[Federal Register Volume 75, Number 228 (Monday, November 29, 2010)]
[Notices]
[Pages 73145-73150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-29906]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63349; File No. SR-NYSEArca-2010-103]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the Listing and Trading of the
Jefferies S&P 500[supreg] VIX Short-Term Futures ETF
November 19, 2010.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on November 9, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the Jefferies S&P
500[supreg] VIX Short-Term Futures ETF under NYSE Arca Equities Rule
8.200. The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and http://www.nyse.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
[[Page 73146]]
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
NYSE Arca Equities Rule 8.200, Commentary .02, permits the trading
of Trust Issued Receipts (``TIRs'') either by listing or pursuant to
unlisted trading privileges (``UTP'').\3\ The Exchange proposes to list
and trade shares (``Shares'') of the Jefferies S&P 500[supreg] VIX
Short-Term Futures ETF (``Fund'') pursuant to NYSE Arca Equities Rule
8.200.\4\ The Fund is a commodity pool and a Delaware statutory
trust.\5\
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\3\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to
TIRs that invest in ``Financial Instruments.'' The term ``Financial
Instruments,'' as defined in Commentary .02(b)(4) to NYSE Arca
Equities Rule 8.200, means any combination of investments, including
cash; securities; options on securities and indices; futures
contracts; options on futures contracts; forward contracts; equity
caps, collars and floors; and swap agreements.
\4\ The Commission previously has approved listing on the
Exchange under Commentary .02 to NYSE Arca Equities Rule 8.200 of
certain securities issuers. See, e.g., Securities Exchange Act
Release Nos. 58457 (September 3, 2008), 73 FR 52711 (September 10,
2008) (SR-NYSEArca-2008-91) (order granting accelerated approval to
list on NYSE Arca of 14 ProShares funds); and 58983 (November 20,
2008), 73 FR 73368 (December 2, 2008) (SR-NYSEArca-2008-126) (order
granting accelerated approval to list on NYSE Arca the GreenHaven
Continuous Commodity Index Fund). See also Securities Exchange Act
Release No. 58968 (November 17, 2008), 73 FR 71082 (November 24,
2008) (SR-NYSEArca-2008-111) (order granting accelerated approval of
proposed rule change to amend NYSE Arca Equities Rule 5.2(j)(6)(v)
to add CBOE Volatility Index Futures to the definition of Futures
Reference Asset).
\5\ The Fund has filed a Pre-Effective Amendment No. 3 to Form
S-1 registration statement under the Securities Act of 1933, dated
August 17, 2010 (File No. 333-166283) (``Registration Statement'').
The description of the Fund and the Shares contained herein are
based on the Registration Statement.
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Overview of the Fund
According to the Registration Statement, the Fund seeks to track
changes, whether positive or negative, in the level of the S&P 500 VIX
Short-Term Futures\TM\ Index ER (``VIX Futures Index'' or ``Index'')
over time.\6\ The Fund will pursue its investment objective primarily
by maintaining long futures positions corresponding to the futures
contracts underlying the VIX Futures Index which trade on the CBOE
Futures Exchange (``CFE'') (``VIX Futures Contracts''),\7\ with an
aggregate notional amount equal to the Fund's total capital. In certain
circumstances, as described below, the Fund may invest in one or more
forward agreements or swaps (``Futures-Linked Investments''). The Fund
is also intended to reflect the excess, if any, of its interest income
from its investment in U.S. Treasury bills, generally with a maturity
of less than one year, and other high credit quality short-term fixed-
income securities, over its expenses.\8\
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\6\ The VIX Futures Index was created by Standard & Poor's
Financial Services, LLC (``Index Sponsor''). The VIX Futures Index
is the excess return version of the S&P 500 VIX Short-Term
Futures\TM\ Index. The Index Sponsor has implemented procedures
designed to prevent the use and dissemination of material, non-
public information regarding the Index.
\7\ As of June 14, 2010, there was VIX Futures Contracts open
interest of 88,366 contracts with a contract price of $25.55 and
value of open interest of $2,257,751,300. Total CFE trading volume
in 2009 in VIX Futures Contracts was 1,143,612 contracts, with
average daily volume of 4538 contracts. Total volume year-to-date
(through May 31, 2010) is 1,399,709 contracts, with average daily
volume of 13,458 contracts. (Source: Bloomberg and CBOE).
