[Federal Register Volume 75, Number 114 (Tuesday, June 15, 2010)]
[Notices]
[Pages 33861-33866]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-14365]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62237; File No. SR-NYSEArca-2010-44]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the United States Commodity Index
Fund
June 7, 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 May 25, 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, II, and III 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 United States
Commodity Index Fund under NYSE Arca Equities Rule 8.200, Commentary
.02. 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.
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 (``Units'') of the United States Commodity Index Fund
(``USCI'' or ``Fund'') pursuant to NYSE Arca Equities Rule 8.200.\4\
The Fund is a commodity pool that is a series of United States
Commodity Index Funds Trust (``Trust''), 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 holding commodities-related instruments.
See, e.g., Securities Exchange Act Release No. 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). The Commission also has approved issues of Partnership Units
based on commodities, which are listed on the Exchange pursuant to
NYSE Arca Equities Rule 8.300 and which have certain characteristics
similar to the Units. See, e.g., Securities Exchange Act Release
Nos. 59173 (December 29, 2008), 74 FR 490 (January 6, 2009) (SR-
NYSEArca-2008-125) (order approving listing and trading of United
States Short Oil Fund, LP); and 61881 (April 9, 2010), 75 FR 20028
(April 16, 2010) (SR-NYSEArca-2010-14) (order approving listing on
the Exchange of United States Brent Oil Fund).
\5\ The Fund has filed Amendment No. 3 to Form S-1, dated May
25, 2010 (File No. 333-164024) (``Registration Statement''). The
description of the Fund and the Units contained herein are based on
the Registration Statement. See E-mail from Michael Cavalier, Chief
Counsel, NYSE Euronext, to Edward Cho, Special Counsel, Division of
Trading and Markets, Commission, dated June 2, 2010 (``Exchange
Confirmation'').
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Overview of USCI
According to the Registration Statement, the investment objective
of USCI is to have the daily changes in percentage terms of the Units'
net asset value (``NAV'') reflect the daily changes in percentage terms
of the SummerHaven Dynamic Commodity Index (``SDCI'') Total Return (the
``Index''), less USCI's expenses. The Index is designed to reflect the
performance of a diversified group of commodities. The Index is owned
and maintained by SummerHaven Index Management, LLC (``SummerHaven
Indexing''), and calculated and published by Bloomberg, L.P.
(``Bloomberg''). The Index was developed based upon academic research
by Yale University professors Gary B. Gorton and K. Geert Rouwenhorst,
and Hitotsubashi University professor Fumio Hayashi.
USCI's sponsor is United States Commodity Funds LLC (``USCF'' or
the ``Sponsor''), a Delaware limited liability company that is
registered as a commodity pool operator with the Commodity Futures
Trading Commission (``CFTC'') and a member of the National Futures
Association (``NFA''). The Sponsor controls the operations of USCI.
USCI's trading advisor is SummerHaven Investment Management, LLC
(``SummerHaven''), a Delaware limited liability company that is
registered as a commodity trading advisor and a commodity pool operator
with the CFTC and is a member of the NFA. SummerHaven provides advisory
services to the Sponsor with respect to the Index and the investment
decisions of USCI. The Sponsor, SummerHaven Indexing, SummerHaven, and
Bloomberg are not affiliated with a broker-dealer and are subject to
procedures designed to prevent the use and dissemination of material
[[Page 33862]]
nonpublic information regarding the Index or the Fund's portfolio.\6\
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\6\ In the event the Sponsor, SummerHaven Indexing, SummerHaven,
or Bloomberg become affiliated with a broker-dealer, they will be
required to implement a fire wall with respect to such broker-dealer
regarding access to information concerning the composition and/or
changes to a portfolio.
