[Federal Register Volume 72, Number 212 (Friday, November 2, 2007)]
[Notices]
[Pages 62277-62287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-21619]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-56719; File No. SR-Amex-2007-98]


Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change, as Modified by Amendment Nos. 
1 and 2, Relating to the Listing and Trading of Units of the United 
States 12 Month Oil Fund, LP and the United States 12 Month Natural Gas 
Fund, LP

October 29, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 \2\ thereunder, notice is hereby given 
that on August 23, 2007, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') 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 substantially prepared by the 
Exchange. On September 14, 2007, the Exchange submitted Amendment No. 1 
to the proposed rule change. On October 25, 2007, the Exchange 
submitted Amendment No. 2 to the proposed rule change. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change, as amended, from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade units (each a ``Unit'' and, 
collectively, the ``Units'') of each of the United States 12 Month Oil 
Fund, LP (``12 Month Oil Fund'') and the United States 12 Month Natural 
Gas Fund, LP (``12 Month Natural Gas Fund'') (each a ``Partnership'' 
and, collectively, the ``Partnerships'').

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 Amex included statements 
concerning the purpose of, and basis for, the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Amex has prepared summaries, set forth in Sections 
A, B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade Units issued by the 12 
Month Oil Fund (under the symbol: ``USL'') and the 12 Month Natural Gas 
Fund (under symbol: ``USN'') pursuant to Amex Rules 1500-AEMI and 1501 
through 1505.\3\ The Exchange submits that the Units will conform to 
the initial and continued listing criteria under Rule 1502,\4\ 
specialist prohibitions under Rule 1503 and the obligations of 
specialists under Rule 1504.
---------------------------------------------------------------------------

    \3\ Amex Rule 1500-AEMI provides for the listing of Partnership 
Units, which are defined as securities, that are: (a) Issued by a 
partnership that invests in any combination of futures contracts, 
options on futures contracts, forward contracts, commodities, and/or 
securities; and (b) that are issued and redeemed daily in specified 
aggregate amounts at net asset value. See Exchange Act Release No. 
53582 (March 31, 2006), 71 FR 17510 (April 6, 2006) (SR-Amex-2005-
127) (approving Amex Rules 1500-AEMI and 1501 through 1505 in 
conjunction with the listing and trading of Units of the United 
States Oil Fund, LP).
    \4\ See section entitled ``Listing and Trading Rules,'' infra.
---------------------------------------------------------------------------

    Ownership of a Partnership Unit represents a fractional undivided 
unit of a beneficial interest in the net assets of

[[Page 62278]]

that Partnership.\5\ Each of the net assets of the 12 Month Oil Fund 
and the 12 Month Natural Gas Fund will consist primarily of investments 
in futures contracts for crude oil, heating oil, gasoline, natural gas, 
and other petroleum-based fuels that are traded on the New York 
Mercantile Exchange (``NYMEX''), Intercontinental Exchange (``ICE 
Futures'') or other U.S. and foreign exchanges (collectively, ``Futures 
Contracts''). In the case of the 12 Month Oil Fund, the predominant 
investments are expected to be based on, or related to, crude oil. 
Similarly, for the 12 Month Natural Gas Fund, the predominant 
investments are expected to be based on, or related to, natural gas.
---------------------------------------------------------------------------

    \5\ Each Partnership is a commodity pool that will issue Units 
that may be purchased and sold on the Exchange.
---------------------------------------------------------------------------

    The 12 Month Oil Fund may also invest in other crude oil-related 
investments such as cash-settled options on Futures Contracts, forward 
contracts for crude oil, and over-the-counter (``OTC'') transactions 
based on the price of crude oil, heating oil, gasoline, natural gas, 
other petroleum-based fuels, Futures Contracts, and indices based on 
the foregoing (collectively, ``Other Crude Oil-Related Investments''). 
Futures Contracts and Other Crude Oil-Related Investments collectively 
are referred to as ``Crude Oil Interests.''
    Similarly, the 12 Month Natural Gas Fund may also invest in other 
natural gas-related investments such as cash-settled options on Futures 
Contracts, forward contracts for natural gas, and OTC transactions 
based on the price of natural gas, crude oil and other petroleum-based 
fuels, Futures Contracts and indices based on the foregoing 
(collectively, ``Other Natural Gas-Related Investments''). Futures 
Contracts and Other Natural Gas-Related Investments collectively are 
referred to as ``Natural Gas Interests.''
    Each of the 12 Month Oil Fund and the 12 Month Natural Gas Fund 
will invest in Crude Oil Interests and Natural Gas Interests, 
respectively, to the fullest extent possible without being leveraged or 
unable to satisfy its current or potential margin or collateral 
obligations. In pursuing this objective, the primary focus of each 
Partnership's investment manager, Victoria Bay Asset Management, LLC 
(``Victoria Bay'' or ``General Partner''), will be the investment in 
Futures Contracts and the management of its investments in short-term 
obligations of the United States of two years or less (``Treasuries'') 
and cash and cash equivalents (collectively, ``Cash'') for margining 
purposes and as collateral.
12 Month Oil Fund Investment Objective and Policies
    The investment objective of the 12 Month Oil Fund is for the 
changes in percentage terms of the Units' net asset value (``NAV'') to 
reflect the changes in percentage terms of the price of light, sweet 
crude oil delivered to Cushing, Oklahoma, as measured by the changes in 
the average of the prices of twelve crude oil futures contracts traded 
on NYMEX (the ``Oil Benchmark Futures Contracts''),\6\ less the 12 
Month Oil Fund's expenses. The Oil Benchmark Futures Contracts consist 
of the near month contract to expire and the contracts for the 
following eleven months, for a total of twelve consecutive months' 
contracts, except when the near month contract is within two weeks of 
expiration, in which case it will be measured by the futures contracts 
that are the next month contract to expire and the contracts for the 
eleven consecutive months following that contract.\7\ When calculating 
the daily movement of the average price of the twelve futures 
contracts, each contract month will be equally weighted.
---------------------------------------------------------------------------

    \6\ The average price is determined by summing up the 12 
individual monthly prices and dividing them by 12, and then 
comparing that result to the prior day's average price determined in 
the same fashion.
    \7\ The composition of the Oil Benchmark Futures Contracts will 
be changed or ``rolled'' over a one day period by selling the near 
month contract and buying the contract, which at that time is the 
thirteen month contract.
---------------------------------------------------------------------------

    The General Partner will employ a ``neutral'' investment strategy 
intended to track the changes in the price of crude oil regardless of 
whether the price of crude oil goes up or goes down. The ``neutral'' 
investment strategy is designed to permit investors to purchase and 
sell the 12 Month Oil Fund's Units for the purpose of investing 
indirectly in crude oil in a cost-effective manner and/or to permit 
participants in the crude oil markets or other industries to hedge the 
risk of losses in their crude oil investments.
    The General Partner will attempt to place the 12 Month Oil Fund's 
trades in Futures Contracts and Other Crude Oil-Related Investments and 
otherwise manage the 12 Month Oil Fund's investments so that ``A'' will 
be within plus/minus 10 percent of ``B'', where:
     A is the average daily change in 12 Month Oil Fund's NAV 
for any period of 30 successive valuation days, i.e., any day as of 
which 12 Month Oil Fund calculates its NAV, and
     B is the average daily change in the average of the prices 
of the Oil Benchmark Futures Contracts over the same period.
    The Exchange states that an investment in the Units will allow both 
retail and institutional investors to easily gain exposure to the crude 
oil market in a cost-effective manner. In addition, the Units are also 
expected to provide additional means for diversifying an investor's 
investments or hedging exposure to changes in crude oil prices.
    The General Partner believes that market arbitrage opportunities 
will cause changes in the 12 Month Oil Fund's unit price on the 
Exchange to closely track changes in the 12 Month Oil Fund's NAV.\8\ 
The General Partner also believes that percentage changes in the 12 
Month Oil Fund's NAV will closely track percentage changes in the Oil 
Benchmark Futures Contracts, less the 12 Month Oil Fund's expenses. The 
12 Month Oil Fund will not be operated in a manner such that the per-
Unit-NAV will equal, in dollar terms, the dollar price of spot crude 
oil or any particular futures contract or contracts based on crude oil.
---------------------------------------------------------------------------

