[Federal Register Volume 76, Number 31 (Tuesday, February 15, 2011)]
[Notices]
[Pages 8799-8801]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3271]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63869; File No. SR-NYSEArca-2010-119]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To List and Trade Shares of the Teucrium WTI Crude 
Oil Fund

February 8, 2011.

I. Introduction

    On December 20, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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 list and trade shares of the Teucrium WTI Crude 
Oil Fund under NYSE Arca Equities Rule 8.200. The proposed rule change 
was published for comment in the Federal Register on January 6, 
2011.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 63625 (December 30, 
2010), 76 FR 807 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade shares (``Shares'') of the 
Teucrium WTI Crude Oil Fund (``Fund'') pursuant to NYSE Arca Equities 
Rule 8.200. NYSE Arca Equities Rule 8.200, Commentary .02, permits the 
trading of Trust Issued Receipts either by listing or pursuant to 
unlisted trading privileges.\4\
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    \4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, means any combination of 
investments, including cash; securities; options on securities and 
indices; futures contracts; options on futures contracts; forward 
contracts; equity caps, collars and floors; and swap agreements.
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    The Shares represent beneficial ownership interests in the Fund, 
which is a commodity pool that is a series of the Teucrium Commodity 
Trust (``Trust''), a Delaware statutory trust.\5\ The Fund is managed 
and controlled by Teucrium Trading, LLC (``Sponsor''). The Sponsor is a 
Delaware limited liability company that is registered as a commodity 
pool operator with the Commodity Futures Trading Commission (``CFTC'') 
and is a member of the National Futures Association.
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    \5\ See Amendment No. 1 to registration statement on Form S-1 
for Teucrium Commodity Trust, dated September 7, 2010 (File No. 333-
167593) relating to the Teucrium Natural Gas Fund (``Registration 
Statement'').
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    The investment objective of the Fund is to have the daily changes 
in percentage terms of the Shares' net asset value (``NAV'') reflect 
the daily changes in percentage terms of a weighted average of a 
weighted average of the closing settlement prices for futures contracts 
for Western Texas Intermediate (``WTI'') crude oil, also known as Texas 
Light Sweet crude oil (``Oil Futures Contracts'') traded on the New 
York Mercantile Exchange (``NYMEX''), specifically (1) the nearest to 
spot June or December Oil Futures Contract, weighted 35%; (2) the June 
or

[[Page 8800]]