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According to the Registration Statement, it is anticipated that the
net assets of USCI will consist primarily of investments in futures
contracts for commodities that are traded on the New York Mercantile
Exchange (``NYMEX''), ICE Futures (``ICE''), Chicago Board of Trade
(``CBOT''), Chicago Mercantile Exchange (``CME''), London Metal
Exchange (``LME''), Commodity Exchange, Inc. (``COMEX'') or on other
foreign exchanges (such exchanges, collectively, the ``Futures
Exchanges'') (such futures contracts, collectively, ``Futures
Contracts'') and, to a lesser extent, in order to comply with
regulatory requirements or in view of market conditions, other
commodity-based contracts and instruments such as cash-settled options
on Futures Contracts, forward contracts relating to commodities,
cleared swap contracts and other over-the-counter transactions that are
based on the price of commodities and Futures Contracts (collectively,
``Other Commodity-Related Investments''). Market conditions that the
Sponsor currently anticipates could cause USCI to invest in Other
Commodity-Related Investments would be those allowing USCI to obtain
greater liquidity or to execute transactions with more favorable
pricing. Futures Contracts and Other Commodity-Related Investments
collectively are referred to herein as ``Commodity Interests.'' The
Sponsor expects to manage USCI's investments directly, using the
trading advisory services of SummerHaven for guidance with respect to
the Index and USCF's selection of investments on behalf of USCI.
USCI seeks to achieve its investment objective by investing in
Futures Contracts and Other Commodity-Related Investments such that
daily changes in USCI's NAV will closely track the changes in the
Index.\7\ The Index is comprised of 14 Futures Contracts that will be
selected on a monthly basis from a list of 27 possible Futures
Contracts. The Futures Contracts that at any given time make up the
Index are referred to herein as ``Benchmark Component Futures
Contracts.'' USCI anticipates that to meet its investment objective it
will invest first, in the current Benchmark Component Futures Contracts
and other Futures Contracts intended to replicate the return on the
current Benchmark Component Futures Contracts and, thereafter, to
comply with regulatory requirements or in view of market conditions, in
Other Commodity-Related Investments intended to replicate the return on
the Benchmark Component Futures Contracts, including cleared swap
contracts and other over-the-counter transactions, and in other Futures
Contracts.
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\7\ Futures Contracts may have various expiration dates.
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USCI's positions in Commodity Interests will be rebalanced on a
monthly basis in order to track the changing nature of the Index. If
Futures Contracts relating to a particular commodity remains in the
Index from one month to the next, such Futures Contracts will be
rebalanced to the 7.14% target weight, as described below.
Specifically, on a specified day near the end of each month called the
Selection Date (as defined below),\8\ it will be determined if a
current Benchmark Component Futures Contract will be replaced by a new
Futures Contract in either the same or different underlying commodity
to be used as a Benchmark Component Futures Contract for the following
month, in which case USCI's investments would have to be changed
accordingly. In order that USCI's trading does not unduly cause
extraordinary market movements, and to make it more difficult for third
parties to profit by trading based on market movements that could be
expected from changes in the Benchmark Component Futures Contracts,
USCI's investments typically will not be rebalanced entirely on a
single day, but rather will typically be rebalanced over a period of
four days. After fulfilling the margin and collateral requirements with
respect to its Commodity Interests, USCI will invest the remainder of
its proceeds from the sale of baskets in short-term obligations of the
United States government (``Treasury Securities'') or cash equivalents,
and/or hold such assets in cash (generally in interest-bearing
accounts).
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\8\ See Exchange Confirmation, supra note 5.
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According to the Registration Statement, the Sponsor endeavors to
place USCI's trades in Commodity Interests and otherwise manage USCI's
investments so that A will be within plus/minus 10 percent of B, where:
A is the average daily change in USCI's NAV for any period
of 30 successive valuation days, i.e., any NYSE Arca trading day as of
which USCI calculates its NAV, and
B is the average daily change in the Index over the same
period.
The Sponsor believes that market arbitrage opportunities will cause
USCI's Unit price on NYSE Arca to closely track USCI's NAV per Unit.
The Sponsor believes that the net effect of this expected relationship
and the expected relationship described above between USCI's NAV and
the Index will be that the changes in the price of USCI's Units on the
NYSE Arca will closely track, in percentage terms, changes in the
Index, less USCI's expenses.
The Sponsor will employ a ``neutral'' investment strategy intended
to track the changes in the Index regardless of whether the Index goes
up or goes down. The Sponsor does not intend to operate USCI in a
fashion such that its per Unit NAV will equal, in dollar terms, the
spot prices of the commodities comprising the Index or the prices of
any particular group of Futures Contracts.