    \8\ See section entitled ``Arbitrage,'' infra.
---------------------------------------------------------------------------

12 Month Natural Gas Fund Investment Objective and Policies
    The investment objective of the 12 Month Natural Gas Fund is for 
the changes in percentage terms of the Units' NAV to reflect the 
changes in percentage terms of the price of natural gas delivered at 
the Henry Hub, Louisiana, as measured by the changes in the average of 
the prices of 12 futures contracts on natural gas traded on NYMEX (the 
``Natural Gas Benchmark Futures Contracts''),\9\ less the 12 Month 
Natural Gas Fund's expenses. The Natural Gas Benchmark Futures 
Contracts consist of the near month contract to expire and the 
contracts for the following eleven months, for a total of twelve 
consecutive months' contracts, except when the near month contract is 
within two weeks of expiration, in which case it will be measured by 
the futures contracts that are the next month contract to expire and 
the contracts for the eleven consecutive months following that 
contract.\10\ When calculating the daily movement of the average price 
of the twelve futures contracts, each contract month will be equally 
weighted.
---------------------------------------------------------------------------

    \9\ The average price is determined by summing up the 12 
individual monthly prices and dividing them by 12, and then 
comparing that result to the prior day's average price determined in 
the same fashion.
    \10\ The composition of the Natural Gas Benchmark Futures 
Contract will be changed or ``rolled'' over a one day period by 
selling the near month contract and buying the contract which at 
that time is the thirteen month contract on the same day.
---------------------------------------------------------------------------

    The General Partner will employ a ``neutral'' investment strategy 
intended

[[Page 62279]]

to track the changes in the price of crude oil regardless of whether 
the price of crude oil goes up or goes down. The ``neutral'' investment 
strategy is designed to permit investors to purchase and sell the 12 
Month Natural Gas Fund's Units for the purpose of investing indirectly 
in crude oil in a cost-effective manner and/or to permit participants 
in the crude oil markets or other industries to hedge the risk of 
losses in their crude oil investments.
    The General Partner will attempt to place the 12 Month Natural Gas 
Fund's trades in Futures Contracts and Other Natural Gas-Related 
Investments and otherwise manage the 12 Month Natural Gas Fund's 
investments so that ``A'' will be within plus/minus 10 percent of 
``B'', where:
     A is the average daily change in 12 Month Natural Gas 
Fund's NAV for any period of 30 successive valuation days, i.e., any 
day as of which 12 Month Natural Gas Fund calculates its NAV, and
     B is the average daily change in the average of the prices 
of the Natural Gas Benchmark Futures Contracts over the same period.
    The Exchange states that an investment in the Units will allow both 
retail and institutional investors to easily gain exposure to the 
natural gas market in a cost-effective manner. The Units are also 
expected to provide additional means for diversifying an investor's 
investments or hedging exposure to changes in natural gas prices.
    The General Partner believes that market arbitrage opportunities 
will cause changes in the 12 Month Natural Gas Fund's unit price on the 
Exchange to closely track changes in the 12 Month Natural Gas Fund's 
NAV.\11\ The General Partner also believes that percentage changes in 
the 12 Month Natural Gas Fund's NAV will closely track percentage 
changes in the Natural Gas Benchmark Futures Contracts, less the 12 
Month Natural Gas Fund's expenses. The 12 Month Natural Gas Fund will 
not be operated in a manner such that the per-Unit-NAV will equal, in 
dollar terms, the dollar price of spot natural gas or any particular 
futures contract or contracts based on natural gas.
---------------------------------------------------------------------------

    \11\ See section entitled ``Arbitrage,'' infra.
---------------------------------------------------------------------------

Description of the Petroleum-Based Fuels Market
    With respect to each of the following petroleum-based commodities, 
the Exchange states as follows:
    Crude Oil. Crude oil is the world's most actively traded commodity. 
The futures contracts for light, sweet crude oil that are traded on the 
NYMEX are the world's most liquid forum for crude oil trading, as well 
as the most liquid futures contracts on a physical commodity. Due to 
the liquidity and price transparency of crude oil futures contracts, 
they are used as a principal international pricing benchmark. The 
futures contracts for light, sweet crude oil trade on the NYMEX \12\ in 
units of 1,000 U.S. barrels (42,000 gallons) and, if not closed out 
before maturity, will result in delivery of crude oil to Cushing, 
Oklahoma, which is also accessible to the world market by two major 
interstate petroleum pipeline systems.
---------------------------------------------------------------------------

    \12\ The Exchange states that NYMEX is the world's largest 
physical commodity futures exchange and the dominant market for the 
trading of energy and precious metals.
---------------------------------------------------------------------------

    The price of crude oil is established by the supply and demand 
conditions in the global market overall and, more particularly, in the 
main refining centers of Singapore, Northwest Europe, and the U.S. Gulf 
Coast. Demand for petroleum products by consumers, as well as 
agricultural, manufacturing and transportation industries, determines 
demand for crude oil by refiners. Since the precursors of product 
demand are linked to economic activity, crude oil demand will tend to 
reflect economic conditions. However, other factors such as weather 
also influence product and crude oil demand. The price of crude oil has 
historically exhibited periods of significant volatility.
    Gasoline. Gasoline is the largest single volume refined product 
sold in the U.S. and accounts for almost half of national oil 
consumption. The Gasoline Futures Contract, listed and traded on the 
NYMEX, trades in units of 42,000 gallons (1,000 barrels) and is based 
on delivery at petroleum products terminals in the New York harbor, the 
major East Coast trading center for imports and domestic shipments from 
refineries in the New York harbor area or from the Gulf Coast refining 
centers. The price of gasoline is volatile.
    Heating Oil. Heating oil, also known as No. 2 fuel oil, accounts 
for 25% of the yield of a barrel of crude oil, the second largest 
``cut'' from oil after gasoline. The heating oil futures contract, 
listed and traded on the NYMEX, trades in units of 42,000 gallons 
(1,000 barrels) and is based on delivery in New York harbor, the 
principal cash market center.
    Natural Gas. Natural gas accounts for almost a quarter of U.S. 
energy consumption. The price of natural gas is established by the 
supply and demand conditions in the North American market and, more 
particularly, in the main refining center of the U.S. Gulf Coast. The 
natural gas market essentially constitutes an auction, where the 
highest bidder wins the supply. When markets are ``strong'' (i.e., when 
demand is high and/or supply is low), the bidder must be willing to pay 
a higher premium to capture the supply. When markets are ``weak'' 
(i.e., when demand is low and/or supply is high), a bidder may choose 
not to outbid competitors, waiting instead for later, possibly lower 
priced, supplies. Demand for natural gas by consumers, and the 
agricultural, manufacturing and transportation industries, determines 
overall demand for natural gas. Since the precursors of product demand 
are linked to economic activity, natural gas demand will tend to 
reflect economic conditions. However, other factors such as weather 
significantly influence natural gas demand. The natural gas futures 
contracts traded on the NYMEX trade in units of 10,000 million British 
thermal units (``mmBtu'') and are based on delivery at the Henry Hub in 
Louisiana.
    Because of the volatility of natural gas prices, a vigorous basis 
market has developed in the pricing relationships between the Henry Hub 
and other important natural gas market centers in the continental 
United States and Canada.
Structure and Regulation of 12 Month Oil Fund and 12 Month Natural Gas 
Fund
    Each of the 12 Month Oil Fund and the 12 Month Natural Gas Fund is 
a Delaware limited partnership formed in June 2007. The 12 Month Oil 
Fund is a commodity pool that will invest in Crude Oil Interests, while 
the 12 Month Natural Gas Fund is a commodity pool that will invest in 
Natural Gas Interests. Both are managed by Victoria Bay, a single 
member Delaware limited liability company, which is wholly owned by 
Wainwright Holdings, Inc. The General Partner of the Partnerships is 
registered as a commodity pool operator (``CPO'') with the Commodity 
Futures Trading Commission (the ``CFTC'') and is a member of the 
National Futures Association.
    Information regarding the Partnerships and the General Partner, as 
well as detailed descriptions of the manner in which the Units will be 
offered and sold, and the investment strategy of the 12 Month Oil Fund 
and the 12 Month Natural Gas Fund, are included in their respective 
registration statements regarding the offering of the

