[Federal Register Volume 76, Number 247 (Friday, December 23, 2011)]
[Notices]
[Pages 80433-80442]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32878]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66002; File No. SR-NYSEARCA-2011-94]


 Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the ProShares 
Managed Futures Strategy Fund, ProShares Commodity Managed Futures 
Strategy Fund and ProShares Financial Managed Futures Strategy Fund 
Under NYSE Arca Equities Rule 8.200

December 19, 2011.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 5, 2011, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.200: ProShares Managed Futures 
Strategy, ProShares Commodity Managed Futures Strategy and ProShares 
Financial Managed Futures Strategy. The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and http://www.nyse.com.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change

[[Page 80434]]

and discussed any comments it received on the proposed rule change. The 
text of those statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant parts of such 
statements.

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

1. Purpose
    NYSE Arca Equities Rule 8.200, Commentary .02 permits the trading 
of Trust Issued Receipts (``TIRs'') either by listing or pursuant to 
unlisted trading privileges (``UTP'').\4\ The Exchange proposes to list 
and trade shares (``Shares'') of the following pursuant to NYSE Arca 
Equities Rule 8.200: ProShares Managed Futures Strategy, ProShares 
Commodity Managed Futures Strategy and ProShares Financial Managed 
Futures Strategy (each a ``Fund,'' together, the ``Funds'').\5\ Each 
Fund is a series of the ProShares Trust II (``Trust''), a Delaware 
statutory trust. ProShare Capital Management LLC (``Sponsor'') is the 
Trust's Sponsor and Wilmington Trust Company is the Trust's trustee. 
Brown Brothers Harriman & Co. serves as the administrator (the 
``Administrator''), custodian and transfer agent of the Funds. SEI 
Investments Distribution Co. serves as distributor of the Shares (the 
``Distributor'').
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    \4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
TIRs 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.
    \5\ See the Trust's Registration Statement on Form S-1, dated 
November 29, 2011 (File No. 333-178212 (``Registration Statement''). 
The description of the Funds and the Shares contained herein is 
based, in part, on the Registration Statement.
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    The Exchange notes that the Commission has previously approved the 
listing and trading of issues of TIRs of the Trust on the American 
Stock Exchange LLC \6\ and on NYSE Arca.\7\ In addition, the Commission 
has approved other exchange-traded investment products linked to the 
performance of underlying commodities and currencies.\8\
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    \6\ See Securities Exchange Act Release No. 58161 (July 15, 
2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39) (order 
approving American Stock Exchange listing and trading of fourteen 
funds of the Commodities and Currency Trust).
    \7\ See Securities Exchange Act Release No. 58457 (September 3, 
2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-2008-91) (order 
approving Exchange listing and trading of fourteen funds of the 
Commodities and Currency Trust).
    \8\ See, e.g., Securities Exchange Act Release Nos. 57456 (March 
7, 2008), 73 FR 13599 (March 13, 2008) (SR-NYSEArca-2007-91) (order 
granting accelerated approval for NYSE Arca listing the iShares GS 
Commodity Trusts); 59895 (May 8, 2009), 74 FR 22993 (May 15, 2009) 
(SR-NYSEArca-2009-40) (order granting accelerated approval for NYSE 
Arca listing the ETFS Gold Trust); 58365 (August 14, 2008), 73 FR 
49522 (August 21, 2008) (order granting accelerated approval for 
NYSE Arca listing of four CurrencyShares Trusts); 63598 (December 
22, 2010), 75 FR 82106 (December 29, 2010) (SR-NYSEArca-2010-98) 
(order approving listing and trading on the Exchange of WisdomTree 
Managed Futures Strategy Fund).
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The Funds and Their Principal Investment Strategies
    According to the Registration Statement, the Funds seek to provide 
investment results (before fees and expenses) that correspond to the 
performance of the S&P Dynamic Futures Index (the ``DFI'' or the 
``Index'') or to a sub-index of the Index (a ``Sub-Index''). The 
ProShares Managed Futures Strategy seeks to provide investment results 
(before fees and expenses) that correspond to the performance of the 
DFI. The ProShares Commodity Managed Futures Strategy seeks to provide 
investment results (before fees and expenses) that correspond to the 
performance of the S&P Dynamic Commodities Futures Index (the 
``DCFI''), a Sub-Index of the DFI. The ProShares Financial Managed 
Futures Strategy seeks to provide investment results (before fees and 
expenses) that correspond to the performance of the S&P Dynamic 
Financial Futures Index (the ``DFFI''), another Sub-Index of the DFI.
    The Index and each Sub-Index were developed by Standard & Poor's 
and are long/short rules-based investable indexes designed to attempt 
to capture the economic benefit derived from both rising and declining 
trends in futures prices.\9\ The Index is composed of unleveraged 
positions in U.S. exchange-traded futures contracts on sixteen 
different tangible commodities (``Commodities Futures Contracts''), as 
well as U.S. exchange-traded futures contracts on eight different 
financials, such as major currencies and U.S. Treasury securities 
(``Financials Futures Contracts'' and together with the Commodities 
Futures Contracts, the ``Index Components'').\10\ Commodities Futures 
Contracts and Financials Futures Contracts each comprise a Sub-Index of 
the Index: The DCFI and the DFFI, respectively (together, the ``Sub-
Indexes'').
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    \9\ Standard & Poor's is not a broker-dealer, is not affiliated 
with a broker-dealer, and has implemented procedures designed to 
prevent the use and dissemination of material, non-public 
information regarding the Index and Sub-Indexes.
    \10\ The Index Components are traded on the Chicago Mercantile 
Exchange, Inc. (``CME''), COMEX (a division of CME), Chicago Board 
of Trade (``CBOT'', a division of CME), NYMEX (a division of CME), 
and ICE Futures U.S. (``ICE'') (collectively, the ``Futures 
Exchanges'').
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    In order to achieve the investment objective of the Funds, the 
Sponsor will invest in: i) exchange-traded futures contracts of the 
type comprising the Index or Sub-Indexes, as applicable (``Futures 
Contracts'');\11\ and/or ii) under limited circumstances (as further 
described herein), swap agreements whose value is derived from the 
level of the Index, a Sub-Index, one or more Futures Contracts, or, in 
the case of currency-based Financials Futures Contracts, the exchange 
rates underlying such Financials Futures Contracts.\12\ Each Fund may 
also invest in cash or cash equivalents such as U.S. Treasury 
securities or other high credit quality short-term fixed-income or 
similar securities (including shares of money market funds, bank 
deposits, bank money market accounts, certain variable rate-demand 
notes and repurchase agreements collateralized by government 
securities) that may serve as collateral for the Futures Contracts or 
swap agreements. The Sponsor does not expect that the Funds will be 
invested directly in any commodity or currency.
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    \11\ Futures Contracts will be the same type of contracts as the 
Index Components, but the expiration dates of such Futures Contracts 
may differ from the expiration dates of the Index Components at any 
given point in time.
    \12\ Terms relating to the Funds and the Shares that are 
referred to, but not defined herein, are defined in the Registration 
Statement.
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    According to the Registration Statement, each Fund seeks to achieve 
its investment objective by investing, under normal market 
conditions,\13\ in exchange-traded Futures Contracts. In the event 
position accountability rules or position limits with respect to a 
Futures Contract is reached with respect to a Fund, the Sponsor may, in 
its commercially reasonable judgment, cause such Fund to obtain 
exposure through swaps whose value is derived from the level of the 
Index, a Sub-Index, one or more Futures Contracts, or, in the case of 
currency-based Financials Futures Contracts, the exchange rates 
underlying such Financials Futures Contracts or invest in swaps if such

