Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade the Shares of the Breakwave Tanker Shipping ETF, 17632-17636 [2023-05915]
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Federal Register / Vol. 88, No. 56 / Thursday, March 23, 2023 / Notices
NATIONAL SCIENCE FOUNDATION
Advisory Committee for
Cyberinfrastructure; Notice of Meeting
In accordance with the Federal
Advisory Committee Act (Pub. L. 92–
463, as amended), the National Science
Foundation (NSF) announces the
following meeting:
Name and Committee Code: Advisory
Committee for Advanced
Cyberinfrastructure (Spring 2023)
(#25150) (Hybrid Meeting).
Date and Time: April 17, 2023, 10:00
a.m.–3:30 p.m. (Eastern), April 18, 2023,
10:00 a.m.–4:00 p.m. (Eastern).
Place: NSF, 2415 Eisenhower Avenue,
Room E3410, Alexandria, VA 22314
(Hybrid).
The final meeting agenda and
instructions to register and attend the
meeting will be posted on the ACCI
website: https://www.nsf.gov/cise/oac/
advisory.jsp.
Type of Meeting: Open.
Contact Persons: Amy Walton,
National Science Foundation, 2415
Eisenhower Avenue, Alexandria, VA
22314; Telephone: (703) 292–4538.
Minutes: May be obtained from
Christine Christy, National Science
Foundation, 2415 Eisenhower Avenue,
Alexandria, VA 22314; Telephone: (783)
878–0375 and will be posted within 90days after the meeting end date to the
ACCI website: https://www.nsf.gov/cise/
oac/advisory.jsp.
Purpose of Meeting: To advise NSF on
the impact of its policies, programs and
activities in the OAC community. To
provide advice to the Director/NSF on
issues related to long-range planning.
Agenda: Updates on NSF wide OAC
activities.
Dated: March 17, 2023.
Crystal Robinson,
Committee Management Officer.
[FR Doc. 2023–05923 Filed 3–22–23; 8:45 am]
BILLING CODE 7555–01–P
NATIONAL SCIENCE FOUNDATION
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Sunshine Act Meetings
The National Science Board’s ad hoc
Committee on Nominating the NSB
Class of 2024–2030 hereby gives notice
of the scheduling of a teleconference for
the transaction of National Science
Board business pursuant to the NSF Act
and the Government in the Sunshine
Act.
TIME AND DATE: Wednesday, March 29,
2023, from 8:00–9:00 a.m. EDT.
PLACE: This meeting will be via
videoconference through the National
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Science Foundation, 2415 Eisenhower
Avenue, Alexandria, VA 22314.
STATUS:
Closed.
The agenda
is: To provide the ad hoc committee
with a general overview of the NSB
nominations process, determine the
desired attributes for the NSB class of
2024–2030, and discuss the
renomination procedures for members
of the NSB class of 2018–2024.
MATTERS TO BE CONSIDERED:
CONTACT PERSON FOR MORE INFORMATION:
Point of contact for this meeting is:
Chris Blair, cblair@nsf.gov, 703/292–
7000. Meeting information and updates
may be found at www.nsf.gov/nsb.
Christopher Blair,
Executive Assistant to the National Science
Board Office.
[FR Doc. 2023–06197 Filed 3–21–23; 4:15 pm]
BILLING CODE 7555–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97159; File No. SR–
CboeEDGX–2023–008]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of
Withdrawal of a Proposed Rule Change
To Amend Its Fee Schedule
March 17, 2023.
On February 1, 2023, Cboe EDGX
Exchange, Inc. (‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
amend its Fee Schedule. The proposed
rule change was immediately effective
upon filing with the Commission
pursuant to Section 19(b)(3)(A) of the
Act.3 The proposed rule change was
published for comment in the Federal
Register on February 21, 2023.4 On
March 9, 2023, EDGX withdrew the
proposed rule change (SR-CboeEDGX–
2023–008).
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
4 See Securities Exchange Act Release No. 96914
(February 14, 2023), 88 FR 10605.
5 17 CFR 200.30–3(a)(12).
2 17
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.5
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–05912 Filed 3–22–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97156; File No. SR–MRX–
2023–04]
Self-Regulatory Organizations; Nasdaq
MRX, LLC; Notice of Withdrawal of
Proposed Rule Change To Amend the
Exchange Pricing Schedule at Options
7, Section 3
March 17, 2023.
On January 30, 2023, Nasdaq MRX,
LLC (‘‘MRX’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend the
maker fees assessed to market makers.
The proposed rule change was
published for comment in the Federal
Register on February 21, 2023.3
On March 1, 2023, MRX withdrew the
proposed rule change (SR–MRX–2023–
04).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.4
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–05914 Filed 3–22–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97158; File No. SR–
NYSEARCA–2022–61]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
a Proposed Rule Change, as Modified
by Amendment No. 1, To List and
Trade the Shares of the Breakwave
Tanker Shipping ETF
March 17, 2023.
I. Introduction
On September 13, 2022, NYSE Arca,
Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 96924
(February 14, 2023), 88 FR 10585.
4 17 CFR 200.30–3(a)(12).
2 17
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Federal Register / Vol. 88, No. 56 / Thursday, March 23, 2023 / Notices
to Section 19(b)(1) 1 of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 2 and Rule 19b–4
thereunder,3 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
Breakwave Tanker Shipping ETF
(‘‘Fund’’) under NYSE Arca Rule 8.200–
E, Commentary .02. The proposed rule
change was published for comment in
the Federal Register on September 27,
2022.4
On November 2, 2022, pursuant to
Section 19(b)(2) of the Act,5 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.6 On December 8,
2022, the Commission instituted
proceedings under Section 19(b)(2)(B) of
the Exchange Act 7 to determine
whether to approve or disapprove the
proposed rule change.8 On March 6,
2023, the Exchange filed Amendment
No. 1, which amended and replaced the
proposed rule change in its entirety.9
The Commission has received no
comments on the proposed rule change.
The Commission is approving the
proposed rule change, as modified by
Amendment No. 1.
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. 95853
(Sept. 21, 2022), 87 FR 58552 (‘‘Notice’’).
5 15 U.S.C. 78s(b)(2).
6 See Securities Exchange Act Release No. 96213,
87 FR 67513 (Nov. 8, 2022).
7 15 U.S.C. 78s(b)(2)(B).
8 See Securities Exchange Act Release No. 96469,
87 FR 76524 (Dec. 14, 2022).
9 In Amendment No. 1, the Exchange: (1) clarified
information regarding the markets for Freight
Futures (as defined herein) and exchange-traded
options on Freight Futures; (2) clarified the
correlation between the Benchmark Portfolio (as
defined herein) and the Fund’s portfolio and the
adjustments and rebalancing of the Fund’s
portfolio; (3) provided additional background
information on the freight futures markets,
generally, and additional supporting information on
the liquidity of the Freight Futures markets,
specifically; (4) clarified the types of instruments
and other holdings in which the Fund will not
invest; (5) expanded its description of the
surveillance applicable to the Shares, Freight
Futures, and exchange-listed options on Freight
Futures; (6) added a representation that, prior to the
commencement of trading of the Shares, it will
inform its ETP Holders (as defined herein) in an
Information Bulletin of the special characteristics
and risks associated with trading the Shares, among
other information; and (7) made other technical
amendments. Because the amendment does not
materially alter the substance of the proposed rule
change or raise unique or novel regulatory issues,
it is not subject to notice and comment.