[[Page 62280]]

Units filed with the Commission under the Securities Act of 1933.\13\
---------------------------------------------------------------------------

    \13\ See 12 Month Oil Fund's Form S-1, filed with the Commission 
on July 5, 2007 and amended on August 31, 2007 (File No. 333-
144348), and 12 Month Natural Gas Fund's Form S-1, filed with the 
Commission on July 6, 2007 (File No. 333-144409).
---------------------------------------------------------------------------

    Clearing Broker. UBS Securities, LLC, a CFTC-registered futures 
commission merchant (``FCM''), will execute and clear each 
Partnership's futures contract transactions and hold the margin related 
to its Futures Contracts investments (the ``Clearing Broker''). The 
clearing arrangements between the Clearing Broker and each Partnership 
are terminable by the Clearing Broker, upon notice. In such an 
instance, the General Partner may be required to renegotiate with the 
current Clearing Broker, or make arrangements with other FCMs, if the 
Partnership(s) intend(s) to continue trading in Futures Contracts or 
Other Crude Oil-or Natural Gas-Related Investments, as appropriate, at 
the present level of capacity.
    Administrator and Custodian. Under separate agreements with each 
Partnership, Brown Brothers Harriman & Co. will serve as administrator, 
registrar, transfer agent and custodian (the ``Administrator'' or 
``Custodian''). The Administrator will perform services necessary for 
the operation and administration of each Partnership, including certain 
administrative and accounting services as well as the preparation of 
certain Commission and CFTC reports on behalf of each Partnership. 
These services include, but are not limited to, investment accounting, 
financial reporting, broker and trader reconciliation, calculation of 
the NAV and valuation of Treasuries and cash equivalents used to 
purchase or redeem Units and other Partnership assets or liabilities. 
As Custodian, it will (i) receive payments from purchasers of Baskets, 
(ii) make payments to Sellers for Redemption Baskets, as described 
below, (iii) hold cash, cash equivalents and Treasuries, as well as 
collateral posted by each Partnership's derivatives counterparties, and 
(iv) make transfers of margin and collateral with respect to each 
Partnership's investments to and from its FCMs or counterparties.
    Marketing Agent. ALPS Distributors, Inc., a registered broker-
dealer, will be the marketing agent for the Partnerships (``Marketing 
Agent''). The Marketing Agent will continuously offer, and redeem, 
Creation and Redemption Baskets, respectively, and will receive and 
process creation and redemption orders from Authorized Purchasers (as 
defined below) and coordinate the processing of orders for the creation 
or redemption of Units with the General Partner and the Depository 
Trust Company (``DTC'').
Investment Strategy of 12 Month Oil Fund
    Investments. The General Partner of the 12 Month Oil Fund believes 
that it will be able to use a combination of Futures Contracts and 
Other Crude Oil-Related Investments to manage the portfolio to achieve 
its investment objective. The General Partner further anticipates that 
the exact mix of Futures Contracts and Other Crude Oil-Related 
Investments held by the portfolio will vary over time depending on, 
among over things, the amount of invested assets in the portfolio, 
price movements of crude oil, the rules and regulations of the various 
futures and commodities exchanges and trading platforms that deal in 
Crude Oil Interests, and innovations in the Crude Oil Interests' 
marketplace including both the creation of new Crude Oil Interest 
investment vehicles, and the creation of new trading venues that trade 
in Crude Oil Interests.
    Futures Contracts. The principal Crude Oil Interests to be invested 
in by the 12 Month Oil Fund are Futures Contracts. The General Partner 
initially expects the 12 Month Oil Fund to purchase the Oil Benchmark 
Futures Contracts. The 12 Month Oil Fund may also invest in Futures 
Contracts in heating oil, crude oil, gasoline, natural gas, and other 
petroleum-based fuels that are traded on the NYMEX, ICE Futures or 
other U.S. and foreign exchanges.
    The price movements in the Oil Benchmark Futures Contracts have 
historically closely tracked the investment objective of the 12 Month 
Oil Fund over both the short-term, medium-term and the long-term. For 
that reason, the 12 Month Oil Fund anticipates making significant 
investments in the Oil Benchmark Futures Contracts. The General Partner 
submits that other Futures Contracts have also tended to track the 
investment objective of the 12 Month Oil Fund, though not as closely as 
the Oil Benchmark Futures Contracts.
    Other Crude Oil-Related Investments. The 12 Month Oil Fund may also 
purchase Other Crude Oil-Related Investments such as cash-settled 
options on Futures Contracts and forward contracts for crude oil, and 
participate in OTC transactions that are based on the price of crude 
oil, heating oil, gasoline, natural gas, and other petroleum-based 
fuels, Futures Contracts and indices based on the foregoing. Option 
contracts offer investors and hedgers another vehicle for managing 
exposure to the crude oil market. The 12 Month Oil Fund may purchase 
options on crude oil Futures Contracts on the principal commodities and 
futures exchanges in pursuing its investment objective.
    In addition to listed options, the Exchange states that there also 
exists an active OTC market in derivatives linked to crude oil. These 
OTC derivative transactions are privately-negotiated agreements between 
two parties. Unlike Futures Contracts or related options, each party to 
an OTC contract bears the credit risk that the counterparty may not be 
able to perform its obligations.
    The Exchange states that some OTC contracts contain fairly generic 
terms and conditions and are available from a wide range of 
participants, while other OTC contracts have highly customized terms 
and conditions and are not as widely available. Many OTC contracts are 
cash-settled forwards for the future delivery of crude oil or 
petroleum-based fuels that have terms similar to the Futures Contracts. 
Others take the form of ``swaps'' in which the two parties exchange 
cash flows based on pre-determined formulas tied to the price of crude 
oil as determined by the spot, forward or futures markets. The 12 Month 
Oil Fund may enter into OTC derivative contracts whose value may be 
tied to changes in the difference between the crude oil spot price, the 
price of Futures Contracts traded on NYMEX, and the prices of non-NYMEX 
Futures Contracts that may be invested in by the 12 Month Oil Fund.
Investment Strategy of 12 Month Natural Gas Fund
    Investments. The General Partner of the 12 Month Natural Gas Fund 
believes that it will be able to use a combination of Futures Contracts 
and Other Natural Gas-Related Investments to manage the portfolio to 
achieve its investment objective. The General Partner further 
anticipates that the exact mix of Futures Contracts and Other Natural 
Gas-Related Investments held by the portfolio will vary over time 
depending on, among over things, the amount of invested assets in the 
portfolio, price movements of natural gas, the rules and regulations of 
the various futures and commodities exchanges and trading platforms 
that deal in Natural Gas Interests, and innovations in the Natural Gas 
Interests' marketplace including both the creation of new Natural Gas 
Interest investment vehicles and the creation of new trading venues 
that trade in Natural Gas Interests.
    Futures Contracts. The principal Natural Gas Interests to be 
invested in by the 12 Month Natural Gas Fund are

[[Page 62281]]

