[Federal Register Volume 77, Number 15 (Tuesday, January 24, 2012)]
[Notices]
[Pages 3532-3539]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-1290]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66180; File No. SR-NYSEArca-2012-04]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating To Listing and Trading of Shares of 
Twenty-Six Series of ProShares Trust II Under NYSE Arca Equities Rule 
8.200

January 18, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on January 6, 2012, NYSE Arca, Inc. (``Exchange'' 
or ``NYSE Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. 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\ 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 UltraPro Australian 
Dollar, ProShares UltraPro Canadian Dollar, ProShares UltraPro Swiss 
Franc, ProShares UltraPro Euro, ProShares UltraPro U.S. Dollar, and 
ProShares UltraPro Yen (collectively, ``UltraPro Funds''); ProShares 
UltraPro Short Australian Dollar, ProShares UltraPro Short Canadian 
Dollar, ProShares UltraPro Short Swiss Franc, ProShares UltraPro Short 
Euro, ProShares UltraPro Short U.S. Dollar, and ProShares UltraPro 
Short Yen (collectively, ``UltraPro Short Funds''); ProShares Ultra 
Australian Dollar, ProShares Ultra Canadian Dollar, ProShares Ultra 
Swiss Franc and ProShares Ultra U.S. Dollar (collectively, ``Ultra 
Funds''); ProShares UltraShort Australian Dollar, ProShares UltraShort 
Canadian Dollar, ProShares UltraShort Swiss Franc and ProShares 
UltraShort U.S. Dollar (collectively, ``UltraShort Funds''); and 
ProShares Short Australian Dollar, ProShares Short Canadian Dollar, 
ProShares Short Swiss Franc, ProShares Short Euro, ProShares Short U.S. 
Dollar, and ProShares Short Yen (collectively, ``Short Funds''). The 
text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and 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 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 
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'').\3\ The Exchange proposes to list 
and trade shares (``Shares'') of the following pursuant to NYSE Arca 
Equities Rule 8.200: ProShares UltraPro Australian Dollar, ProShares 
UltraPro Canadian Dollar, ProShares UltraPro Swiss Franc, ProShares 
UltraPro Euro, ProShares UltraPro U.S. Dollar, ProShares UltraPro Yen, 
ProShares UltraPro Short Australian Dollar, ProShares UltraPro Short 
Canadian Dollar, ProShares UltraPro Short Swiss Franc, ProShares 
UltraPro Short Euro, ProShares UltraPro Short U.S. Dollar, ProShares 
UltraPro Short Yen, ProShares Ultra Australian Dollar, ProShares Ultra 
Canadian Dollar,

[[Page 3533]]