[[Page 80435]]

instruments tend to exhibit trading prices or returns that correlate 
with the Index, the Sub-Indexes or any Futures Contract and will 
further the investment objective of the Funds.\14\ The Funds may also 
invest in swaps if the market for a specific Futures Contract 
experiences emergencies (e.g., natural disaster, terrorist attack or an 
act of God) or disruptions (e.g., a trading halt or a flash crash) that 
would prevent the Funds from obtaining the appropriate amount of 
investment exposure to the affected Futures Contracts directly.\15\
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    \13\ The term ``under normal market circumstances [sic]'' 
includes, but is not limited to, the absence of extreme volatility 
or trading halts in the futures markets or the financial markets 
generally; operational issues causing dissemination of inaccurate 
market information; or force majeure type events such as systems 
failure, natural or man-made disaster, act of God, armed conflict, 
act of terrorism, riot or labor disruption or any similar 
intervening circumstance.
    \14\ To the extent practicable, the Funds will invest in swaps 
cleared through the facilities of a centralized clearing house.
    \15\ According to the Registration Statement, the Sponsor will 
also attempt to mitigate the Funds' credit risk by transacting only 
with large, well-capitalized institutions using measures designed to 
determine the creditworthiness of a counterparty. The Sponsor will 
take various steps to limit counterparty credit risk, as described 
in the Registration Statement.
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The Index and the Sub-Indexes
    The Index is composed of the Index Components, representing 
unleveraged long or short positions in U.S. exchange-traded futures 
contracts in the commodity and financial markets.\16\ These Index 
Components are then formed into ``sectors'' of one or more contracts 
with similar characteristics. Index Components within each sector are 
chosen based on fundamental characteristics and liquidity. The 
Commodities Futures Contracts comprise the DCFI as described below, and 
the Financials Futures Contracts comprise the DFFI, as described below.
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    \16\ As set forth in the Index weighting scheme example below, 
the commodities portion of the Index consists of multiple commodity 
sectors (e.g., Energy, Industrial Metals) and each sector is 
assigned a percentage sector weight. Each sector, in turn, consists 
of one or more components, each with an assigned component weight. 
Similarly, the financial markets portion of the Index consists of 
multiple foreign currency and U.S. Treasury sectors (e.g., 
Australian Dollar and U.S. Treasury Notes), each with an assigned 
sector weight. Each such sector has one component, with an assigned 
component weight.
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    Weightings of the Commodities Futures Contracts are based on 
generally known world production levels, as adjusted to limit the 
impact of the energy sector. Weightings of the Financials Futures 
Contracts are based on, but not directly proportional to, gross 
domestic product (``GDP'').
    The positions the Index (and accordingly, each Sub-Index) takes in 
the Index Components are not long-only, but are set by sector, long, 
short or, in the case of Energy, flat (zero-weight) based on the 
relation of the current aggregate price input of the Index Components 
in a particular sector (e.g., Grains) with a seven-month weighted 
moving average of the aggregate price inputs of the same Index 
Components.
    The following charts reflect the initial 2011 weighting schemes for 
the Index and each Sub-Index. For the Index and the DCFI, the sector 
weights will vary based on whether or not Energy is positioned long or 
flat. If Energy is flat, its weight is redistributed pro-rata among the 
other sectors. Since the DFFI has no commodity exposure, the weights of 
the sectors and the Index Components that comprise it are not impacted 
by the long or flat positioning of the Energy sector.
    For the Index, if Energy is positioned ``long,'' the initial Index 
weights, together with information about the exchange and trading hours 
for each Futures Contract, are as follows:

