[Federal Register Volume 76, Number 35 (Tuesday, February 22, 2011)]
[Notices]
[Pages 9843-9846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-3824]
[[Page 9843]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63915; File No. SR-NYSEArca-2010-121]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change Relating to the Listing and Trading of
FactorShares Funds
February 15, 2011.
I. Introduction
On December 22, 2010, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to list and trade
shares (``Shares'') of FactorShares 2X: S&P500 Bull/TBond Bear,
FactorShares 2X: TBond Bull/S&P500 Bear, FactorShares 2X: S&P500 Bull/
USD Bear, FactorShares 2X: Oil Bull/S&P500 Bear, and FactorShares 2X:
Gold Bull/S&P500 Bear (each a ``Fund'' and, collectively, ``Funds'')
under NYSE Arca Equities Rule 8.200, Commentary .02. The proposed rule
change was published for comment in the Federal Register on January 10,
2011.\3\ The Commission received no comments on the proposal. This
order grants approval of 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. 63636 (January 3,
2011), 76 FR 1477 (``Notice'').
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II. Description of the Proposal
The Exchange proposes to list and trade the Shares of the Funds
under NYSE Arca Equities Rule 8.200, Commentary .02. Each of the Funds
was formed on January 26, 2010 as a separate Delaware statutory trust,
and each Fund will issue and offer common units of beneficial interest,
which represent units of fractional beneficial undivided interest in
and ownership of such Fund.\4\
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\4\ See Pre-Effective Amendment No. 3 to Form S-1, dated
November 3, 2010, for each Fund (individually, a ``Registration
Statement,'' and, collectively, ``Registration Statements'') (File
Nos. 333-164754, 333-164758, 333-164757, 333-164756 and 333-164755,
respectively). All Funds, other than the FactorShares 2X: TBond
Bull/S&P500 Bear, are also referred to herein as ``Leveraged
Funds,'' and FactorShares 2X: TBond Bull/S&P500 Bear is referred to
herein as the ``Leveraged Inverse Fund.''
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Factor Capital Management, LLC (``Managing Owner''), a Delaware
limited liability company, will serve as the Managing Owner of each
Fund. Interactive Brokers LLC, a Connecticut limited liability company,
will serve as each Fund's clearing broker (``Commodity Broker''). The
Commodity Broker is registered with the Commodity Futures Trading
Commission (``CFTC'') as a futures commission merchant and is a member
of the National Futures Association in such capacity. Each Fund has
appointed State Street Bank and Trust Company (``Administrator'') as
the Administrator, the Transfer Agent, and the Custodian of each Fund.
In addition, each Fund has appointed Foreside Fund Services, LLC
(``Distributor'') as the Distributor to assist the Managing Owner and
the Funds with certain functions and duties relating to distribution,
compliance of sales and marketing materials, and certain regulatory
compliance matters. The Distributor will not open or maintain customer
accounts or handle orders for any of the Funds.
Underlying Indexes and Sub-Indexes
The Standard & Poor's Factor Index Series (``Indexes'') are
intended to reflect the daily spreads, or the differences, in the
relative return, positive or negative, between the corresponding sub-
indexes constructed from futures contracts (``Index Futures
Contracts'') of each Index. Each Index is comprised of a long sub-index
(``Long Sub-Index'') and a short sub-index (``Short Sub-Index'')
(individually, a ``Sub-Index'' and, collectively, ``Sub-Indexes''). The
Long Sub-Index is composed of the long front Index Futures Contract
(``Long Index Futures Contract'').\5\ The Short Sub-Index is composed
of the short front Index Futures Contract (``Short Index Futures
Contract'').\6\ Each Index is calculated to reflect the corresponding
relative return, or spread, which is the difference in the daily
changes, positive or negative, between the value of the Long Sub-Index
and the value of the Short Sub-Index, plus the return on a risk free
component.
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\5\ The term ``long front'' refers to a long position in the
near month contract.
\6\ The term ``short front'' refers to a short position in the
near month contract.
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The objective of each Index is to track the daily price spreads, or
difference between the Sub-Indexes, and in turn, the underlying Index
Futures Contracts, to reflect the difference in the daily return
between two market segments. Although each Index is calculated to
reflect both an excess return and a total return, each Fund tracks an
Index that is calculated to reflect a total return. Standard & Poor's
Financial Services LLC (``Index Sponsor'') is the Index Sponsor for the
Indexes and is the calculation agent for the Indexes and Sub-
Indexes.\7\ The Long Sub-Index tracks the changes in the Long Index
Futures Contract, and the Short Sub-Index tracks the changes in the
Short Index Futures Contract.