Amendment No. 1 is available on the Commission’s
website at: https://www.sec.gov/comments/srnysearca-2022-61/srnysearca202261-20158810326900.pdf.
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II. Exchange’s Description of the
Proposed Rule Change, as Modified by
Amendment No. 1
As described in more detail in
Amendment No 1 to the proposed rule
change,10 the Exchange proposes to list
and trade the Shares of the Fund under
NYSE Arca Rule 8.200–E, Commentary
.02, which governs the listing and
trading of Trust Issued Receipts on the
Exchange. The Fund will be a series of
ETF Managers Group Commodity Trust
I (‘‘Trust),11 and the Fund and the Trust
will be managed and controlled by their
sponsor and investment manager, ETF
Managers Capital LLC (‘‘Sponsor’’).12
According to the Exchange, the
Fund’s investment objective will be to
provide investors with exposure to the
daily change in the price of tanker
freight futures,13 before expenses and
liabilities of the Fund, by tracking the
performance of a portfolio (‘‘Benchmark
Portfolio’’) consisting of positions in the
three-month strip of the nearest
calendar quarter of futures contracts on
specified indexes (individually,
‘‘Reference Index’’) that measure prices
for shipping crude oil (‘‘Freight
Futures’’).14 Each Reference Index is
published each U.K. business day by the
10 See
id. Additional information about the tanker
freight industry, including tanker vessel supply,
demand for seaborne oil transportation, calculation
of NAV (as defined herein), dissemination of IFV
(as defined herein), creation and redemption of
Shares, general availability of information, trading
halts, trading rules, surveillance, and information
bulletin, among other things, can be found in the
proposed rule change, as modified by Amendment
No. 1.
11 The Exchange states that on July 1, 2022, the
Trust submitted to the Commission on a
confidential basis its draft registration statement on
Form S–1 (‘‘Registration Statement’’) under the
Securities Act of 1933.
12 The Sponsor is registered with the Commodity
Futures Trading Commission (‘‘CFTC’’) as a
commodity pool operator and is a member of the
National Futures Association. Breakwave Advisors
LLC (‘‘Breakwave’’) is registered as a commodity
trading advisor with the CFTC and will serve as the
Fund’s commodity trading advisor. ETFMG
Financial LLC will be the Fund’s distributor, and
US Bancorp Fund Services LLC will be the Fund’s
administrator and transfer agent (‘‘Administrator’’
and ‘‘Transfer Agent’’).
13 According to the Exchange, freight futures
contracts mainly exist for dry bulk and tanker
freight rates. The Fund’s exposure will be to tanker
(not dry bulk) freight futures.
14 According to the Exchange, Freight Futures are
primarily traded through broker members of the
Forward Freight Agreement Brokers Association
(‘‘FFABA’’). Members of the FFABA must be
members of the Baltic Exchange and must be
regulated by the Financial Conduct Authority if
resident in the U.K., or if not resident in the U.K.,
by an equivalent body if required by the authorities
in the jurisdiction. Freight Futures are quoted in
U.S. dollars per metric ton, with a minimum lot size
of 1,000 metric tons. One lot represents freight costs
to transport in U.S. dollars. The nominal value of
a contract is simply the product of lots and Freight
Futures prices.
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London-based Baltic Exchange 15 and
measures the charter rate for shipping
crude oil in a specific size category of
cargo ship and for a specific route. The
two Reference Indexes are: (1) the TD3C
Index: Persian Gulf to China 270,000
metric tons cargo (Very Large Crude
Carrier or VLCC tankers); and (2) the
TD20 Index: West Africa to Europe,
130,000 metric tons cargo (Suezmax
tankers).16 The value of each of the
TD3C Index and TD20 Index is
disseminated daily at 4:00 p.m., London
Time by the Baltic Exchange.17 Such
Reference Index information also is
publicly available and widely
disseminated by Reuters, Bloomberg,
and/or other major market data vendors.
Freight Futures reflect market
expectations for the future cost of
transporting crude oil.18
The Fund will seek to achieve its
objective by purchasing Freight Futures.
The Fund also may hold exchangetraded options on Freight Futures.
Currently, the exclusive markets for
Freight Futures and options on Freight
Futures are ICE Futures Europe (‘‘ICE’’)
and the Chicago Mercantile Exchange
(‘‘CME’’). The applicable exchange acts
as a counterparty for each member for
15 The Baltic Exchange, which is a wholly-owned
subsidiary of the Singapore Exchange, is a
membership organization and an independent
source of maritime market information for the
trading and settlement of physical and derivative
shipping contracts.
16 The Reference Indexes are published by the
Baltic Exchange’s subsidiary company, Baltic
Exchange Information Services Ltd (‘‘Baltic’’),
which publishes a wide range of market reports,
fixture lists, and market rate indicators on a daily
and (in some cases) weekly basis. The Baltic
indices, which include the Reference Indexes, are
an assessment of the price of moving the major raw
materials by sea. The indices are based on
assessments of the cost of transporting various bulk
cargoes, both wet (e.g., crude oil and oil products)
and dry (e.g., coal and iron ore), made by leading
shipbroking houses located around the world on a
per ton and daily hire basis. The information is
collated and published by the Baltic Exchange.
Procedures relating to administration of the Baltic
indices are set forth in ‘‘The Baltic Exchange, Guide
to Market Benchmarks’’ November 2016, including
production methods, calculation, confidentiality
and transparency, duties of panelists, code of
conduct, audits, and quality control.
17 Freight futures, including tanker Freight
Futures, settle monthly over the arithmetic average
of spot index assessments in the contract month for
the relevant underlying product, rounded to three
decimal places. The daily Reference Index
publication, against which Freight Futures settle, is
published by the Baltic Exchange.
18 Generally, Freight Futures trade from
approximately 3:00 a.m. Eastern Time (‘‘E.T.’’) to
approximately 1:00 p.m. E.T. The great majority of
trading volume occurs during London business
hours, from approximately 4:00 a.m. E.T. time to
approximately 12:00 p.m. E.T. Some limited trading
takes place during Asian business hours as well
(12:00 a.m. to 3:00 a.m. E.T.). The final closing
prices for settlement are published daily around
12:30 p.m. E.T. Final cash settlement occurs the
first business day following the expiry day.