December Oil Futures Contract following the aforementioned (1), 
weighted 30%; and (3) the December Oil Futures Contract following the 
aforementioned (2),\6\ weighted 35%; before taking Fund expenses and 
interest income into account. The Sponsor employs a ``neutral'' 
investment strategy intended to track the changes in the Oil Benchmark 
regardless of whether the Oil Benchmark goes up or down.
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    \6\ See e-mail from Michael Cavalier, Chief Counsel, NYSE 
Euronext, to Christopher W. Chow, Special Counsel, Commission, dated 
December 22, 2010.
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    The Fund seeks to achieve its investment objective by investing 
under normal market conditions in Oil Benchmark Component Futures 
Contracts or, in certain circumstances, in other Oil Futures Contracts 
traded on the NYMEX and to a lesser extent the IntercontinentalExchange 
(``ICE''). The Fund may also invest in other kinds of crude oil futures 
contracts traded on the NYMEX or ICE or on other domestic or foreign 
exchanges. In addition, and to a limited extent, the Fund will invest 
in crude oil-based swap agreements that are cleared through the NYMEX 
or ICE or their affiliated providers of clearing services (``Cleared 
Oil Swaps'') in furtherance of the Fund's investment objective, and to 
the extent permitted and appropriate in light of the liquidity in the 
Cleared Oil Swaps market. Once position limits and accountability 
levels in Oil Futures Contracts are applicable, the Fund's intention is 
to invest first in Cleared Oil Swaps to the extent permitted by the 
position limits and accountability levels applicable to Cleared Oil 
Swaps and appropriate in light of the liquidity in the Cleared Oil 
Swaps market,\7\ and then in contracts or instruments such as cash-
settled options on Oil Futures Contracts and forward contracts, swaps 
other than Cleared Oil Swaps, and other over-the-counter transactions 
that are based on the price of crude oil and Oil Futures Contracts 
(collectively, ``Other Oil Interests,'' and together with Oil Futures 
Contracts and Cleared Oil Swaps, ``Oil Interests'').\8\
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    \7\ See e-mail from Michael Cavalier, Chief Counsel, NYSE 
Euronext, to Christopher W. Chow, Special Counsel, Commission, dated 
December 27, 2010.
    \8\ The Commission has previously approved listing of similar 
funds which held forward contracts or swaps on the American Stock 
Exchange (``Amex'') and NYSE Arca. See, e.g., Securities Exchange 
Act Release Nos. 53582 (March 31, 2006), 71 FR 17510 (April 6, 2006) 
(SR-Amex-2005-127) (order approving Amex listing of United States 
Oil Fund, LP); 57188 (January 23, 2008), 73 FR 5607 (January 30, 
2008) (SR-Amex-2007-70) (order approving Amex listing of United 
States Heating Oil Fund, LP and United States Gasoline Fund, LP); 
61881 (April 9, 2010), 75 FR 20028 (April 16, 2010) (SR-NYSEArca-
2010-14) (order approving listing and trading of United States Brent 
Oil Fund, LP); and 62527 (July 19, 2010), 75 FR 43606 (July 26, 
2010) (order approving listing and trading of United States 
Commodity Index Fund).
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    The Exchange represents that the Fund will meet the initial and 
continued listing requirements applicable to Trust Issued Receipts in 
NYSE Arca Equities Rule 8.200 and Commentary .02 thereto. With respect 
to application of Rule 10A-3 under the Act,\9\ the Trust will rely on 
the exception contained in Rule 10A-3(c)(7).\10\ A minimum of 100,000 
Shares will be outstanding as of the start of trading on the Exchange.
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    \9\ 17 CFR 240.10A-3.
    \10\ 17 CFR 240.10A-3(c)(7).
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    Additional details regarding the trading policies of the Fund, 
creations and redemptions of the Shares, Oil Interests and other 
aspects of the WTI crude oil and Oil Interest markets, investment 
risks, Benchmark performance, NAV calculation, the dissemination and 
availability of information about the underlying assets, trading halts, 
applicable trading rules, surveillance, and the Information Bulletin, 
among other things, can be found in the Notice and/or the Registration 
Statement, as applicable.\11\
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    \11\ See supra notes 3 and 5.
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III. Discussion and Commission's Findings

    After careful consideration, the Commission finds that the proposed 
rule change to list and trade the Shares is consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\12\ In particular, the 
Commission finds that the proposed rule change is consistent with the 
requirements of Section 6(b)(5) of the Act,\13\ which requires, among 
other things, that the Exchange's rules be 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.
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    \12\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is also consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\14\ which sets forth Congress's 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. Quotation and last-
sale information regarding the Shares will be disseminated through the 
facilities of the Consolidated Tape Association (``CTA''), and the 
Benchmark will be disseminated by one or more major market data vendors 
every 15 seconds during the NYSE Arca Core Trading Session of 9:30 a.m. 
to 4 p.m. Eastern Time (``E.T.''). In addition, the Indicative Trust 
Value (``ITV'') will be disseminated on a per-Share basis by one or 
more major market data vendors every 15 seconds during the NYSE Arca 
Core Trading Session.\15\ The Fund will provide Web site disclosure of 
portfolio holdings daily and will include, as applicable, the names, 
quantity, price, and market value of Financial Instruments \16\ and the 
characteristics of such instruments and cash equivalents, and amount of 
cash held in the portfolio of the Fund. The closing price and 
settlement prices of the Oil Futures Contracts are also readily 
available from the NYMEX (http://www.cmegroup.com) and ICE (http://www.theice.com), automated quotation systems, published or other public 
sources, or on-line information services such as Bloomberg or Reuters. 
The NAV for the Fund will be calculated by the Administrator once a day 
and will be disseminated daily to all market participants at the same 
time, and the Web site for the Fund (http://www.teucriumoilfund.com) 
and/or the Exchange will contain the prospectus and additional data 
relating to NAV and other applicable quantitative information.
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    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \15\ The normal trading hours for Oil Futures Contracts on NYMEX 
are 9 a.m. to 2:30 p.m. E.T. The ITV will not be updated, and, 
therefore, a static ITV will be disseminated, between the close of 
trading on NYMEX of Oil Futures Contracts and the close of the NYSE 
Arca Core Trading Session. The value of a Share may be influenced by 
non-concurrent trading hours between NYSE Arca and the NYMEX and ICE 
when the Shares are traded on NYSE Arca after normal trading hours 
of Oil Futures Contracts.
    \16\ See supra note 4.
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    The Commission further 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. If the Exchange becomes aware that the NAV with respect to the 
Shares is not