                                                           Index Weights with Energy ``Long''
--------------------------------------------------------------------------------------------------------------------------------------------------------
                         Weight                            Weight                            Weight
      Sub-Index        (percent)          Sector         (percent)        Component        (percent)         Exchange            Trading hours \17\
--------------------------------------------------------------------------------------------------------------------------------------------------------
DCFI................           50  Energy.............        14.12  Light Crude........        10.20  NYMEX (CME)........  6:00 pm-5:15 pm next day.
                                                                     Heating Oil........         1.54  NYMEX (CME)........  6:00 pm-5:15 pm next day.
                                                                     RBOB Gasoline......         1.40  NYMEX (CME)........  6:00 pm-5:15 pm next day.
                                                                     Natural Gas........         0.98  NYMEX (CME)........  6:00 pm-5:15 pm next day.
                                   Industrial Metals..         5.02  Copper.............         5.02  COMEX (CME)........  6:00 pm-5:15 pm next day.
                                   Precious Metals....         3.79  Gold...............         3.22  COMEX (CME)........  6:00 pm-5:15 pm next day.
                                                                     Silver.............         0.57  COMEX (CME)........  6:00 pm-5:15 pm next day.
                                   Livestock..........         5.27  Lean Hogs..........         2.04  CME................  **.\18\
                                                                     Live Cattle........         3.23  CME................  **.\19\
                                   Grains.............        13.85  Corn...............         5.75  CBOT (CME).........  7:00 pm-8:15 am; 10:30 am-
                                                                                                                             2:15 pm
                                                                     Soybeans...........         3.37  CBOT (CME).........  7:00 pm-8:15 am; 10:30 am-
                                                                                                                             2:15 pm
                                                                     Wheat..............         4.73  CBOT (CME).........  7:00 pm-8:15 am; 10:30 am-
                                                                                                                             2:15 pm
                                   Softs..............         7.95  Coffee.............         1.26  ICE................  3:30 am-2:00 pm
                                                                     Cocoa..............         0.42  ICE................  4:00 am-2:00 pm
                                                                     Sugar..............         3.58  ICE................  3:30 am-2:00 pm
                                                                     Cotton.............         2.69  ICE................  9:00 pm-2:30 pm next day.
DFFI................           50  Australian Dollar..         1.67  Australian Dollar..  ...........  CME................  6:00 pm-5:15 pm next day.
                                   British Pound......         3.08  British Pound......  ...........  CME................  6:00 pm-5:15 pm next day.
                                   Canadian Dollar....         2.10  Canadian Dollar....  ...........  CME................  6:00 pm-5:15 pm next day.
                                   Euro...............        15.67  Euro...............  ...........  CME................  6:00 pm-5:15 pm next day.

[[Page 80436]]

 
                                   Japanese Yen.......         7.31  Japanese Yen.......  ...........  CME................  6:00 pm-5:15 pm next day.
                                   Swiss Franc........         0.70  Swiss Franc........  ...........  CME................  6:00 pm-5:15 pm next day.
                                   U.S. Treasury Notes         9.74  U.S. Treasury Notes  ...........  CBOT (CME).........  6:30 pm-5:00 pm next day.
                                    \20\.
                     -----------------------------------------------------------------------------------------------------------------------------------
    Totals..........          100  ...................       100     ...................       100     ...................
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\17\ All times are Eastern time (``E.T.''), inclusive of electronic and open outcry trading sessions, as applicable.
\18\ Live Cattle trade from 10:05 a.m. Monday to 2:55 p.m. Friday, with daily trading halts from 5 p.m. to 6 p.m.
\19\ Lean Hogs trade from 10:05 a.m. Monday to 2:55 p.m. Friday, with daily trading halts from 5 p.m. to 6 p.m.
\20\ ``U.S. Treasury Notes'' refer to 10 year U.S. Treasury Note futures.
\21\ ``U.S. Treasury Bonds'' refer to those futures with underlying bonds of a remaining term to call or maturity of 15-25 years.