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Federal Register / Vol. 88, No. 56 / Thursday, March 23, 2023 / Notices
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clearing purposes. The Fund’s
investments in Freight Futures will be
cleared by ICE and/or CME.19
According to the Exchange, although
freight derivatives have been used in the
shipping industry for more than 30
years, freight futures (including tanker
Freight Futures) have been clearing on
exchanges since 2005. In addition, the
Exchange represents that the liquidity of
tanker Freight Futures (clean and dirty)
has been increasing, in lot terms, over
the last five years.20 For example, in
2021, approximately 560,000 lots in
Freight Futures traded. As of 2022, open
interest in Freight Futures stood at
approximately 145,000 lots across all
asset classes representing an estimated
value of more than $2 billion. Of such
open interest in 2022, TD3C contracts
accounted for approximately 50% in
lots of all tanker Freight Futures.
The Fund will invest substantially all
of its assets in Freight Futures
constituting the Benchmark Portfolio,
and at any given time, the average
maturity of the futures held by the Fund
will be approximately 50 to 70 days.
The Fund’s portfolio will be traded with
a view to reflecting the performance of
the Benchmark Portfolio, whether the
Benchmark Portfolio is rising, falling, or
flat over any particular period. The
Benchmark Portfolio, which is
maintained by Breakwave and will be
rebalanced annually, will hold long
positions in Freight Futures
corresponding to the TD3C Index and
TD20 Index. The Benchmark Portfolio’s
initial allocation will be approximately
90% TD3C contracts and 10% TD20
contracts, based on contract value, not
number of lots. The Benchmark
Portfolio will consist of positions in the
three-month strip of the nearest
calendar quarter of Freight Futures and
roll them constantly to the next calendar
quarter. The three-month strip of each of
the four-calendar quarters are January,
February, and March (Q1); April, May,
and June (Q2); July, August, and
September (Q3); and October,
November, and December (Q4). The
Benchmark Portfolio will hold all
positions to maturity and settle them in
cash. During any given calendar quarter,
the Benchmark Portfolio will
progressively increase its position to the
next calendar quarter three-month strip,
19 The Exchange represents that CME and ICE are
members of the Intermarket Surveillance Group
(‘‘ISG’’).
20 Tanker Freight Futures are quoted in U.S.
Dollars per metric ton, with a minimum lot size of
1,000 metric tons. One lot represents freight costs
to transport in U.S. Dollars. The nominal value of
a contract is simply the product of lots and Freight
Futures prices. There are futures contracts of up to
72 consecutive months, starting with the current
month, available for trading for each vessel class.
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thus maintaining constant long
exposure to the Freight Futures market
as positions mature.
To track the Benchmark Portfolio, the
Fund will attempt to roll positions in
the nearby calendar quarter, on a pro
rata basis. For example, if the Fund was
currently holding the Q1 calendar
quarter comprising the January,
February and March monthly contracts,
each week in the month of February, the
Fund will attempt to purchase Q2
contracts in an amount equal to
approximately one quarter of the
expiring February positions. As a result,
by the end of February, the Fund would
have rolled the February position to Q2
freight contracts, leaving the Fund with
March and Q2 contracts. At the end of
March, the Fund will have completed
the roll and will then hold only Q2
exposure comprising April, May, and
June monthly contracts.
During the month of December of
each year, the Fund will rebalance its
portfolio in order to bring the allocation
of assets back to the initial allocation
levels (i.e., 90% and 10% in accordance
with the Benchmark Portfolio
construction). Given each asset’s
individual price movements during the
year, such percentages might deviate
from the targeted allocation. To
maintain the correlation between the
Fund and the change in the Benchmark
Portfolio with regard to the performance
of near-dated versus longer-dated
futures (i.e., based on contract duration),
the Sponsor may adjust the Fund’s
portfolio of investments on a daily basis
in response to creation and redemption
orders or otherwise as required. For
example, if needed, the Fund will sell
current month Freight Futures and buy
next calendar quarter futures to
maintain a balance in terms of average
duration, but also sell TD3C futures and
buy TD20 futures to maintain the initial
allocation levels (i.e., 90%; 10%). The
Sponsor anticipates that the Fund’s
Freight Futures positions will be held to
expiration and settle in cash against the
respective Reference Index as published
by the Baltic Exchange and ICE or CME.
Because Freight Futures contracts are
cash settled, the Fund need not close
out of existing contracts. Rather, it will
hold such contracts to expiration and
apply the above methodology in order
acquire the nearby calendar contract.
When establishing positions in
Freight Futures, the Fund will be
required to deposit initial margin with
a value of approximately 10% to 40% of
the notional value of each Freight
Futures position at the time it is
established. These margin requirements
are established and subject to change
from time to time by the relevant
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exchanges, clearing houses, or the
Fund’s futures commission merchant
(‘‘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 overall Freight
Futures positions. Any assets not
required to be posted as margin with the
FCM will be held at the Fund’s
custodian in cash or cash equivalents.21
Like other investors in Freight Futures,
the Fund will place purchase orders for
Freight Futures with an execution
broker. The broker will identify a selling
counterparty and, simultaneously with
the completion of the transaction, will
submit the block traded Freight Futures
to the relevant exchange or clearing
house for clearing, thereby completing
and creating a cleared futures
transaction. If the exchange or clearing
house does not accept the transaction
for any reason, the transaction will be
considered null and void and of no legal
effect.
The Exchange represents that not
more than 10% of the net assets of the
Fund in the aggregate invested in
Freight Futures and exchange-traded
options on Freight Futures will consist
of Freight Futures and exchange-traded
options on Freight Futures whose
principal market is not a member of the
ISG or is a market with which the
Exchange does not have in place a
comprehensive surveillance sharing
agreement (‘‘CSSA’’). In addition, while
the Fund maintains the right to invest
in other maturities of Freight Futures, if
such strategy is deemed necessary,
according to the Exchange, the
Benchmark Portfolio will not include,
and the Fund will not invest in, swaps
or other over-the-counter derivative
instruments.
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the Exchange’s proposal to list
and trade the Shares is consistent with
the Exchange Act and the rules and
regulations thereunder applicable to a
national securities exchange.22 In
particular, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent
with: (1) Section 6(b)(5) of the Exchange
21 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 for
direct investment or as collateral for the U.S.
Treasuries and for other liquidity purposes, and to
meet redemptions that may be necessary on an
ongoing basis.
22 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).
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Federal Register / Vol. 88, No. 56 / Thursday, March 23, 2023 / Notices
Act,23 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; and (2)
Section 11A(a)(1)(C)(iii) of the Exchange
Act,24 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.