ProShares Ultra Swiss Franc, ProShares Ultra U.S. Dollar, ProShares 
UltraShort Australian Dollar, ProShares UltraShort Canadian Dollar, 
ProShares UltraShort Swiss Franc, ProShares UltraShort U.S. Dollar, 
ProShares Short Australian Dollar, ProShares Short Canadian Dollar, 
ProShares Short Swiss Franc, ProShares Short Euro, ProShares Short U.S. 
Dollar, and ProShares Short Yen (each a ``Fund'' and, collectively, 
``Funds'').\4\ Each of the Funds 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. 
(``Administrator'') serves as the administrator, custodian and transfer 
agent of the Funds. SEI Investments Distribution Co. (``Distributor'') 
serves as distributor of the Shares.
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    \3\ 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.
    \4\ See registration statement on Form S-1, dated December 22, 
2011 (File No. 333-178707) (``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 other series of the Commodities and Currency 
Trust (now known as ProShares Trust II) on the American Stock Exchange 
LLC,\5\ trading on NYSE Arca pursuant to UTP \6\ and listing and 
trading on NYSE Arca.\7\ The Exchange further notes that the shares of 
other ProShares Ultra Funds, UltraShort Funds and Short Funds based on 
various securities indexes have previously been approved by the 
Commission.\8\
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    \5\ See, e.g., Securities Exchange Act Release No. 58161 (July 
15, 2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39).
    \6\ See, e.g., Securities Exchange Act Release No. 58162 (July 
15, 2008), 73 FR 42391 (July 21, 2008) (SR-NYSEArca-2008-73).
    \7\ See, e.g., Securities Exchange Act Release No. 58457 
(September 3, 2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-
2008-91) (approving listing of certain leveraged ProShares Funds on 
the Exchange).
    \8\ See, e.g., Securities Exchange Act Release Nos. 52553 
(October 3, 2005), 70 FR 59100 (October 11, 2005) (SR-Amex-2004-62) 
(approving the listing and trading of shares of the xtraShares 
Trust); 54040 (June 23, 2006), 71 FR 37629 (June 30, 2006) (SR-Amex-
2006-41) (approving the listing and trading of shares of the 
ProShares Trust); 55117 (January 17, 2007), 72 FR 3442 (January 25, 
2007) (SR-Amex 2006-101) (approving the listing and trading of 
shares of the ProShares Trust); 56592 (October 1, 2007), 72 FR 57364 
(October 9, 2007) (SR-Amex-2007-60) (approving the listing and 
trading of 6 issues of shares of the ProShares Trust based on 
international equity indexes); and 56998 (December 19, 2007), 72 FR 
73404 (December 27, 2007) (SR-Amex-2007-104) (approving the listing 
and trading of shares of the ProShares Trust).
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    According to the Registration Statement, the UltraPro Funds seek 
daily investment results (before fees and expenses) that correspond to 
three times (+300%) the daily performance, whether positive or 
negative, of their corresponding benchmark and the UltraPro Short Funds 
seek daily investment results (before fees and expenses) that 
correspond to three times the inverse (-300%) of the daily performance, 
whether positive or negative, of their corresponding benchmark. The 
Ultra Funds seek daily investment results (before fees and expenses) 
that correspond to twice (+200%) the daily performance, whether 
positive or negative, of their corresponding benchmarks and the 
UltraShort Funds seek daily investment results (before fees and 
expenses) that correspond to twice the inverse (-200%) of the daily 
performance, whether positive or negative, of their corresponding 
benchmarks. The Short Funds seek daily investment results (before fees 
and expenses) that correspond to the inverse (-100%) of the daily 
performance, whether positive or negative, of their corresponding 
benchmarks. Each reference to a corresponding benchmark is a 
``Benchmark'' and together, ``Benchmarks,'' as described below.
    Each of the Funds will hold futures contracts on the applicable 
Benchmark and, in the case of a Benchmark index, futures on such 
Benchmark index or the Benchmark index components, traded on a United 
States exchange (``Benchmark Futures Contracts'') and, to a limited 
extent, forward contracts, as described below, to produce the 
economically ``inverse,'' ``leveraged,'' and ``inverse leveraged'' 
investment results, as set forth by each Fund's investment 
objective.\9\
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    \9\ Terms relating to the Funds, the Shares and the Benchmarks 
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,\10\ in Benchmark Futures Contracts. In the event position 
accountability rules or position limits are reached with respect to a 
particular Benchmark Futures Contract, the Sponsor may, in its 
commercially reasonable judgment, cause the relevant Fund to obtain 
exposure through over-the-counter forward contracts referencing the 
particular exchange rate, index or index components, or invest in other 
forward contracts not based on the particular exchange rate, if such 
instruments tend to exhibit trading prices or returns that correlate 
with the Benchmarks or any Benchmark Futures Contract and will further 
the investment objective of a Fund.\11\ A Fund may also invest in 
forward contracts if the market for a specific Benchmark 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) to prevent a Fund from obtaining the appropriate amount of 
investment exposure to the affected Benchmark Futures Contracts 
directly.\12\
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    \10\ The term ``under normal conditions'' [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.
    \11\ To the extent practicable, the Funds will invest in forward 
contracts cleared through the facilities of a centralized clearing 
house.
    \12\ 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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    Each Fund will also invest in cash equivalents (such as shares of 
money market funds, bank deposits, bank money market accounts, certain 
variable rate-demand notes and repurchase agreements collateralized by 
government securities, whether denominated in U.S. dollars or the 
applicable foreign currency) that serve or will serve as collateral for 
the investments in futures and forward contracts. The Funds do not 
currently intend to invest directly in any currency but may invest 
directly in U.S. Treasury securities.
    The Funds' investment in Benchmark Futures Contracts and forward 
contracts may involve a small investment relative to the amount of 
investment exposure assumed and may result in losses exceeding the 
amounts invested. Such instruments, particularly when used to create 
leverage, may expose the Funds to potentially dramatic changes (losses 
or gains) in the value of the instruments and imperfect correlation 
between the value of the instruments and the applicable Benchmark.
    The Funds will not seek to achieve their stated investment 
objective over a period of time greater than one day because 
mathematical compounding prevents the Funds from perfectly achieving 
such results. Accordingly, results over periods of time greater than 
one day typically will not be a simple multiple (e.g., 2x, 3x, or -1x, 
-2x, -3x) of the period return of the corresponding Benchmark and may 
differ significantly.
    If an UltraPro Fund (or UltraPro Short Fund) is successful in 
meeting its

