[Federal Register Volume 73, Number 103 (Wednesday, May 28, 2008)]
[Notices]
[Pages 30649-30655]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-11832]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57838; File No. SR-NYSEArca-2008-09]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2 
Thereto, Relating to the Listing and Trading of Shares of the 
AirShares\TM\ EU Carbon Allowances Fund

May 20, 2008.

I. Introduction

    On March 14, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), 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: (1) Adopt new NYSE Arca Equities Rule 8.204 
relating to the listing and trading of Commodity Futures Trust Shares; 
(2) incorporate cross-references to Commodity Futures Trust Shares and 
proposed NYSE Arca Equities Rule 8.204 in certain Exchange rules; and 
(3) permit the listing and trading, or trading pursuant to unlisted 
trading privileges (``UTP''), of shares (``Shares'') of the 
AirSharesTM EU Carbon Allowances Fund (``Fund'') under the 
proposed rule. On April 4, 2008, the Exchange filed Amendment No. 1 to 
the proposed rule change. The proposed rule change, as amended by 
Amendment No. 1 thereto, was published for comment in the Federal 
Register on April 15, 2008.\3\ On May 14, 2008, the Exchange filed 
Amendment No. 2 to the proposed rule change.\4\ The Commission received 
no comments regarding the proposal. This order approves the proposed 
rule change, as modified by Amendment Nos. 1 and 2 thereto.
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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. 57636 (April 8, 
2008), 73 FR 20344 (``Notice'').
    \4\ In Amendment No. 2, the Exchange made minor, non-substantive 
changes to incorporate cross-references to Trust Units under NYSE 
Arca Equities Rule 8.500: (1) in the list of securities for which 
the Core Trading Session (as defined herein) on the Exchange 
concludes at 4:15 p.m. Eastern Time (``ET''), as provided in NYSE 
Arca Equities Rule 7.34(a)(3); (2) in the definition of ``Derivative 
Securities Product'' as set forth in NYSE Arca Equities Rule 
7.34(a)(4); and (3) in the list of securities included under the 
term ``Derivative Securities Products'' set forth in note 3 of the 
NYSE Arca Equities Schedule of Fees and Charges for Exchange 
Services. See Securities Exchange Act Release No. 57059 (December 
28, 2007), 73 FR 909 (January 4, 2008) (SR-NYSEArca-2006-76) 
(approving, among other things, the adoption of NYSE Arca Equities 
Rule 8.500 relating to the listing and trading of Trust Units). In 
addition, the Exchange made clarifying changes to NYSE Arca Equities 
Rule 7.34(a) and the NYSE Arca Equities Schedule of Fees and Charges 
for Exchange Service to reflect the incorporation of cross-
references to Managed Fund Shares under NYSE Arca Equities Rule 
8.600 that was approved by the Commission subsequent to the date of 
the Notice. See Securities Exchange Act Release No. 57619 (April 4, 
2008), 73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25) 
(approving, among other things, the adoption of NYSE Arca Equities 
Rule 8.600 relating to the listing and trading of Managed Fund 
Shares). Amendment No. 2 is technical in nature, and therefore is 
not subject to notice and comment.
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II. Description of the Proposed Rule Change

