[Federal Register Volume 77, Number 123 (Tuesday, June 26, 2012)]
[Notices]
[Pages 38117-38124]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-15492]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67223; File No. SR-NYSEAmex-2012-24]


Self-Regulatory Organizations; NYSE Amex LLC; Order Granting 
Approval of Proposed Rule Change To List Shares of the Nuveen Long/
Short Commodity Total Return Fund Under NYSE Amex Rule 1600 et seq.

June 20, 2012.

I. Introduction

    On April 18, 2012, NYSE Amex LLC (``Exchange'' or ``NYSE Amex'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list shares of the Nuveen Long/Short Commodity 
Total Return Fund under NYSE Amex Rule 1600 et seq. The proposed rule 
change was published for comment in the Federal Register on May 7, 
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. 66887 (May 1, 2012), 
77 FR 26798 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list shares (``Shares'') of the Nuveen 
Long/Short Commodity Total Return Fund (``Fund'') pursuant to NYSE Amex 
Rule 1600 et seq., which permits the listing of Trust Units \4\ on the 
Exchange. The Fund was organized as a statutory trust under Delaware 
law on May 25, 2011, and will be operated pursuant to a Trust 
Agreement.\5\ The Fund will issue Shares that represent units of 
fractional undivided beneficial interest in and ownership of the Fund. 
The Fund will not continuously offer Shares and will not provide daily 
redemptions. Thus, the Manager (as defined below) has advised the 
Exchange that it expects the Shares to have trading characteristics 
similar to those of exchange-traded closed-end funds.
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    \4\ The term ``Trust Units'' is defined as a security that is 
issued by a trust or other similar entity that is constituted as a 
commodity pool that holds investments comprising or otherwise based 
on any combination of futures contracts, options on futures 
contracts, forward contracts, swap contracts, and/or commodities. 
See NYSE Amex Rule 1600(b)(ii).
    \5\ See Pre-Effective Amendment No. 3 to Registration Statement 
on Form S-1 under the Securities Act of 1933 (15 U.S.C. 77a) as 
filed with the Commission on December 20, 2011 (File No. 333-174764) 
(``Registration Statement''). The Fund, as a commodity pool, will 
not be subject to registration and regulation under the Investment 
Company Act of 1940.
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    The Fund is managed by Nuveen Commodities Asset Management, LLC 
(``Manager''), a Delaware limited liability company and a wholly-owned 
subsidiary of Nuveen Investments, Inc. (``Nuveen Investments'').\6\ The 
Manager will serve as the CPO and a CTA of the Fund and will determine 
the Fund's overall investment strategy, including: (i) The selection 
and ongoing monitoring of the Fund's sub-advisors; (ii) the assessment 
of performance and potential needs to modify strategy or change sub-
advisors; (iii) the determination of the Fund's administrative 
policies; (iv) the management of the Fund's business affairs; and (v) 
the provision of certain clerical, bookkeeping, and other 
administrative services.\7\
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    \6\ The Manager is registered as a commodity pool operator 
(``CPO'') and a commodity trading advisor (``CTA'') with the 
Commodity Futures Trading Commission (``CFTC'') and is a member of 
the National Futures Association (``NFA'').
    \7\ Pursuant to the Fund's Trust Agreement, the Manager will 
possess and exercise all authority (other than the limited functions 
performed by the independent committee of the Manager which will 
fulfill the Fund's audit committee and nominating committee 
functions) to operate the business of the Fund and will be 
responsible for the conduct of the Fund's commodity affairs. The 
Manager has established within its organization an independent 
committee, comprised of three members who are unaffiliated with the 
Manager, which will fulfill the audit committee and nominating 
committee functions for the Fund, those functions required under the 
NYSE Amex listing standards, and certain other functions as set 
forth in the Trust Agreement. As a registered CPO and CTA, the 