[[Page 3534]]

objective, its value on a given day (before fees and expenses) should 
gain (or lose) approximately three times as much on a percentage basis 
as its corresponding Benchmark when the Benchmark rises on a given day. 
Conversely, its value on a given day (before fees and expenses) should 
lose (or gain) approximately three times as much on a percentage basis 
as the corresponding Benchmark when the Benchmark declines on a given 
day.
    If an Ultra Fund (or UltraShort Fund) is successful in meeting its 
objective, its value on a given day (before fees and expenses) should 
gain (or lose) approximately twice as much on a percentage basis as its 
corresponding Benchmark when the Benchmark rises on a given day. 
Conversely, its value on a given day (before fees and expenses) should 
lose (or gain) approximately twice as much on a percentage basis as the 
corresponding Benchmark when the Benchmark declines on a given day.
    If a Short Fund is successful in meeting its objective, its value 
on a given day (before fees and expenses) should gain approximately as 
much on a percentage basis as the corresponding Benchmark when the 
Benchmark declines on a given day. Conversely, its value on a given day 
(before fees and expenses) should lose approximately as much on a 
percentage basis as the corresponding Benchmark when the Benchmark 
rises on a given day.
    In seeking to achieve each Fund's daily investment objective, the 
Sponsor will use a mathematical approach to investing. Using this 
approach, the Sponsor will determine the type, quantity and mix of 
investment positions that the Sponsor believes in combination should 
produce daily returns consistent with a Fund's objective. The Sponsor 
will rely upon a pre-determined model to generate orders that result in 
repositioning each Fund's investments in accordance with its daily 
investment objectives.
    According to the Registration Statement, a number of factors may 
affect a Fund's ability to achieve a high degree of correlation with 
its Benchmark, and there can be no guarantee that a Fund will achieve a 
high degree of correlation. While the Funds do not expect that their 
daily returns will deviate adversely from their respective daily 
investment objectives, several factors may affect their ability to 
achieve this correlation. Among these factors are a Fund's expenses, 
including fees, transaction costs and the cost of the investment 
techniques employed by that Fund, bid-ask spreads, a Fund's Share 
prices being rounded to the nearest cent, changes to a Benchmark that 
are not disseminated in advance and the need to conform a Fund's 
portfolio holdings to comply with investment restrictions or policies 
or regulatory or tax law requirements.
ProShares UltraPro Australian Dollar, ProShares UltraPro Short 
Australian Dollar, ProShares Ultra Australian Dollar, ProShares 
UltraShort Australian Dollar, and ProShares Short Australian Dollar
    These Funds will be designed to track a multiple, the inverse or an 
inverse multiple of the daily performance of the Australian dollar spot 
price versus the U.S. dollar (``AUD/USD''). The Benchmark for each of 
these Funds will be the U.S. dollar price of the Australian dollar. 
These Funds will use the 4 p.m. Eastern Time (``E.T.'') Australian 
Dollar exchange rate as provided by Bloomberg, expressed in terms of 
U.S. dollars per unit of foreign currency, as the basis for the 
underlying Benchmark. The Australian dollar is the national currency of 
Australia and the currency of the accounts of the Reserve Bank of 
Australia, the Australian central bank. The official currency code for 
the Australian dollar is ``AUD.'' The Australian dollar is referred to 