A. Proposed Listing Rules for Commodity Futures Trust Shares

    The Exchange proposes to adopt new NYSE Arca Equities Rule 8.204 to 
permit the listing and trading, or trading pursuant to UTP, of 
Commodity Futures Trust Shares. Proposed NYSE Arca Equities Rule 
8.204(c) defines a Commodity Futures Trust Share as a security that: 
(1) Is issued by a trust that (a) is a commodity pool, as defined in 
the Commodity Exchange Act (``CEA'') and regulations thereunder, 
managed by a commodity pool operator registered with the Commodity 
Futures Trading Commission (``CFTC''), and (b) holds positions in 
futures contracts \5\ that track the performance of a specified 
commodity, or interests in a commodity pool which, in turn, holds such 
positions; and (2) is issued and redeemed daily in specified aggregate 
amounts at net asset value (``NAV'').
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    \5\ For purposes of the proposed rule: (1) The term ``futures 
contract'' is a ``contract of sale of a commodity for future 
delivery'' set forth in Section 2(a) of the CEA; and (2) the term 
``commodity'' is defined in Section 1(a)(4) of the CEA.
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    Proposed NYSE Arca Equities Rule 8.204(d) provides that the 
Exchange may trade, either by listing or pursuant to UTP, Commodity 
Futures Trust Shares that are based on an underlying commodity futures 
contract. Each issue of Commodity Futures Trust Shares would be 
designated as a separate series and would be identified by a unique 
symbol.
    The criteria for listing and trading Commodity Futures Trust Shares 
are set forth in proposed NYSE Arca Equities Rule 8.204(e). Proposed 
NYSE Arca Equities Rule 8.204(e)(1) provides that the Exchange will 
establish a minimum number of Commodity Futures Trust Shares that will 
be required to be outstanding at the time of commencement of trading. 
The continued listing criteria in proposed NYSE Arca Equities Rule 
8.204(e)(2) provide for the suspension of trading in, or removal from 
listing of, the Commodity Futures Trust Shares under any of the 
following circumstances:
     If, following the initial 12-month period beginning upon 
the commencement of trading of the Shares: (1) The trust has fewer than 
50,000 Shares issued and outstanding; (2) the market value of all 
Shares is less than $1,000,000; or (3) there are fewer than 50 record 
and/or beneficial holders of Commodity Futures Trust Shares for 30 
consecutive trading days;
     If the value of the underlying futures contract is no 
longer calculated or available on at least a 15-second delayed basis 
during the Exchange's Core Trading Session, as defined in NYSE Arca 
Equities Rule 7.34(a), from a source unaffiliated with the sponsor, the 
trust, or the trustee;
     If the NAV for the trust is no longer disseminated to all 
market participants at the same time;
     If the Indicative Trust Value is no longer disseminated on 
at least a 15-second delayed basis during the Exchange's ``Core Trading 
Session,'' as defined in NYSE Arca Equities Rule 7.34(a); \6\ or
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    \6\ The Core Trading Session on the Exchange is from 9:30 a.m. 
to 4 or 4:15 p.m. ET. See NYSE Arca Equities Rule 7.34(a).
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     If such other event shall occur or condition exists that, 
in the opinion of the Exchange, makes further dealings on the Exchange 
inadvisable.

[[Page 30650]]

    In addition, the Exchange will remove the Commodity Futures Trust 
Shares from listing upon termination of the trust.
    Proposed NYSE Arca Equities Rule 8.204(e)(3) provides that the term 
of a trust is as stated in the trust's prospectus, and that the trust 
may be terminated ``earlier'' as may be specified in the prospectus. 
Proposed NYSE Arca Equities Rule 8.204(e)(4) sets forth proposed 
requirements for the trustee of a trust: (1) The trustee of a trust 
must be a trust company or banking institution having substantial 
capital and surplus and the experience and facilities for handling 
corporate trust business; in cases where, for any reason, an individual 
has been appointed as trustee, a qualified trust company or banking 
institution must be appointed co-trustee; and (2) no change is to be 
made in the trustee of a listed issue without prior notice to and 
approval of the Exchange. Proposed NYSE Arca Equities Rule 8.204(e)(5) 
provides that voting rights will be as set forth in the applicable 
trust prospectus.
    Proposed NYSE Arca Equities Rule 8.204(f) sets forth certain 
restrictions on ETP Holders acting as registered Market Makers \7\ in 
Commodity Futures Trust Shares to facilitate surveillance. Proposed 
NYSE Arca Equities Rules 8.204(f)(2)-(3) require that the ETP Holder 
acting as a registered Market Maker in the Commodity Futures Trust 
Shares provide the Exchange with necessary information relating to its 
trading in the underlying commodity, related futures or options on 
futures, or any other related derivatives. Proposed NYSE Arca Equities 
Rule 8.204(f)(4) prohibits the ETP Holder acting as a registered Market 
Maker in the Commodity Futures Trust Shares from using any material 
non-public information received from any person associated with an ETP 
Holder or employee of such person regarding trading by such person or 
employee in the underlying commodity, related futures or options on 
futures, or any other related derivative (including the Commodity 
Futures Trust Shares). In addition, proposed NYSE Arca Equities Rule 
8.204(f)(1) prohibits the ETP Holder acting as a registered Market 
Maker in the Commodity Futures Trust Shares from being affiliated with 
a market maker in the underlying commodity, related futures or options 
on futures, or any other related derivative, unless adequate 
information barriers are in place, as provided in NYSE Arca Equities 
Rule 7.26.
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    \7\ Section 1.1(u) defines ``Market Maker'' as ``an ETP Holder 
that acts as a Market Maker pursuant to Rule 7.''
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    Proposed NYSE Arca Equities Rule 8.204(g) relates to the Exchange's 
limitation of liability. Proposed NYSE Arca Equities Rule 8.204(h) 
specifically provides that the Exchange will file separate proposals 
under Section 19(b) of the Act \8\ before listing and trading separate 
and distinct series of Commodity Futures Trust Shares.
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    \8\ 15 U.S.C. 78s(b).
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    Commentary .01 to proposed NYSE Arca Equities Rule 8.204 requires 
ETP Holders to provide all purchasers of newly issued Commodity Futures 
Trust Shares with a prospectus. Commentary .02 to proposed NYSE Arca 
Equities Rule 8.204 provides that trading in the Commodity Futures 
Trust Shares will occur during the trading hours specified in NYSE Arca 
Equities Rule 7.34. Commentary .03 to proposed NYSE Arca Equities Rule 
8.204 requires that if the Indicative Trust Value or the value of the 
underlying futures contract is not being disseminated as required, the 
Exchange may halt trading during the day in which the interruption to 
the dissemination of the Indicative Trust Value or the value of the 
underlying futures contract occurs. If the interruption to the 
dissemination of the Indicative Trust Value or the value of the 
underlying futures contract persists past the trading day in which it 
occurred, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption. In addition, if the 
Exchange becomes aware that the NAV with respect to a series of 
Commodity Futures Trust Shares is not disseminated to all market 
participants at the same time, it will halt trading in such series 
until such time as the NAV or the Disclosed Portfolio is available to 
all market participants. Commentary .04 to proposed NYSE Arca Equities 
Rule 8.204 provides that the Exchange's rules governing the trading of 
equity securities apply to Commodity Futures Trust Shares. Commentary 
.05 to proposed NYSE Arca Equities Rule 8.204 provides that the 
Exchange will implement written surveillance procedures for Commodity 
Futures Trust Shares.