Manager is required to comply with various regulatory requirements 
under the CEA and the rules and regulations of the CFTC and the NFA.
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    Gresham Investment Management LLC (``Commodity Sub-Advisor'') will 
be responsible for the Fund's commodity futures investment strategy and 
options strategy.\8\ Nuveen Asset Management, LLC (``Collateral Sub-
Advisor''), an affiliate of the Manager and a wholly-owned subsidiary 
of Nuveen Investments, will invest the Fund's collateral in short-term, 
high-grade debt securities.
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    \8\ The Commodity Sub-Advisor is a Delaware limited liability 
company, is registered with the CFTC as a CTA and a CPO, and is a 
member of the NFA. As a registered CPO and CTA, the Commodity Sub-
Advisor is required to comply with various regulatory requirements 
under the CEA and the rules and regulations of the CFTC and the NFA. 
Nuveen Investments and the Commodity Sub-Advisor have announced the 
execution of an agreement pursuant to which Nuveen Investments would 
acquire a 60% interest in the Commodity Sub-Advisor, which would 
make the Commodity Sub-Advisor an affiliate of the Manager.
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    Wilmington Trust Company is the Delaware Trustee of the Fund and is 
unaffiliated with the Manager. State Street Bank and Trust Company 
(``State Street'') will be the Custodian and Accounting Agent for the 
assets of the Fund, and its affiliate, Computershare Shareholder 
Services, Inc., will be the Transfer Agent and Registrar for the Shares 
of the Fund. Barclays Capital Inc. (``BCI'') will serve as the Fund's 
clearing broker to execute and clear the Fund's futures transactions 
and provide other brokerage-related services. BCI is a registered 
securities broker-dealer and futures commission merchant. BCI is wholly 
owned by Barclays Bank PLC, which is authorized and regulated by the 
U.K. Financial Services Authority.
    Each of the Manager, BCI, the Commodity Sub-Advisor, and the 
Collateral Sub-Advisor has represented to the Exchange that it has 
erected and maintains firewalls within its respective institution to 
prevent the flow and/or use of non-public information regarding the 
portfolio of underlying securities from the personnel involved in the 
development and implementation of the investment strategy to others 
such as sales and trading personnel. In the event that there is any new 
manager, adviser, sub-adviser, or commodity broker, such new entity 
will maintain a firewall within its respective institution to prevent 
the flow and/or use of non-public information regarding the portfolio 
of underlying commodity futures contracts.\9\
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    \9\ The Commodity Sub-Advisor and the Collateral Sub-Advisor are 
each registered with the Commission under the Investment Advisers 
Act of 1940 (``Advisers Act''). As a result, the Commodity Sub-
Advisor, the Collateral Sub-Advisor, any sub-adviser of either, and 
the respective related personnel of both are subject to the 
provisions of Rule 204A-1 under the Advisers Act relating to codes 
of ethics. This Rule requires investment advisers to adopt a code of 
ethics that reflects the fiduciary nature of the relationship to 
clients as well as compliance with other applicable securities laws. 
Accordingly, procedures designed to prevent the communication and 
misuse of non-public information by an investment adviser must be 
consistent with Rule 204A-1 under the Advisers Act. In addition, 
Rule 206(4)-7 under the Advisers Act makes it unlawful for an 
investment adviser to provide investment advice to clients unless 
such investment adviser has (i) adopted and implemented written 
policies and procedures reasonably designed to prevent violation, by 
the investment adviser and its supervised persons, of the Advisers 
Act and the Commission rules adopted there under; (ii) implemented, 
at a minimum, an annual review regarding the adequacy of the 
policies and procedures established pursuant to subparagraph (i) 
above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.