USCI creates and redeems Units only in blocks called Creation
Baskets and Redemption Baskets, respectively. Only Authorized
Purchasers may purchase or redeem Creation Baskets or Redemption
Baskets. The creation and redemption of baskets are only made in
exchange for delivery to USCI or the distribution by USCI of the amount
of Treasury Securities and/or cash equal to the combined NAV of the
number of Units included in the baskets being created or redeemed,
determined as of 4 p.m. Eastern time (``E.T.'') on the day the order to
create or redeem baskets is properly received.
All proceeds from the sale of Creation Baskets will be invested as
quickly as practicable in the investments described in the Registration
Statement. Investments and related margin or collateral are held
through USCI's custodian, Brown Brothers Harriman & Co.
(``Custodian''), in accounts with USCI's commodity futures brokers or,
in some instances when agreed to by USCI, in collateral accounts held
by third parties with respect to its non-exchange traded or cleared
over-the-counter Commodity Interests.
The principal types of Commodity Interests in which USCI may invest
are set forth in the Registration Statement and include futures
contracts, forward contracts, swaps or options on futures contracts,\9\
forward contracts or commodities on the spot market.
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\9\ See Exchange Confirmation, supra note 5.
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USCI will invest in Commodity Interests to the fullest extent
possible without being leveraged or unable to satisfy its current or
potential margin or
[[Page 33863]]
collateral obligations with respect to its investments in Commodity
Interests. The primary focus of the Sponsor is the investment in
Commodity Interests and the management of USCI's investments in
Treasury Securities, cash and/or cash equivalents.
USCI seeks to achieve its investment objective by investing in a
mix of Commodity Interests such that the changes in its NAV will
closely track the changes in the Index. USCI's positions in Commodity
Interests will be rebalanced on a monthly basis in order to track the
changing nature of the Index. The portfolio rebalancing takes place
during the last four business days of the month (``Rebalancing
Period''). At the end of each of the days in the Rebalancing Period,
one fourth of the prior month portfolio positions are replaced by
equally-weighted positions reflecting the particular Benchmark
Component Futures Contracts determined on the selection date, which is
the fifth business day before the end of the month (``Selection
Date''). At the end of the Rebalancing Period, the Index will have an
equal-weight position of approximately 7.14% in each of the selected
Benchmark Component Futures Contracts which will be reflected in the
rebalanced portfolio. After fulfilling the collateral requirements with
respect to its Commodity Interests, USCI will invest the remainder of
its proceeds from the sale of baskets in short-term Treasury Securities
or cash equivalents, and/or hold such assets in cash (generally in
interest-bearing accounts).
According to the Registration Statement, the specific Commodity
Interests purchased will depend on various factors, including a
judgment by the Sponsor as to the appropriate diversification of USCI's
investments. While the Sponsor anticipates significant investments in
Futures Contracts on the Futures Exchanges, for various reasons,
including the ability to enter into the precise amount of exposure to
the commodities market and position limits on Futures Contracts, it may
also invest in Other Commodity-Related Investments, such as swaps, in
the over-the-counter market. If USCI is required by law or regulation,
or by one of its regulators, including a Futures Exchange, to reduce
its position in one or more Futures Contracts to the applicable
position limit or to a specified accountability level, a substantial
portion of USCI's assets could be invested in Other Commodity-Related
Investments that are intended to replicate the return on the Index or
particular Benchmark Component Futures Contracts. As USCI's assets
reach higher levels, USCI is more likely to exceed position limits,
accountability levels or other regulatory limits and, as a result, it
is more likely that it will invest in Other Commodity-Related
Investments at such higher levels.\10\
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\10\ See note 15, infra.
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The Sponsor may not be able to fully invest USCI's assets in
Futures Contracts having an aggregate notional amount exactly equal to
USCI's NAV. For example, as standardized contracts, the Benchmark
Component Futures Contracts included in the Index are for a specified
amount of a particular commodity, and USCI's NAV and the proceeds from
the sale of a Creation Basket is unlikely to be an exact multiple of
the amounts of those contracts. As a result, in such circumstances,
USCI may be better able to achieve the exact amount of exposure to
changes in price of the Benchmark Component Futures Contracts through
the use of Other Commodity-Related Investments, such as over-the-
counter contracts that have better correlation with changes in price of
the Benchmark Component Futures Contracts.\11\
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\11\ See Exchange Confirmation, supra note 5.