\8\ Terms relating to the Fund, the Shares and the Index
referred to, but not defined, herein are defined in the Registration
Statement.
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Jefferies Commodity Investment Services, LLC, a Delaware limited
liability company, is the Fund's promoter, and will serve as Managing
Owner of the Fund. The Managing Owner will serve as the commodity pool
operator and commodity trading advisor of the Fund. The Managing Owner
is registered as a commodity pool operator and commodity trading
advisor with the Commodity Futures Trading Commission and is a member
of the National Futures Association. The Bank of New York Mellon
(``Administrator'') will be the administrator, custodian and transfer
agent of the Fund.
According to the Registration Statement, the Index is designed to
provide an exposure to one or more maturities of futures contracts on
the CBOE Volatility Index (``Volatility Index''), which reflect implied
volatility in the S&P 500[reg] Index at various points along
the volatility forward curve. The Volatility Index is calculated based
on the prices of put and call options on the S&P 500[reg]
Index. The VIX Futures Index is intended to reflect the returns that
are potentially available through an unleveraged investment in the
relevant futures contract or contracts on the Volatility Index.
The Index measures the return from a daily rolling long position in
the first and second month VIX Futures Contracts, targeting a constant
weighted average futures maturity of one month. The Fund will acquire
and roll long positions in the first and second month VIX Futures
Contracts with a view to tracking the level of the Index over time. The
Fund will both roll and rebalance its holdings of VIX Futures Contracts
in a manner consistent with the method described in the Registration
Statement.
The Index is comprised of, and the value of the Shares will be
based on, VIX Futures Contracts. VIX Futures Contracts are measures of
the market's expectation of the level of the Volatility Index at
certain points in the future, and may diverge from current, or spot,
Volatility Index values. The Fund is not linked to the Volatility
Index, and the value of the Index and the Shares may diverge
significantly from the Volatility Index.
The Fund does not intend to outperform the Index. The Managing
Owner will seek to cause the net asset value (``NAV'') of the Fund to
track the Index during periods in which the Index is flat or declining
as well as when the Index is rising.
According to the Registration Statement, the Fund seeks to achieve
its investment objective by investing under normal market conditions in
VIX Futures Contracts. In the event the Fund reaches its position
accountability rules with respect to VIX Futures Contracts, the
Managing Owner, may, in its commercially reasonable judgment, cause the
Fund to invest in a Futures-Linked Investment referencing the
particular VIX Futures Contracts, or invest in other futures contracts
or a Futures-Linked Investment not based on the particular VIX Futures
Contracts if such instruments tend to exhibit trading prices or returns
that correlate with the VIX Futures Index or any VIX Futures Contract
and will further the investment objective of the Fund.\9\ The Fund may
also invest in Futures-Linked Investments if the market for a specific
futures contract experiences emergencies (e.g., natural disaster,
terrorist attack or an act of God) or disruptions (e.g., a trading halt
or a flash crash) to prevent the Fund from obtaining the appropriate
amount of investment exposure to the affected VIX Futures Contract
directly or other futures contract.\10\
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\9\ To the extent practicable, the Fund will invest in swaps
cleared through the facilities of a centralized clearing house.
\10\ According to the Registration Statement, the Managing Owner
will also attempt to mitigate the Fund's credit risk by transacting
only with large, well-capitalized institutions using measures
designed to determine the creditworthiness of a counterparty. The
Managing Owner will take various steps to limit counterparty credit
risk, as described in the Registration Statement.
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The Fund will hold a portfolio of VIX Futures Contracts as well as
cash and U.S. Treasury bills, generally with a maturity of less than
one year, and other high credit quality short-term fixed-income
securities for deposit with the Fund's Clearing Broker as margin. The
Fund's portfolio will be traded with a view to tracking the Index,
whether the Index is rising, falling or flat over any particular
period. The Fund is not
[[Page 73147]]
``managed'' by traditional methods, which typically involve effecting
changes in the composition of the Fund's portfolio on the basis of
judgments relating to economic, financial and market considerations
with a view to obtaining positive results under all market conditions.
