[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Notices]
[Pages 15440-15445]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6231]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66553; File No. SR-NYSEArca-2012-04]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval 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

March 9, 2012.

I. Introduction

    On January 6, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares of twenty-six series of the ProShares Trust II 
under Commentary .02 to NYSE Arca Equities Rule 8.200. The proposed 
rule change was published for comment in the Federal Register on 
January 24, 2012.\3\ The Commission received no comments on the 
proposal. This order grants approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 66180 (January 18, 
2012), 77 FR 3532 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade shares (``Shares'') of the 
following funds (each a ``Fund'' and, collectively, ``Funds'') pursuant 
to NYSE Arca Equities Rule 8.200, Commentary .02: 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''). NYSE Arca Equities Rule 8.200, 
Commentary .02 permits the trading of Trust Issued Receipts either by 
listing or pursuant to unlisted trading privileges.\4\ Each Fund is a 
series of the ProShares Trust II (``Trust''), a Delaware statutory 
trust.\5\ 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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    \4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, means any combination of 
investments, including cash; securities; options on securities and 
indices; futures contracts; options on futures contracts; forward 
contracts; equity caps, collars and floors; and swap agreements.
    \5\ See registration statement on Form S-1, dated December 22, 
2011 (File No. 333-178707) (``Registration Statement'').
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    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 corresponding benchmark is referred to as a 
``Benchmark'' and, collectively, ``Benchmarks'').
    Each of the Funds will hold futures contracts on the applicable 
Benchmark or, in the case of a Benchmark index, futures contracts on 
such Benchmark index or the Benchmark index components, that are 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,'' or ``inverse leveraged'' 
investment results, as set forth by each Fund's investment objective.
    Each Fund seeks to achieve its investment objective by investing, 
under normal market conditions,\6\ 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

[[Page 15441]]

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, 
index, or index components, 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.\7\ 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.\8\
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    \6\ The term ``under normal market conditions'' 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.
    \7\ To the extent practicable, the Funds will invest in forward 
contracts cleared through the facilities of a centralized clearing 
house.
    \8\ 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 Exchange represents that the Sponsor will take 
various steps to limit counterparty credit risk.
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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' investments 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 objective, its value on a given day (before fees and 
expenses) should gain (or lose in the case of an UltraPro Short Fund) 
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 in the case of an UltraPro Short Fund) 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 in the case of an UltraShort Fund) 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 in the case of an 
UltraShort Fund) 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.
    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 
(``Australian Dollar Funds'')

    The Australian Dollar 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 the Australian Dollar Funds will be the U.S. 
dollar price of the Australian dollar. The Australian Dollar 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 approximately 
$11.56 billion. AUD/USD futures contracts had an average daily trading 
volume in 2011 of approximately 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 (``Canadian Dollar Funds'')

    The Canadian Dollar Funds will be designed to track a multiple, the 
inverse, or an inverse multiple of the

[[Page 15442]]

daily performance of the Canadian dollar spot price versus the U.S. 
dollar (CAD/USD). The Benchmark for each of the Canadian Dollar Funds 
will be the U.S. dollar price of the Canadian dollar. The Canadian 
Dollar 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 approximately $11.66 billion. CAD/USD futures 
contracts had an average daily trading volume in 2011 of approximately 
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 (``Swiss Franc Funds'')

    The Swiss Franc 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 the Swiss Franc Funds will be the U.S. dollar price of the 
Swiss franc. The Swiss Franc 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 approximately $4.99 billion. CHF/USD futures 
contracts had an average daily trading volume in 2011 of approximately 
40,955 contracts.

ProShares UltraPro Euro, ProShares UltraPro Short Euro, and ProShares 
Short Euro (``Euro Funds'')

    The Euro 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 
the Euro Funds will be the U.S. dollar price of the euro. The Euro 
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 currently 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 EUR/USD futures contracts 
traded on CME was approximately $46.12 billion. EUR/USD futures 
contracts had an average daily trading volume in 2011 of approximately 
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 (``U.S. Dollar Funds'')

    The U.S. Dollar 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'').\9\ 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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    \9\ 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 approximately 
$5.44 billion. U.S. Dollar Index futures contracts had an average daily 
trading volume in 2011 of approximately 30,341 contracts. Open interest 
in British pound (``GBP/USD'') futures contracts traded on the CME was 
approximately $19.59 billion, and GBP/USD futures contracts had an 
average daily trading volume in 2011 of approximately 116,115 
contracts. Open interest in Swedish krona (``SEK/USD'') futures 
contracts traded on the CME was approximately $16.79 million, and SEK/
USD futures contracts had an average daily trading volume of 
approximately 8 contracts.

