[Federal Register Volume 75, Number 66 (Wednesday, April 7, 2010)]
[Notices]
[Pages 17818-17820]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7836]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61807; File No. SR-NYSEAmex-2010-09]
Self-Regulatory Organizations; NYSE Amex LLC; Order Granting
Approval of Proposed Rule Change Amending Its Trust Unit Rules and
Proposing the Listing of the Nuveen Diversified Commodity Fund
March 31, 2010.
On January 29, 2010, NYSE Amex LLC (``NYSE Amex'' or ``Exchange'')
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 NYSE Amex Rule 1600 et seq. to permit the listing and trading of
shares (``Shares'') of the Nuveen Diversified Commodity Fund (the
``Fund''). The proposed rule change was published in the Federal
Register on March 1, 2010.\3\ The Commission received no comments on
the proposal. This order approves the proposed rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 61571 (February 23,
2010), 75 FR 9265 (``Notice'').
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I. Description of the Proposal
NYSE Amex previously adopted Rule 1600 et seq. to permit the
listing of Trust Units, which are defined as securities that are issued
by a trust or other similar entity that invests in the assets of a
trust, partnership, limited liability company, corporation or other
similar entity constituted as a commodity pool that holds investments
comprising or otherwise based on any combination of futures contracts,
options on futures contracts, forward contracts, swap contracts and/or
commodities.\4\ Rule 1600 was adopted in contemplation of the listing
of shares of the Nuveen Commodities Income and Growth Fund (the
``Fund''), a fund sponsored by Nuveen Investments, Inc. (``Nuveen'').
Nuveen now proposes to go forward with a listing of shares (the
``Shares'') of the Fund under a new name, the Nuveen Diversified
Commodity Fund, and with a modified investment plan, which is described
in detail in the Notice.\5\ NYSE Amex Rule 1600 as currently in effect
permits only the listing of Trust Units whose issuers utilize the
master/feeder structure originally intended to be used for the Fund.
According to the Exchange, due to a change in the interpretation of
applicable tax law by the Internal Revenue Service, the originally
expected trust reporting procedures would no longer be available under
a master/feeder structure. Nuveen therefore proposes to modify its
approach and have the listed Fund make its own direct investments.
Consequently, the Exchange proposes to amend the definition of Trust
Units in Rule 1600 to remove the master/feeder structure requirement
and permit the listing of Trust Units where the issuer is constituted
as a commodity pool which invests directly in commodities and commodity
derivatives. Nuveen has represented to the Exchange that there are no
material revisions to the Fund's structure or investment approach other
than those described in this current filing.
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\4\ See Securities Exchange Act Release No. 56880 (December 3,
2007), 72 FR 69259 (December 7, 2007) (SR-Amex-2006-96) (order
approving NYSE Amex Rule 1600 et seq.).
\5\ See Securities Exchange Act Release No. 56465 (September 19,
2007), 72 FR 54489 (September 25, 2007) (SR-Amex-2006-96) (notice
providing a description of the Fund).
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[[Page 17819]]
The Fund was formed as a Delaware statutory trust on December 7,
2005 pursuant to a Declaration of Trust signed by Wilmington Trust
Company, as the Delaware Trustee.\6\ The Fund's primary investment
objective is to seek total return through broad exposure to the
commodities markets. The Fund's secondary objective is to provide
investors with monthly income and capital distributions not commonly
associated with commodity investments. The Fund intends to pursue its
investment objective by utilizing: (a) An actively managed rules-based
commodity investment strategy, whereby the Fund will invest in a
diversified basket of commodity futures and forward contracts with an
aggregate notional value substantially equal to the net assets of the
Fund; and (b) a risk management program designed to moderate the
overall risk and return characteristics of the Fund's commodity
investments. The Fund will invest in commodity futures and forward
contracts, options on commodity futures and forward contracts and over-
the-counter (``OTC'') commodity options in the following commodity
groups: energy, industrial metals, precious metals, livestock,
agriculturals, and tropical foods and fibers and may in the future
include other commodity investments that become the subject of
commodity futures trading.
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\6\ The Fund, as a commodity pool, will not be subject to
registration and regulation under the Investment Company Act of 1940
(the ``1940 Act'').
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The Fund is a commodity pool and is managed by Nuveen Commodities
Asset Management, LLC (the ``Manager''). The Manager is registered as a
commodity pool operator (the ``CPO'') and a commodity trading advisor
(the ``CTA'') with the Commodity Futures Trading Commission (``CFTC'')
and is a member of the National Futures Association (``NFA''). The
Manager will serve as the CPO and a CTA of the Fund and will determine
the Fund's overall investment strategy, including: (i) The selection
and ongoing monitoring of the Fund's sub-advisors; (ii) the management
of the Fund's business affairs; and (iii) the provision of certain
clerical, bookkeeping and other administrative services. Gresham
Investment Management LLC (the ``Commodity Sub-Advisor'') will invest
on a notional basis substantially all of the Fund's assets in commodity
futures and forward contracts pursuant to the commodity investment
strategy and a risk management program.\7\ The Commodity Sub-Advisor is
a Delaware limited liability company and is registered with the CFTC as
a CTA and a CPO and is a member of the NFA. The Commodity Sub-Advisor
is also registered with the Commission as an investment adviser. Nuveen
Asset Management (the ``Collateral Sub-Advisor''), an affiliate of the
Manager, will invest the Fund's collateral in short-term, investment-
grade quality debt instruments. The Collateral Sub-Advisor is
registered with the Commission as an investment adviser.
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\7\ The Fund does not intend to utilize leverage. However, the
Fund may borrow for temporary or emergency purposes in an amount up
to 5% of the value of the Fund's net assets should the need arise.