As stated in the proposal, the Fund
will seek to achieve its objective by
purchasing Freight Futures (and
exchange-traded options on Freight
Futures) that are cleared through major
exchanges and, currently, the exclusive
markets for Freight Futures (and options
on Freight Futures) are ICE and CME,
both of which are members of ISG and
are regulated in the U.S. by the CFTC.25
The Exchange further states that,
although freight derivatives have been
used in the shipping industry for more
than 30 years, freight futures (including
tanker Freight Futures) have been
clearing on exchanges since 2005. In
summary, Freight Futures are cleared on
well-established, regulated markets that
are members of the ISG.26 The
Commission finds that the Exchange
will be able to obtain and share
surveillance information with a
significant regulated market in Freight
Futures.
To be listed and traded on the
Exchange, the Shares must comply with
the requirements of NYSE Arca Rule
8.200–E, Commentary .02 thereto on an
initial and continuing basis. 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.
Quotation and last-sale information
regarding the Shares will be
disseminated through the facilities of
the Consolidated Tape Association. The
intraday, closing prices, and settlement
prices of the Freight Futures will be
readily available from the applicable
futures exchange websites, automated
quotation systems, published or other
public sources, or major market data
23 15
U.S.C. 78f(b)(5).
U.S.C. 78k–1(a)(1)(C)(iii).
25 See supra note 19.
26 See supra notes 19–20 and accompanying text.
24 15
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19:23 Mar 22, 2023
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vendors. Complete real-time data for
Freight Futures is available by
subscription through on-line
information services. Trading prices for
the Freight Futures and exchange-traded
options on Freight Futures will be
disseminated by one or more major
market data vendors during the NYSE
Arca Core Trading Session of 9:30 a.m.
to 4:00 p.m. E.T. CME and ICE provide
on a daily basis transaction volumes,
transaction prices, and open interest on
their respective websites. Daily
settlement prices and historical
settlement prices are available through a
subscription service to the Baltic
Exchange, ICE, and CME; however,
these exchanges provide the daily
settlement price change of Freight
Futures on their respective websites.
Certain Freight Futures brokers provide
real time pricing information to the
general public either through their
websites or through data vendors, such
as Bloomberg or Reuters. Most Freight
Futures brokers provide, upon request,
individual electronic screens that
market participants can use to transact,
place orders, or only monitor Freight
Futures market price levels.
In addition, the Fund’s website will
display the applicable end of day
closing net asset value (‘‘NAV’’). The
daily holdings of the Fund will be
disclosed on the Fund’s website before
9:30 a.m. E.T. each day. The Fund’s
website disclosure of portfolio holdings
will include, as applicable: (1) the
composite value of the total portfolio;
(2) the quantity and type of each
holding (including the ticker symbol,
maturity date, or other identifier, if any)
and other descriptive information
including, in the case of an option, its
strike price; (3) the percentage
weighting of each holding in the Fund’s
portfolio; (4) the number of Freight
Futures contracts and the value of each
Freight Futures (in U.S. dollars); (5) the
type (including maturity, ticker symbol,
or other identifier) and value of each
Treasury security and cash equivalent;
and (6) the amount of cash held in the
Fund’s 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 be available through major
market data vendors during those times
that the hours trading in Freight Futures
overlap with trading hours on NYSE
Arca (i.e., between 9:00 a.m. and 1:00
p.m. E.T.). The indicative fund value
(‘‘IFV’’), which will be calculated by
using the prior day’s closing NAV per
PO 00000
Frm 00120
Fmt 4703
Sfmt 4703
17635
Share of the Fund as a base and
updating that value throughout the
trading day to reflect changes in the
most recently reported trade price for
the futures and/or options held by the
Fund, will be disseminated on a per
Share basis every 15 seconds during
regular NYSE Arca Core Trading
Session hours of 9:30 a.m. E.T. to 4:00
p.m. E.T.27 The Administrator will
calculate the NAV of the Fund on each
NYSE Arca trading day. The NAV for a
particular trading day will be released
after 4:00 p.m. E.T., and the NAV for the
Shares will be disseminated daily to all
market participants at the same time.
The Commission also believes that the
proposal to list and trade the Shares is
reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. 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.
Further, the Exchange may halt trading
during the day in which an interruption
to the dissemination of the IFV or the
intraday value of the Benchmark
Portfolio occurs; if the interruption to
the dissemination of the IFV or the
value of the Benchmark Portfolio
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.
Trading in Shares of the Fund will be
halted if the circuit breaker parameters
in NYSE Arca Rule 7.12–E have been
reached. Trading also may be halted
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. The Exchange states that it
has a general policy prohibiting the
distribution of material, non-public
information by its employees. Moreover,
trading of the Shares will be subject to
NYSE Arca Rule 8.200–E, Commentary
.02(e), which sets forth certain
restrictions on Equity Trading Permit
holders (‘‘ETP Holders’’) acting as
registered Market Makers in Trust
27 The Exchange represents that the customary
trading hours of Freight Futures trading are 3:00
a.m. E.T. to 1:00 p.m. E.T. This means that there
is a gap in time at the end of each day during which
the Fund’s Shares will be traded on the NYSE Arca,
but real-time trading prices for contracts are not
available. During such gaps in time the IFV will be
calculated based on the end of day price of such
contracts from the Baltic Exchange’s, CME’s, and
ICE’s immediately preceding settlement prices.
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ddrumheller on DSK120RN23PROD with NOTICES1
17636
Federal Register / Vol. 88, No. 56 / Thursday, March 23, 2023 / Notices
Issued Receipts to facilitate
surveillance.
Under the proposal, the Exchange or
the Financial Industry Regulatory
Authority (‘‘FINRA’’), on behalf of the
Exchange, or both, will communicate as
needed regarding trading in the Shares,
Freight Futures, and exchange-traded
options on Freight Futures with other
markets and other entities that are
members of the ISG, and the Exchange
or FINRA, on behalf of the Exchange, or
both, may obtain trading information
regarding trading in the Shares, Freight
Futures, and exchange-traded options
on Freight Futures from such markets
and other entities. In addition, the
Exchange may obtain information
regarding trading in the Shares, Freight
Futures, and options on Freight Futures
from markets and other entities that are
members of ISG or with which the
Exchange has in place a CSSA.
In support of this proposal, the
Exchange also represents that:
(1) The Shares will conform to the
initial and continued listing criteria
under NYSE Arca Rule 8.200–E.
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) Trading in the Shares will be
subject to the existing trading
surveillances administered by the
Exchange, as well as cross-market
surveillances administered by 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.
(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 Information Bulletin
will discuss the following: (a) the risks
involved in trading the Shares during
the Early and Late Trading Sessions
when an updated IFV will not be
calculated or publicly disseminated; (b)
the procedures for purchases and
redemptions of Shares in creation
baskets and redemption baskets (and
that Shares are not individually
redeemable); (c) NYSE Arca Rule 9.2–
E(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; (d) how
information regarding the IFV is
disseminated; (e) how information
regarding portfolio holdings is
VerDate Sep<11>2014
19:23 Mar 22, 2023
Jkt 259001
disseminated; (f) 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
(g) trading information.
(5) For initial and continued listing,
the Funds will be in compliance with
Rule 10A–3 under the Act,28 as
provided by NYSE Arca Rule 5.3–E.