in Australia as ``dollar.'' As with U.S. currency, 100 Australian cents 
are equal to one Australian dollar. In Australia, unlike most other 
countries, cash transactions are rounded to the nearest five cents. The 
most commonly used symbol used to represent the Australian dollar is 
``A$.''
    As of December 30, 2011, open interest in AUD/USD futures contracts 
traded on the Chicago Mercantile Exchange (``CME'') was $11.56 billion. 
AUD/USD futures contracts had an average daily trading volume in 2011 
of 123,006 contracts.
ProShares UltraPro Canadian Dollar, ProShares UltraPro Short Canadian 
Dollar, ProShares Ultra Canadian Dollar, ProShares UltraShort Canadian 
Dollar, and ProShares Short Canadian Dollar
    These Funds will be designed to track a multiple, the inverse or an 
inverse multiple of the daily performance of the Canadian dollar spot 
price versus the U.S. dollar (CAD/USD). The Benchmark for each of these 
Funds will be the U.S. dollar price of the Canadian dollar. These Funds 
will use the 4 p.m. E.T. Canadian dollar exchange rate as provided by 
Bloomberg, expressed in terms of U.S. dollars per unit of foreign 
currency, as the basis for the underlying Benchmark. The Canadian 
Dollar is the national currency of Canada and the currency of the 
accounts of the Bank of Canada, the Canadian central bank. The official 
currency code for the Canadian dollar is ``CAD.'' As with U.S. 
currency, 100 Canadian cents are equal to one Canadian dollar.
    As of December 30, 2011, open interest in CAD/USD futures contracts 
traded on CME was $11.66 billion. CAD/USD futures contracts had an 
average daily trading volume in 2011 of 89,667 contracts.
ProShares UltraPro Swiss Franc, ProShares UltraPro Short Swiss Franc, 
ProShares Ultra Swiss Franc, ProShares UltraShort Swiss Franc, and 
ProShares Short Swiss Franc
    These Funds will be designed to track a multiple, the inverse or an 
inverse multiple of the daily performance of the Swiss franc spot price 
versus the U.S. dollar (``CHF/USD''). The Benchmark for each of these 
Funds will be the U.S. dollar price of the Swiss Franc. These Funds 
will use the 4 p.m. E.T. Swiss franc exchange rate as provided by 
Bloomberg, expressed in terms of U.S. dollars per unit of foreign 
currency, as the basis for the underlying Benchmark. The Swiss franc is 
the national currency of Switzerland and Liechtenstein and the currency 
of the accounts of the Swiss National Bank, the central bank of 
Switzerland. The official currency code for the Swiss franc is ``CHF.'' 
Each Swiss franc is equal to 100 Swiss centimes.
    As of December 30, 2011, open interest in CHF/USD futures contracts 
traded on CME was $4.99 billion. CHF/USD futures contracts had an 
average daily trading volume in 2011 of 40,955 contracts.
ProShares UltraPro Euro, ProShares UltraPro Short Euro, and ProShares 
Short Euro
    These Funds will be designed to track a multiple, the inverse, or 
an inverse multiple of the daily change in the spot price of the euro 
versus the U.S. dollar (``EUR/USD''). The Benchmark for each of these 
Funds will be the U.S. dollar price of the Euro. These Funds will use 
the 4 p.m. E.T. Euro exchange rate as provided by Bloomberg, expressed 
in terms of U.S. dollars per unit of foreign currency, as the basis for 
the underlying Benchmark. The Euro is the official currency of the 
Eurozone, which consists of 17 European states including: Austria, 
Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, 
Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, 
Slovenia, and Spain. The Euro is managed and administered by the 
European Central Bank and the European System of Central Banks. As of 
December 30, 2011, open interest in

[[Page 3535]]