Futures Contracts. The General Partner of the 12 Month Natural Gas Fund 
initially expects to purchase the Natural Gas Benchmark Futures 
Contracts. The 12 Month Natural Gas Fund may also invest in Futures 
Contracts in crude oil, natural gas, heating oil, gasoline and other 
petroleum-based fuels that are traded on the NYMEX, ICE Futures or 
other U.S. and foreign exchanges.
    The price movements in the Natural Gas Benchmark Futures Contracts 
have historically closely tracked the investment objective of the 12 
Month Natural Gas Fund over both the short-term, medium-term and the 
long-term. For that reason, the General Partner of the 12 Month Natural 
Gas Fund anticipates making significant investments in the Natural Gas 
Benchmark Futures Contracts. The General Partner submits that other 
Futures Contracts have also tended to track the investment objective of 
the 12 Month Natural Gas Fund, though not as closely as the Natural Gas 
Benchmark Futures Contracts.
    Other Natural Gas-Related Investments. The 12 Month Natural Gas 
Fund may also purchase Other Natural Gas-Related Investments such as 
cash-settled options on Futures Contracts and forward contracts for 
natural gas, and participate in OTC transactions that are based on the 
price of gasoline, heating oil, crude oil, natural gas, and other 
petroleum-based fuels, as well as Futures Contracts and indices based 
on the foregoing. Option contracts offer investors and hedgers another 
vehicle for managing exposure to the natural gas market. The 12 Month 
Natural Gas Fund may purchase options on natural gas Futures Contracts 
on the principal commodities and futures exchanges in pursuing its 
investment objective.
    In addition to listed options, the Exchange states that there also 
exists an active OTC market in derivatives linked to natural gas. These 
OTC derivative transactions are privately-negotiated agreements between 
two parties. Unlike Futures Contracts or related options, each party to 
an OTC contract bears the credit risk that the counterparty may not be 
able to perform its obligations.
    The Exchange states that some OTC contracts contain fairly generic 
terms and conditions and are available from a wide range of 
participants, while other OTC contracts have highly customized terms 
and conditions and are not as widely available. Many OTC contracts are 
cash-settled forwards for the future delivery of gasoline or petroleum-
based fuels that have terms similar to the Futures Contracts. Others 
take the form of ``swaps'' in which the two parties exchange cash flows 
based on pre-determined formulas tied to the price of gasoline as 
determined by the spot, forward or futures markets. The 12 Month 
Natural Gas Fund may enter into OTC derivative contracts whose value 
will be tied to changes in the difference between the natural gas spot 
price, the price of Futures Contracts traded on NYMEX, and the prices 
of non-NYMEX Futures Contracts that may be invested in by the 12 Month 
Natural Gas Fund.
Impact of Accountability Levels and Position Limits.
    The Exchange states that the CFTC and U.S. designated contract 
markets such as NYMEX have established accountability levels and 
position limits on the maximum net long or net short Futures Contracts 
in commodity interests that any person or group of persons under common 
trading control and that these limits are applicable to each of the 
Partnerships. Accountability levels and position limits are intended, 
among other things, to prevent a corner or squeeze on a market or undue 
influence on prices by any single trader or group of traders. The net 
position is the difference between an individual or firm's open long 
contracts and open short contracts in any one commodity.
    Most U.S. futures exchanges, such as NYMEX, also limit the daily 
price fluctuation (i.e., daily price limits) for Futures Contracts. The 
daily price limits establish the maximum amount that the price of a 
futures contract or an option on a futures contract may vary either up 
or down from the previous day's settlement price during a particular 
trading session. Once the daily limit has been reached in a particular 
futures contract or option on a futures contract, no trades may be made 
at a price beyond the limit.
    The accountability levels for each of the Benchmark Futures 
Contracts and other Futures Contracts traded on NYMEX are not a fixed 
ceiling, but rather, a threshold above which NYMEX may exercise greater 
scrutiny and control over an investor's positions. The current 
accountability level for investments at any one time in crude oil 
Futures Contracts (including investments in the Oil Benchmark Futures 
Contracts) is 20,000 contracts. Similarly, the amount for natural gas 
Futures Contracts (including investments in the Natural Gas Benchmark 
Futures Contracts) is 12,000 contracts. If a Partnership exceeds its 
respective accountability level for investments in either crude oil or 
natural gas Futures Contracts, as appropriate, NYMEX will monitor the 
Partnership's exposure and request additional information on its 
activities including the total size of all positions, investment and 
trading strategy, and the extent of its liquidity resources. If deemed 
necessary, NYMEX could order the Partnership to reduce its position 
back to the accountability level.
    If NYMEX orders a Partnership to reduce its position back to the 
accountability level, or to an accountability level that NYMEX deems 
appropriate for the Partnership, such accountability level may impact 
the mix of investments in Crude Oil Interests or Natural Gas Interests 
made by the 12 Month Oil Fund or the 12 Month Natural Gas Fund, 
respectively. To illustrate, assume that the Oil Benchmark Futures 
Contracts and the Unit price of the 12 Month Oil Fund are each $50, and 
that NYMEX has determined that the 12 Month Oil Fund may not own more 
than 20,000 contracts in crude oil Futures Contracts. In such case, the 
12 Month Oil Fund could invest up to $1 billion of its daily net assets 
in the Oil Benchmark Futures Contracts (i.e., $50 per unit multiplied 
by 1,000 (an Oil Benchmark Futures Contract is a contract for 1,000 
barrels) multiplied by 20,000 contracts) before reaching the 
accountability level imposed by NYMEX. Once the daily net assets of the 
portfolio exceed $1 billion in the Oil Benchmark Futures Contracts, the 
portfolio may not be able to make any further investments in the Oil 
Benchmark Futures Contracts, depending on whether NYMEX imposes limits. 
If NYMEX does impose limits at the $1 billion level (or another level), 
the 12 Month Oil Fund anticipates that it will invest the majority of 
its assets above that level in a mix of other Futures Contracts or 
Other Crude Oil-Related Investments. The above example applies equally 
to the 12 Month Natural Gas Fund and the Natural Gas Benchmark Futures 
Contracts.
    In addition to accountability levels, NYMEX imposes position limits 
on contracts held in the last few days of trading in the near month 
contract. The Exchange states that it is unlikely that a Partnership 
will run up against such position limits because each Partnership's 
investment strategy is to exit from the near month contract 
approximately two weeks before expiration of the contract.
Investment Procedures
    The General Partner for each of the 12 Month Oil Fund and the 12 
Month Natural Gas Fund anticipates that the use of Other Crude Oil-
Related Investments and Other Natural Gas-Related Investments, 
respectively, together with investments in Futures

[[Page 62282]]

Contracts, will produce price and total return results that closely 
track each Partnership's investment objective.
    Counterparty Procedures. To protect themselves from the credit risk 
that arises in connection with such contracts, the 12 Month Oil Fund 
and the 12 Month Natural Gas Fund will each enter into agreements, with 
each counterparty, that provide for the netting of their respective 
overall exposure to the counterparty, such as the agreements published 
by the International Swaps and Derivatives Association, Inc. Each 
Partnership will also require that the counterparty be highly rated 
and/or provide collateral or other credit support to address the 
Partnership's exposure to the counterparty. The General Partner will 
assess or review, as appropriate, the creditworthiness of each 
potential or existing counterparty to an OTC contract pursuant to 
guidelines approved by the General Partner's Board of Directors. The 
General Partner, on behalf of the Partnerships, will only enter into 
OTC contracts with (a) members of the Federal Reserve System or foreign 
banks with branches regulated by the Federal Reserve Board; (b) primary 
dealers in U.S. government securities; (c) broker-dealers; (d) 
commodities futures merchants; or (e) affiliates of the foregoing.
    Cash, Cash Equivalents and Treasuries. The 12 Month Oil Fund and 
the 12 Month Natural Gas Fund will invest virtually all of their assets 
not invested in Crude Oil Interests or Natural Gas Interests, 
respectively, in cash, cash equivalents, and Treasuries. The cash, cash 
equivalents and Treasuries will be available for use in meeting each 
Partnership's current or potential margin and collateral requirements 
with respect to investments in Crude Oil Interests or Natural Gas 
Interests, as appropriate. Neither Partnership will use cash, cash 
equivalents, and Treasuries as margin for new investments unless it has 
a sufficient amount of cash, cash equivalents, and Treasuries to meet 
the margin or collateral requirements that may arise due to changes in 
the value of its currently held Crude Oil Interests or Natural Gas 
Interests. Other than in connection with a redemption of Units, each 
Partnership does not intend to distribute cash or property to its Unit 
holders. Interest earned on cash, cash equivalents, and Treasuries held 
by a Partnership will be retained by it to pay its expenses, to make 
investments to satisfy its investment objectives, or to satisfy its 
margin or collateral requirements.
The Markets for Partnership Units
    There will be two markets for investors to purchase and sell Units. 
New issuances of the Units will be made only in baskets of 100,000 
Units (a ``Basket''), or multiples thereof. Each Partnership will issue 
and redeem Baskets of the Units on a continuous basis, by or through 
participants who have each entered into an authorized purchaser 
agreement (``Authorized Purchaser Agreement'' and each such 
participant, an ``Authorized Purchaser'') \14\ with the General 
Partner, at the NAV per Unit next determined after an order to purchase 
the Units in a Basket is received in proper form. Baskets may be issued 
and redeemed on any ``business day'' (defined as any day other than a 
day on which the Amex, the NYMEX or the New York Stock Exchange 
(``NYSE'') is closed for regular trading) through the Marketing Agent 
in exchange for cash and/or Treasuries, which the Custodian receives 
from Authorized Purchasers or transfers to Authorized Purchasers, in 
each case, on behalf of a Partnership. Baskets are then separable upon 
issuance into identical Units that will be listed and traded on the 
Exchange.\15\
---------------------------------------------------------------------------