(6) A minimum of 100,000 Shares will
be outstanding at the commencement of
trading on the Exchange.
(7) The Fund will invest substantially
all of its assets in Freight Futures
currently constituting the Benchmark
Portfolio, and not more than 10% of the
net assets of the Fund in the aggregate
invested in Freight Futures and
exchange-traded options on Freight
Futures will consist of Freight Futures
and exchange-traded options on Freight
Futures whose principal market is not a
member of the ISG or is a market with
which the Exchange does not have a
CSSA.
(8) The Benchmark Portfolio will not
include, and the Fund will not invest in,
swaps or other over-the-counter
derivative instruments.
(9) Statements and representations
made in this filing regarding (a) the
description of the Reference Indexes
and portfolios, (b) limitations on
portfolio holdings or reference assets, or
(c) applicability of Exchange listing
rules specified in this filing shall
constitute continued listing
requirements for listing the Shares on
the Exchange.
(10) The Sponsor has represented to
the Exchange that it will advise the
Exchange of any failure by the Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will monitor for
compliance with the continued listing
requirements.29 If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E(m).
This approval order is based on all of
the Exchange’s representations and
28 17
CFR 240.10A–3.
Commission notes that certain other
proposals for the listing and trading of exchangetraded products include a representation that the
listing exchange will ‘‘surveil’’ for compliance with
the continued listing requirements. See, e.g.,
Securities Exchange Act Release No. 77620 (Apr.
14, 2016), 81 FR 23339 (Apr. 20, 2016) (SR–BATS–
2015–124). In the context of this representation, it
is the Commission’s view that ‘‘monitor’’ and
‘‘surveil’’ both mean ongoing oversight of the
Fund’s compliance with the continued listing
requirements. Therefore, the Commission does not
view ‘‘monitor’’ as a more or less stringent
obligation than ‘‘surveil’’ with respect to the
continued listing requirements.
29 The
PO 00000
Frm 00121
Fmt 4703
Sfmt 4703
description of the Fund, including those
set forth above and in Amendment No.
1 to the proposed rule change.
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1, is consistent with Sections 6(b)(5)
and 11A(a)(1)(C)(iii) of the Act 30 and
the rules and regulations thereunder
applicable to a national securities
exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,31
that the proposed rule change (SR–
NYSEARCA–2022–61), as modified by
Amendment No. 1, be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023–05915 Filed 3–22–23; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
[Public Notice 12019]
Notice of Determinations; Culturally
Significant Object Being Imported for
Exhibition—Determinations: Exhibition
of ‘‘Statue of the Capitoline Aphrodite’’
Notice is hereby given of the
following determinations: I hereby
determine that a certain object being
imported from abroad pursuant to an
agreement with its foreign owner or
custodian for temporary exhibition or
display at The Metropolitan Museum of
Art, New York, New York, and at
possible additional exhibitions or
venues yet to be determined, is of
cultural significance, and, further, that
its temporary exhibition or display
within the United States as
aforementioned is in the national
interest. I have ordered that Public
Notice of these determinations be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT:
Elliot Chiu, Attorney-Adviser, Office of
the Legal Adviser, U.S. Department of
State (telephone: 202–632–6471; email:
section2459@state.gov). The mailing
address is U.S. Department of State,
L/PD, 2200 C Street NW (SA–5), Suite
5H03, Washington, DC 20522–0505.
SUPPLEMENTARY INFORMATION: The
foregoing determinations were made
SUMMARY:
30 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78k–
1(a)(1)(C)(iii).
31 15 U.S.C. 78s(b)(2).
32 17 CFR 200.30–3(a)(12).
E:\FR\FM\23MRN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 56 (Thursday, March 23, 2023)]
[Notices]
[Pages 17632-17636]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05915]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97158; File No. SR-NYSEARCA-2022-61]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To
List and Trade the Shares of the Breakwave Tanker Shipping ETF
March 17, 2023.
I. Introduction
On September 13, 2022, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant
[[Page 17633]]
to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (``Act''
or ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule
change to list and trade shares (``Shares'') of the Breakwave Tanker
Shipping ETF (``Fund'') under NYSE Arca Rule 8.200-E, Commentary .02.
The proposed rule change was published for comment in the Federal
Register on September 27, 2022.\4\
---------------------------------------------------------------------------
\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. 95853 (Sept. 21,
2022), 87 FR 58552 (``Notice'').
---------------------------------------------------------------------------
On November 2, 2022, pursuant to Section 19(b)(2) of the Act,\5\
the Commission designated a longer period within which to approve the
proposed rule change, disapprove the proposed rule change, or institute
proceedings to determine whether to disapprove the proposed rule
change.\6\ On December 8, 2022, the Commission instituted proceedings
under Section 19(b)(2)(B) of the Exchange Act \7\ to determine whether
to approve or disapprove the proposed rule change.\8\ On March 6, 2023,
the Exchange filed Amendment No. 1, which amended and replaced the
proposed rule change in its entirety.\9\ The Commission has received no
comments on the proposed rule change. The Commission is approving the
proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78s(b)(2).
\6\ See Securities Exchange Act Release No. 96213, 87 FR 67513
(Nov. 8, 2022).
\7\ 15 U.S.C. 78s(b)(2)(B).
\8\ See Securities Exchange Act Release No. 96469, 87 FR 76524
(Dec. 14, 2022).
\9\ In Amendment No. 1, the Exchange: (1) clarified information
regarding the markets for Freight Futures (as defined herein) and
exchange-traded options on Freight Futures; (2) clarified the
correlation between the Benchmark Portfolio (as defined herein) and
the Fund's portfolio and the adjustments and rebalancing of the
Fund's portfolio; (3) provided additional background information on
the freight futures markets, generally, and additional supporting
information on the liquidity of the Freight Futures markets,
specifically; (4) clarified the types of instruments and other
holdings in which the Fund will not invest; (5) expanded its
description of the surveillance applicable to the Shares, Freight
Futures, and exchange-listed options on Freight Futures; (6) added a
representation that, prior to the commencement of trading of the
Shares, it will inform its ETP Holders (as defined herein) in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares, among other information; and (7)
made other technical amendments. Because the amendment does not
materially alter the substance of the proposed rule change or raise
unique or novel regulatory issues, it is not subject to notice and
comment. Amendment No. 1 is available on the Commission's website
at: https://www.sec.gov/comments/sr-nysearca-2022-61/srnysearca202261-20158810-326900.pdf.