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USCI anticipates that, to the extent it invests in Futures
Contracts other than the Benchmark Component Futures Contracts and
Other Commodity-Related Investments, it will enter into various non-
exchange-traded derivative contracts to hedge the short-term price
movements of such Futures Contracts and Other Commodity-Related
Investments against the current Benchmark Component Futures Contracts.
Index Methodology
According to the Registration Statement, the Index is designed to
reflect the performance of a fully margined or collateralized portfolio
of 14 commodity futures contracts with equal weights, selected each
month from a universe of 27 eligible commodity futures contracts. The
Index is rules-based and rebalanced monthly based on observable price
signals. The overall return on the Index is generated by two
components: (i) Uncollateralized returns from the commodity Benchmark
Component Futures Contracts \12\ comprising the Index; and (ii) a daily
fixed income return reflecting the interest earned on a hypothetical 3-
month U.S. Treasury Bill collateral portfolio, calculated using the
weekly auction rate for the 3-month U.S. Treasury Bills published by
the U.S. Department of the Treasury. SummerHaven Indexing is the owner
of the Index.
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\12\ See id.
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The Index is composed of physical non-financial commodity futures
contracts with active and liquid markets traded upon futures exchanges
in major industrialized countries. The Benchmark Component Futures
Contracts \13\ are denominated in U.S. dollars and weighted equally by
notional amount. The commodity sectors for the Index include grains
(e.g., wheat, corn, soybeans, etc.), precious metals (e.g., gold,
silver, platinum), industrial metals (e.g., zinc, nickel, aluminum,
copper, etc.), livestock (e.g., live cattle, lean hogs, feeder cattle),
softs (e.g., sugar, cotton, coffee, cocoa) and energy (e.g., crude oil,
natural gas, heating oil, etc.).
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\13\ See id.
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The eligible commodities and relevant Futures Exchange on which the
Futures Contract is listed are as follows: \14\
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\14\ See id.
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Designated Position limits Position limits Trading hours
Commodity contract Exchange Units single month \15\ all months (E.T.)
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Crude Oil (Brent)............... Crude Oil......... ICE-UK............ 1,000 barrels..... none.............. none.............. 8 p.m.-6 p.m.
(next day).
Crude Oil (WTI)................. Light, Sweet Crude NYMEX............. 1,000 barrels..... none.............. none.............. 10 a.m.-2:30 p.m.
Oil.
Gas Oil......................... Gas Oil........... ICE-UK............ 100 metric tons... none.............. none.............. 8 p.m.-6 p.m.
(next day).
Heating Oil..................... Heating Oil....... NYMEX............. 42,000 gallons.... none.............. none.............. 9 a.m.-2:30 p.m.
Natural Gas..................... Henry Hub Natural NYMEX............. 10,000 mmbtu...... none.............. none.............. 9 a.m.-2:30 p.m.
Gas.
[[Page 33864]]
Unleaded Gasoline............... Reformulated NYMEX............. 42,000 gallons.... none.............. none.............. 9 a.m.-2:30 p.m.
Blendstock for
Oxygen Blending
``RBOB''.
Feeder Cattle................... Feeder Cattle..... CME............... 50,000 lbs........ 1,600............. 1,600............. 10:05 a.m.-2 p.m.
Lean Hogs....................... Lean Hogs......... CME............... 40,000 lbs........ 4,100............. 4,100............. 9:10 a.m.-1 p.m.
Live Cattle..................... Live Cattle....... CME............... 40,000 lbs........ 5,400............. 5,400............. 10:05 a.m.-2 p.m.
Bean Oil........................ Bean Oil.......... CBOT.............. 60,000 lbs........ 5,000............. 6,500............. 10:30 a.m.-2:15
p.m.
Corn............................ Corn.............. CBOT.............. 5,000 bushels..... 13,500............ 22,000............ 10:30 a.m.-2:15
p.m.
Soybeans........................ Soybeans.......... CBOT.............. 5,000 bushels..... 6,500............. 10,000............ 10:30 a.m.-2:15
p.m.
Soybean Meal.................... Soybean Meal...... CBOT.............. 100 tons.......... 5,000............. 6,500............. 10:30 a.m.-2:15
p.m.
