Core Trading Session on
the Exchange.\24\ The NAV for the Shares will be disseminated to all
market participants at the same time.\25\ The Fund's Web site will
display the applicable end of day closing NAV and 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.\26\
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\24\ See id. The Fund's NAV 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. 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. 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. See id.
\25\ See id. at 69177.
\26\ See id. at 69176 and 69177.
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The Fund will provide Web site disclosure of its portfolio holdings
daily, which 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; the characteristics of such
instruments and cash equivalents; and the amount of cash held in the
portfolio of the Fund.\27\ 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.\28\ 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.\29\
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\27\ See id. at 69176.
\28\ See id.
\29\ See id.
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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.\30\ The
intraday value of the Benchmark Portfolio, updated every 15 seconds,
will also be available through major market data vendors.\31\ The
Benchmark Component Instruments constituting the Benchmark Portfolio
and anticipated rebalancing dates, information relating to the
weighting of Treasury Instruments in the Benchmark Portfolio, and the
Benchmark Portfolio methodology will be available on the Web site for
Fund.\32\
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\30\ See id. at 69177.
\31\ See id.
\32\ See id. at 69174 and 69177.
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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.\33\ 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.\34\ 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
the Treasury Instruments are traded.\35\ The relevant futures exchanges
trading Treasury Instruments also provide delayed futures price (and
volume) information on current and past trading sessions and market
news free-of-charge on their Web sites.\36\ The specific contract
specifications for such contracts are available at the futures
exchanges Web sites, as well as other financial informational
sources.\37\ The price of Treasury Instruments also is available on a
24-hour basis from major market data vendors.\38\ Similar information
regarding the Treasury securities underlying the Treasury Instruments
will be publicly available from various financial information service
providers.\39\ 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).\40\
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\33\ See id. at 69176.
\34\ See id.
\35\ See id. at 69177.
\36\ See id.
\37\ See id. at 69176.
\38\ See id.
\39\ See id. at 69177.
\40\ See id.
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The Commission believes that the proposal to list and trade Shares
is reasonably designed to promote fair disclosure of information that
may be necessary to price Shares appropriately and to prevent trading
when a reasonable degree of transparency cannot be assured. The
Exchange represents that it 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.\41\ 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.\42\ 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
[[Page 77586]]
the NAV is available to all market participants.\43\
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\41\ See id.
\42\ See id.
\43\ See id.
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With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares.\44\ 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 \45\ or by the halt or suspension
of trading of the underlying Treasury Instruments.\46\
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\44\ See id.
\45\ See NYSE Arca Equities Rule 7.12.
\46\ See Notice, supra note 5, 79 FR at 69177.
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The Exchange states that it has a general policy prohibiting the
distribution of material, non-public information by its employees.\47\
Moreover, 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.\48\ The
Financial Industry Regulatory Authority (``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.\49\ 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.\50\ 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.\51\ Furthermore, the Sponsor is not a broker-
dealer or affiliated with a broker-dealer and the Sponsor represents
that it will implement and maintain procedures designed to prevent the
use and dissemination of material non-public information.\52\ Sit,
which maintains the Benchmark Portfolio, is not affiliated with the
Sponsor and is not a broker-dealer or affiliated with a broker-
dealer.\53\
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\47\ See id. at 69178.
\48\ See id. at 69177.
\49\ See id.
\50\ See id. at 69177-78.
\51\ See id. at 69178.
\52\ See id.
\53\ See id.
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In support of this proposal, the Exchange has made the following
representations:
(1) The Fund will meet the initial and continued listing
requirements applicable to TIRs in NYSE Arca Equities Rule 8.200 and
Commentary .02 thereto.\54\
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\54\ See id. at 69176.
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(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.\55\
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\55\ See id. at 69177.
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(3) Trading in the Shares will be subject to the existing trading
surveillances, administered by the FINRA on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws, and 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.\56\
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\56\ See id.
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(4) Prior to the commencement of trading, the Exchange will inform
its ETP Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (a) The
procedures for purchases and redemptions of Shares in Creation Basket
aggregations (and that Shares are not individually redeemable); (b)
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; (c) 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; (d) how
information regarding the IIV is disseminated; (e) 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 (f) trading information.\57\
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\57\ See id. at 69178.
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(5) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act,\58\ as provided by NYSE Arca
Equities Rule 5.3.\59\
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\58\ 17 CFR 240.10A-3.
\59\ See Notice, supra note 5, 79 FR at 69177.
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(6) For components traded on exchanges, not more than 10% of such
components 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.\60\
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\60\ See id. at 69178.
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(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.\61\
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\61\ See id. at 69176.
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(8) A minimum of 100,000 Shares for the Fund will be outstanding at
the commencement of trading on the Exchange.\62\
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\62\ See id. at 69177.
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This order is based on the Exchange's representations above, as
well as those in the Notice.\63\
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\63\ See supra note 5.
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For the forgoing reasons, the Commission believes the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\64\ that the proposed rule change (SR-NYSEArca-2014-120),
as modified by Amendment No. 2 thereto, be, and it hereby is, approved.
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\64\ 15 U.S.C. 78s(b)(2).
\65\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\65\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30105 Filed 12-23-14; 8:45 am]
BILLING CODE 8011-01-P