EUR\USD futures contracts traded on CME was $46.12 billion. EUR\USD 
futures contracts had an average daily trading volume in 2011 of 
336,947 contracts.
ProShares UltraPro U.S. Dollar, ProShares UltraPro Short U.S. Dollar, 
ProShares Ultra U.S. Dollar, ProShares UltraShort U.S. Dollar, and 
ProShares Short U.S. Dollar
    These Funds will be designed to track a multiple, the inverse or an 
inverse multiple of the daily performance of their Benchmark, the U.S. 
Dollar Index (``U.S. Dollar Index'' or ``Index'').\13\ The U.S. Dollar 
Index is a geometrically-averaged calculation of six currencies 
weighted against the U.S. dollar. The six component currencies are the 
Euro, Japanese yen, British pound, Canadian dollar, Swedish krona and 
Swiss franc. The component currencies do not have the same weight. The 
Euro has a weighting of 57.6%, the Japanese yen a weighting of 13.6%, 
the British pound a weighting of 11.9%, the Canadian dollar a weighting 
of 9.1%, the Swedish krona a weighting of 4.2% and the Swiss franc a 
weighting of 3.6%. The U.S. Dollar Index is calculated by Bloomberg in 
real time approximately every 15 seconds using the spot prices of the 
Index's component currencies. The price used for the calculation of the 
Index is the mid-point between the Bloomberg top of the book bid/offer 
in the component currencies.
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    \13\ The U.S. Dollar Index was created by the U.S. Federal 
Reserve in 1973. Following the ending of the 1944 Bretton Woods 
Agreement, which had established a system of fixed exchange rates, 
the U.S. Federal Reserve Bank began the calculation of the U.S. 
Dollar Index to provide an external bilateral trade-weighted average 
of the U.S. dollar as it freely floated against global currencies. 
Futures contracts based on the U.S. Dollar Index (``USDX'' or ``U.S. 
Dollar Index futures contracts'') were listed on November 20, 1985, 
and are now available only on the IntercontinentalExchange (``ICE'') 
electronic trading platform. Options on the futures contracts began 
trading on September 3, 1986, and are available both on the ICE 
electronic trading platform and on the ICE options trading floor.
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    In addition to the data on EUR/USD, CAD/USD, CHF/USD and JPY/USD 
futures contracts stated herein, as of December 30, 2011, open interest 
in U.S. Dollar Index futures contracts traded on ICE was $5.44 billion. 
U.S. Dollar Index futures contracts had an average daily trading volume 
in 2011 of 30,341 contracts. Open interest in British pound (``GBP/
USD'') futures contracts traded on the CME was $19.59 billion, and GBP/
USD futures contracts had an average daily trading volume in 2011 of 
116,115 contracts. Open interest in Swedish krona (``SEK/USD'') futures 
contracts traded on the CME was $16.79 million, and SEK/USD futures 
contracts had an average daily trading volume of 8 contracts.
ProShares UltraPro Yen, ProShares UltraPro Short Yen, and ProShares 
Short Yen
    These Funds will be designed to track a multiple, the inverse or an 
inverse multiple of the daily performance of the Japanese yen spot 
price versus the U.S. dollar (``JPY/USD''). The Benchmark for each of 
these Funds will be the U.S. dollar price of the Japanese yen. These 
Funds will use the 4 p.m. E.T. Japanese yen exchange rate as provided 
by Bloomberg, expressed in terms of U.S. dollars per unit of foreign 
currency, as the basis for the underlying Benchmark. The Japanese yen 
has been the official currency of Japan since 1871. The Bank of Japan 
has been operating as the central bank of Japan since 1882. The 
official currency code for the Japanese yen is ``YEN.''
    As of December 30, 2011, open interest in JPY/USD futures contracts 
traded on the CME was $25.75 billion. JPY/USD futures contracts had an 
average daily trading volume in 2011 of 113,476 contracts.
Benchmark Futures Contracts Held by the Funds
    All open Benchmark Futures Contracts held by the Funds will be 
traded on a United States exchange and will be calculated at their then 
current market value, based upon the last traded price before the net 
asset value (``NAV'') calculation time, for that particular futures 
contract traded on the applicable United States exchange on the date 
with respect to which NAV is being determined; provided, that if a 
futures contract traded on a United States exchange could not be 
liquidated on such day, due to the operation of daily limits or other 
rules of the exchange upon which that position is traded or otherwise, 
the Sponsor may in its sole discretion choose to determine a fair value 
price as the basis for determining the market value of such position 
for such day.
    The Benchmark Futures Contracts trade on the follow exchanges:

------------------------------------------------------------------------
                                  Benchmark futures
        Fund benchmarks               contracts         Exchange \14\
------------------------------------------------------------------------
Australian dollar/US dollar      AUD/USD...........  CME
 exchange rate.
Canadian dollar/US dollar        CAD/USD...........  CME
 exchange rate.
European euro/US dollar          EUR/USD...........  CME
 exchange rate.
Japanese yen/US dollar exchange  JPY/USD...........  CME
 rate.
Swiss franc/US dollar exchange   CHF/USD...........  CME
 rate.
US Dollar Index................  USDX..............  ICE
                                 CAD/USD...........  CME
                                 CHF/USD...........  CME
                                 EUR/USD...........  CME
                                 GBP/USD...........  CME
                                 JPY/USD...........  CME
                                 SEK/USD...........  CME
------------------------------------------------------------------------

    The daily 4 p.m. E.T. closing value for each Benchmark is published 
daily on www.wsj.com. The value of the Benchmarks will be disseminated 
by one or more major market data vendors and will be updated at least 
every 15 seconds during the Exchange's Core Trading Session. Data 
regarding the Benchmarks is also available from the respective 
Benchmark provider to subscribers.\15\
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    \14\ Each Benchmark Futures Contract trades electronically for 
21 or more hours each trading session, beginning every Sunday 
evening and closing for the week on the following Friday evening.
    \15\ ICE Futures U.S., Inc. compiles, maintains, determines and 
weights the components of the U.S. Dollar Index. The U.S. Dollar 
Index and USDX are trademarks and service marks of ICE Futures U.S., 
Inc. registered in the United States, Great Britain, the European 
Union and Japan and used under license. ICE Futures U.S., Inc. is 
not engaged in the business of trading in commodities or securities 
but operates a derivatives exchange. ICE Futures U.S., Inc. 
maintains a Code of Conduct applicable to all personnel that 
prohibits disclosure of any confidential information obtained during 
the course of one's employment and the use or disclosure of any 
material non-public information relating to changes to the 
composition of the U.S. Dollar Index or changes to the U.S. Dollar 
Index methodology in violation of applicable laws, rules or 
regulations.

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[[Page 3536]]

Net Asset Value
    According to the Registration Statement, the NAV of each Fund will 
be total assets including, but not limited to, all cash and cash 
equivalents or other debt securities, less total liabilities, each 
determined on the basis of generally accepted accounting principles. In 
particular, the NAV will include any unrealized profit or loss on 
Benchmark Futures Contracts and other Fund holdings, and any other 
credit or debit accruing to a Fund but unpaid or not received by a 
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 of each Fund will be 
calculated by the Administrator and will be determined each business 
day as described in the Registration Statement.
Creation and Redemption of Shares
    According to the Registration Statement, the Funds 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 of a Fund. 
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. Authorized participants may pay a fixed and 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 with the 
Distributor to create one or more Creation Units. An order to create or 
redeem Shares must be placed by 3 p.m. E.T. 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 purchase of Creation Units. On any 
business day, an authorized participant may place an order 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 DTC's book-entry 
system to the applicable 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 will be equal to the NAV of the 
number of Creation Unit(s) of such Fund requested in the authorized 
participant's redemption order as of the time of the calculation of 
such 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 NAV per Share will be calculated and disseminated daily. One or 
more major market data vendors will disseminate for the Funds on a 
daily basis information with respect to the corresponding Indicative 
Optimized Portfolio Value (``IOPV'') (as discussed below), recent NAV 
per Share and Shares outstanding. The Exchange will also make available 
on its Web site (www.nyse.com) daily trading volume of the Shares, 
closing prices of the Shares, and the NAV per Share. The intraday 
pricing and settlement values of the Benchmark Futures Contracts held 
by the Funds are also available from the CME, the ICE, and other public 
sources or on-line information services such as www.ino.com. Real-time 
dissemination of spot pricing for the Australian dollar, Canadian 
dollar, Swiss franc, Euro and Japanese yen and data for the U.S. Dollar 
Index are available from various major market data vendors. Quotation 
and last sale information for the Shares will be available via the 
Consolidated Tape Association (``CTA'') high-speed line.
Portfolio Disclosure
    Each Fund's total portfolio composition will be disclosed on the 
Funds' Web site or another relevant Web site as determined by the Trust 
and/or the Exchange. The Trust will provide Web site disclosure of 
portfolio holdings daily and will include, as applicable, the 
description and notional value (in U.S. dollars) of the Funds' 
investments in Benchmark Futures Contracts and forward contracts, if 
any, cash equivalents and amount of cash held in the portfolio of each 
Fund. This public Web site disclosure of the portfolio composition of 
each Fund 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 each Fund through the Funds' 
Web site.
Dissemination of Net Asset Value and Indicative Optimized Portfolio 
Value
    The Administrator will calculate and disseminate, once each trading 
day, the NAV per Share to market participants. The NAV calculation time 
for each Fund will be 4 p.m. E.T. The Exchange will obtain a 
representation (prior to listing of the Funds) from the Trust that the 
NAV per Share will be calculated daily and made available to all market 
participants at the same time. In addition, the Sponsor will cause to 
be made available on a daily basis the total payment required to create 
each Creation Unit of the applicable Fund on the purchase order date in 
connection with the issuance of the respective Shares.
    The IOPV relating to Shares of each Fund will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session.\16\ The IOPV will be an 
indicator of the value of the investments and cash and receivables less 
liabilities of a Fund at the time the IOPV is disseminated. The IOPV 
will be calculated by NYSE Arca using the prior day's closing net 
assets of each Fund as a base and updating throughout the Core Trading 
Session changes in the value of Benchmark Futures Contracts and forward 
contracts, if any, held by the Fund. The IOPV should not be viewed as 
an actual real time update of the NAV because NAV is calculated only 
once at the end of each trading day. The IOPV also should not be viewed 
as a precise value of the Shares.
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    \16\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IOPV 
published on CTA or other data feeds.