    For the DCFI, if Energy is positioned ``flat,'' the initial Index 
weights will be as follows:

                                       Index Weights With Energy ``Flat''
----------------------------------------------------------------------------------------------------------------
                             Weight                                Weight                               Weight
        Sub-Index          (percent)            Sector           (percent)          Component         (percent)
----------------------------------------------------------------------------------------------------------------
DCFI....................        41.78  Energy.................         0.00  Light Crude...........         0.00
                          ...........  .......................  ...........  Heating Oil...........         0.00
                          ...........  .......................  ...........  RBOB Gasoline.........         0.00
                          ...........  .......................  ...........  Natural Gas...........         0.00
                          ...........  Industrial Metals......         5.84  Copper................         5.84
                          ...........  Precious Metals........         4.41  Gold..................         3.75
                                                                             Silver................         0.66
                          ...........  Livestock..............         6.13  Lean Hogs.............         2.38
                                                                             Live Cattle...........         3.76
                          ...........  Grains.................        16.13  Corn..................         6.70
                                                                             Soybeans..............         3.92
                                                                             Wheat.................         5.51
                                       Softs..................         9.26  Coffee................         1.47
                                                                             Cocoa.................         0.48
                                                                             Sugar.................         4.17
                                                                             Cotton................         3.13
DFFI....................        58.22  Australian Dollar......         1.94  Australian Dollar.....         1.94
                                       British Pound..........         3.59  British Pound.........         3.59
                                       Canadian Dollar........         2.44  Canadian Dollar.......         2.44
                                       Euro...................        18.24  Euro..................        18.24
                                       Japanese Yen...........         8.51  Japanese Yen..........         8.51
                                       Swiss Franc............         0.81  Swiss Franc...........         0.81
                                       U.S. Treasury Notes....        11.34  U.S. Treasury Notes...        11.34
                                       U.S. Treasury Bonds....        11.34  U.S. Treasury Bonds...        11.34
                         ---------------------------------------------------------------------------------------
    Totals..............       100     .......................       100     ......................       100
----------------------------------------------------------------------------------------------------------------

    For the DCFI, if Energy is positioned ``long'' the initial Sub-
Index weightings would be as follows:

                    DCFI Weights With Energy ``Long''
------------------------------------------------------------------------
                                  Weight                        Weight
            Sector              (percent)      Component      (percent)
------------------------------------------------------------------------
Energy.......................        28.24  Light Crude....        20.40
                                            Heating Oil....         3.08
                                            RBOB Gasoline..         2.80
                                            Natural Gas....         1.96
Industrial Metals............        10.04  Copper.........        10.04
Precious Metals..............         7.58  Gold...........         6.44
                                            Silver.........         1.14
Livestock....................        10.54  Lean Hogs......         4.08
                                            Live Cattle....         6.46

[[Page 80437]]

 
Grains.......................        27.70  Corn...........        11.50
                                            Soybeans.......         6.74
                                            Wheat..........         9.46
Softs........................        15.90  Coffee.........         2.52
                                            Cocoa..........         0.84
                                            Sugar..........         7.16
                                            Cotton.........         5.38
                              ------------------------------------------
    Total....................       100     ...............       100
------------------------------------------------------------------------

    For the DCFI, if Energy is initially positioned ``flat'' the 
weights would be as follows:

                                        DCFI Weights With Energy ``Flat''
----------------------------------------------------------------------------------------------------------------
                                                    Weight                                            Weight
                     Sector                       (percent)                Component                 (percent)
----------------------------------------------------------------------------------------------------------------
Energy.........................................         0.00  Light Crude.......................         0.00
                                                              Heating Oil.......................         0.00
                                                              RBOB Gasoline.....................         0.00
                                                              Natural Gas.......................         0.00
Industrial Metals..............................        13.98  Copper............................        13.98
Precious Metals................................        10.56  Gold..............................         8.99
                                                              Silver............................         1.58
Livestock......................................        14.69  Lean Hogs.........................         5.69
                                                              Live Cattle.......................         8.99
Grains.........................................        38.61  Corn..............................        16.04
                                                              Soybeans..........................         9.39
                                                              Wheat.............................        13.18
Softs..........................................        22.16  Coffee............................         3.53
                                                              Cocoa.............................         1.16
                                                              Sugar.............................         9.98
                                                              Cotton............................         7.50
                                                ----------------------------------------------------------------
    Total......................................       100     ..................................       100
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    Finally, for the DFFI, the initial weights are as follows:

