Federal Register, Volume 77 Issue 51 (Thursday, March 15, 2012)

[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]

-----------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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'').
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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'').
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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:

----------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------
\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\
---------------------------------------------------------------------------

\11\ See Notice and Registration Statement, supra notes 3 and 5,
respectively.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

\22\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

(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\
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\24\ 15 U.S.C. 78f(b)(5).

---------------------------------------------------------------------------

[[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.
---------------------------------------------------------------------------

\25\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

\26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Secretary.
[FR Doc. 2012-6231 Filed 3-14-12; 8:45 am]
BILLING CODE 8011-01-P