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II. Exchange's Description of the Proposed Rule Change, as Modified by
Amendment No. 1
As described in more detail in Amendment No 1 to the proposed rule
change,\10\ the Exchange proposes to list and trade the Shares of the
Fund under NYSE Arca Rule 8.200-E, Commentary .02, which governs the
listing and trading of Trust Issued Receipts on the Exchange. The Fund
will be a series of ETF Managers Group Commodity Trust I (``Trust),\11\
and the Fund and the Trust will be managed and controlled by their
sponsor and investment manager, ETF Managers Capital LLC
(``Sponsor'').\12\
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\10\ See id. Additional information about the tanker freight
industry, including tanker vessel supply, demand for seaborne oil
transportation, calculation of NAV (as defined herein),
dissemination of IFV (as defined herein), creation and redemption of
Shares, general availability of information, trading halts, trading
rules, surveillance, and information bulletin, among other things,
can be found in the proposed rule change, as modified by Amendment
No. 1.
\11\ The Exchange states that on July 1, 2022, the Trust
submitted to the Commission on a confidential basis its draft
registration statement on Form S-1 (``Registration Statement'')
under the Securities Act of 1933.
\12\ The Sponsor is registered with the Commodity Futures
Trading Commission (``CFTC'') as a commodity pool operator and is a
member of the National Futures Association. Breakwave Advisors LLC
(``Breakwave'') is registered as a commodity trading advisor with
the CFTC and will serve as the Fund's commodity trading advisor.
ETFMG Financial LLC will be the Fund's distributor, and US Bancorp
Fund Services LLC will be the Fund's administrator and transfer
agent (``Administrator'' and ``Transfer Agent'').
---------------------------------------------------------------------------
According to the Exchange, the Fund's investment objective will be
to provide investors with exposure to the daily change in the price of
tanker freight futures,\13\ before expenses and liabilities of the
Fund, by tracking the performance of a portfolio (``Benchmark
Portfolio'') consisting of positions in the three-month strip of the
nearest calendar quarter of futures contracts on specified indexes
(individually, ``Reference Index'') that measure prices for shipping
crude oil (``Freight Futures'').\14\ Each Reference Index is published
each U.K. business day by the London-based Baltic Exchange \15\ and
measures the charter rate for shipping crude oil in a specific size
category of cargo ship and for a specific route. The two Reference
Indexes are: (1) the TD3C Index: Persian Gulf to China 270,000 metric
tons cargo (Very Large Crude Carrier or VLCC tankers); and (2) the TD20
Index: West Africa to Europe, 130,000 metric tons cargo (Suezmax
tankers).\16\ The value of each of the TD3C Index and TD20 Index is
disseminated daily at 4:00 p.m., London Time by the Baltic
Exchange.\17\ Such Reference Index information also is publicly
available and widely disseminated by Reuters, Bloomberg, and/or other
major market data vendors. Freight Futures reflect market expectations
for the future cost of transporting crude oil.\18\
---------------------------------------------------------------------------
\13\ According to the Exchange, freight futures contracts mainly
exist for dry bulk and tanker freight rates. The Fund's exposure
will be to tanker (not dry bulk) freight futures.
\14\ According to the Exchange, Freight Futures are primarily
traded through broker members of the Forward Freight Agreement
Brokers Association (``FFABA''). Members of the FFABA must be
members of the Baltic Exchange and must be regulated by the
Financial Conduct Authority if resident in the U.K., or if not
resident in the U.K., by an equivalent body if required by the
authorities in the jurisdiction. Freight Futures are quoted in U.S.
dollars per metric ton, with a minimum lot size of 1,000 metric
tons. One lot represents freight costs to transport in U.S. dollars.
The nominal value of a contract is simply the product of lots and
Freight Futures prices.
\15\ The Baltic Exchange, which is a wholly-owned subsidiary of
the Singapore Exchange, is a membership organization and an
independent source of maritime market information for the trading
and settlement of physical and derivative shipping contracts.
\16\ The Reference Indexes are published by the Baltic
Exchange's subsidiary company, Baltic Exchange Information Services
Ltd (``Baltic''), which publishes a wide range of market reports,
fixture lists, and market rate indicators on a daily and (in some
cases) weekly basis. The Baltic indices, which include the Reference
Indexes, are an assessment of the price of moving the major raw
materials by sea. The indices are based on assessments of the cost
of transporting various bulk cargoes, both wet (e.g., crude oil and
oil products) and dry (e.g., coal and iron ore), made by leading
shipbroking houses located around the world on a per ton and daily
hire basis. The information is collated and published by the Baltic
Exchange. Procedures relating to administration of the Baltic
indices are set forth in ``The Baltic Exchange, Guide to Market
Benchmarks'' November 2016, including production methods,
calculation, confidentiality and transparency, duties of panelists,
code of conduct, audits, and quality control.
\17\ Freight futures, including tanker Freight Futures, settle
monthly over the arithmetic average of spot index assessments in the
contract month for the relevant underlying product, rounded to three
decimal places. The daily Reference Index publication, against which
Freight Futures settle, is published by the Baltic Exchange.
\18\ Generally, Freight Futures trade from approximately 3:00
a.m. Eastern Time (``E.T.'') to approximately 1:00 p.m. E.T. The
great majority of trading volume occurs during London business
hours, from approximately 4:00 a.m. E.T. time to approximately 12:00
p.m. E.T. Some limited trading takes place during Asian business
hours as well (12:00 a.m. to 3:00 a.m. E.T.). The final closing
prices for settlement are published daily around 12:30 p.m. E.T.
Final cash settlement occurs the first business day following the
expiry day.
---------------------------------------------------------------------------
The Fund will seek to achieve its objective by purchasing Freight
Futures. The Fund also may hold exchange-traded options on Freight
Futures. Currently, the exclusive markets for Freight Futures and
options on Freight Futures are ICE Futures Europe (``ICE'') and the
Chicago Mercantile Exchange (``CME''). The applicable exchange acts as
a counterparty for each member for
[[Page 17634]]
clearing purposes. The Fund's investments in Freight Futures will be
cleared by ICE and/or CME.\19\
---------------------------------------------------------------------------
\19\ The Exchange represents that CME and ICE are members of the
Intermarket Surveillance Group (``ISG'').
---------------------------------------------------------------------------
According to the Exchange, although freight derivatives have been
used in the shipping industry for more than 30 years, freight futures
(including tanker Freight Futures) have been clearing on exchanges
since 2005. In addition, the Exchange represents that the liquidity of
tanker Freight Futures (clean and dirty) has been increasing, in lot
terms, over the last five years.\20\ For example, in 2021,
approximately 560,000 lots in Freight Futures traded. As of 2022, open
interest in Freight Futures stood at approximately 145,000 lots across
all asset classes representing an estimated value of more than $2
billion. Of such open interest in 2022, TD3C contracts accounted for
approximately 50% in lots of all tanker Freight Futures.
---------------------------------------------------------------------------
\20\ Tanker Freight Futures are quoted in U.S. Dollars per
metric ton, with a minimum lot size of 1,000 metric tons. One lot
represents freight costs to transport in U.S. Dollars. The nominal
value of a contract is simply the product of lots and Freight
Futures prices. There are futures contracts of up to 72 consecutive
months, starting with the current month, available for trading for
each vessel class.