ProShares UltraPro Yen, ProShares UltraPro Short Yen, and ProShares 
Short Yen (``Yen Funds'')

    The Yen 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 
the Yen Funds will be the U.S. dollar price of the Japanese yen. The 
Yen 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 approximately $25.75 billion. JPY/USD futures 
contracts had an average daily trading volume in 2011 of approximately 
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

[[Page 15443]]

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 following exchanges:

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             Fund benchmarks                     Benchmark futures contracts                Exchange \10\
----------------------------------------------------------------------------------------------------------------
Australian dollar/U.S. dollar exchange     AUD/USD                                  CME
 rate.
Canadian dollar/U.S. dollar exchange rate  CAD/USD                                  CME
European euro/U.S. dollar exchange rate..  EUR/USD                                  CME
Japanese yen/U.S. dollar exchange rate...  JPY/USD                                  CME
Swiss franc/U.S. dollar exchange rate....  CHF/USD                                  CME
U.S. Dollar Index........................  USDX                                     ICE
                                           CAD/USD                                  CME
                                           CHF/USD                                  CME
                                           EUR/USD                                  CME
                                           GBP/USD                                  CME
                                           JPY/USD                                  CME
                                           SEK/USD                                  CME
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\10\ 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.

    Additional details regarding the Trust, Funds, Shares, trading 
policies of the Funds, creations and redemptions of the Shares, 
investment risks, fees, NAV calculation, the dissemination and 
availability of information about the underlying assets of the Funds, 
trading halts, applicable trading rules, surveillance, and the 
Information Bulletin, among other things, can be found in the Notice 
and/or the Registration Statement, as applicable.\11\
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    \11\ See Notice and Registration Statement, supra notes 3 and 5, 
respectively.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change to list and trade the Shares of the Funds is consistent with the 
requirements of Section 6 of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\12\ In 
particular, the Commission finds that the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act,\13\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The Commission notes that 
the Funds and the Shares must comply with the requirements of NYSE Arca 
Equities Rule 8.200 and Commentary .02 thereto to be listed and traded 
on the Exchange.
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    \12\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \13\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\14\ which sets forth Congress's finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information regarding the Shares will be available via the 
Consolidated Tape Association (``CTA'') high-speed line. 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 NYSE 
Arca Core Trading. Data regarding the U.S. Dollar Index is also 
available from the Index provider to subscribers.\15\ In addition, an 
Indicative Optimized Portfolio Value (``IOPV'') for each Fund, which 
will be calculated using the prior day's closing net assets of each 
Fund as a base and updating that value throughout the NYSE Arca Core 
Trading Session to reflect changes in the value of Benchmark Futures 
Contracts and forward contracts, if any, held by the Fund, will be 
widely disseminated by one or more major market data vendors at least 
every 15 seconds during the NYSE Arca Core Trading Session.\16\ The NAV 
for each Fund will be calculated by the Administrator each trading day 
and will be disseminated daily.\17\ The Trust will provide Web site 
disclosure of the portfolio holdings of each Fund daily and will 
include, as applicable, the description and notional value (in U.S. 
dollars) of each Fund's investments in Benchmark Futures Contracts and 
forward contracts, if any, and cash equivalents and the amount of cash 
held by each Fund. The intraday pricing and settlement values of the 
Benchmark Futures Contracts held by the Funds are readily available 
from CME, ICE, and other public sources or on-line information 
services. 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 also available from major market data 
vendors. In addition, the Web site for the Funds and/or the Exchange 
will contain the prospectus and additional data relating to NAV and 
other applicable quantitative information.
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    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \15\ ICE Futures U.S., Inc. compiles, maintains, determines, and 
weights the components of the U.S. Dollar Index. 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.
    \16\ According to the Exchange, several major market data 
vendors currently display and/or make widely available IOPVs 
published on CTA or other data feeds.
    \17\ 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. The NAV calculation time for each Fund will be 4 p.m., 
E.T.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair

[[Page 15444]]

disclosure of information that may be necessary to price the Shares 
appropriately and to prevent trading when a reasonable degree of 
transparency cannot be assured. If the Exchange becomes aware that the 
NAV with respect to the Shares is not disseminated to all market 
participants at the same time, it will halt trading in the Shares until 
such time as the NAV is available to all market participants. Further, 
the Exchange represents that it may halt trading during the day in 
which an interruption to the dissemination of the 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. The Exchange may halt trading in the 
Shares if trading is not occurring in the underlying Benchmark Futures 
Contracts, or if other unusual conditions or circumstances detrimental 
to the maintenance of a fair and orderly market are present.\18\ In 
addition, the 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. 
The Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. 
Lastly, the trading of the Shares will be subject to NYSE Arca Equities 
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on 
ETP Holders \19\ acting as registered Market Makers \20\ in Trust 
Issued Receipts to facilitate surveillance.
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    \18\ 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 in the Shares will be subject to 
halts caused by extraordinary market volatility pursuant to the 
Exchange's ``circuit breaker'' rule in NYSE Arca Equities Rule 7.12 
or by the halt or suspension of trading of the underlying Benchmark 
Futures Contracts. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
    \19\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \20\ See NYSE Arca Equities Rule 1.1(u) (defining Market Maker).
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    The Exchange has represented that the Shares are deemed to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (1) The Funds will be subject to the criteria in NYSE Arca Equities 
Rule 8.200 and Commentary .02 thereto for initial and continued listing 
of the Shares.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures applicable to derivative 
products, including Trust Issued Receipts, are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws.
    (4) The Exchange can obtain market surveillance information, 
including customer identity information, from ICE and CME, which are 
members of the Intermarket Surveillance Group.
    (5) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Opening and Late 
Trading Sessions when an updated IOPV will not be calculated or 
publicly disseminated; (b) the procedures for purchases and redemptions 
of Shares in ``Creation Unit'' size (and that Shares are not 
individually redeemable); (c) NYSE Arca Equities Rule 9.2(a), which 
imposes a duty of due diligence on its ETP Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
(d) how information regarding the IOPV is disseminated; (e) the 
requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (f) trading information. The 
Information Bulletin will also reference, among other things, the FINRA 
Regulatory Notices regarding sales practice and customer margin 
requirements for FINRA members applicable to leveraged exchange-traded 
funds (which include the Shares) and options thereon.\21\ ETP Holders 
that carry customer accounts will be required to follow the FINRA 
guidance set forth in the FINRA Regulatory Notices.
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    \21\ See FINRA Regulatory Notices 09-31 (June 2009), 09-53 
(August 2009) and 09-65 (November 2009). 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 
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.
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    (6) The minimum number of Shares for each Fund to be outstanding at 
the start of trading will be 100,000 Shares.
    (7) 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.\22\
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    \22\ See 17 CFR 240.10A-3.
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    (8) To the extent practicable, the Funds will invest in forward 
contracts cleared through the facilities of a centralized clearing 
house. In addition, with respect to investments in forward contracts, 
the Sponsor will 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.
    This approval order is based on all of the Exchange's 
representations.\23\
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    \23\ The Commission notes that it does not regulate the market 
for futures in which the Funds plan to take positions, which is the 
responsibility of the Commodity Futures Trading Commission 
(``CFTC''). The CFTC has the authority to set limits on the 
positions that any person may take in futures. These limits may be 
directly set by the CFTC or by the markets on which the futures are 
traded. The Commission has no role in establishing position limits 
on futures, even though such limits could impact an exchange-traded 
product that is under the jurisdiction of the Commission.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \24\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \24\ 15 U.S.C. 78f(b)(5).

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[[Page 15445]]

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\25\ that the proposed rule change (SR-NYSEArca-2012-04) be, and it 
hereby is, approved.
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    \25\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Secretary.
[FR Doc. 2012-6231 Filed 3-14-12; 8:45 am]
BILLING CODE 8011-01-P