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\7\ The Exchange represents that the Index Sponsor is not
affiliated with a broker-dealer.
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Each Index is rebalanced daily as of the Index Calculation Time (as
defined below) in order to continue to reflect the spread, or the
difference in the daily return between two specific market segments. By
rebalancing each Index on a daily basis as of the Index Calculation
Time, each Index will then be comprised of equal notional amounts
(i.e., +100% and -100%, respectively) of both of its Long Index Futures
Contracts and Short Index Futures Contracts in accordance with its
daily objectives. Daily rebalancing of each Index will lead to
different results than would otherwise occur if an Index, and in turn,
its corresponding Fund, were to be rebalanced less frequently or more
frequently than daily.
Funds
The objective of each Fund will be to reflect the spread, or the
difference, in daily return, on a leveraged basis, between two
predetermined market segments. Each Fund will represent a relative
value or ``spread'' strategy seeking to track the differences in daily
returns between two futures-based Index components. By simultaneously
buying and selling two benchmark Index Futures Contracts (or, as
necessary, substantively equivalent combinations of Substitute Futures
and Financial Instruments),\8\ each Leveraged Fund and Leveraged
Inverse Fund will target a daily return equivalent to approximately
+200% and -200%, respectively, of the spread, or the difference, in
daily return between a long futures contract and a short futures
contract (before fees, expenses, and interest income). Thus, each
Leveraged Fund will allow investors to potentially profit from the
daily return of a Long Index Futures Contract in excess of the daily
return of a Short Index Futures Contract. The Leveraged Inverse Fund
will allow investors to potentially profit from the daily return of a
Short Index Futures Contract in excess of the daily return of a Long
Index Futures Contract.
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\8\ The term ``Substitute Futures'' refers to futures contracts
other than the specific Index Futures Contracts that underlie the
applicable Index that the Managing Owner expects will tend to
exhibit trading prices or returns that generally correlate with an
Index Futures Contract. The term ``Financial Instruments'' refers to
forward agreements and swaps that the Managing Owner expects will
tend to exhibit trading prices or returns that generally correlate
with an Index Futures Contract.
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Each Fund will hold a portfolio of Index Futures Contracts, each of
which are traded on various futures markets in
[[Page 9844]]
the United States. In the event a Fund reaches position limits imposed
by the CFTC or a futures exchange with respect to an Index Futures
Contract, the Managing Owner may, in its commercially reasonable
judgment, cause the Fund to invest in Substitute Futures or Financial
Instruments referencing the particular Index Futures Contract, or
Financial Instruments not referencing the particular Index Futures
Contract if such instruments tend to exhibit trading prices or returns
that correlate with the corresponding Index or any Index Futures
Contract and will further the investment objective of the Fund.\9\ A
Fund may also invest in Substitute Futures or Financial Instruments if
the market for a specific Index Futures Contract experiences
emergencies (such as a natural disaster, terrorist attack, or an act of
God) or disruptions (such as a trading halt or flash crash) that would
prevent the Fund from obtaining the appropriate amount of investment
exposure to the affected Index Futures Contract.\10\
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\9\ The Exchange represents that, to the extent practicable, a
Fund will invest in swaps cleared through the facilities of a
centralized clearing house.
\10\ The Managing Owner will attempt to mitigate each Fund's
credit risk by transacting only with large, well-capitalized
institutions using measures designed to determine the
creditworthiness of a counterparty. The Managing Owner will take
various steps to limit counterparty credit risk, as described in the
Registration Statements.
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Each Fund also will hold cash and United States Treasury securities
and other high credit quality, short-term fixed-income securities
(``Fixed Income Instruments'') for deposit with its Commodity Broker as
margin. No Fund will be ``managed'' by traditional methods, which
typically involve effecting changes in the composition of a portfolio
on the basis of judgments relating to economic, financial, and market
considerations with a view to obtaining positive results under changing
market conditions.
A Fund's underlying Index consists of two Sub-Indexes. A Long Sub-
Index reflects a passive exposure to a certain near-month long Index
Futures Contract. A Short Sub-Index reflects a passive exposure to a
certain near-month short Index Futures Contract. Each Index is designed
to reflect +100% of the spread, or the difference, in daily return,
positive or negative, between the Long Sub-Index and the Short Sub-
Index, plus the return on a risk free component.
Because each Fund will seek to achieve its daily investment
objective by tracking its corresponding Index on a daily and leveraged
basis, each Fund will seek to rebalance daily both its long and short
positions around the net asset value (``NAV'') calculation time. The
purpose of daily rebalancing is to reposition each Fund's investments
in accordance with its daily investment objective.