    \14\ An ``Authorized Purchaser'' must be (i) a registered 
broker-dealer or other market participant, such as a bank or other 
financial institution, that is exempt from broker-dealer 
registration and (ii) a DTC Participant.
    \15\ The Exchange expects that the number of outstanding Units 
will increase and decrease as a result of creations and redemptions 
of Baskets.
---------------------------------------------------------------------------

    The Units will thereafter be traded on the Exchange similar to 
other equity securities. Units will be registered in book-entry form 
through DTC. Trading in the Units on the Exchange will be effected 
until 4:15 p.m. Eastern time (``ET'') each business day. The minimum 
trading increment for such Units will be $.01.
    Each Authorized Purchaser, and each distributor, offering and 
selling newly issued Units as part of the distribution of such Units, 
is required to comply with the prospectus delivery and disclosure 
requirements of the Securities Act of 1933, as well as the requirements 
of the Commodities Exchange Act (``CEA''), including the requirement 
that prospective investors provide an acknowledgement of receipt of 
such disclosure materials prior to the payment for any newly issued 
Units.
    Calculation of Partnership NAV. The Administrator will calculate 
NAV as follows: (1) Determine the current value of each Partnership's 
assets and (2) subtract the liabilities of each Partnership. The NAV 
will be calculated shortly after the close of trading on the Exchange 
using the settlement value \16\ of Futures Contracts traded on the 
NYMEX as of the close of open-outcry trading on the NYMEX at 2:30 p.m. 
ET, and for the value of other Crude Oil Interests or Natural Gas 
Interests, depending on the Partnership, and Treasuries and cash 
equivalents, the value of such investments as of the earlier of 4 p.m. 
ET or the close of trading on the NYSE. The NAV is calculated by 
including any unrealized profit or loss on Futures Contracts and Other 
Crude Oil-Related Investments and Other Natural Gas Related-
Investments, as the case may be, and any other credit or debit accruing 
to a Partnership but unpaid or not received by such Partnership. The 
NAV is then used to compute all fees (including the management and 
administrative fees) that are calculated from the value of Partnership 
assets. The Administrator will calculate the NAV per Unit by dividing 
the NAV by the number of Units outstanding.
---------------------------------------------------------------------------

    \16\ See Rules 6.52 and 6.52A of the NYMEX Rulebook.
---------------------------------------------------------------------------

    When calculating NAV, the Administrator will value Futures 
Contracts based on the closing settlement prices quoted on the relevant 
commodities and futures exchange and obtained from various major market 
data vendors such as Bloomberg or Reuters. The value of the Other Crude 
Oil-Related Investments or Other Natural Gas-Related Investments, for 
purposes of determining the NAV, will be based upon the determination 
of the Administrator as to the fair market value. Certain types of 
Other Crude Oil-Related Investments and Other Natural Gas-Related 
Investments, such as listed options on Futures Contracts, have closing 
prices that are available from the exchange upon which they are traded 
or from various market data vendors. Other Crude Oil-Related 
Investments and Other Natural Gas-Related Investments will be valued 
based on the last sale price on the exchange or market where traded. If 
a contract fails to trade, the value shall be the most recent bid 
quotation from the third-party source. Some types of Other Crude Oil-
Related Investments and Other Natural Gas-Related Investments, such as 
forward contracts, do not trade on established exchanges but typically 
have prices that are widely available from third-party sources. The 
Administrator may make use of such third-party sources in calculating a 
fair market value of these Other Crude Oil-Related Investments and 
Other Natural Gas-Related Investments.

[[Page 62283]]

    Certain types of Other Crude Oil-Related Investments and Other 
Natural Gas-Related Investments, such as OTC derivative contracts such 
as ``swaps'' also do not have established exchanges upon which they 
trade and may not have readily available price quotes from third 
parties. Swaps and other similar derivative or contractual-type 
instruments will be first valued at a price provided by a single broker 
or dealer, typically the counterparty. If no such price is available, 
the contract will be valued at a price at which the counterparty to 
such contract could repurchase the instrument or terminate the 
contract. In determining the fair market value of such derivative 
contracts, the Administrator may make use of quotes from other 
providers of similar derivatives. If these are not available, the 
Administrator may calculate a fair market value of the derivative 
contract based on the terms of the contract and the movement of the 
underlying price factors of the contract.
    Calculation of the Basket Amount. Baskets will be issued in 
exchange for Treasuries and/or cash in an amount equal to the NAV per 
Unit times 100,000 Units (the ``Basket Amount''). Baskets will be 
delivered by the Marketing Agent to each Authorized Purchaser only 
after execution of the Authorized Purchaser Agreement.
    Units in a Basket are issued and redeemed in accordance with the 
Authorized Purchaser Agreement. Authorized Purchasers that wish to 
purchase a Basket must transfer the Basket Amount, for each Basket 
purchased, to the Custodian (the ``Deposit Amount''). Authorized 
Purchasers that wish to redeem a Basket will receive an amount of 
Treasuries and/or cash in exchange for each Basket surrendered in an 
amount equal to the NAV per Basket (the ``Redemption Amount'').
    On each business day, the Administrator will make available, 
immediately prior to the opening of trading on the Exchange, the Basket 
Amount for the creation of a Basket based on the prior day's NAV. At or 
about 4 p.m. ET on each business day, the Administrator will determine 
the Basket Amount for orders placed by Authorized Purchasers received 
before 12 p.m. ET that day. Because orders to purchase and/or redeem 
Baskets must be placed by 12 p.m. ET, but the Basket Amount will not be 
determined until shortly after 4 p.m. ET, on the date the purchase 
order or redemption order, as applicable, is received, Authorized 
Purchasers will not know the total payment required to create or redeem 
a Basket, as applicable, at the time they submit such irrevocable 
purchase and/or redemption order. This is similar to exchange-traded 
funds and mutual funds. The 12 Month Oil Fund's and the 12 Month 
Natural Gas Fund's registration statements disclose that NAV and the 
Basket Amount could rise and fall substantially between the time an 
irrevocable purchase order and/or redemption order is submitted and the 
time the Basket Amount is determined.\17\
---------------------------------------------------------------------------

    \17\ The General Partner states that the price of crude oil or 
natural gas futures may fluctuate 5% or more between 12 noon, the 
cutoff for creation and redemption orders, and 2:30 p.m., the close 
of trading on NYMEX. As explained further below (see section 
entitled ``Arbitrage,'' infra), the Exchange does not anticipate 
such price movements to impact the arbitrage process.
---------------------------------------------------------------------------