                              DFFI Weights
------------------------------------------------------------------------
                                  Weight                        Weight
            Sector              (percent)      Component      (percent)
------------------------------------------------------------------------
Australian Dollar............         3.34  Australian              3.34
                                             Dollar.
British Pound................         6.16  British Pound..         6.16
Canadian Dollar..............         4.20  Canadian Dollar         4.20
Euro.........................        31.34  Euro...........        31.34
Japanese Yen.................        14.62  Japanese Yen...        14.62
Swiss Franc..................         1.40  Swiss Franc....         1.40
U.S. Treasury Notes..........        19.48  U.S. Treasury          19.48
                                             Notes.
U.S. Treasury Bonds..........        19.48  U.S. Treasury          19.48
                                             Bonds.
                              ------------------------------------------
    Total....................       100     ...............       100
------------------------------------------------------------------------

    Sectors are rebalanced monthly to the applicable above-mentioned 
weights; the weighting of each individual Index Component within a 
particular sector is rebalanced annually.
Energy's Short Exemption
    If Energy receives a negative price signal (as determined by the 
weighted moving average, as discussed below), it is positioned flat 
(zero-weight) rather than short. This is due to the ``risk of ruin'' 
inherent in the Energy sector because of the concentration of supply in 
a relatively small number of production locales. If supply from these 
locales were to be disrupted (whether by war, terrorism, or other 
events), the price of the Energy sector within the Index and the DCFI 
is exposed to large

[[Page 80438]]

scale price increases regardless of the current trend and position 
setting. This would expose the Index and the DCFI to significant, if 
not total, losses in such a circumstance. As such, the Energy sector is 
positioned flat in a negative price environment and the weight it would 
otherwise receive is redistributed pro rata among the other sectors of 
the Index and the DCFI, as applicable.
Determining the Long/Short Positioning of the Sectors
    The rule for the Index and each Sub-Index regarding long or short 
positions is summarized as follows:
     Long positions are tracked when a sector's current 
aggregate 1-month price change is greater than or equal to the 
exponential average of the past seven monthly price inputs; and
     Short positions (or flat, in the case of Energy) are 
tracked when a sector's current 1-month price change is less than the 
exponential average of the past seven monthly price inputs.
    Monthly positions are determined on the second to last DFI business 
day of the month (defined as the position determination date, or PDD) 
when the monthly percentage change of an Index Component's price is 
compared to past monthly price changes, exponentially weighted to give 
greatest weight to the most recent return and least weight to the 
return seven months prior. The weighted sum of the percentage changes 
of all the Index Component prices equals the daily movement of the 
Index.
    To create an exponential average for comparison, price inputs 
(percentage change from current and previous PDDs) are weighted per the 
schedule below. Due to this weighting methodology, current price 
movements are more important than those of the more distant past.

------------------------------------------------------------------------
                                                              Weight
                    Number of months                         (percent)
------------------------------------------------------------------------
7.......................................................            2.32
6.......................................................            3.71
5.......................................................            5.94
4.......................................................            9.51
3.......................................................           15.22
2.......................................................           24.34
1.......................................................           38.95
                                                         ---------------
    SUM.................................................          100.00
------------------------------------------------------------------------