---------------------------------------------------------------------------
The Fund will invest substantially all of its assets in Freight
Futures constituting the Benchmark Portfolio, and at any given time,
the average maturity of the futures held by the Fund will be
approximately 50 to 70 days. The Fund's portfolio will be traded with a
view to reflecting the performance of the Benchmark Portfolio, whether
the Benchmark Portfolio is rising, falling, or flat over any particular
period. The Benchmark Portfolio, which is maintained by Breakwave and
will be rebalanced annually, will hold long positions in Freight
Futures corresponding to the TD3C Index and TD20 Index. The Benchmark
Portfolio's initial allocation will be approximately 90% TD3C contracts
and 10% TD20 contracts, based on contract value, not number of lots.
The Benchmark Portfolio will consist of positions in the three-month
strip of the nearest calendar quarter of Freight Futures and roll them
constantly to the next calendar quarter. The three-month strip of each
of the four-calendar quarters are January, February, and March (Q1);
April, May, and June (Q2); July, August, and September (Q3); and
October, November, and December (Q4). The Benchmark Portfolio will hold
all positions to maturity and settle them in cash. During any given
calendar quarter, the Benchmark Portfolio will progressively increase
its position to the next calendar quarter three-month strip, thus
maintaining constant long exposure to the Freight Futures market as
positions mature.
To track the Benchmark Portfolio, the Fund will attempt to roll
positions in the nearby calendar quarter, on a pro rata basis. For
example, if the Fund was currently holding the Q1 calendar quarter
comprising the January, February and March monthly contracts, each week
in the month of February, the Fund will attempt to purchase Q2
contracts in an amount equal to approximately one quarter of the
expiring February positions. As a result, by the end of February, the
Fund would have rolled the February position to Q2 freight contracts,
leaving the Fund with March and Q2 contracts. At the end of March, the
Fund will have completed the roll and will then hold only Q2 exposure
comprising April, May, and June monthly contracts.
During the month of December of each year, the Fund will rebalance
its portfolio in order to bring the allocation of assets back to the
initial allocation levels (i.e., 90% and 10% in accordance with the
Benchmark Portfolio construction). Given each asset's individual price
movements during the year, such percentages might deviate from the
targeted allocation. To maintain the correlation between the Fund and
the change in the Benchmark Portfolio with regard to the performance of
near-dated versus longer-dated futures (i.e., based on contract
duration), the Sponsor may adjust the Fund's portfolio of investments
on a daily basis in response to creation and redemption orders or
otherwise as required. For example, if needed, the Fund will sell
current month Freight Futures and buy next calendar quarter futures to
maintain a balance in terms of average duration, but also sell TD3C
futures and buy TD20 futures to maintain the initial allocation levels
(i.e., 90%; 10%). The Sponsor anticipates that the Fund's Freight
Futures positions will be held to expiration and settle in cash against
the respective Reference Index as published by the Baltic Exchange and
ICE or CME. Because Freight Futures contracts are cash settled, the
Fund need not close out of existing contracts. Rather, it will hold
such contracts to expiration and apply the above methodology in order
acquire the nearby calendar contract.
When establishing positions in Freight Futures, the Fund will be
required to deposit initial margin with a value of approximately 10% to
40% of the notional value of each Freight Futures position at the time
it is established. These margin requirements are established and
subject to change from time to time by the relevant exchanges, clearing
houses, or the Fund's futures commission merchant (``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 overall Freight Futures positions. Any assets
not required to be posted as margin with the FCM will be held at the
Fund's custodian in cash or cash equivalents.\21\ Like other investors
in Freight Futures, the Fund will place purchase orders for Freight
Futures with an execution broker. The broker will identify a selling
counterparty and, simultaneously with the completion of the
transaction, will submit the block traded Freight Futures to the
relevant exchange or clearing house for clearing, thereby completing
and creating a cleared futures transaction. If the exchange or clearing
house does not accept the transaction for any reason, the transaction
will be considered null and void and of no legal effect.
---------------------------------------------------------------------------
\21\ 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 for direct investment or as collateral for the
U.S. Treasuries and for other liquidity purposes, and to meet
redemptions that may be necessary on an ongoing basis.
---------------------------------------------------------------------------
The Exchange represents that not more than 10% of the net assets of
the Fund in the aggregate invested in Freight Futures and exchange-
traded options on Freight Futures will consist of Freight Futures and
exchange-traded options on Freight Futures whose principal market is
not a member of the ISG or is a market with which the Exchange does not
have in place a comprehensive surveillance sharing agreement
(``CSSA''). In addition, while the Fund maintains the right to invest
in other maturities of Freight Futures, if such strategy is deemed
necessary, according to the Exchange, the Benchmark Portfolio will not
include, and the Fund will not invest in, swaps or other over-the-
counter derivative instruments.
III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\22\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 1, is consistent
with: (1) Section 6(b)(5) of the Exchange
[[Page 17635]]
Act,\23\ 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; and (2) Section 11A(a)(1)(C)(iii) of the Exchange
Act,\24\ 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.
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\22\ 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).
\23\ 15 U.S.C. 78f(b)(5).
\24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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As stated in the proposal, the Fund will seek to achieve its
objective by purchasing Freight Futures (and exchange-traded options on
Freight Futures) that are cleared through major exchanges and,
currently, the exclusive markets for Freight Futures (and options on
Freight Futures) are ICE and CME, both of which are members of ISG and
are regulated in the U.S. by the CFTC.\25\ The Exchange further states
that, although freight derivatives have been used in the shipping
industry for more than 30 years, freight futures (including tanker
Freight Futures) have been clearing on exchanges since 2005. In
summary, Freight Futures are cleared on well-established, regulated
markets that are members of the ISG.\26\ The Commission finds that the
Exchange will be able to obtain and share surveillance information with
a significant regulated market in Freight Futures.
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\25\ See supra note 19.
\26\ See supra notes 19-20 and accompanying text.
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To be listed and traded on the Exchange, the Shares must comply
with the requirements of NYSE Arca Rule 8.200-E, Commentary .02 thereto
on an initial and continuing basis. 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.
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the Consolidated Tape
Association. The intraday, closing prices, and settlement prices of the
Freight Futures will be readily available from the applicable futures
exchange websites, automated quotation systems, published or other
public sources, or major market data vendors. Complete real-time data
for Freight Futures is available by subscription through on-line
information services. Trading prices for the Freight Futures and
exchange-traded options on Freight Futures will be disseminated by one
or more major market data vendors during the NYSE Arca Core Trading
Session of 9:30 a.m. to 4:00 p.m. E.T. CME and ICE provide on a daily
basis transaction volumes, transaction prices, and open interest on
their respective websites. Daily settlement prices and historical
settlement prices are available through a subscription service to the
Baltic Exchange, ICE, and CME; however, these exchanges provide the
daily settlement price change of Freight Futures on their respective
websites. Certain Freight Futures brokers provide real time pricing
information to the general public either through their websites or
through data vendors, such as Bloomberg or Reuters. Most Freight
Futures brokers provide, upon request, individual electronic screens
that market participants can use to transact, place orders, or only
monitor Freight Futures market price levels.