[[Page 8801]]

disseminated to all market participants at the same time, it will halt 
trading in the Shares until such time as the NAV is available to all 
market participants. Further, the Exchange represents that it may halt 
trading during the day in which an interruption to the dissemination of 
the ITV or the value of the underlying futures contracts occurs. If the 
interruption to the dissemination of the ITV or the value of the 
underlying futures contracts persists past the trading day in which it 
occurred, the Exchange will halt trading no later than the beginning of 
the trading day following the interruption. In addition, the Web site 
disclosure of the portfolio composition of the Fund will occur at the 
same time as the disclosure by the Sponsor of the portfolio composition 
to Authorized Purchasers (as defined in the Registration Statement) so 
that all market participants are provided portfolio composition 
information at the same time. Therefore, the same portfolio information 
will be provided on the public Web site as well as in electronic files 
provided to Authorized Purchasers. Accordingly, each investor will have 
access to the current portfolio composition of the Fund through the 
Fund's Web site. Lastly, the trading of the Shares will be subject to 
NYSE Arca Equities Rule 8.200, Commentary .02(e), which sets forth 
certain restrictions on ETP Holders \17\ acting as registered Market 
Makers \18\ in Trust Issued Receipts to facilitate surveillance.
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    \17\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \18\ See NYSE Arca Equities Rule 1.1(u) (defining Market Maker).
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    The Exchange has represented that the Shares are deemed equity 
securities subject to the Exchange's rules governing the trading of 
equity securities. In support of this proposal, the Exchange has made 
representations, including the following:
    (1) The Fund will meet the initial and continued listing 
requirements applicable to Trust Issued Receipts in NYSE Arca Equities 
Rule 8.200 and Commentary .02 thereto.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance 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.
    (4) With respect to Fund assets traded on exchanges, not more than 
10% of the weight of such assets in the aggregate shall consist of 
components whose principal trading market is not a member of the 
Intermarket Surveillance Group or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement.
    (5) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Opening and Late 
Trading Sessions when an updated ITV will not be calculated or publicly 
disseminated; (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) how information regarding the ITV is 
disseminated; (e) 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 (f) trading information.
    (6) A minimum of 100,000 Shares will be outstanding as of the start 
of trading on the Exchange.
    (7) With respect to the application of Rule 10A-3 under the Act, 
the Trust will rely on the exception contained in Rule 10A-3(c)(7).\19\
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    \19\ See supra notes 9 and 10 and accompanying text.

This approval order is based on the Exchange's representations.\20\
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    \20\ The Commission notes that it does not regulate the market 
for the futures in which the Fund plans to take positions, which is 
the responsibility of the CFTC. The CFTC has the authority to set 
limits on the positions that any person may take in futures on 
commodities. These limits may be directly set by the CFTC, or by the 
markets on which the futures are traded. The Commission has no role 
in establishing position limits on futures in commodities, even 
though such limits could impact a commodity-based exchange-traded 
product that is under the jurisdiction of the Commission.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NYSEArca-2010-119) be, and 
it hereby is, approved.
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    \21\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-3271 Filed 2-14-11; 8:45 am]
BILLING CODE 8011-01-P