    Shortly after 4 p.m. ET on each business day, the Administrator, 
Amex, and the General Partner will disseminate the Basket Amount (for 
orders placed during the day) together with the NAV for the Units.\18\ 
The Basket Amount and the NAV are communicated by the Administrator to 
all Authorized Purchasers via facsimile or electronic mail message. 
Concurrently, the Amex will also disclose the NAV and Basket Amount on 
its Web site at http://www.amex.com. The Basket Amount necessary for 
the creation of a Basket will change from day to day. On each day that 
the Amex is open for regular trading, the Administrator will adjust the 
Deposit Amount as appropriate to reflect the prior day's Partnership 
NAV and accrued expenses. The Administrator will then determine the 
Deposit Amount for a given business day.
    Calculation and Payment of the Deposit Amount. The Deposit Amount 
of Treasuries and/or cash will be in the same proportion to the total 
net assets of each Partnership as the number of Units to be created is 
in proportion to the total number of Units outstanding as of the date 
the purchase order is accepted. The General Partner will determine the 
requirements for the Treasuries that may be included in the Deposit 
Amount and will disseminate these requirements at the start of each 
business day. The amount of cash that is required is the difference 
between the aggregate market value of the Treasuries required to be 
included in the Deposit Amount as of 4 p.m. ET on the date of purchase 
and the total required deposit.
---------------------------------------------------------------------------

    \18\ The Exchange will obtain a representation from each 
Partnership that its NAV and other relevant pricing information will 
be disclosed to all market participants at the same time.
---------------------------------------------------------------------------

    All purchase orders must be received by the Marketing Agent by 12 
p.m. ET for consideration on that business day. Delivery of the Deposit 
Amount, i.e., Treasuries and/or cash, to the Administrator must occur 
by the third business day following the purchase order date (T+3).\19\ 
Thus, the General Partner will disseminate shortly after 4 p.m. ET on 
the date the purchase order was properly submitted, the amount of 
Treasuries and/or cash to be deposited with the Custodian for each 
Basket.
---------------------------------------------------------------------------

    \19\ Authorized Purchasers are required to pay a transaction fee 
of $1,000 for each order to create one or more Baskets.
---------------------------------------------------------------------------

    Calculation and Payment of the Redemption Amount. The Units will 
not be individually redeemable but will only be redeemable in Baskets. 
To redeem, an Authorized Purchaser will be required to accumulate 
enough Units to constitute a Basket (i.e., 100,000 Units). An 
Authorized Purchaser redeeming a Basket will receive the Redemption 
Amount. Upon the surrender of the Units and payment of applicable 
redemption transaction fee,\20\ taxes or charges, the Custodian will 
deliver to the redeeming Authorized Purchaser the Redemption Amount. 
The Redemption Amount of Treasuries and/or cash will be in the same 
proportion to the total net assets of each Partnership as the number of 
Units to be redeemed is in proportion to the total number of Units 
outstanding as of the date the redemption order is accepted. The 
General Partner will determine the Treasuries to be included in the 
Redemption Amount. The amount of cash that is required is the 
difference between the aggregate market value of the Treasuries 
required to be included in the Redemption Amount as of 4 p.m. ET on the 
date of redemption and the total Redemption Amount. All redemption 
orders must be received by the Marketing Agent by 12 p.m. ET on the 
business day redemption is requested and are irrevocable. Delivery of 
the Basket to be redeemed to the Custodian and payment of the 
Redemption Amount will occur by the third business day following the 
redemption order date (T+3).
---------------------------------------------------------------------------

    \20\ Authorized Purchasers are required to pay a transaction fee 
of $1,000 for each order to redeem one or more Baskets.
---------------------------------------------------------------------------

Arbitrage
    The Exchange believes that the Units will not trade at a material 
discount or premium to a Unit's NAV based on potential arbitrage 
opportunities. Due to the fact that the Units can be created and 
redeemed only in Baskets at NAV, the Exchange submits that arbitrage 
opportunities should provide a mechanism to mitigate the effect of any

[[Page 62284]]

premiums or discounts that may exist from time to time.\21\
---------------------------------------------------------------------------

    \21\ The Exchange states that arbitrage opportunities may arise 
whenever the market price of a Partnership is higher (or lower) than 
its expected fair market value, which is based on the price of the 
underlying commodity futures. Authorized Purchasers may effectively 
lock-in an arbitrage spread by selling (or buying) the Units while, 
at the same time buying (or selling), the related commodity futures. 
This arbitrage activity may occur not only at the time of an 
irrevocable creation or redemption order, but throughout the day. 
Accordingly, the Exchange believes that arbitrage activity should 
not be affected by price movements in the underlying commodity 
assets between the cutoff for creation and redemption orders and the 
close of futures trading, following which the Basket Amount is 
determined.
---------------------------------------------------------------------------

Dissemination and Availability of Information
    Futures Contracts. The daily settlement prices for NYMEX-traded 
Futures Contracts are publicly available on NYMEX's Web site at http://www.nymex.com. The Exchange will also include on its Web site at http://www.amex.com a hyperlink to NYMEX's Web site for the purpose of 
disclosing futures contract pricing. In addition, various market data 
vendors and news publications publish futures prices and related data. 
The Exchange represents that quote and last sale information for the 
Futures Contracts are widely disseminated through a variety of market 
data vendors worldwide, including Bloomberg and Reuters. In addition, 
the Exchange further represents that real-time futures data is 
available by subscription from Reuters and Bloomberg. NYMEX also 
provides delayed futures information on current and past trading 
sessions and market news free of charge on its Web site. The specific 
contract specifications for the Futures Contracts are also available on 
NYMEX's Web site and the ICE Futures Web site at http://www.icefutures.com.
    Partnership Units. The Exchange's Web site at http://www.amex.com, 
which is publicly accessible at no charge, will contain the following 
information: (1) The prior business day's NAV and the reported closing 
price; (2) the mid-point of the bid-ask price\22\ in relation to the 
NAV as of the time the NAV is calculated (the ``Bid-Ask Price''); (3) 
calculation of the premium or discount of such price against such NAV; 
(4) data in chart form displaying the frequency distribution of 
discounts and premiums of the Bid-Ask Price against the NAV, within 
appropriate ranges for each of the four previous calendar quarters; (5) 
the prospectus and the most recent periodic reports filed with the 
Commission or required by the CFTC; and (6) other applicable 
quantitative information.
---------------------------------------------------------------------------

    \22\ The Bid-Ask Price of Units is determined using the highest 
bid and lowest offer as of the time of calculation of the NAV.
---------------------------------------------------------------------------