Wheat........................... Wheat............. CBOT.............. 5,000 bushels..... 5,000............. 6,500............. 10:30 a.m.-2:15
p.m.
Aluminum........................ High Grade Primary LME............... 25 metric tons.... none.............. none.............. 6:55 a.m.-12 p.m.
Aluminum.
Copper.......................... Copper............ COMEX............. 25,000 lbs........ none.............. none.............. 8:10 a.m.-1 p.m.
Lead............................ Lead.............. LME............... 25 metric tons.... none.............. none.............. 3 p.m.-2:45 p.m.
(next day).
Nickel.......................... Primary Nickel.... LME............... 6 metric tons..... none.............. none.............. 3 p.m.-2:45 p.m.
(next day).
Tin............................. Tin............... LME............... 5 metric tons..... none.............. none.............. 3 p.m.-2:45 p.m.
(next day).
Zinc............................ Special High Grade LME............... 25 metric tons.... none.............. none.............. 3 p.m.-2:45 p.m.
Zinc. (next day).
Gold............................ Gold.............. COMEX............. 100 troy oz....... none.............. none.............. 8:20 a.m.-1:30
p.m.
Platinum........................ Platinum.......... NYMEX............. 50 troy oz........ none.............. none.............. 8:20 a.m.-1:05
p.m.
Silver.......................... Silver............ COMEX............. 5,000 troy oz..... none.............. none.............. 8:25 a.m.-1:25
p.m.
Cocoa........................... Cocoa............. ICE-US............ 10 metric tons.... none.............. none.............. 4 a.m.-2 p.m.
Coffee.......................... Coffee ``C''...... ICE-US............ 37,500 lbs........ none.............. none.............. 3:30 a.m.-2 p.m.
Cotton.......................... Cotton............ ICE-US............ 50,000 lbs........ 3,500............. 5,000............. 9 p.m.-2:30 p.m.
Sugar........................... World Sugar No. 11 ICE-US............ 112,000 lbs....... none.............. none.............. 3:30 a.m.-2 p.m.
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\15\ The Sponsor has represented that the positions limits in the chart above reflect fixed limits on the maximum number of futures contracts that any
person may hold in a single month or all months combined for a given contract as of date of the date of this filing. These limits are subject to
change and may be altered if a proposed rule by the CFTC to impose new position limits on energy futures contracts is implemented (see 75 FR 1209
(January 26, 2010)), if federal financial regulatory reform is passed by Congress, or in a variety of other ways. In addition to the specific position
limits noted above, many of the futures contracts listed in the chart above are also subject to position limits in the spot or expiration month of
such contract, in addition to various accountability levels and/or other limits that allow the Futures Exchanges to exercise greater scrutiny and
control over an investor's positions. A more complete description of the limits placed upon these futures contracts is available in the Registration
Statement.
Values of the Index are computed by Bloomberg and disseminated
approximately every fifteen seconds from 8 a.m. to 5 p.m., E.T., which
also publishes a daily Index value at approximately 5:30 p.m., E.T.
Additional information regarding calculation of the Index and the
selection of eligible commodities is included in the Registration
Statement. In addition, the Registration Statement contains detailed
information regarding the Index methodology.
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 Units 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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A more detailed description of the Units, the Fund, the Index and
Commodity Interests as well as investment risks, are set forth in the
Registration Statement. All terms relating to the Fund that are
referred to, but not defined in, this proposed rule change are defined
in the Registration Statement.
Availability of Information Regarding the Units
The NAV for the Fund will be calculated by the Administrator,
(Brown Brothers Harriman & Co., Inc.), once a day and will be
disseminated daily to all market participants at the same time. The
Exchange will make available on its Web site daily trading volume of
each of the Units, closing prices of such Units, and number of Units
outstanding.
The closing prices and settlement prices of the Futures Contracts
are also readily available from the Web sites of the applicable futures
exchanges, automated quotation systems, published or other public
sources, or online information services such as Bloomberg or Reuters.