Each Fund will have a leverage ratio of approximately 4:1 upon
daily rebalancing, which increases the potential for trading profits
and losses. The use of leverage increases the potential for both
trading profits and losses, depending on the changes in market value of
the Long Index Futures Contracts positions, the Short Index Futures
Contracts positions (and/or Substitute Futures and Financial
Instruments, as applicable), of each Fund. Holding futures positions
with a notional amount in excess of each Fund's NAV constitutes a form
of leverage. Because the notional value of each Fund's Index Futures
Contracts (and/or Substitute Futures and Financial Instruments, as
applicable) will rise or fall throughout each trading day and prior to
rebalancing, the leverage ratio could be higher or lower than an
approximately 4:1 leverage ratio between the notional value of a Fund's
portfolio and a Fund's Equity (estimated NAV) immediately after
rebalancing. As the ratio increases, an investor's losses may increase
correspondingly.
Each Sub-Index, which is comprised of a certain Index Futures
Contract, includes provisions for the replacement (also referred to as
``rolling'') of its Index Futures Contract as it approaches its
expiration date. ``Rolling'' is a procedure which involves closing out
the Index Futures Contract that will soon expire and establishing a
position in a new Index Futures Contract with a later expiration date
pursuant to the rules of each Sub-Index. In turn, each Fund will seek
to roll its Index Futures Contracts in a manner consistent with its
Sub-Index's provisions for the replacement of an Index Futures Contract
that is approaching maturity.
Leveraged Funds
For a Leveraged Fund, a long position is established in the Long
Index Futures Contract seeking to provide a leveraged exposure to the
Long Sub-Index. A Leveraged Fund will purchase a sufficient number of
Long Index Futures Contracts targeting a long notional exposure
equivalent to approximately +200% of a Fund's estimated NAV, or Fund
Equity. Additionally, a Leveraged Fund will establish a short position
in the Short Index Futures Contracts seeking to provide a leveraged
exposure to the Short Sub-Index. Accordingly, a Leveraged Fund will
sell a sufficient number of Short Index Futures Contracts targeting a
short notional exposure equivalent to approximately -200% of Fund
Equity. Therefore, immediately after establishing each of these
positions, the target gross notional exposure of a Leveraged Fund's
aggregate Long Index Futures Contracts and Short Index Futures
Contracts will equal approximately +400% (i.e., +200% long and +200%
short) of Fund Equity.
Leveraged Inverse Fund
For the Leveraged Inverse Fund, a long position is established in
the Short Index Futures Contract seeking to provide a leveraged
exposure to the Short Sub-Index. The Leveraged Inverse Fund will
purchase a sufficient number of Short Index Futures Contracts targeting
a long notional exposure equivalent to approximately +200% of Fund
Equity. Additionally, the Leveraged Inverse Fund will establish a short
position in the Long Index Futures Contracts seeking to provide a
leveraged exposure to the Long Sub-Index. Accordingly, the Leveraged
Inverse Fund will sell a sufficient number of Long Index Futures
Contracts targeting a short notional exposure equivalent to
approximately -200% of Fund Equity. Therefore, immediately after
establishing each of these positions, the target gross notional
exposure of the Leveraged Inverse Fund's aggregate Long Index Futures
Contracts and Short Index Futures Contracts will equal approximately
+400% (i.e., +200% long and +200% short) of Fund Equity.
FactorShares 2X: S&P500 Bull/TBond Bear
The FactorShares 2X: S&P500 Bull/TBond Bear is designed for
investors who believe the large-cap U.S. equity market segment will
increase in value relative to the long-dated U.S. Treasury market
segment. The objective of the FactorShares 2X: S&P500 Bull/TBond Bear
will be to seek to track approximately +200% of the daily return of the
S&P U.S. Equity Risk Premium Total Return Index. The Fund will seek to
track the spread, or the difference in daily returns, between the U.S.
equity and interest rate market segments by primarily establishing a
leveraged long position in the E-mini Standard and Poor's 500 Stock
Price Index\TM\ Futures (``Equity Index Futures Contract'') and a
leveraged short position in the 30-Year U.S. Treasury Bond Futures
(``Treasury Index Futures Contract'').
[[Page 9845]]
FactorShares 2X: TBond Bull/S&P500 Bear
The FactorShares 2X: TBond Bull/S&P500 Bear is designed for
investors who believe the long-dated U.S. Treasury market segment will
increase in value relative to the large-cap U.S. equity market segment.
The objective of the FactorShares 2X: TBond Bull/S&P500 Bear will be to
seek to track approximately -200% of the daily return of the S&P U.S.