According to the Registration Statement, the Shares are designed to
reflect as closely as possible the changes, whether positive or
negative, in the level of the VIX Futures Index over time, through the
Fund's portfolio of VIX Futures Contracts, and/or, if applicable,
Futures-Linked Investments that reference the VIX Futures Index. The
value of the Shares relates directly to the changes in market value,
whether positive or negative, of the Fund's portfolio of VIX Futures
Contracts and the value of the Fund's portfolio of U.S. Treasury bills,
generally with a maturity of less than one year, and other high credit
quality short-term fixed-income securities, less the liabilities
(including estimated accrued but unpaid expenses) of the Fund.
The Volatility Index
According to the Registration Statement, the Volatility Index is a
benchmark index designed to estimate expected volatility in large cap
U.S. stocks over 30 days in the future by averaging the weighted prices
of certain put and call options on the S&P 500[supreg] Index. During
periods of market instability, the implied level of volatility of the
S&P 500[supreg] Index typically increases and, consequently, the prices
of options linked to the S&P 500[supreg] Index typically increase
(assuming all other relevant factors remain constant or have negligible
changes). This, in turn, causes the level of the Volatility Index to
increase. Because the Volatility Index may increase in times of
uncertainty, the Volatility Index is commonly known as the ``fear
gauge'' of the broad U.S. equities market. The Volatility Index has
historically had negative correlations to the S&P 500[supreg] Index.
The calculation of the Volatility Index involves a formula that
uses the prices of a weighted series of out-of-the money put and call
options on the level of the S&P 500[supreg] Index (``SPX Options''),
with two adjacent expiry terms to derive a constant 30-day forward
measure of market volatility. The Volatility Index is calculated
independent of any particular option pricing model and in doing so
seeks to eliminate any biases which may otherwise be included in using
options pricing methodology based on certain assumptions.
According to the Registration Statement, although the Volatility
Index measures the 30-day forward volatility in the S&P 500[supreg]
Index as implied by the SPX Options, 30-day options are only available
once a month. To arrive at the Volatility Index level, a broad range of
out-of-the money SPX Options expiring on the two closest nearby months
(``near term options'' and ``next term options,'' respectively) are
selected in order to bracket a 30-day calendar period. SPX Options
having a maturity of less than eight days are excluded at the outset
and, when the near term options have eight days or less left to
expiration, the Volatility Index rolls to the second and third contract
months in order to minimize pricing anomalies that occur close to
expiration. The model-free implied volatility using prices of the near
term options and next term options are then calculated on a strike
price weighted-average basis in order to arrive at a single average
implied volatility value for each month. The results of each of the two
months are then interpolated to arrive at a single value with a
constant maturity of 30 days to expiration. Futures on the Volatility
Index were first launched for trading by the CBOE in 2004. Volatility
Index futures have expirations ranging from the front month
consecutively out to the tenth month.
The VIX Futures Index is composed of one or more futures contracts
on the Volatility Index. OTC derivatives and various types of
electronic trading facilities and markets may offer investments linked
to the Volatility Index. At present, all of the contracts included in
the VIX Futures Index are exchange-traded futures contracts.
The VIX Futures Index is a rolling Index, which rolls on a daily
basis. One of the effects of daily rolling is to maintain a constant
weighted average maturity for the underlying futures contracts. The VIX
Futures Index is composed of rolling first and second month futures
contracts on the Volatility Index. Unlike equities, which typically
entitle the holder to a continuing stake in a corporation, futures
contracts normally specify a certain date for the delivery of the
underlying asset or financial instrument or, in the case of futures
contracts relating to indices such as the Volatility Index, a certain
date for payment in cash of an amount determined by the level of the
underlying index. The VIX Futures Index operates by selling futures
contracts on the Volatility Index on a daily basis, specifying cash
settlement on a nearby date and purchasing futures contracts on the
Volatility Index on a daily basis specifying cash settlement on a later
date. The roll for each VIX Futures Contract occurs on each index
business day according to a pre-determined schedule that has the effect
of keeping constant the weighted average maturity of the relevant VIX
Futures Contract. This process is known as ``rolling'' a futures
position, and the VIX Futures Index is a ``rolling index.'' The
constant weighted average maturity for the futures contracts underlying
the VIX Futures Index is one month.\11\
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\11\ It is anticipated that, near expiration, the performance of
a VIX Futures Contract will be close to that of the Volatility
Index, while longer term futures (not close to expiration) reflect
the long term expectations of the value of the Volatility Index plus
a risk premium and may not closely track the performance of the
Volatility Index. The Exchange notes that the Fund seeks results
that match the performance of the VIX Futures Index and should not
be expected to match the performance of the Volatility Index.