    Because this valuation is done on a sector basis, all the Index 
Components within a particular sector will be set long, short (or flat, 
in the case of Energy) upon each monthly rebalancing.
Sector Rebalancing
    While sector weights are fixed and rebalanced back to their base 
weight monthly, Index Components that are part of a multicomponent 
sector (energy, livestock, grains, and precious metals) are only reset 
back to their base weight within their sector during the first five 
business days of February. For example (assuming Energy is long), the 
Japanese Yen (a single component sector) and Grains (a multi-component 
sector) will rebalance to 6.85% and 11.16% of the Index respectively on 
the roll date, as described below. However, the individual components 
within the grains sector will only rebalance to their base weight at 
the beginning of the year. During the year, they ``float'' within the 
11.16% Index Grains weighting.
    During this monthly rebalancing, the Index will also ``roll'' 
certain of its positions from the current contract to a contract 
further from settlement.\22\
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    \22\ The Index is composed of Index Components, which are 
futures contracts. In order to maintain consistent exposure to the 
Index Components, each Index Component contract must be sold prior 
to its expiration date and replaced by a contract maturing at a 
specified date in the future. This process is known as rolling. 
Index Component contracts are rolled periodically. The rolls are 
implemented pursuant to a roll schedule over a five-day period from 
the first through the fifth Index business days of the month. An 
Index business day is any day on which the majority of the Index 
Components are open for official trading and official settlement 
prices are provided, excluding holidays and weekends. The roll 
schedule is set forth in the Registration Statement.
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Net Asset Value (``NAV'')
    The NAV in respect of each Fund means the total assets of such Fund 
including, but not limited to, all cash and cash equivalents or other 
debt securities less total liabilities of such Fund, each determined on 
the basis of generally accepted accounting principles in the United 
States, consistently applied under the accrual method of accounting. In 
particular, NAV will include any unrealized profit or loss on open 
Futures Contracts and other holdings, if any, and any other credit or 
debit accruing to a Fund but unpaid or not received by such Fund. The 
NAV per Share of each Fund will be computed by dividing the value of 
the net assets of such Fund (i.e., the value of its total assets less 
total liabilities) by its total number of Shares outstanding. Expenses 
and fees will be accrued daily and taken into account for purposes of 
determining NAV. The NAV for the Funds linked to the DFI and DFFI will 
be calculated daily by the Administrator at 3 p.m. E.T. and will be 
disseminated daily to market participants. The NAV for the Fund linked 
to the DCFI is calculated daily at 2:30 p.m., E.T.\23\
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    \23\ The Exchange stated that ``The NAV for the Fund linked to 
the DCFI which is calculated daily at 2:30 p.m. E.T. will also be 
disseminated daily to market participants.'' See electronic mail 
correspondence, dated December 15, 2011, from Tim Malinowski, Senior 
Director, NYSE Euronext, to Kristie Diemer, Special Counsel, 
Commission.
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    In calculating the NAV of each Fund, all open Futures Contracts 
will be calculated at their then current market value, as described in 
the Registration Statement. The current market value of all open 
Futures Contracts, to the extent applicable, will be based upon the 
settlement price for that particular Futures Contract on the date with 
respect to which NAV is being determined, as described in the 
Registration Statement.
    The settlement value of a Fund's swap agreements, as applicable, 
will be determined by applying the then-current disseminated value for 
the Index Components to the terms of the Funds' swap agreements. 
However, in the event that an underlying Futures Contract is not 
trading due to the operation of daily limits or otherwise, the Sponsor 
may in its sole discretion choose to fair value the applicable Index or 
Sub-Index level in order to value a Fund's swap agreements for purposes 
of NAV calculation.
    The Exchange will obtain a representation (prior to listing of each 
Fund) from the Trust that the NAV per Share will be calculated daily 
and made available to all market participants at the same time.
Indicative Optimized Portfolio Value (``IOPV'')
    According to the Registration Statement, the IOPV is an indicator 
of the value of Futures Contracts and other applicable holdings, cash 
and receivables less liabilities of each Fund at the time the IOPV is 
disseminated.
    For each Fund, the IOPV will be widely disseminated on a per Share 
basis by one or more major market data vendors every 15 seconds during 
the NYSE Arca Core Trading Session (9:30 a.m. to 4 p.m., E.T.).\24\ The 
value of a Share may be influenced by non-concurrent trading hours 
between NYSE Arca and the applicable Futures Exchanges trading Futures 
Contracts when the Shares are traded on NYSE Arca after normal trading 
hours of such Futures Exchanges. The IOPV will be updated during the 
NYSE Arca Core Trading Session when applicable Futures Exchanges are 
trading any Futures Contracts held by the Funds. However, the IOPV that 
will be disseminated between 2 p.m. E.T. and

[[Page 80439]]

the close of the NYSE Arca Core Trading Session will be impacted by 
static values for certain Futures Contracts.\25\ For each Fund, the 
IOPV will be calculated by NYSE Arca throughout the NYSE Arca Core 
Trading Session using the prior day's closing NAV of such Fund as a 
base and updating throughout the trading day changes in the value of 
each Fund's holdings. The IOPV should not be viewed as an actual real 
time update of the NAV because NAV is calculated only once each trading 
day at 3 p.m. E.T. (at 2:30 p.m. E.T. for the DCFI). The IOPV also 
should not be viewed as a precise value of the Shares.
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    \24\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IOPVs 
published on CTA or other data feeds.
    \25\ The value of the IOPV will be based on the underlying 
Futures Contracts. Once a particular Futures Contract closes for 
trading, a static value for that Futures Contract will be used to 
calculate the IOPV.
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    According to the Registration Statement, dissemination of the IOPV 
provides additional information that is not otherwise available to the 
public in such form and may be useful to investors and market 
professionals in connection with the trading of Shares.
Creation and Redemption of Shares
    According to the Registration Statement, each Fund will create and 
redeem Shares from time to time, but only in one or more Creation 
Units. A Creation Unit is a block of 50,000 Shares. Creation Units may 
be created or redeemed only by authorized participants, as described in 
the Registration Statement. Except when aggregated in Creation Units, 
the Shares will not be redeemable securities. The Sponsor will make 
available on a daily basis the total payment required to create each 
Creation Unit of a Fund on the purchase order date in connection with 
the issuance of the respective Shares. Authorized participants may pay 
a fixed and/or variable transaction fee in connection with each order 
to create or redeem a Creation Unit. Authorized participants may sell 
the Shares included in the Creation Units they purchase from the Funds 
to other investors. On any business day, an authorized participant may 
place an order prior to 10:45 a.m. E.T. with the Distributor to create 
one or more Creation Units. The total cash payment required to create 
each Creation Unit will be the NAV of 50,000 Shares of the applicable 
Fund on the purchase order date plus the applicable transaction fee.
    According to the Registration Statement, the procedures by which an 
authorized participant can redeem one or more Creation Units will 
mirror the procedures for the creation of Creation Units. On any 
business day, an authorized participant may place an order prior to 
10:45 a.m. E.T. with the Distributor to redeem one or more Creation 
Units. Individual shareholders may not redeem directly from a Fund.
    By placing a redemption order, an authorized participant agrees to 
deliver the Creation Units to be redeemed through the Depository Trust 
Company's book-entry system to a Fund not later than noon (E.T.), on 
the third business day immediately following the redemption order date 
(T+3). The redemption proceeds from a Fund will consist of the cash 
redemption amount. The cash redemption amount is an amount of cash 
equal to the NAV of the number of Creation Unit(s) of a Fund requested 
in the authorized participant's redemption order as of the time of the 
calculation of the Fund's NAV on the redemption order date, less 
transaction fees, as described in the Registration Statement.
Availability of Information Regarding the Shares
    The Web site for the Funds (www.proshares.com) and/or the Exchange, 
which are publicly accessible at no charge, will contain the following 
information: (a) The current NAV per Share daily and the prior business 
day's NAV per Share; (b) calculation of the premium or discount of the 
closing market price against the NAV per Share; (c) the prospectus; and 
(d) other applicable quantitative information.
    The Exchange also will disseminate on a daily basis via the 
Consolidated Tape Association (``CTA'') information with respect to the 
recent NAV, and Shares outstanding. The Exchange will also make 
available on its Web site (http://www.nyse.com) daily trading volume of 
the Shares, closing prices of the Shares, and the NAV per Share. The 
intra-day, closing, and settlement prices of the Futures Contracts are 
also readily available, as applicable, from the respective Futures 
Exchanges.\26\ Quotation and last sale information for the Shares will 
be available via the CTA high-speed line.
---------------------------------------------------------------------------