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[[Page 38118]]

Description of the Fund's Investments

    The Fund's investment objective will be to generate attractive 
total returns. The Fund will be actively managed and will seek to 
outperform its benchmark, the Morningstar[supreg] Long/Short 
CommoditySM Index (``Index'').\10\ In pursuing its 
investment objective, the Fund will invest directly in a diverse 
portfolio of exchange-traded commodity futures contracts that represent 
the main commodity sectors and are among the most actively traded 
futures contracts in the global commodity markets. Generally, 
individual commodity futures positions may be either long or short (or 
flat in the case of energy futures contracts) depending upon market 
conditions. The Commodity Sub-Advisor will use various rules to 
determine the commodity futures contracts in which the Fund will 
invest, their respective weightings, and whether the futures positions 
in each commodity are held long, short, or flat (in the case of energy 
futures contracts). The Fund's commodity investments will, at all 
times, be fully collateralized. The Fund's investments will be 
consistent with its investment objective and will not be used to create 
or enhance leverage. The Fund also will employ a commodity option 
writing strategy that seeks to produce option premiums for the purpose 
of enhancing the Fund's risk-adjusted total return over time. Option 
premiums generated by this strategy may also enable the Fund to more 
efficiently implement its distribution policy.
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    \10\ Morningstar, Inc., the Index sponsor, owns a dually-
registered investment advisor and broker-dealer subsidiary, 
Morningstar Investment Services, Inc., which maintains a broker-
dealer registration for the limited purpose of receiving 12b-1 fees 
directly from the underlying funds that make up the portfolios 
managed by it. The Manager has advised the Exchange that it has been 
informed by Morningstar, Inc., that it has erected and maintains 
information firewalls between the group which is responsible for the 
Index and employees of the broker-dealer to prevent the flow and/or 
use of material non-public information regarding the Index from the 
personnel responsible for the Index to employees of the broker-
dealer.
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    The Fund's investment strategy will utilize the Commodity Sub-
Advisor's proprietary long/short commodity investment program, which 
has three principal elements:
     An actively managed long/short portfolio of exchange-
traded commodity futures contracts;
     A portfolio of exchange-traded commodity option contracts; 
and
     A collateral portfolio of cash equivalents and short-term, 
high-grade debt securities.
    The Manager has advised the Exchange that the Commodity Sub-Advisor 
has represented that it does not believe that position limits will be 
an issue for its firm, but that it has reserved firm-wide capacity for 
the Fund so that the Fund will be able to continue to invest in futures 
contracts without hitting any position limits.
    Long/Short Commodity Investment Program. The Fund's long/short 
commodity investment program will be an actively managed, fully 
collateralized, rules-based commodity investment strategy that seeks to 
capitalize on opportunities in both up and down commodity markets. The 
Fund will invest in a diverse portfolio of exchange-traded commodity 
futures contracts with an aggregate notional value substantially equal 
to the net assets of the Fund. To provide diversification, the Fund 
will invest initially in approximately 20 commodities, and the long/
short commodity investment program rules will limit weights for any 
individual commodity futures contract. The Fund expects to make 
investments in the most actively traded commodity futures contracts in 
the four main commodity sectors in the global commodities markets:
     Energy;
     Agriculture;
     Metals; and
     Livestock.
    During temporary defensive periods or during adverse market 
circumstances,\11\ the Fund may deviate from its investment objective 
and policies. The Commodity Sub-Advisor may invest 100% of the total 
assets of the Fund in short-term, high-quality debt securities and 
money market instruments to respond to adverse market circumstances. 
The Fund may invest in such instruments for extended periods, depending 
on the Commodity Sub-Advisor's assessment of market conditions. These 
debt securities and money market instruments may include shares of 
mutual funds, commercial paper, certificates of deposit, bankers' 
acceptances, U.S. Government securities, repurchase agreements, and 
bonds that are rated AAA.
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    \11\ Adverse market circumstances would include large downturns 
in the broad market value of two or more times current average 
volatility, where the Commodity Sub-Advisor views such downturns as 
likely to continue for an extended period of time.
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    Generally, the program rules will be used to determine the specific 
commodity futures contracts in which the Fund will invest, the relative 
weighting for each commodity, and whether a position is either long or 
short (or flat in the case of energy futures contracts).
    The commodity markets are dynamic and as such the long/short 
commodity investment program may require frequent adjustments in the 
Fund's commodity positions. The Commodity Sub-Advisor expects to trade 
each position no less frequently than once per month. The relative 
balance of the Fund's long/short commodity investments may vary 
significantly over time, and at certain times, the Fund's aggregate 
exposure may be all long, all short and flat, or may consist of various 
combinations (long, short, and/or flat) thereof. The Commodity Sub-
Advisor intends to manage its overall strategy so that the notional 
amount of the Fund's combined long, short, and flat futures positions 
will not exceed 100% of the Fund's net assets. As of September 30, 
2011, the Index had 61.85% long, 24.08% short and 14.07% flat exposure.
    The Fund has no intention to short energy futures contracts because 
the prices of energy futures contracts are generally more sensitive to 
geopolitical events than to economic factors and, as a result, 
significant price variations are often driven by factors other than 
supply-demand imbalances. References to a flat position mean that 
instead of shorting energy futures contracts when market signals 
dictate, the Fund will have no futures contracts positions, either long 
or short, for that energy commodity. In that circumstance, the sum of 
the notional value of the portfolio's futures contracts will be less 
than the sum of the collateral assets. The difference quantitatively 
equals the notional value of what would have been the short portion in 
energy and is generally referred to as the ``flat'' position in energy. 
Because the Fund will hold no futures contracts to express a flat 
position, commodity traders customarily say that being flat is the 
equivalent of being invested in cash. The amounts that otherwise would 
have been allocated to an energy futures