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[[Page 3537]]

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 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 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 the Funds. The Exchange represents that, 
for the initial and continued listing of the Shares, the Funds must be 
in compliance with 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.\17\ The Exchange 
has appropriate rules to facilitate transactions in the Shares during 
all trading sessions. As provided in NYSE Arca Equities Rule 7.6, 
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.
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    \17\ See NYSE Arca Equities Rule 7.34 regarding hours for the 
NYSE Arca Opening, Core and Late Trading Sessions.
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    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 Benchmark 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 \18\ or by the halt or suspension 
of trading of the underlying Benchmark Futures Contracts.
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    \18\ See NYSE Arca Equities Rule 7.12.
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    The Exchange represents that the Exchange may halt trading during 
the day in which an interruption to the dissemination of the IOPV, the 
Benchmark value, or the value of the underlying Benchmark Futures 
Contracts occurs. If the interruption to the dissemination of the IOPV, 
the Benchmark value, or the value of the underlying Benchmark 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 ICE and the CME in that these markets are members of the 
Intermarket Surveillance Group (``ISG''). A list of ISG members is 
available at www.isgportal.org.\19\
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    \19\ The Exchange may obtain information regarding Benchmark 
Futures Contracts from exchanges with which the Exchange has entered 
into a surveillance sharing agreement or that are ISG members. 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.
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    The Exchange also has a general policy prohibiting the distribution 
of material, non-public information by its employees.
Suitability
    Currently, NYSE Arca Equities Rule 9.2(a) (Diligence as to 
Accounts) provides that an ETP Holder, before recommending a 
transaction in any security, must have reasonable grounds to believe 
that the recommendation is suitable for the customer based on any facts 
disclosed by the customer as to its other security holdings and as to 
its financial situation and needs. Further, the rule provides, with a 
limited exception, that prior to the execution of a transaction 
recommended to a non-institutional customer, the ETP Holder must make 
reasonable efforts to obtain information concerning the customer's 
financial status, tax status, investment objectives, and any other 
information that such ETP Holder believes would be useful to make a 
recommendation.
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders of the suitability requirements of NYSE Arca Equities Rule 
9.2(a) in an Information Bulletin. Specifically, ETP Holders will be 
reminded in the Information Bulletin that, in recommending transactions 
in these securities, they must have a reasonable basis to believe that 
(1) the recommendation is suitable for a customer given reasonable 
inquiry concerning the customer's investment objectives, financial 
situation, needs, and any other information known by such member, and 
(2) the customer can evaluate the special characteristics, and is able 
to bear the financial risks, of an investment in the Shares. In 
connection with the suitability obligation, the Information Bulletin 
will also provide that members must make reasonable efforts to obtain 
the following information: (1) The customer's financial status; (2) the 
customer's tax status; (3) the customer's investment objectives; and 
(4) such other information used or considered to be reasonable by such 
member or registered representative in making recommendations to the 
customer.
    In addition, FINRA has implemented increased sales practice and 
customer margin requirements for FINRA members applicable to leveraged 
exchange-traded funds (``ETFs'') (which include the Shares) and options 
on leveraged ETFs, as described in FINRA Regulatory Notices 09-31 (June 
2009), 09-53 (August 2009) and 09-65 (November 2009) (``FINRA 
Regulatory Notices''). ETP Holders that carry customer accounts will be 
required to follow the FINRA guidance set forth in the FINRA Regulatory 
Notices.
    As disclosed in the Registration Statement, the Funds will seek