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Because the Index incorporates this process of rolling futures
positions on a daily basis, and the Fund, in general, also rolls its
positions on a daily basis, the daily roll is not anticipated to be a
significant source of tracking error between the Fund and its Index.
The Index is based on VIX Futures Contracts and not the Volatility
Index, and as such neither the Fund nor the Index are expected to track
the Volatility Index.
Creation and Redemption of Shares
The Fund creates and redeems Shares from time-to-time in one or
more Baskets. A Basket is a block of 20,000 Shares. Baskets may be
created or redeemed only by Authorized Participants, except that the
initial Baskets in the Fund will be created by the Initial Purchaser.
Except when aggregated in Baskets, the Shares are not redeemable
securities. Authorized Participants pay a transaction fee in connection
with each order to create or redeem a Basket.
The total cash payment required to create each Basket is the NAV of
20,000 Shares on the purchase order date.\12\ Baskets are issued as of
noon, E.T., on the business day immediately following the purchase
order date at the applicable NAV per Share on the purchase order date,
but only if the required payment has been timely received. Purchase and
redemption orders must be placed by noon, E.T.
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\12\ E-mail from Michael Cavalier, Chief Counsel, NYSE Euronext,
to Edward Y. Cho, Special Counsel, Division of Trading and Markets,
Commission, dated November 15, 2010 (``Exchange Confirmation'').
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The procedures by which an Authorized Participant can redeem one or
more Baskets mirror the procedures for the creation of Baskets. On any
business day, an Authorized Participant may place an order with the
Managing Owner to redeem one or more Baskets.
[[Page 73148]]
The redemption proceeds from the Fund consist of the cash redemption
amount. The cash redemption amount is equal to the NAV of the number of
Baskets of the Fund requested in the Authorized Participant's
redemption order on the redemption order date.
Availability of Information Regarding the Shares
The NAV for the Fund will be calculated by the Administrator once a
day at or after 4:15 p.m., E.T., and will be disseminated daily to all
market participants at the same time.\13\ The Exchange will make
available on its Web site daily trading volume of each of the Shares,
closing prices of such Shares, and number of Shares outstanding.
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\13\ According to the Registration Statement, net asset value
means the total assets of the Fund including, but not limited to,
all cash and cash equivalents or other debt securities less total
liabilities of the Fund, each determined on the basis of generally
accepted accounting principles in the United States, consistently
applied under the accrual method of accounting.
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The closing prices and settlement prices of VIX Futures Contracts
are also readily available from the Web sites of the CFE, automated
quotation systems, published or other public sources, or on-line
information services such as Bloomberg or Reuters. Complete real-time
data for VIX Futures Contracts is available by subscription from
Reuters and Bloomberg. The CFE also provides delayed futures
information on current and past trading sessions and market news free
of charge on its Web site (http://www.cfe.cboe.com). The specific
contract specifications for VIX Futures Contracts are also available on
such Web sites, as well as other financial informational sources.
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA. In addition, the Fund's
Web site at http://www.jamfunds.com/jcis will display the end of day
closing Index levels and NAV. The level of the Volatility Index as
calculated by CBOE, updated every 15 seconds from 9:30 a.m. to 4:15
p.m., E.T., is disseminated on the CBOE Web site at http://www.cboe.com
and through major market data vendors.
The Fund will provide Web site disclosure of portfolio holdings
daily and will include, as applicable, the names and value (in U.S.
dollars) of VIX Futures Contracts, Futures-Linked Investments and other
futures contracts, if any, and characteristics of such investments and
cash equivalents, and amount of cash held in the portfolio of the Fund.
This Web site disclosure of the portfolio composition of the Fund will
occur at the same time as the disclosure by the Managing Owner of the
portfolio composition to Authorized Participants so that all market
participants are provided portfolio composition information at the same
time. Therefore, the same portfolio information will be provided on the
public Web site as well as in electronic files provided to Authorized
Participants. Accordingly, each investor will have access to the
current portfolio composition of the Fund through the Fund's Web site.