[[Page 38119]]

contract will be held in cash as collateral for the Fund.
    The specific commodities and the total number of futures contracts 
in which the Fund will invest, and the relative weighting of those 
contracts, will be determined annually by the Commodity Sub-Advisor 
based upon the composition of the Index at that time. The selected 
commodity futures contracts are expected to remain unchanged until the 
next annual reconstitution each December. Upon annual reconstitution, 
the target weight of any individual commodity futures contract will be 
set and will be limited to 10% of the Fund's net assets to provide for 
diversification. The Commodity Sub-Advisor expects the actual portfolio 
weights to vary during the year due to market movements. If price 
movements cause an individual commodity futures contract to represent 
more than 10% of the Index at any time between monthly rebalancing, the 
Fund would seek to match the target weighting at the time of the 
monthly rebalancing. Generally, the Fund expects to invest in short-
term commodity futures contracts with terms of one to three months, but 
may invest in commodity futures contracts with terms of up to six 
months.
    Eligible Contracts. The Fund will invest in those commodity futures 
contracts and option contracts that are listed on an exchange with the 
greatest dollar volume traded in those contracts. Listed below are the 
main categories of eligible commodity futures contracts. The related 
options contracts are traded on the same exchanges as the futures 
contracts on which they are based. Each commodity may have several 
different types of individual commodity futures contracts (e.g., hard 
winter wheat and soft red wheat). The Commodity Sub-Advisor will have 
discretion over commodity futures contract selection and may choose 
from the available contract types.