    Portfolio Disclosure. The 12 Month Oil Fund's and the 12 Month 
Natural Gas Fund's total portfolio composition will be disclosed each 
business day that the Amex is open for trading on their respective Web 
sites at http://www.unitedstates12monthoilfund.com and http://www.unitedstates12monthnaturalgasfund.com, respectively. The 12 Month 
Oil Fund's Web site disclosure of portfolio holdings will be made daily 
and will include, as applicable, the name and value of each Crude Oil 
Interest, the specific types of Crude Oil Interests and characteristics 
of such Crude Oil Interests, Treasuries, and amount of cash and cash 
equivalents held in the portfolio of the 12 Month Oil Fund. The 12 
Month Natural Gas Fund's Web site disclosure of portfolio holdings will 
be made daily and will include, as applicable, the name and value of 
each Natural Gas Interest, the specific types of Natural Gas Interests 
and characteristics of such Natural Gas Interests, Treasuries, and 
amount of cash and cash equivalents held in the portfolio of the 12 
Month Natural Gas Fund. The public Web site disclosure of the portfolio 
composition of each of the 12 Month Oil Fund and the 12 Month Natural 
Gas Fund will coincide with the disclosure by the Administrator on each 
business day of the NAV for the Units and the Basket Amount (for orders 
placed during the day) for each Partnership. Therefore, the same 
portfolio information will be provided at the same time on the public 
Web site for each Partnership as well as in the facsimile or electronic 
mail message to Authorized Purchasers containing the NAV and Basket 
Amount (``Daily Dissemination''). The format of the public Web site 
disclosure and the Daily Dissemination will differ because the public 
Web site will list all portfolio holdings while the Daily Dissemination 
will provide the portfolio holdings in a format appropriate for 
Authorized Purchasers, i.e., the exact components of a Creation Unit.
    As described above, each Partnership's NAV will be calculated and 
disseminated daily. The Amex also intends to disseminate for each 
Partnership on a daily basis by means of the Consolidated Tape 
Association (``CTA'')/Consolidated Quote High Speed Lines information 
with respect to the Indicative Partnership Value (as discussed below), 
recent NAV, Units outstanding, the Basket Amount and the Deposit 
Amount. The Exchange will also make available on its Web site daily 
trading volume, closing prices and the NAV. The closing price and 
settlement prices of the Futures Contracts held by each Partnership are 
also readily available from the NYMEX, automated quotation systems, 
published or other public sources, or on-line information services such 
as Bloomberg or Reuters. In addition, the Exchange will provide a 
hyperlink on its Web site at http://www.amex.com to each Partnership's 
Web site.
    Indicative Partnership Value. In order to provide updated 
information relating to each Partnership for use by investors, 
professionals and persons wishing to create or redeem the Units, the 
Exchange will disseminate through the facilities of the CTA an amount 
representing, on a per-Unit-basis, the current indicative value of the 
Basket Amount (the ``Indicative Partnership Value'').\23\ Consistent 
with Amex Rule 1502, the Indicative Partnership Value for each 
Partnership will be disseminated on a per-Unit-basis at least every 15 
seconds during regular Amex trading hours of 9:30 a.m. to 4:15 p.m. ET. 
The Indicative Partnership Value will be calculated based on the 
Treasuries and cash required for creations and redemptions (i.e., NAV 
per Unit x 100,000) adjusted to reflect the price changes of the 
relevant Benchmark Futures Contracts.
---------------------------------------------------------------------------

    \23\ The Exchange proposes to amend Amex Rule 1500-AEMI(b) to 
define ``Indicative Partnership Value'' as an estimate, updated at 
least every 15 seconds, of the value of a Partnership Unit of each 
series.
---------------------------------------------------------------------------

    The Indicative Partnership Value is based on open outcry trading of 
the relevant Benchmark Futures Contracts on NYMEX. Open-outcry trading 
on the NYMEX closes daily at 2:30 p.m. ET while NYMEX's energy futures 
contracts are traded on the Chicago Mercantile Exchange's CME Globex 
[reg] electronic trading platform on a twenty-four hour basis.\24\ 
After the close of open outcry on NYMEX at 2:30 p.m., the Indicative 
Partnership Value will reflect changes to the relevant Benchmark 
Futures Contracts as provided for through CME Globex [reg]. The value 
of the relevant Benchmark Futures Contracts will be available on a 15-
second delayed basis during the time that a Unit trades on the 
Exchange.
---------------------------------------------------------------------------

    \24\ CME Globex[supreg] (``Globex'') is an open-access 
marketplace that operates virtually 24 hours each trading day. 
Electronic trading on Globex is conducted from 6 p.m. ET Sunday 
through 5:15 p.m. ET Friday each week. There is a 45-minute break 
each day between 5:15 p.m. ET and 6 p.m. ET.
---------------------------------------------------------------------------

    While NYMEX is open for trading, the Indicative Partnership Value 
can be expected to closely approximate the value per Unit of the Basket 
Deposit. However, during Amex trading hours

[[Page 62285]]

when the Futures Contracts have ceased trading in NYMEX's open outcry, 
spreads and resulting premiums or discounts may widen and, therefore, 
increase the difference between the price of the Units and the NAV of 
the Units. The Exchange submits that the Indicative Partnership Value 
disseminated during Amex trading hours, on a per-Unit-basis, should not 
be viewed as a real-time update of the NAV, which is calculated only 
once daily. The Exchange believes that dissemination of the Indicative 
Partnership Value based on the Basket Deposit provides additional 
information that is not otherwise available to the public and is useful 
to professionals and investors in connection with the Units trading on 
the Exchange or the creation or redemption of the Units.
Partnership Termination Events
    Each Partnership shall continue in effect from the date of its 
formation in perpetuity, unless sooner terminated upon the occurrence 
of any one or more of the following events: (1) The death, adjudication 
of incompetence, bankruptcy, dissolution, withdrawal, or removal of a 
General Partner who is the sole remaining General Partner, unless a 
majority in interest of limited partners within ninety (90) days after 
such event elects to continue the Partnership and appoints a successor 
general partner; or (2) the affirmative vote of a majority in interest 
of the limited partners to terminate the partnership, subject to 
certain conditions.
    Upon termination of the Partnership, holders of the Units will 
surrender their Units and the assets of the Partnership shall be 
distributed to the Unit holders pro rata in accordance with the value 
of the Units, in cash or in kind, as determined by the General Partner.
Purchases and Redemptions in Baskets
    In the Information Circular, members and member organizations will 
be informed that procedures for purchases and redemptions of Units in 
Baskets are described in the Prospectus and that Units are not 
individually redeemable but are redeemable only in Baskets or multiples 
thereof.
Listing and Trading Rules
    Each Partnership will be subject to the criteria in Amex Rule 1502 
for initial and continued listing of the Units. The Exchange will 
require a minimum of 100,000 Units to be outstanding at the start of 
trading. The Exchange expects that the initial price of a Unit will be 
$50.00.\25\ The Exchange believes that the anticipated minimum number 
of Units outstanding at the start of trading is sufficient to provide 
adequate market liquidity and to further each Partnership's objective 
to seek to provide a simple and cost effective means of accessing the 
commodity futures markets. The Exchange represents that it prohibits 
the initial and/or continued listing of any security that is not in 
compliance with Rule 10A-3 under the Act.\26\
---------------------------------------------------------------------------

    \25\ Each Partnership expects that the initial Authorized 
Purchaser will purchase the initial Basket of 100,000 Units at the 
initial offering price per Unit of $50.00. On the date of the public 
offering and thereafter, each Partnership will continuously issue 
Baskets consisting of 100,000 Units to Authorized Purchasers at NAV.
    \26\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    The Amex original listing fee applicable to the listing of Units 
for each Partnership is $5,000. In addition, the annual listing fee 
applicable under Section 141 of the Amex Company Guide will be based 
upon the year-end aggregate number of Units in all series of each 
Partnership outstanding at the end of each calendar year.
    Amex Rule 154-AEMI, ``Orders in AEMI,'' paragraph (c)(ii), provides 
that stop and stop limit orders to buy or sell a security the price of 
which is derivatively priced based upon another security or index of 
securities, may be elected by a quotation, as set forth in 
subparagraphs (c)(ii) (1)-(4) of Rule 154-AEMI. The Units will be 
deemed eligible for this treatment.
    The Exchange states that Amex Rule 126A-AEMI, which will apply to 
trading of the Units, complies with Rule 611 of Regulation NMS, which 
requires among other things, that the Exchange adopt and enforce 
written policies and procedures that are reasonably designed to prevent 
trade-throughs of protected quotations.\27\
---------------------------------------------------------------------------

    \27\ See Exchange Act Release No. 54552 (September 29, 2006), 71 
FR 59546 (October 10, 2006) (SR-Amex-2005-104) (implementing a new 
hybrid market structure for equities and exchange-traded funds known 
as the ``Auction & Electronic Market Integration'').
---------------------------------------------------------------------------