    \26\ See note 10, supra.
---------------------------------------------------------------------------

Portfolio Disclosure
    Each Fund's total portfolio composition will be disclosed on such 
Fund's Web site or another relevant Web site as determined by the Trust 
and/or the Exchange.\27\ The Trust will provide Web site disclosure of 
portfolio holdings daily and will include, as applicable, the names, 
notional value (in U.S. dollars) and number of Futures Contracts or 
units of swaps held by a Fund, if any, cash equivalents and the amount 
of cash held in the portfolio of each Fund. This public Web site 
disclosure of the portfolio composition of the Funds will occur at the 
same time as the disclosure by the Sponsor of the portfolio composition 
to Authorized Participants, 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 Participants. 
Accordingly, each investor will have access to the current portfolio 
composition of the Funds through the Funds' Web site, and/or at the 
Exchange's Web site.
---------------------------------------------------------------------------

    \27\ The Exchange has clarified that each Fund's total portfolio 
composition will be disclosed only on such Fund's Web site for 
purposes of this proposed rule change. See electronic mail 
correspondence, dated December 15, 2011, from Tim Malinowski, Senior 
Director, NYSE Euronext, to Kristie Diemer, Special Counsel, 
Commission.
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Availability of Information About the Index and Sub-Indexes
    The daily closing Index level and the percentage change in the 
daily closing Index level for the Index and each Sub-Index will be 
publicly available from one or more major market data vendors. Data 
regarding the Index and each Sub-Index, updated every 15 seconds during 
the NYSE Arca Core Trading Session, is also available from Standard & 
Poor's on a subscription basis. Several independent data vendors also 
package and disseminate Index and Sub-Index data in various value-added 
formats (including vendors displaying both Index constituents and Index 
levels and vendors displaying Index levels only). Data regarding the 
Index Components is also available from the Web sites of the Futures 
Exchanges. Data regarding the commodities, currencies and Treasury 
securities underlying the Index Components is publicly available from 
various financial information service providers.
Criteria for Initial and Continued Listing
    The Funds will be subject to the criteria in NYSE Arca Equities 
Rule 8.200 and Commentary .02 thereto for initial and continued listing 
of the Shares.
    The anticipated minimum number of Shares for each Fund to be 
outstanding at the start of trading will be 100,000 Shares. The 
Exchange believes that this anticipated minimum number of Shares for 
each Fund to be outstanding at the start of trading is sufficient to 
provide adequate market liquidity and to further the objectives of each 
Fund. The Exchange represents that, for the initial and continued 
listing of the Shares, the Funds must be in compliance with

[[Page 80440]]

NYSE Arca Equities Rule 5.3 and Rule 10A-3 under the Act.
Trading Rules
    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. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. The Exchange has 
appropriate rules to facilitate transactions in the Shares during all 
trading sessions. As provided in NYSE Arca Equities Rule 7.6(a), 
Commentary .03, the minimum price variation (``MPV'') for quoting and 
entry of orders in equity securities traded on the NYSE Arca 
Marketplace is $0.01, with the exception of securities that are priced 
less than $1.00 for which the MPV for order entry is $0.0001.
    The trading of the Shares will be subject to NYSE Arca Equities 
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on 
Equity Trading Permit (``ETP'') Holders acting as registered Market 
Makers in TIRs to facilitate surveillance. See ``Surveillance'' below 
for more information.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading may 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 Futures Contracts, or 
(2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule \28\ or by the halt or suspension of trading of the 
underlying Futures Contracts.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