B. Other Proposed Amendments \9\
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    \9\ See supra note 4.
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    The Exchange proposes to amend NYSE Arca Equities Rule 7.34(a)(3) 
to add references to Commodity Futures Trust Shares and proposed NYSE 
Arca Equities Rule 8.204 to the list of securities for which the Core 
Trading Session on the Exchange concludes at 4:15 p.m. ET. In addition, 
the Exchange proposes to amend NYSE Arca Equities Rule 7.34(a)(4) to 
include Commodity Futures Trust Shares under the definition of 
``Derivative Securities Product'' with respect to trading halts of 
certain derivative securities products trading pursuant to UTP on the 
Exchange. The Exchange also proposes to add Commodity Futures Trust 
Shares to the securities included under the term ``Derivative 
Securities Products'' in note 3 of the NYSE Arca Equities Schedule of 
Fees and Charges for Exchange Services.
Proposal To List and Trade the Shares of the Fund
    Pursuant to proposed NYSE Arca Equities Rule 8.204, the Exchange 
proposes to list and trade the Shares of the Fund.\10\ The Exchange 
states that the Shares, which represent ownership of a fractional 
undivided beneficial interest in the net assets of the Fund, will 
conform to the initial and continued listing criteria under proposed 
NYSE Arca Equities Rule 8.204.
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    \10\ The Exchange states that the Fund is not an investment 
company registered under the Investment Company Act of 1940, 
according to the Registration Statement on Form S-1 for the Fund, 
which was filed with the Commission on December 14, 2007 (File No. 
333-145448) (``Registration Statement'').
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    The investment objective of the Fund is to provide investors with 
investment results that correspond generally, before payment of the 
Fund's expenses and liabilities, to the performance of a basket of 
exchange-traded futures contracts for carbon equivalent emissions 
allowances (``EUAs'') issued under the European Union Emissions Trading 
Scheme (``EU ETS'').\11\ The EU ETS is a ``cap and trade'' emissions 
trading program instituted by the European Union (``EU''), in 
furtherance of the joint commitment of its member states under the 
Kyoto Protocol to achieve certain reductions in their emissions of 
greenhouse gases from 2008 to 2012. The Fund will not be actively 
managed in that it will not engage in activities designed to obtain a 
profit from, or to ameliorate losses caused by, changes in the value of 
its portfolio of EUAs.
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    \11\ According to the Registration Statement, while the 
investment objective of the Fund is to track generally the value of 
the underlying futures contracts, the Fund's portfolio of fixed 
income securities, as well as other factors such as the Fund's 
expenses and its hedging activities, may cause a lack of correlation 
between the NAV of the Shares and the value of the Fund's portfolio 
of futures contracts.
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    The net assets of the Fund will consist of long positions in ICE 
Futures ECX Carbon Financial Instrument Futures Contracts (``ECX CFI 
Futures

[[Page 30651]]