    Consistent with the treatment of trust issued receipts (``TIRs''), 
Specialist transactions of the Units made in connection with the 
creation and redemption of Units will not be subject to the 
prohibitions of Amex Rule 190, ``Specialist's Transactions with Public 
Customers.'' \28\ The Units will generally be subject to the Exchange's 
stabilization rule, Rule 170-AEMI, ``Registration and Functions of 
Specialists,'' except that specialists may buy on ``plus ticks'' and 
sell on ``minus ticks,'' in order to bring the Units into parity with 
the underlying commodity or commodities and/or futures contract price. 
The Exchange notes that Commentary .01 to its Rule 1503, ``Specialist 
Prohibitions,'' sets forth this limited exception to Rule 170-AEMI.
---------------------------------------------------------------------------

    \28\ The Commission notes that Commentary .05 to Amex Rule 190 
provides an exemption from the prohibitions stated in that rule for 
securities issued by a trust listed pursuant to Amex Rules 1200-AEMI 
and 1201-1202, 1200A-AEMI and 1201A-1205A, or 1200B and 1201B-1205B.
---------------------------------------------------------------------------

    The trading of the Units will be subject to certain conflict of 
interest provisions set forth in Amex Rules 1503 and 1504. Rule 1503 
provides that the prohibitions in Rule 175(c) apply to a specialist in 
the Units so that the specialist or affiliated person may not act or 
function as a market-maker in an underlying asset, related futures 
contract or option or any other related derivative. An exception to the 
general prohibition in Rule 1503 provides that an approved person of an 
equity specialist that has established and obtained Exchange approval 
for procedures restricting flow of material, non-public market 
information between itself and the specialist member organization, and 
any member, officer or employee associated therewith, may act in a 
market making capacity, other than as a specialist in the Units on 
another market center, in the underlying asset or commodity, related 
futures or options on futures, or any other related derivatives. Rule 
1504 provides that specialists handling Units provide the Exchange with 
all necessary information relating to their trading in underlying 
physical assets or commodities, related futures or options on futures, 
or any other related derivatives. In addition, members and member 
organizations will be subject to Commentary .03 to Amex Rule 1500-AEMI 
prohibiting such member or member organizations from acting as a market 
maker from off-floor through the use of multiple limit orders.
Trading Halts
    If an Indicative Partnership Value is not being disseminated by one 
or more major market data vendors, the Exchange may halt trading during 
the day in which the interruption to the dissemination of such 
Indicative Partnership Value occurs. If the interruption to the 
dissemination of an Indicative Partnership Value 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.
    Prior to the commencement of trading, the Exchange will issue an 
Information Circular to members informing them of, among other things, 
Exchange policies regarding trading

[[Page 62286]]

halts in the Units. First, the Information Circular will advise that 
trading will be halted in the event the market volatility trading halt 
parameters set forth in Amex Rule 117 have been reached. Second, the 
Information Circular will advise that, in addition to the parameters 
set forth in Rule 117, the Exchange will halt trading in the Units if 
trading in the underlying Benchmark Futures Contracts is halted or 
suspended. Third, with respect to a halt in trading that is not 
specified above, the Exchange may also consider other relevant factors 
and the existence of unusual conditions or circumstances that may be 
detrimental to the maintenance of a fair and orderly market. 
Additionally, the Exchange represents that it will cease trading in the 
Units if any of the condition in Amex Rule 1502(b)(ii) or (iii) exist 
(i.e., if there is a halt or disruption in the dissemination of the 
Indicative Partnership Value and/or underlying Oil Benchmark Futures 
Contracts and/or Natural Gas Benchmark Futures Contracts).
Suitability
    The Information Circular will inform members and member 
organizations of the characteristics of the Units and of applicable 
Exchange rules, as well as of the requirements of Amex Rule 411 (Duty 
to Know and Approve Customers).
    The Exchange notes that pursuant to Amex Rule 411, members and 
member organizations are required, in connection with recommending 
transactions in the Units, to have a reasonable basis to believe that a 
customer is suitable for the particular investment given reasonable 
inquiry concerning the customer's investment objectives, financial 
situation, needs, and any other information known by such member.
Information Circular
    The Amex will distribute an Information Circular to its members in 
connection with the trading of each Partnership's Units. The 
Information Circular will discuss the special characteristics, and 
risks, of trading in the Units. Specifically, the Information Circular, 
among other things, will discuss what the Units are, how a Basket is 
created and redeemed, the requirement that members and member firms 
deliver a prospectus to investors purchasing the Units prior to, or 
concurrently with, the confirmation of a transaction, applicable Amex 
rules, dissemination of information regarding the per-Unit-Indicative 
Partnership Value, trading information, and applicable suitability 
rules. The Information Circular will also explain that each Partnership 
is subject to various fees and expenses described in the relevant 
Registration Statements. The Information Circular will also reference 
the fact that there is no regulated source of last sale information 
regarding physical commodities, and describe the regulatory framework 
relating to the trading of crude oil, natural gas, heating oil, 
gasoline, or other petroleum-based fuels and crude oil- and natural 
gas-based futures contracts and related options.
    The Information Circular will also notify members and member 
organizations about the procedures for purchases and redemptions of 
Units in Baskets, and that Units are not individually redeemable but 
are redeemable only in Baskets or multiples thereof. The Information 
Circular will advise members of their suitability obligations with 
respect to recommended transactions to customers in the Units. The 
Information Circular will also discuss any relief, if granted, by the 
Commission or the staff from any rules under the Act.
    The Information Circular will disclose that the NAV for Units will 
be calculated shortly after 4 p.m. ET each trading day.
Surveillance
    The Exchange submits that its surveillance procedures are adequate 
to deter and detect violations of Exchange rules relating to the 
trading of the Units. The surveillance procedures for the Units will be 
similar to those used for units of the United States Oil Fund, LP and 
the United States Natural Gas Fund, LP \29\ as well as other commodity-
based trusts, TIR and exchange-traded funds. In addition, the 
surveillance procedures will incorporate and rely upon existing Amex 
surveillance procedures governing options and equities. The Exchange 
currently has in place a comprehensive surveillance sharing agreement 
with each of NYMEX and ICE Futures for the purpose of providing 
information in connection with trading in, or related to, futures 
contracts traded on NYMEX and ICE Futures, respectively. To the extent 
that a Partnership invests in Crude Oil Interests or Natural Gas 
Interests traded on other exchanges, the Amex will enter into 
comprehensive surveillance sharing agreements with those particular 
exchanges.\30\
---------------------------------------------------------------------------

    \29\ See Exchange Act Release Nos. 53582 (March 31, 2006), 71 FR 
17510 (April 6, 2006) (SR-Amex-2005-127) (approving Amex Rules 1500-
AEMI and 1501 through 1505 in conjunction with the listing and 
trading of Units of the United States Oil Fund, LP) and 55632 (April 
13, 2007), 72 FR 19987 (April 20, 2007) (SR-Amex-2006-112) 
(approving the listing and trading of Units of the United States 
Natural Gas Fund, LP).
    \30\ The Exchange represents that each of the Partnerships will 
only invest in futures contracts on markets where the Exchange has 
entered into the appropriate comprehensive surveillance sharing 
agreements.
---------------------------------------------------------------------------

2. Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
the requirements of Section 6(b) of the Act \31\ in general, and 
furthers the objectives of Section 6(b)(5),\32\ of the Act 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, and, in general to protect 
investors and the public interest; and is not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers, or to 
regulate by virtue of any authority conferred by the Act matters not 
related to the purpose of the Act or the administration of the 
Exchange.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b).
    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange has neither solicited nor received written comments on 
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 such proposed rule change or

[[Page 62287]]

    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Amex has requested accelerated approval of this proposed rule 
change prior to the 30th day after the date of publication of the 
notice of the filing thereof. The Commission has determined that a 15-
day comment period is appropriate in this case.

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-Amex-2007-98 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-Amex-2007-98. 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 inspection and 
copying 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 available publicly. All 
submissions should refer to File Number SR-Amex-2007-98 and should be 
submitted on or before November 19, 2007.
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\33\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-21619 Filed 11-1-07; 8:45 am]
BILLING CODE 8011-01-P