    The Exchange represents that the Exchange may halt trading during 
the day in which an interruption to the dissemination of the IOPV, the 
level of the Index (or Sub-Index) or the value of the underlying 
Futures Contracts occurs. If an interruption to the dissemination of 
the IOPV, the level of the Index (or Sub-Index) 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, if the 
Exchange becomes aware that the NAV with respect to the Shares is not 
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.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products, including TIRs, 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 can obtain market surveillance information, including 
customer identity information, with respect to transactions occurring 
on the Futures Exchanges, all of which are members of the Intermarket 
Surveillance Group (``ISG'').\29\
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    \29\ A list of ISG members is available at www.isgportal.org. 
The Exchange notes that not all components of the portfolio for the 
Funds may trade on markets that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.
---------------------------------------------------------------------------

    In addition, for components traded on exchanges, not more than 10% 
of the weight of a Fund's portfolio in the aggregate shall consist of 
components whose principal trading market is not a member of ISG or is 
a market with which the Exchange does not have a comprehensive 
surveillance sharing agreement.
    The Exchange also has a general policy prohibiting the distribution 
of material, non-public information by its employees.
Information Bulletin
    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: (1) The risks involved 
in trading the Shares during the Opening and Late Trading Sessions when 
an updated IOPV will not be calculated or publicly disseminated, as 
well as during the Core Trading Session where the IOPV may be based in 
part on static underlying values; (2) the procedures for purchases and 
redemptions of Shares in Creation Baskets and Redemption Baskets (and 
that Shares are not individually redeemable); (3) 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; (4) how information regarding the IOPV is 
disseminated; (5) 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 (6) trading information.
    In addition, the Information Bulletin will advise ETP Holders, 
prior to the commencement of trading, of the prospectus delivery 
requirements applicable to the Funds. The Exchange notes that investors 
purchasing Shares directly from the Funds will receive a prospectus. 
ETP Holders purchasing Shares from the Funds for resale to investors 
will deliver a prospectus to such investors. The Information Bulletin 
will also discuss any exemptive, no-action and interpretive relief 
granted by the Commission from any rules under the Act.
    In addition, the Information Bulletin will reference that the Funds 
are subject to various fees and expenses described in the Registration 
Statement. The Information Bulletin will also reference that the 
Commodity Futures Trading Commission has regulatory jurisdiction over 
the trading of futures contracts traded on U.S. markets.
    The Information Bulletin will also disclose the trading hours of 
the Shares of the Funds. The Bulletin will disclose that information 
about the Shares of the Funds is publicly available on the Funds' Web 
site.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \30\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities

[[Page 80441]]

Rule 8.200 and Commentary .02 thereto. The Exchange has in place 
surveillance procedures that are adequate to properly monitor trading 
in the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange may obtain information via ISG from other exchanges that 
are members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. The Futures Contracts are 
traded on the Futures Exchanges, each of which is an ISG member, and 
information regarding trading in the Index Components is available from 
the Web sites of the respective Futures Exchanges and from major market 
data vendors. The daily closing Index level and the percentage change 
in the daily closing Index level for the Index and each Sub-Index will 
be publicly available from one or more major market data vendors. Data 
regarding the Index and each Sub-Index, updated every 15 seconds during 
the NYSE Arca Core Trading Session, is also available from Standard & 
Poor's on a subscription basis. Standard & Poor's has implemented 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the Index and Sub-Indexes. Data 
regarding the commodities, currencies and Treasury securities 
underlying the Index Components is publicly available from various 
financial information service providers. The Exchange may halt trading 
during the day in which an interruption to the dissemination of the 
IOPV, the level of the Index (or Sub-Index) or the value of the 
underlying Futures Contracts occurs. If an interruption to the 
dissemination of the IOPV, the level of the Index (or Sub-Index) 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. Quotation and 
last sale information for the Shares will be available via CTA. Each 
Fund's total portfolio composition will be disclosed on the Funds' Web 
site.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information is publicly available regarding the 
Funds and the Shares, thereby promoting market transparency. The NAV 
per Share will be calculated daily and made available to all market 
participants at the same time. One or more major market data vendors 
will disseminate for the Funds on a daily basis information with 
respect to the recent NAV per Share and Shares outstanding. For each 
Fund, the IOPV will be widely disseminated on a per Share basis by one 
or more major market data vendors every 15 seconds during the NYSE Arca 
Core Trading Session.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of exchange-traded products that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding the Funds' holdings, IOPV, and 
quotation and last sale information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEARCA-2011-94 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2011-94. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street 
NE., Washington, DC 20549-1090, on official business days between 10 
a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at the NYSE's principal office and on its 
Internet Web site at http://www.nyse.com. All comments received will be 
posted without change; the Commission does not edit personal 
identifying information from submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2011-94 and should be submitted 
on or before January 13, 2012.


[[Page 80442]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Secretary.
[FR Doc. 2011-32878 Filed 12-22-11; 8:45 am]
BILLING CODE 8011-01-P