Dissemination of Indicative Trust Value and Index Value
In addition, in order to provide updated information relating to
the Fund for use by investors and market professionals, an updated
Indicative Trust Value (``ITV'') will be calculated. The ITV is
calculated by using the prior day's closing NAV per share of the Fund
as a base and updating that value throughout the NYSE Arca Core Trading
Session of 9:30 a.m. to 4 p.m. E.T. each trading day to reflect current
changes in the value of VIX Futures Contracts held by the Fund, as well
as the value of any swap or forward contracts and other futures
contracts held by the Fund. The ITV disseminated during the Core
Trading Session should not be viewed as an actual real-time update of
the NAV, which is calculated only once a day.
The ITV will be disseminated on a per-Share basis by one or more
major market data vendors every 15 seconds during the Core Trading
Session. In addition, the end-of-day NAV of the Fund will be
disseminated once a day.
The Exchange believes that dissemination of the ITV provides
additional information regarding the Fund that is not otherwise
available to the public and is useful to professionals and investors in
connection with the related Shares trading on the Exchange or the
creation or redemption of such Shares.
The Index Sponsor will publish the daily closing level of the VIX
Futures Index as of the close of the NYSE Arca Core Trading Session.
The Managing Owner will publish the NAV of the Fund and the NAV per
Share daily. The Index Sponsor will publish the intra-day level of the
VIX Futures Index updated every 15 seconds during the NYSE Arca Core
Trading Session on the consolidated tape, Reuters and/or Bloomberg, and
the Managing Owner will publish the ITV per Share once every 15 seconds
during the NYSE Arca Core Trading Session on the Managing Owner's Web
site at http://www.jamfunds.com/jcis.\14\
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\14\ See Exchange Confirmation, supra note 12.
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The current trading price per Share will be published continuously
as trades occur during the NYSE Arca Core Trading Session on the
consolidated tape, Reuters and/or Bloomberg and on the Managing Owner's
Web site. The most recent end-of-day Index closing level will be
published as of the close of the NYSE Arca Core Trading Session each
trading day on the consolidated tape, Reuters and/or Bloomberg and on
the Managing Owner's Web site. The most recent end-of-day NAV of the
Fund will be published on Reuters and/or Bloomberg and on the Managing
Owner's Web site. In addition, the most recent end-of-day NAV of the
Fund will be published the following morning on the consolidated tape.
All of the foregoing information with respect to the VIX Futures Index
will also be published at http://www.cfe.cboe.com.
Additional information regarding the Fund and the Shares, including
investment strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions and taxes is
included in the Registration Statement.
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. The Exchange has
appropriate rules to facilitate transactions in the Shares during all
trading sessions. As provided in NYSE Arca Equities Rule 7.6,
Commentary .03, the minimum price variation (``MPV'') for quoting and
entry of orders in equity securities traded on the NYSE Arca
Marketplace is $0.01, with the exception of securities that are priced
less than $1.00 for which the MPV for order entry is $0.0001.
The trading of the Shares will be subject to NYSE Arca Equities
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on
ETP Holders acting as registered Market Makers in Trust Issued Receipts
to facilitate surveillance. See ``Surveillance'' below for more
information.
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares. Trading may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. These may
[[Page 73149]]
include: (1) The extent to which trading is not occurring in the
underlying futures contracts; or (2) whether other unusual conditions
or circumstances detrimental to the maintenance of a fair and orderly
market are present. In addition, trading in Shares will be subject to
trading halts caused by extraordinary market volatility pursuant to the
Exchange's ``circuit breaker'' rule \15\ or by the halt or suspension
of trading of the underlying futures contracts.
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\15\ See NYSE Arca Equities Rule 7.12.
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The Exchange represents that the Exchange may halt trading during
the day in which the interruption to the dissemination of the ITV, the
VIX Futures Index, the Volatility Index or the value of the underlying
futures contracts occurs. If the interruption to the dissemination of
the ITV, the VIX Futures Index, the Volatility Index or the value of
the underlying futures contracts persists past the trading day in which
it occurred, the Exchange will halt trading no later than the beginning
of the trading day following the interruption. In addition, if the
Exchange becomes aware that the NAV with respect to the Shares is not
disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants.