Equity Risk Premium Total Return Index. The Fund will seek to track the
spread, or the difference in daily returns, between the interest rate
and U.S. equity market segments by primarily establishing a leveraged
long position in the Treasury Index Futures Contract and a leveraged
short position in the Equity Index Futures Contract.
FactorShares 2X: S&P500 Bull/USD Bear
The FactorShares 2X: S&P500 Bull/USD Bear is designed for investors
who believe the large-cap U.S. equity market segment will increase in
value relative to the general indication of the international value of
the U.S. dollar. The objective of the FactorShares 2X: S&P500 Bull/USD
Bear will be to seek to track approximately +200% of the daily return
of the S&P 500 Non-U.S. Dollar Index. The Fund will seek to track the
spread, or the difference in daily returns, between the U.S. equity and
currency market segments by primarily establishing a leveraged long
position in the Equity Index Futures Contract and a leveraged short
position in the U.S. Dollar Index[reg] Futures.
FactorShares 2X: Oil Bull/S&P500 Bear
The FactorShares 2X: Oil Bull/S&P500 Bear is designed for investors
who believe that crude oil will increase in value relative to the
large-cap U.S. equity market segment. The objective of the FactorShares
2X: Oil Bull/S&P500 Bear will be to seek to track approximately +200%
of the daily return of the S&P Crude Oil-Equity Spread Total Return
Index. The Fund will seek to track the spread, or the difference in
daily returns, between the oil and U.S. equity market segments by
primarily establishing a leveraged long position in the Oil Index
Futures Contract\11\ and a leveraged short position in the Equity Index
Futures Contract.
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\11\ The Oil Index Futures Contract provides an exposure to the
oil market segment with respect to light sweet crude oil. The Oil
Index Futures Contract is a futures contract that provides and
permits investors to invest in a substitute instrument in place of
the underlying, speculate or hedge, as applicable, in the direction
of the value of light sweet crude oil. The Oil Index Futures
Contract serves as a proxy for light sweet crude oil because the
performance of the Oil Index Futures Contract is dependent upon and
reflects the changes in the price of light sweet crude oil.
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FactorShares 2X: Gold Bull/S&P500 Bear
The FactorShares 2X: Gold Bull/S&P500 Bear is designed for
investors who believe that gold will increase in value relative to the
large-cap U.S. equity market segment. The objective of the FactorShares
2X: Gold Bull/S&P500 Bear will be to seek to track approximately +200%
of the daily return of the S&P Gold-Equity Spread Total Return Index.
The Fund will seek to track the spread, or the difference in daily
returns, between the gold and U.S. equity market segments by primarily
establishing a leveraged long position in the Gold Index Futures
Contract\12\ and a leveraged short position in the Equity Index Futures
Contract.
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\12\ The Gold Index Futures Contract provides an exposure to the
precious metals market segment with respect to gold. The Gold Index
Futures Contract is a futures contract that provides and permits
investors to invest in a substitute instrument in place of the
underlying, speculate or hedge, as applicable, in the direction of
the value of gold. The Gold Index Futures Contract serves as a proxy
for gold because the performance of the Gold Index Futures Contract
is dependent upon and reflects the changes in the price of gold.
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Additional information regarding the Funds and the Shares, the
Indexes and Sub-Indexes, the Index Futures Contracts, investment
strategies, risks, creation and redemption procedures, calculation and
dissemination of NAV and NAV calculation times, fees, portfolio
holdings and disclosure policies, distributions and taxes, availability
of information, trading rules and halts, and surveillance procedures,
among other things, can be found in the Registration Statements and in
the Notice, as applicable.\13\
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\13\ See Notice and Registration Statements, supra notes 3 and
4.
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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\14\ and the rules and regulations thereunder applicable to a
national securities exchange.\15\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\16\
which requires, among other things, that the Exchange's rules be
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest. The Commission notes that the Shares must comply with
the requirements of NYSE Arca Equities Rule 8.200 and Commentary .02
thereto to be listed and traded on the Exchange.
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\14\ 15 U.S.C. 78f.
\15\ 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).