Contracts'').\12\ The ECX CFI Futures Contracts are standardized 
contractual instruments for futures on deliverable EUAs issued under 
the EU ETS and developed by the European Climate Exchange (``ECX''). 
ECX CFI Futures Contracts are listed and admitted to trading on ICE 
Futures on the London-based electronic platform, owned and operated by 
Intercontinental Exchange, Inc. (also known as the ICE Platform).\13\ 
Each ECX CFI Futures Contract provides for delivery of 1,000 EUAs on a 
specified date at a specified price, with each EUA being an entitlement 
to emit one ton of carbon dioxide equivalent gas.\14\ The Exchange 
states that, if the Fund invests in EUAs other than ECX CFI Futures 
Contracts, it will file a Form 19b-4 under the Act\15\ to obtain 
Commission approval for the continued listing and trading of the 
Shares.\16\
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    \12\ The Fund represents that the ECX CFI Futures Contracts 
meets the definition of ``futures contract'' as set forth in Section 
2(a) of the CEA. The Exchange further represents that carbon 
equivalent emissions allowances meet the definition of ``commodity'' 
as defined in Section 1(a)(4) of the CEA.
    \13\ The ECX CFI Futures Contracts trade on the London-based ICE 
Platform from 7:00 a.m. to 5:00 p.m. Greenwich Mean Time.
    \14\ The Exchange states that the ECX CFI Futures Contract had 
average daily trading volume of $135,717,089 (USD), or approximately 
87,587,602 Euro, representing 3,551 contracts traded daily from 
January 1, 2008 through March 11, 2008.
    \15\ 15 U.S.C. 78a.
    \16\ The Exchange also states that it will file a proposed 
change seeking approval to continue listing or trading the Shares if 
the Fund invests in EUAs that constitute more than 10% of the weight 
of the Fund and where the principal trading market for such 
component is not a member or affiliate member of the Intermarket 
Surveillance Group (``ISG'') or where the Exchange does not have a 
comprehensive surveillance sharing agreement with such market.
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    More information about the structure of the Fund, the Kyoto 
Protocol, the EU ETS, the ECX CFI Futures Contracts, and the Fund's 
investment objective and strategy, as well as further descriptions of 
the Shares, risks, NAV, and procedures for creations and redemptions of 
Shares, can be found in the Notice\17\ and the Registration 
Statement,\18\ as applicable.
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    \17\ See Notice, supra note 3.
    \18\ See supra note 9.
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Availability of Information Regarding the Fund and the Shares
    The daily settlement prices for the EUAs are publicly available on 
the ICE Futures Web site at http://www.icefutures.com. In addition, 
various market data vendors and news publications publish futures 
prices and related data. Quote and last-sale information for the EUAs 
are widely disseminated through a variety of market data vendors 
worldwide. ICE Futures 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 EUAs are also 
available on the ICE Futures Web site.
    The Web site for the Fund at http://www.airsharesfund.com, which is 
publicly accessible at no charge, will contain the following 
information: (1) The prior business day's NAV per Share\19\ and the 
reported closing price; (2) the mid-point of the bid-ask price in 
relation to the NAV per Share as of the time the NAV is calculated 
(``Bid-Ask Price''); \20\ (3) calculation of the premium or discount of 
such price against such NAV per Share; (4) data in chart form 
displaying the frequency distribution of discounts and premiums of the 
Bid-Ask Price against the NAV per Share, 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; \21\ and (6) other applicable quantitative information.
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    \19\ The most recent end-of-day NAV of the Fund and NAV per 
Share will be published by the Fund sponsor as of 4 p.m. ET on 
Reuters and/or Bloomberg and on the Fund's Web site at http://www.airsharesfund.com. The end-of-day NAV per Share will also be 
published the following morning on the consolidated tape.
    \20\ The Bid-Ask Price of Shares is determined using the highest 
bid and lowest offer as of the time of calculation of the NAV per 
Share.
    \21\ Monthly account statements conforming to CFTC and National 
Futures Association requirements are posted on the Fund's Web site 
at http://www.airsharesfund.com. Additional reports may be posted on 
the Fund's Web site in the discretion of the Fund sponsor or as 
required by regulatory authorities.
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    The Fund's total portfolio composition, consisting primarily of 
long positions in ECX CFI Futures Contracts and cash, will be disclosed 
each business day that the Exchange is open for trading on the Fund's 
Web site. The Fund has informed the Exchange that Web site disclosure 
of portfolio holdings will be made daily and will include, as 
applicable, the name and value of each EUA and amount of cash held in 
the portfolio of the Fund.
    As noted above, the Fund's NAV will be calculated and disseminated 
daily.\22\ The Exchange will disseminate for the Fund on a daily basis 
by means of Consolidated Tape Association CQ High Speed Lines 
information with respect to the Indicative Fund Value (as discussed 
below), recent Fund NAV, Shares outstanding, and the Basket amount. The 
Exchange will also make available on its Web site daily trading volume, 
closing prices, and the Fund's NAV per Share. The closing price and 
settlement prices of the EUAs held by the Fund are also readily 
available from ICE Futures, automated quotation systems, published or 
other public sources, or on-line information services.
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    \22\ The Exchange will obtain a representation from the Fund 
that the Fund's NAV per Share will be calculated daily and made 
available to all market participants at the same time. See Notice at 
20347, n.16.
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    Information regarding market price and volume of the Shares is and 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. The 
previous day's closing price and trading volume information will be 
published daily in the financial section of newspapers. Quotation and 
last-sale information for the Shares will be available via the 
facilities of the Consolidated Tape Association.
    All pricing information will be quoted in U.S. dollars, other than 
the current trading value of the Euro-denominated EUAs, which will be 
quoted in Euro. The current trading price per Share will be published 
continuously as trades occur throughout each trading day on the 
consolidated tape, Reuters, and/or Bloomberg. The most recent trading 
value of each EUA is published on the Web site of the ECX at http://www.ecxeurope.com, under the heading ``Market Data,'' and each vintage 
futures contract in the Fund's portfolio will be published on the 
Fund's Web site at http://www.airsharesfund.com, or any successor 
thereto.
    To provide updated information relating to the Fund for use by 
investors, professionals and persons wishing to create or redeem the 
Shares, the Exchange or a major market data vendor will disseminate 
through the facilities of the Consolidated Tape Association an updated 
Indicative Fund Value (``Indicative Fund Value'').\23\ The Indicative 
Fund Value, which is also known as intraday indicative value (IIV) or 
intraday optimized portfolio value (IOPV), is an estimate, updated on a 
real-time basis at least every 15 seconds, of the NAV, which is 
disclosed only once per day. The Indicative Fund Value for the Fund 
will be disseminated on a per-Share basis at least every 15 seconds 
during the Exchange's Core Trading Session. The Indicative Fund Value 
will be calculated based on the previously-disclosed portfolio 
composition of the Fund, i.e., the futures contracts in the Fund's 
portfolio, and will be adjusted to reflect the price changes of the 
relevant EUAs.
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    \23\ The Indicative Fund Value is referred to as the Indicative 
Trust Value in proposed new NYSE Arca Equities Rule 8.204(e)(2)(iv).
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    The value of a Share may be influenced by the non-concurrent