Such short-term borrowings would mature in less than 60 days from
the date of borrowing. In order to facilitate any such borrowing,
the Fund intends to establish a standby credit facility with State
Street Bank and Trust Company that will be entered into as of the
closing of the offering of its common shares. Any temporary or
emergency borrowings would be used to provide the Fund with added
potential flexibility in managing short-term portfolio liquidity
needs and managing the payment of distributions.
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The Exchange states that the Shares will conform to the initial and
continued listing criteria under NYSE Amex Rule 1602 and that the Fund
has represented to the Exchange that, for initial and continued listing
of the Shares, it will be in compliance with Section 803 of the NYSE
Amex Company Guide (Independent Directors and Audit Committee) and Rule
10A-3 under the Act.\8\ Additional information regarding the Fund, the
Shares, the Fund's investment objectives, strategies, policies, and
restrictions, fees and expenses, availability of information, trading
rules, and surveillance procedures, among other things, can be found in
the Notice.\9\
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\8\ 17 CFR 240.10A-3.
\9\ See supra note 3.
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II. Discussion and Commission's Findings
The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of Section 6 of the
Act \10\ and the rules and regulations thereunder applicable to a
national securities exchange.\11\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\12\
which requires, among other things, that the Exchange's rules be
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest. The Commission notes that the Shares must comply with
the requirements of NYSE Amex Rule 1600 et seq. to be listed and traded
on the Exchange.
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\10\ 15 U.S.C. 78f.
\11\ 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).
\12\ 17 U.S.C. 78f(b)(5).
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The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\13\ 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. The daily settlement
prices for the commodity futures and forward contracts held by the Fund
are publicly available on the Web sites of the futures and forward
exchanges trading the particular contracts. Various data vendors and
news publications publish futures prices and data. The Exchange
represents that futures, forwards and related exchange traded options
quotes and last sale information for the commodity contracts are widely
disseminated through a variety of market data vendors worldwide,
including Bloomberg and Reuters. In addition, the Exchange further
represents that complete real-time data for such futures, forwards and
exchange traded options is available by subscription from Reuters and
Bloomberg. The relevant futures and forward exchanges also provide
delayed futures and forward contract information on current and past
trading sessions and market news free of charge on their respective Web
sites. The contract specifications for the futures and forward
contracts are also available from the futures and forward exchanges on
their Web sites as well as other financial informational sources.
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\13\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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The Fund's total portfolio holdings will also be disclosed and
updated on its Web site on each business day that the Exchange is open
for trading.\14\ This Web site disclosure of portfolio holdings (as of
the previous day's close) will be made daily and will include, as
applicable: (a) The name and value of each commodity investment; (b)
the value of over-the-counter commodity put options, if any, and the
value of the collateral as represented by cash; (c) cash equivalents;
and (d) debt securities held in the Fund's portfolio. The values of the
Fund's portfolio holdings will, in
[[Page 17820]]
each case, be determined in accordance with the Fund's valuation
policies.
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\14\ The total portfolio holdings will be disseminated to all
market participants at the same time.
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The Commission further believes that the proposal 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. The Commission
notes that the Exchange will obtain a representation from the issuer
that the NAV per Share will be calculated daily and made available to
all market participants at the same time.\15\ The Manager has
represented to the Exchange that the NAV will be disseminated to all
market participants at the same time.\16\ Additionally, if the Exchange
becomes aware that the portfolio holdings and net asset value per share
are not being disseminated as required, the Exchange may halt trading
during the day in which the interruption to the dissemination of the
portfolio holdings or net asset value per share occurs. If the
interruption to the dissemination of the portfolio holdings or net
asset value per share 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.\17\
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\15\ See NYSE Amex Rule 1602 (a)(ii).
\16\ See Notice, supra, note 3.
\17\ See NYSE Amex Rule 1602(b)(ii).
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In addition, each of the Manager, the Commodity Broker, and the
Commodity Sub-Advisor have represented to the Exchange that they have
erected and maintain firewalls within their respective institutions to
prevent the flow of non-public information regarding the portfolio of
underlying securities from the personnel involved in the development
and implementation of the investment strategy to others such as sales
and trading personnel.
The Exchange has represented that the Shares are equity securities
subject to the Exchange's rules governing the trading of equity
securities. In support of this proposal, the Exchange has made
representations, including:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Amex Rule 1602.
(2) The Exchange's surveillance procedures are adequate to properly
monitor Exchange trading of the Shares and to deter and detect
violations of Exchange rules and applicable Federal securities laws.
(3) The Exchange will distribute an Information Circular to its
members in connection with the trading of the Shares. The Circular will
discuss the special characteristics and risks of trading this type of
security. Specifically, the Circular, among other things, will discuss
what the Shares are, the requirement that members and member firms
deliver a prospectus to investors purchasing the Shares prior to or
concurrently with the confirmation of a transaction during the initial
public offering, applicable NYSE Amex rules, and trading information
and applicable suitability rules. The Circular will also explain that
the Fund is subject to various fees and expenses described in the
Registration Statement. The Circular will also reference the fact that
there is no regulated source of last sale information regarding
physical commodities and note the respective jurisdictions of the
Commission and CFTC. The Circular will advise members of their
suitability obligations with respect to recommended transactions to
customers in the Shares.
(4) The Fund will be in compliance with Rule 10A-3 under the Act.
This approval order is based on the Exchange's representations.
In addition, the Commission finds that the proposed changes to NYSE
Amex Rule 1600 et seq. to amend the definition of Trust Units to remove
the master/feeder structure requirement and to modify and update the
rules to make them consistent with the Exchange's recent rule book
changes are consistent with the Act.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.
III. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-NYSEAmex-2010-09), be, and
it hereby is, approved.
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\18\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-7836 Filed 4-6-10; 8:45 am]
BILLING CODE 8011-01-P