\16\ 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 consistent with Section 11A(a)(1)(C)(iii) of the
Act,\17\ 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. Quotation and last-sale
information regarding the Shares will be disseminated through the
facilities of the Consolidated Tape Association. The Index Sponsor will
publish the intra-day level of each Index and Sub-Index once every 15
seconds during the NYSE Arca Core Trading Session on the consolidated
tape, Reuters, and/or Bloomberg, and the closing level of each Index
and Sub-Indexes daily on its Web site. In addition, the Indicative
Index Value (``IIV'') per Share of each Fund will be calculated by
applying the percentage price change of each Fund's holdings in futures
contracts (and/or Substitute Futures and Financial Instruments, as
applicable) to the last published NAV of each Fund and will be
disseminated (in U.S. dollars) by one or more market data vendors every
15 seconds during the NYSE Arca Core Trading Session. Further, the
Funds will provide Web site disclosure of portfolio holdings daily and
will include, as applicable, the names and value (in U.S. dollars) of
Index Futures Contracts, Substitute Futures and Financial Instruments,
characteristics of these Index Futures Contracts, Substitute Futures,
and Financial Instruments, as applicable, and Fixed Income Instruments,
and the amount of cash held in the portfolio of the Funds. The closing
prices and settlement prices of Index Futures Contracts are available
from the New York Mercantile Exchange (``NYMEX''), the Chicago
Mercantile Exchange, Inc. (``CME''), the COMEX division of NYMEX
(``COMEX''), and the Intercontinental Exchange Inc. (``ICE''),
automated quotation systems, published or other public sources, and on-
line information services such as Bloomberg
[[Page 9846]]
or Reuters. The specific contract specifications for the Index Futures
Contracts are also available on those Web sites, as well as on other
financial informational sources. NYMEX, CME, COMEX, and ICE also
provide delayed futures information on current and past trading
sessions and market news free of charge on their Web sites. The NAV for
each Fund will be calculated by the Administrator once a day as of the
first to settle of the corresponding Index Futures Contracts, but in no
event after 4 p.m. E.T. The Exchange will disseminate on a daily basis
via the Consolidated Tape Association information with respect to
recent NAV, Shares outstanding, and the daily trading volume of the
Shares. The Web site for the Funds and/or the Exchange will contain:
(a) The current NAV per Share daily and the prior business day's NAV;
(b) the reported closing price; (c) the Prospectus; and (d) other
quantitative information.
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\17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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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. The Commission notes that the Web site disclosure of the
portfolio composition of the Funds will occur at the same time as the
disclosure by the Managing Owner of the portfolio composition to
Authorized Participants so that all market participants are provided
portfolio composition information at the same time. In addition, if the
Exchange becomes aware that the NAV with respect to the Shares is not
disseminated to all market participants at the same time, the Exchange
will halt trading in the Shares until such time as the NAV is available
to all market participants. Further, the Exchange may halt trading
during the day in which an interruption to the dissemination to the
IIV, the Indexes, the Sub-Indexes, or the value of the underlying
futures contracts occurs. If such interruption 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.\18\ Trading in the Shares will be subject to NYSE Arca
Equities Rule 8.200, Commentary .02(e), which sets forth certain
restrictions on ETP Holders acting as registered Market Makers in Trust
Issued Receipts to facilitate surveillance. The Exchange represents
that the Index Sponsor has implemented procedures designed to prevent
the use and dissemination of material, non-public information regarding
the Indexes.
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\18\ 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 Index 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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The Exchange has represented that the Shares are deemed to be
equity securities subject to the Exchange's existing rules governing
the trading of equity securities. In support of this proposal, the
Exchange has made representations, including:
(1) The Funds 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. In addition, with respect to components traded on
exchanges, not more than 10% of the weight of a Fund's portfolio in the
aggregate will 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.
(4) 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 IIV will not be calculated or publicly
disseminated; (b) the procedures for purchases and redemptions of
Shares in Creation Baskets and Redemption Baskets (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 IIV 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.\19\
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\19\ The Information Bulletin will further advise ETP Holders
that FINRA has implemented increased customer margin requirements
applicable to leveraged ETFs (which include the Shares) and options
on leveraged ETFs, as described in FINRA Regulatory Notices 09-53
(August 2009) and 09-65 (November 2009).
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(5) For the initial and continued listing of the Shares, the Shares
must be in compliance with NYSE Arca Equities Rule 5.3 and Rule 10A-3
under the Act.\20\
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\20\ 17 CFR 240.10A-3.
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(6) A minimum of 100,000 Shares for each Fund will be outstanding
as of the start of trading on the Exchange. This approval order is
based on the Exchange's representations.\21\
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\21\ The Commission notes that it does not regulate the market
for 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. 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, even though such limits could impact an
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 Section 6(b)(5) of the Act\22\ and the
rules and regulations thereunder applicable to a national securities
exchange.
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\22\ 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,\23\ that the proposed rule change (SR-NYSEArca-2010-121), be, and
it hereby is, approved.
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\23\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-3824 Filed 2-18-11; 8:45 am]
BILLING CODE 8011-01-P