[[Page 30652]]

trading hours between the Exchange and the exchanges on which the EUAs 
trade. While the Shares will trade from 4 a.m. to 8 p.m. ET, the ECX 
CFI Futures Contracts, for example, trade on the London-based ICE 
Platform from 7 a.m. to 5 p.m. local time in London, England. When the 
ICE Platform and the Exchange are both open for trading, the Indicative 
Fund Value can be expected to closely approximate the NAV per Share. 
When the ICE Platform is closed and the Exchange is open, trading 
spreads and the resulting premium or discount on the Shares may widen 
and, therefore, increase the difference between the public trading 
price of the Shares and the NAV per Share. The Indicative Fund Value on 
a per-Share basis disseminated during the Exchange's Core Trading 
Session should not be viewed as a real-time update of the Fund's NAV, 
which is calculated only once a day.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares.\24\ Trading in the Shares will be halted if the 
circuit breaker parameters under NYSE Arca Equities Rule 7.12 are 
reached. Trading may also be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the underlying EUA futures contracts; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present. Trading in the Shares also will be 
subject to Commentary .03 to proposed NYSE Arca Equities Rule 8.204, 
which sets forth circumstances under which trading in the Shares may be 
halted.
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    \24\ See Commentary .04 to NYSE Arca Equities Rule 7.12.
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Trading Rules
    Under proposed NYSE Arca Equities Rule 8.204(b), Commodity Futures 
Trust Shares are included within the Exchange's definition of 
``securities.'' The Exchange deems the Shares to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Commentary .02 to 
proposed NYSE Arca Equities Rule 8.204 provides that transactions in 
Commodity Futures Trust Shares will occur during the trading hours 
specified in Rule 7.34. Therefore, in accordance with such rule, the 
Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. 
ET. The Exchange states that it has appropriate rules to facilitate 
transactions in the Shares during all three trading sessions.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which will include 
Commodity Futures Trust Shares) to monitor trading in the Shares. The 
Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations.
    The Exchange may obtain information via the ISG from other 
exchanges who are members or affiliate members of the ISG. In addition, 
the Exchange has an information sharing agreement in place with ICE 
Futures for the purpose of providing information in connection with 
trading in, or related to, futures contracts traded on ICE Futures. The 
Exchange states that it will file a proposed change pursuant to Rule 
19b-4 under the Act \25\ seeking approval to continue trading the 
Shares if the Fund invests in EUAs (or pricing information is used for 
a new or existing component) that constitute more than 10% of the 
weight of the Fund where the principal trading market for such 
component is not a member or affiliate member of ISG or where the 
Exchange does not have a comprehensive surveillance sharing agreement 
with such market. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
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    \25\ 17 CFR 240.19b-4.
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Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders \26\ in an Information Bulletin (``Bulletin'') of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions \27\ when an updated Indicative Fund Value will not be 
calculated or publicly disseminated; (2) the procedures for purchases 
and redemptions of Shares (and that Shares are not individually 
redeemable); (3) NYSE Arca Equities Rule 9.2(a),\28\ which imposes a 
duty of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (4) the risk 
involved in trading the Shares during the Core and Late Trading 
Sessions when the ECX CFI Futures Contracts are not trading on the ICE 
Platform; (5) how information regarding the Indicative Fund Value is 
disseminated; (6) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (7) trading information.
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    \26\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \27\ The Opening Trading Session is from 4 a.m. to 9:30 a.m. ET 
and the Late Trading Session is from 4:15 p.m. to 8 p.m. ET. See 
NYSE Arca Equities Rule 7.34.
    \28\ NYSE Arca Equities Rule 9.2(a) provides that ETP Holders, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
rule provides, with a limited exception, that prior to the execution 
of a transaction recommended to a non-institutional customer, the 
ETP Holder shall make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives, and any other information that the ETP Holder believes 
would be useful to make a recommendation.
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    In addition, the Bulletin will reference that: (1) The Fund is 
subject to various fees and expenses described in the relevant 
registration statement; (2) that there is no regulated source of last-
sale information regarding physical commodities; (3) the Commission has 
no jurisdiction over the trading of EUAs; and (4) the Financial 
Services Authority in the United Kingdom has regulatory jurisdiction 
over the trading of EUAs and related options. The Bulletin will also 
discuss any exemptive, no-action, and interpretive relief granted by 
the Commission from any rules under the Act and disclose that the NAV 
for the Shares will be calculated after 4: p.m. ET each trading day.