Complete real-time data for the Futures Contracts is available by
subscription from Reuters and Bloomberg. The relevant futures exchanges
also provide delayed futures information on current and past trading
sessions and market news free of charge
[[Page 33865]]
on their respective Web sites. The specific contract specifications for
the Futures Contracts are also available on such Web sites, as well as
other financial informational sources. Quotation and last-sale
information regarding the Units will be disseminated through the
facilities of the CTA. In addition, the Fund's Web site at http://www.unitedstatescommodityindexfund.com will display the end of day
closing index levels, and NAV.
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 Financial Instruments and characteristics of such
instruments and cash equivalents, and amount of cash held in the
portfolio of the Fund. This Web site disclosure of the portfolio
composition of the Fund will occur at the same time as the disclosure
by the Sponsor of the portfolio composition to Authorized Purchasers 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 Purchasers. 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
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 Unit 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 the Futures Contracts. The ITV disseminated
during the 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 Unit basis by one or more
major market data vendors every 15 seconds during the Core Trading
Session. The value of a Unit may be influenced by non-concurrent
trading hours between NYSE Arca and the applicable Futures Exchanges
when the Units are traded on NYSE Arca after normal trading hours of
such Futures Exchanges. The ITV will be updated during the NYSE Arca
Core Trading Session when Futures Exchanges are trading any Futures
Contracts held by the Fund. However, a static ITV will be disseminated
between the close of trading of all applicable Futures Contracts on
Futures Exchanges and the close of the NYSE Arca Core Trading Session.
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 Units trading on the Exchange or the
creation or redemption of such Units.
Trading Rules
The Exchange deems the Units to be equity securities, thus
rendering trading in the Units subject to the Exchange's existing rules
governing the trading of equity securities. Units 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 Units during all
trading sessions.
The trading of the Units 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 Units. Trading may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Units inadvisable. These may include: (1) The extent to
which trading is not occurring in the underlying Futures Contracts,\18\
or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. In addition,
trading in Units will be subject to trading halts caused by
extraordinary market volatility pursuant to the Exchange's ``circuit
breaker'' rule \19\ or by the halt or suspension of trading of the
underlying Futures Contracts.\20\
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\18\ See Exchange Confirmation, supra note 5.
\19\ See NYSE Arca Equities Rule 7.12.
\20\ See Exchange Confirmation, supra note 5.
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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 Index
value, ITV or the value of the underlying Futures Contracts occurs. If
the interruption to the dissemination of the Index value, ITV 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 Units is
not disseminated to all market participants at the same time, it will
halt trading in the Units until such time as the NAV is available to
all market participants.
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products, including Trust Issued
Receipts, to monitor trading in the Units. The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Units 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 Units, the physical
commodities included in, or options, futures or options on futures on,
Units through ETP Holders, in connection with such ETP Holders'
proprietary or customer trades which they effect on any relevant
market. The Exchange currently has in place an Information Sharing
Agreement with the ICE and LME for the purpose of providing information
in connection with trading in or related to Futures Contracts traded on
their respective exchanges. 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 CME, CBOT, COMEX
and NYMEX. A list of ISG members is available at http://www.isgportal.org.\21\
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\21\ The Exchange notes that not all Commodity Interests 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 assets traded on exchanges, not
more than 10% of the weight of such assets 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.
[[Page 33866]]
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 Units. Specifically, the
Information Bulletin will discuss the following: (1) The risks involved
in trading the Units 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 Units in Creation Baskets
and Redemption Baskets (and that Units 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 Units; (4) how
information regarding the ITV is disseminated; (5) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Units 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 Units directly from the Fund will receive a prospectus. ETP
Holders purchasing Units 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 the Futures Contracts traded on U.S.
markets.
The Information Bulletin will also disclose the trading hours of
the Units of the Fund and that the NAV for the Units is calculated
after 4 p.m. E.T. each trading day. The Bulletin will disclose that
information about the Units 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,\22\ in general, and furthers the objectives of Section
6(b)(5),\23\ 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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\22\ 15 U.S.C. 78f(b).
\23\ 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.
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 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve 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-2010-44 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-2010-44. 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, on official business days between
the hours of 10 a.m. and 3 p.m. Copies of such filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
publicly available. All submissions should refer to File Number SR-
NYSEArca-2010-44 and should be submitted on or before July 6, 2010.
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\24\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-14365 Filed 6-14-10; 8:45 am]
BILLING CODE 8011-01-P