The Fund will meet the initial and continued listing requirements
applicable to Trust Issued Receipts in NYSE Arca Equities Rule 8.200
and Commentary .02 thereto. With respect to application of Rule 10A-3
under the Act,\16\ the Trust relies on the exception contained in Rule
10A-3(c)(7).\17\ A minimum of 100,000 Shares of the Fund will be
outstanding as of the start of trading on the Exchange.
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\16\ 17 CFR 240.10A-3.
\17\ 17 CFR 240.10A-3(c)(7).
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Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products, including Trust Issued
Receipts, to monitor trading in the Shares. The Exchange represents
that these procedures are adequate to properly monitor Exchange trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable Federal securities laws.
The Exchange's current trading surveillances focus on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations. The Exchange is able to
obtain information regarding trading in the Shares, or options, futures
or options on futures on, Shares through ETP Holders, in connection
with such ETP Holders' proprietary or customer trades through ETF
Holders which they effect on any relevant market. The Exchange can
obtain market surveillance information, including customer identity
information, with respect to transactions occurring on the exchanges
that are members of the Intermarket Surveillance Group (``ISG''),
including CBOE and CFE. A list of ISG members is available at http://www.isgportal.org.\18\
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\18\ The Exchange notes that not all investments held by the
Fund may trade on markets that are members of ISG or with which the
Exchange has in place a comprehensive surveillance sharing
agreement.
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In addition, with respect to Fund components traded on exchanges,
not more than 10% of the weight of such components in the aggregate
shall consist of components whose principal trading market is not a
member of ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement.
The Exchange also has a general policy prohibiting the distribution
of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin of the special characteristics
and risks associated with trading the Shares. Specifically, the
Information Bulletin will discuss the following: (1) The risks involved
in trading the Shares during the Opening and Late Trading Sessions when
an updated ITV will not be calculated or publicly disseminated; (2) the
procedures for purchases and redemptions of Shares in Creation Baskets
and Redemption Baskets (and that Shares are not individually
redeemable); (3) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (4) how
information regarding the ITV is disseminated; (5) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
In addition, the Information Bulletin will advise ETP Holders,
prior to the commencement of trading, of the prospectus delivery
requirements applicable to the Fund. The Exchange notes that investors
purchasing Shares directly from the Fund will receive a prospectus. ETP
Holders purchasing Shares from the Fund for resale to investors will
deliver a prospectus to such investors. The Information Bulletin will
also discuss any exemptive, no-action and interpretive relief granted
by the Commission from any rules under the Act.
In addition, the Information Bulletin will reference that the Fund
is subject to various fees and expenses described in the Registration
Statement. The Information Bulletin will also reference that the CFTC
has regulatory jurisdiction over futures contracts traded on U.S.
markets.
The Information Bulletin will also disclose the trading hours of
the Shares of the Fund and that the NAV for the Shares is calculated
after 4 p.m. E.T. each trading day. The Bulletin will disclose that
information about the Shares of the Fund is publicly available on the
Fund's Web site.
2. Statutory Basis
The proposed rule change is consistent with Section 6(b) of the
Act,\19\ in general, and furthers the objectives of Section
6(b)(5),\20\ in particular, in that it is designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system. The Exchange believes that the
proposed rule change will permit the listing of an additional issuance
of Trust Issued Receipts on the Exchange that will enhance competition
among market participants, to the benefit of investors and the
marketplace. In addition, the listing and trading criteria set forth in
Rule 8.200 are intended to protect investors and the public interest.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
[[Page 73150]]
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NYSEArca-2010-103 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2010-103. This
file number should be included on the subject line if e-mail 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 (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for Web site
viewing and printing in the Commission's Public Reference Room, 100 F
Street, NE., Washington, DC 20549-1090 on official business days
between 10 a.m. and 3 p.m. Copies of the filing will also be available
for inspection and copying at the Exchange's principal office. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2010-103 and should
be submitted on or before December 20, 2010.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2010-29906 Filed 11-26-10; 8:45 am]
BILLING CODE 8011-01-P