III. 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 \29\ and the rules and regulations thereunder applicable to a 
national securities exchange.\30\ In particular, the

[[Page 30653]]

Commission finds that the proposal is consistent with Section 6(b)(5) 
of the Act,\31\ 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 it has 
approved similar NYSE Arca Equities rules to list and trade products 
based on or related to commodities.\32\
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    \29\ 15 U.S.C. 78f.
    \30\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. 15 U.S.C. 78c(f).
    \31\ 15 U.S.C. 78f(b)(5).
    \32\ See Securities Exchange Act Release Nos. 54025 (June 21, 
2006), 71 FR 36856 (June 28, 2006) (SR-NYSEArca-2006-12) (approving 
new NYSE Arca Equities Rule 8.203 ``Commodity-Indexed Trust Shares'' 
for trading pursuant to UTP the iShares GSCI Commodity-Indexed 
Trust); 51067 (January 21, 2005), 70 FR 3952 (January 27, 2005) (SR-
PCX-2004-132) (approving new NYSE Arca Equities Rule 8.201 
``Commodity-Based Trust Shares'' for trading pursuant to UTP the 
iShares COMEX Gold Trust); 56041 (July 11, 2007), 72 FR 39114 (July 
17, 2007) (SR-NYSEArca-2007-43) (approving listing of shares of 
iShares COMEX Gold Trust pursuant to NYSE Arca Equities Rule 8.201); 
53875 (May 25, 2006), 71 FR 32164 (June 2, 2006) (SR-NYSEArca-2006-
11) (approving new NYSE Arca Equities Rule 8.300 ``Partnership 
Shares'' for trading pursuant to UTP the United States Oil Fund, 
LP); and 53736 (April 27, 2006), 71 FR 26582 (May 5, 2006) (SR-PCX-
2006-22) (approving new Commentary .02 to NYSE Arca Equities Rule 
8.200 ``Investment Shares'' for trading pursuant to UTP the DB 
Commodity Index Tracking Fund).
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A. Proposed Amendments to NYSE Arca Equities Rules