In addition, the Fund's website will display the applicable end of
day closing net asset value (``NAV''). The daily holdings of the Fund
will be disclosed on the Fund's website before 9:30 a.m. E.T. each day.
The Fund's website disclosure of portfolio holdings will include, as
applicable: (1) the composite value of the total portfolio; (2) the
quantity and type of each holding (including the ticker symbol,
maturity date, or other identifier, if any) and other descriptive
information including, in the case of an option, its strike price; (3)
the percentage weighting of each holding in the Fund's portfolio; (4)
the number of Freight Futures contracts and the value of each Freight
Futures (in U.S. dollars); (5) the type (including maturity, ticker
symbol, or other identifier) and value of each Treasury security and
cash equivalent; and (6) the amount of cash held in the Fund's
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 be available through major market data vendors during those times
that the hours trading in Freight Futures overlap with trading hours on
NYSE Arca (i.e., between 9:00 a.m. and 1:00 p.m. E.T.). The indicative
fund value (``IFV''), which will be calculated by using the prior day's
closing NAV per Share of the Fund as a base and updating that value
throughout the trading day to reflect changes in the most recently
reported trade price for the futures and/or options held by the Fund,
will be disseminated on a per Share basis every 15 seconds during
regular NYSE Arca Core Trading Session hours of 9:30 a.m. E.T. to 4:00
p.m. E.T.\27\ The Administrator will calculate the NAV of the Fund on
each NYSE Arca trading day. The NAV for a particular trading day will
be released after 4:00 p.m. E.T., and the NAV for the Shares will be
disseminated daily to all market participants at the same time.
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\27\ The Exchange represents that the customary trading hours of
Freight Futures trading are 3:00 a.m. E.T. to 1:00 p.m. E.T. This
means that there is a gap in time at the end of each day during
which the Fund's Shares will be traded on the NYSE Arca, but real-
time trading prices for contracts are not available. During such
gaps in time the IFV will be calculated based on the end of day
price of such contracts from the Baltic Exchange's, CME's, and ICE's
immediately preceding settlement prices.
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The Commission also believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. 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. Further, the Exchange may halt
trading during the day in which an interruption to the dissemination of
the IFV or the intraday value of the Benchmark Portfolio occurs; if the
interruption to the dissemination of the IFV or the value of the
Benchmark Portfolio 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. Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Rule
7.12-E have been reached. Trading also may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. The Exchange states that it has a
general policy prohibiting the distribution of material, non-public
information by its employees. Moreover, trading of the Shares will be
subject to NYSE Arca Rule 8.200-E, Commentary .02(e), which sets forth
certain restrictions on Equity Trading Permit holders (``ETP Holders'')
acting as registered Market Makers in Trust
[[Page 17636]]
Issued Receipts to facilitate surveillance.
Under the proposal, the Exchange or the Financial Industry
Regulatory Authority (``FINRA''), on behalf of the Exchange, or both,
will communicate as needed regarding trading in the Shares, Freight
Futures, and exchange-traded options on Freight Futures with other
markets and other entities that are members of the ISG, and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares, Freight Futures,
and exchange-traded options on Freight Futures from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in the Shares, Freight Futures, and options on
Freight Futures from markets and other entities that are members of ISG
or with which the Exchange has in place a CSSA.
In support of this proposal, the Exchange also represents that:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Rule 8.200-E.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) Trading in the Shares will be subject to the existing trading
surveillances administered by the Exchange, as well as cross-market
surveillances administered by 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.
(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 Information Bulletin will discuss the following: (a)
the risks involved in trading the Shares during the Early and Late
Trading Sessions when an updated IFV will not be calculated or publicly
disseminated; (b) the procedures for purchases and redemptions of
Shares in creation baskets and redemption baskets (and that Shares are
not individually redeemable); (c) NYSE Arca Rule 9.2-E(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;
(d) how information regarding the IFV is disseminated; (e) how
information regarding portfolio holdings is disseminated; (f) 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 (g) trading information.
(5) For initial and continued listing, the Funds will be in
compliance with Rule 10A-3 under the Act,\28\ as provided by NYSE Arca
Rule 5.3-E.
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\28\ 17 CFR 240.10A-3.
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(6) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.
(7) The Fund will invest substantially all of its assets in Freight
Futures currently constituting the Benchmark Portfolio, and not more
than 10% of the net assets of the Fund in the aggregate invested in
Freight Futures and exchange-traded options on Freight Futures will
consist of Freight Futures and exchange-traded options on Freight
Futures whose principal market is not a member of the ISG or is a
market with which the Exchange does not have a CSSA.
(8) The Benchmark Portfolio will not include, and the Fund will not
invest in, swaps or other over-the-counter derivative instruments.
(9) Statements and representations made in this filing regarding
(a) the description of the Reference Indexes and portfolios, (b)
limitations on portfolio holdings or reference assets, or (c)
applicability of Exchange listing rules specified in this filing shall
constitute continued listing requirements for listing the Shares on the
Exchange.
(10) The Sponsor has represented to the Exchange that it will
advise the Exchange of any failure by the Fund to comply with the
continued listing requirements, and, pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange will monitor for compliance
with the continued listing requirements.\29\ If the Fund is not in
compliance with the applicable listing requirements, the Exchange will
commence delisting procedures under NYSE Arca Rule 5.5-E(m).
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\29\ The Commission notes that certain other proposals for the
listing and trading of exchange-traded products include a
representation that the listing exchange will ``surveil'' for
compliance with the continued listing requirements. See, e.g.,
Securities Exchange Act Release No. 77620 (Apr. 14, 2016), 81 FR
23339 (Apr. 20, 2016) (SR-BATS-2015-124). In the context of this
representation, it is the Commission's view that ``monitor'' and
``surveil'' both mean ongoing oversight of the Fund's compliance
with the continued listing requirements. Therefore, the Commission
does not view ``monitor'' as a more or less stringent obligation
than ``surveil'' with respect to the continued listing requirements.
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This approval order is based on all of the Exchange's
representations and description of the Fund, including those set forth
above and in Amendment No. 1 to the proposed rule change.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1, is consistent with
Sections 6(b)(5) and 11A(a)(1)(C)(iii) of the Act \30\ and the rules
and regulations thereunder applicable to a national securities
exchange.
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\30\ 15 U.S.C. 78f(b)(5) and 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\31\ that the proposed rule change (SR-NYSEARCA-2022-61),
as modified by Amendment No. 1, be, and it hereby is, approved.
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\31\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-05915 Filed 3-22-23; 8:45 am]
BILLING CODE 8011-01-P