[[Page 3538]]

leveraged, inverse, or leveraged inverse returns on a daily basis, and 
the Funds will not seek to achieve their stated investment objective 
over a period of time greater than one day because compounding prevents 
the Funds from perfectly achieving such results. Accordingly, results 
over periods of time greater than one day typically will not be a 
leveraged multiple (+300% or +200%), the inverse (-100%) or a leveraged 
inverse multiple (-200% or -300%) of the period return of the 
applicable Benchmark and may differ significantly from these multiples. 
The Exchange's Information Bulletin regarding the Funds, described 
below, will provide information regarding the suitability of an 
investment in the Shares, as stated in the Registration Statement.
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; (2) 
the procedures for purchases and redemptions of Shares in Creation Unit 
size (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 reference the FINRA Regulatory Notices regarding sales practice 
and customer margin requirements for FINRA members applicable to 
leveraged ETFs and options on leveraged ETFs. 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 Benchmark 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) \20\ 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.
---------------------------------------------------------------------------

    \20\ 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 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 Benchmark Futures Contracts held by the Funds 
are traded on CME and ICE, which are ISG members. Each Fund will seek 
to achieve its investment objective by investing under normal market 
conditions, in Benchmark Futures Contracts. In the event position 
accountability rules or position limits are reached with respect to a 
particular Benchmark Futures Contract, the Sponsor, may, in its 
commercially reasonable judgment, cause the relevant Fund to obtain 
exposure through over-the-counter forward contracts referencing the 
particular exchange rate, index or index components, or invest in other 
forward contracts not based on the particular exchange rate, if such 
instruments tend to exhibit trading prices or returns that correlate 
with the Benchmarks or any Benchmark Futures Contract and will further 
the investment objective of a Fund. The intra-day futures prices, 
closing price and settlement prices of the Benchmark Futures Contracts 
held by the Funds are also available from the CME and ICE, as 
applicable, automated quotation systems, published or other public 
sources, or on-line information services. 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 or 
another relevant 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 will be publicly available regarding 
the Funds and the Shares, thereby promoting market transparency. Real-
time dissemination of spot pricing for the Australian dollar, Canadian 
dollar, Swiss franc, Euro and Japanese yen and data for the U.S. Dollar 
Index is available from various major market data vendors. 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 IOPV, recent NAV per Share and Shares outstanding. The 
IOPV will be widely disseminated by one or more major market data 
vendors at least every 15 seconds during the Core Trading Session. 
Trading in Shares of the Funds will be halted if the circuit breaker 
parameters in NYSE Arca Equities Rule 7.12 have been reached or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. The Exchange may halt trading 
during the day in which an interruption to the dissemination of the 
IOPV, the Benchmark value or the value of the underlying Benchmark 
Futures Contracts occurs. If the interruption to the dissemination of 
the IOPV, the Benchmark value or the value of the underlying Benchmark 
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.

[[Page 3539]]

Moreover, 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. The 
Information Bulletin will also reference the FINRA Regulatory Notices 
regarding sales practice and customer margin requirements for FINRA 
members applicable to leveraged ETFs and options on leveraged ETFs.
    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-2012-04 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-2012-04. 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 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-2012-04 and should be submitted on or before 
February 14, 2012.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-1290 Filed 1-23-12; 8:45 am]
BILLING CODE 8011-01-P