    The Commission finds that NYSE Arca's proposal contains adequate 
rules and procedures to govern the listing and trading of Commodity 
Futures Trust Shares on the Exchange. Prior to listing and/or trading 
on the Exchange, NYSE Arca must file a separate proposed rule change 
pursuant to Section 19(b) of the Act for each series of Commodity 
Futures Trust Shares.\33\ All such securities listed and/or traded 
under proposed NYSE Arca Equities Rule 8.204 will be subject to the 
full panoply of NYSE Arca rules and procedures that currently govern 
the trading of equity securities on the Exchange.\34\ For the initial 
listing of each series of Commodity Futures Trust Shares under proposed 
NYSE Arca Equities Rule 8.204, the Exchange must establish a minimum 
number of Commodity Futures Trust Shares required to be outstanding at 
the commencement of trading on the Exchange.\35\
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    \33\ See proposed NYSE Arca Equities Rule 8.204(h).
    \34\ Commentary .04 to proposed NYSE Arca Equities Rule 8.204 
provides that the Exchange's rules governing the trading of equity 
securities apply to Commodity Futures Trust Shares.
    \35\ See proposed NYSE Arca Equities Rule 8.204(e)(1).
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    The Commission believes that the proposed continued listing and 
trading standards under proposed NYSE Arca Equities Rule 8.204 are 
adequate to ensure transparency of key values and information regarding 
the securities. The Exchange may consider suspending trading in, or 
removing from listing, a series of Commodity Futures Trust Shares if: 
(1) Following the initial twelve-month period beginning upon the 
commencement of trading of the Commodity Futures Trust Shares, (a) The 
Trust has fewer than 50,000 Commodity Futures Trust Shares issued and 
outstanding; (b) the market value of all Commodity Futures Trust Shares 
issued and outstanding is less than $1,000,000, or (c) there are fewer 
than 50 record and/or beneficial holders of Commodity Futures Trust 
Shares for 30 consecutive trading days; (2) the value of the underlying 
futures contracts is no longer calculated or available on at least a 
15-second delayed basis during the Exchange's Core Trading Session, as 
defined in NYSE Arca Equities Rule 7.34(a), from a source unaffiliated 
with the sponsor, the trust or the trustee of the trust; (3) the NAV 
for the trust is no longer disseminated to all market participants at 
the same time; (4) the Indicative Trust Value is no longer disseminated 
on at least a 15-second delayed basis during the Corporation's Core 
Trading Session, as defined in NYSE Arca Equities Rule 7.34(a); or (5) 
such other event shall occur or condition exists which in the opinion 
of the Corporation makes further dealings on the Corporation 
inadvisable.\36\
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    \36\ See proposed NYSE Arca Equities Rule 8.204(e)(2)(i)-(v).
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    The Commission finds that the Exchange's rules with respect to 
trading halts under proposed NYSE Arca Equities Rule 8.204 should help 
ensure the availability of key values and information relating to 
Commodity Futures Trust Shares. If the Indicative Trust Value or the 
value of the underlying futures contract is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the Indicative Trust Value or the 
value of the underlying futures contract occurs; if the interruption to 
the dissemination of the Indicative Trust Value or the value of the 
underlying futures contract 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.\37\ In addition, if the 
Exchange becomes aware that the NAV with respect to a series of 
Commodity Futures Trust Shares is not disseminated to all market 
participants at the same time, it will halt trading in such series 
until such time as the NAV is available to all market participants.\38\ 
Lastly, the Exchange proposes to amend NYSE Arca Equities Rule 
7.34(a)(4) to include Commodity Futures Trust Shares under ``Derivative 
Securities Products'' with respect to trading halts of certain 
derivative securities products trading pursuant to UTP on the Exchange. 
The Commission believes that the foregoing requirements of the 
Exchange's proposed rules should help to prevent trading when a 
reasonable degree of transparency cannot be assured and to maintain a 
fair and orderly market for Commodity Futures Trust Shares.
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    \37\ See Commentary .03 to proposed NYSE Arca Equities Rule 
8.204.
    \38\ See id.
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    The Commission also believes that the proposed listing and trading 
rules for Commodity Futures Trust Shares are reasonably designed to 
promote a fair and orderly market for such securities by, among other 
things, requiring ETP Holders acting as registered Market Makers in 
Commodity Futures Trust Shares to be subject to certain restrictions in 
dealings and trading activities, to maintain and present, upon request, 
appropriate books and records, and to be subject to restrictions 
governing the use of any material, non-pubic information in connection 
with the trading of Commodity Futures Trust Shares and any underlying 
components.\39\ The proposed rule also requires the implementation of 
written surveillance procedures \40\ and prescribes prospectus delivery 
requirements for purchasers of each newly issued series of Commodity 
Futures Trust Shares.\41\
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    \39\ See proposed NYSE Arca Equities Rule 8.204(f)(1)-(4).
    \40\ See Commentary .05 to proposed NYSE Arca Equities Rule 
8.204.
    \41\ See Commentary .01 to proposed NYSE Arca Equities Rule 
8.204.
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    As proposed, the Exchange's listing fees will be applicable to a 
series of Commodity Futures Trust Shares under the Schedule of Fees and 
Charges for Exchange Services. In connection with proposed NYSE Arca 
Equities Rule 8.204, the Exchange also proposes to make certain 
technical revisions so that Commodity Futures Trust Shares are also 
included among the types of securities referenced in NYSE Arca Equities 
Rule 7.34 relating to trading hours and trading halts. The

[[Page 30654]]

Commission finds that the changes made to the Exchange's listing fees 
and the technical revisions to NYSE Arca Equities Rule 7.34 are 
reasonable and promote transparency and consistent application of 
certain rules imposed with respect to a series of Commodity Futures 
Trust Shares.

B. Proposal To List and Trade the Shares of the Fund

    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,\42\ 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. Quotations and last-sale 
information for EUAs are widely disseminated through a variety of 
market data vendors worldwide, and the daily settlement prices for the 
EUAs are publicly available on the ICE Futures Web site. In addition, 
quotations and last-sale information for the Shares will be available 
via the facilities of the Consolidated Tape Association. The daily NAV 
for the Fund will be calculated and disseminated publicly to all market 
participants at the same time, and the Exchange or a major market data 
vendor will disseminate through the facilities of the Consolidated Tape 
Association an updated Indicative Fund Value on a real-time basis at 
least every 15 seconds during the Exchange's Core Trading Session. The 
Fund's Web site will provide information relating to NAV, the Fund's 
daily total portfolio composition, the Fund's prospectus and other 
reports filed with the Commission, and other applicable quantitative 
information. Additionally, the Exchange will make available on its Web 
site daily trading volume of the Shares, closing prices of the Shares, 
and the Fund's NAV per Share.
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    \42\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Furthermore, the Commission believes that the proposal to list and 
trade the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that the Exchange will obtain a 
representation from the Fund that the NAV per Share for the Fund will 
be calculated daily and made available to all market participants at 
the same time.\43\ The Exchange may consider the suspension of trading 
in, or removal from listing of, the Shares if the value of the 
underlying futures contracts, the NAV, or the Indicative Fund Value is 
no longer calculated or available as required under proposed NYSE Arca 
Equities Rule 8.204(e)(2). In addition, proposed NYSE Arca Equities 
Rule 8.204(f) restricts ETP Holders from engaging in certain trading 
activities with respect to dealings in Commodity Futures Trust Shares 
and prescribes certain other restrictions regarding the use of 
material, non-public information.
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    \43\ See supra note 22.
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    For the reasons discussed above, the Commission believes that the 
Exchange's trading halt rules are reasonably designed to prevent 
trading in the Shares when transparency is impaired. Commentary .03 to 
proposed NYSE Arca Equities Rule 8.204 provides that, if the Indicative 
Fund Value or the value of the underlying futures contract is not being 
disseminated as required, the Exchange may halt trading during the day 
in which the interruption to the dissemination of the Indicative Fund 
Value or the value of the underlying futures contract occurs; if the 
interruption to the dissemination of the Indicative Fund Value or the 
value of the underlying futures contract 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.\44\ In 
addition, if the Exchange becomes aware that the NAV with respect to a 
series of Commodity Futures Trust Shares is not disseminated to all 
market participants at the same time, it will halt trading in such 
series until such time as the NAV is available to all market 
participants.\45\ Trading in the Shares also will be halted if the 
circuit breaker parameters under NYSE Arca Equities Rule 7.12 are 
reached. Trading may also be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. These may include: (1) The extent to which trading is not 
occurring in the underlying EUA futures contracts; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.
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    \44\ See Commentary .03 to proposed NYSE Arca Equities Rule 
8.204.
    \45\ See id.
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    The Commission further believes that the trading rules and 
procedures to which the Shares will be subject pursuant to this 
proposal are consistent with the Act. 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 the following 
representations:
    (1) The Shares will conform to the initial and continued listing 
criteria under proposed NYSE Arca Equities Rule 8.204(e).
    (2) The Exchange's surveillance procedures applicable to derivative 
products (which will include Commodity Futures Trust Shares) are 
adequate to properly monitor Exchange trading of the Shares in all 
trading sessions and to deter and detect violations of Exchange rules 
and applicable federal securities laws.
    (3) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in the Bulletin of the special characteristics and 
risks associated with trading the Shares. Specifically, the Bulletin 
will discuss, among other things, the following: (a) The risks involved 
in trading the Shares during the Opening and Late Trading Sessions when 
an updated Indicative Fund Value will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares (and that Shares are not individually redeemable); (c) NYSE Arca 
Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (d) the risk involved in trading the Shares 
during the Core and Late Trading Sessions when the ECX CFI Futures 
Contracts are not trading on the ICE Platform; (e) how information 
regarding the Indicative Fund Value is disseminated; (f) the 
requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (g) trading information.
    This approval order is based on the Exchange's representations.
    The Commission believes that the proposal should help to facilitate 
the listing and trading of additional types of exchange-traded products 
that should enhance competition among market participants, to the 
benefit of investors and the marketplace. In addition, the Commission 
believes that the listing and trading criteria for Commodity Futures 
Trust Shares set forth in proposed NYSE Arca Equities Rule 8.204 are 
reasonably designed to protect investors and the public interest, as 
discussed herein. For the foregoing reasons, the Commission finds that 
the proposed rule change is consistent with the Act and the rules

[[Page 30655]]

and regulations thereunder applicable to a national securities 
exchange, and, in particular, with Section 6(b)(5) of the Act.\46\
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    \46\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\47\ that the proposed rule change (SR-NYSEArca-2008-09), as 
modified by Amendment Nos. 1 and 2 thereto, be, and it hereby is, 
approved.
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    \47\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\48\
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    \48\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E8-11832 Filed 5-27-08; 8:45 am]
BILLING CODE 8010-01-P