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                                                                                                 Trading Hours
                Group                          Commodity               Primary Exchange          (Eastern Time)
----------------------------------------------------------------------------------------------------------------
Energy...............................  Coal....................  New York Mercantile Exchange        18:00-15:00
                                       Crude Oil...............  New York Mercantile Exchange         9:00-14:30
                                       Crude Oil...............  ICE Futures Europe..........         1:00-23:00
                                       Ethanol.................  New York Mercantile Exchange         8:50-12:05
                                       Ethanol.................  Chicago Board of Trade......         9:30-13:15
                                       Gas Oil.................  ICE Futures Europe..........         1:00-23:00
                                       Gasoline................  New York Mercantile Exchange         9:00-14:30
                                       Heating Oil.............  New York Mercantile Exchange         9:00-14:30
                                       Natural Gas.............  New York Mercantile Exchange         9:00-14:30
                                       Propane.................  New York Mercantile Exchange           Delisted
Agriculture..........................  Butter..................  Chicago Mercantile Exchange.        12:05-12:15
                                       Cocoa...................  ICE Futures US..............         8:00-11:50
                                       Coffee..................  ICE Futures US..............         8:00-13:30
                                       Corn....................  Chicago Board of Trade......        10:30-14:15
                                       Cotton..................  ICE Futures US..............        10:30-14:15
                                       Diamonium Phosphate.....  Chicago Mercantile Exchange.           Delisted
                                       Lumber..................  Chicago Mercantile Exchange.        10:00-14:05
                                       Milk....................  Chicago Mercantile Exchange.        10:05-14:10
                                       Oats....................  Chicago Board of Trade......        10:30-14:15
                                       Orange Juice............  ICE Futures US..............        10:00-13:30
                                       Pulp....................  ICE Futures US..............         7:00-15:15
                                       Pulp....................  Chicago Mercantile Exchange.        17:00-16:00
                                       Rice....................  Chicago Board of Trade......         9:30-13:15
                                       Soybean Meal............  Chicago Board of Trade......        10:30-14:15
                                       Soybean Oil.............  Chicago Board of Trade......        10:30-14:15
                                       Soybeans................  Chicago Board of Trade......        10:30-14:15
                                       Sugar...................  ICE Futures US..............         8:10-13:30
                                       Urea....................  Chicago Mercantile Exchange.           Delisted
                                       Urea Ammonium Nitrate...  Chicago Mercantile Exchange.           Delisted
                                       Wheat...................  Chicago Board of Trade......        10:30-14:15
                                       Wheat...................  Kansas City Board of Trade..        10:30-14:15
Metals...............................  Aluminum................  New York Mercantile Exchange           Delisted
                                       Copper..................  New York Commodities                 8:10-13:00
                                                                  Exchange.
                                       Gold....................  New York Commodities                 8:20-13:30
                                                                  Exchange.
                                       Palladium...............  New York Mercantile Exchange         8:30-13:00
                                       Platinum................  New York Mercantile Exchange         8:20-13:05
                                       Silver..................  New York Commodities                 8:25-13:25
                                                                  Exchange.
Livestock............................  Broilers................  Chicago Mercantile Exchange.           Delisted
                                       Feeder Cattle...........  Chicago Mercantile Exchange.        10:05-14:00
                                       Hogs....................  Chicago Mercantile Exchange.        10:05-14:00
                                       Live Cattle.............  Chicago Mercantile Exchange.        10:05-14:00
                                       Pork Bellies............  Chicago Mercantile Exchange.           Delisted
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    Current Index Composition. The actual signals (direction) and 
weights of the Morningstar[supreg] Long/Short CommoditySM 
Index as of September 30, 2011 are as follows:

[[Page 38120]]



------------------------------------------------------------------------
 
------------------------------------------------------------------------
Long Commodity Futures Positions........................          61.85%
Short Commodity Futures Positions.......................          24.08%
Flat Commodity Futures Positions........................          14.07%
                                                         ---------------
                                                                 100.00%
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------------------------------------------------------------------------
             Commodity                       Signal           Weight (%)
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Energy:
    Crude Oil Brent................  Long..................         8.18
    Gas-Oil-Petroleum..............  Long..................         6.50
    Heating Oil 2/Fuel Oil  Long..................         5.43
    Gasoline Blendstock............  Long..................         5.28
                                                            ------------
        Long Energy Positions......  ......................        25.39
    Crude Oil WTI..................  Flat..................         8.45
    Natural Gas Henry Hub..........  Flat..................         5.62
                                    ------------------------------------
        Flat Energy Positions......  ......................        14.07
                                    ------------------------------------
            Total Energy Positions.  ......................        39.46
Agriculture:
    Corn...........................  Long..................         5.20
    Soybeans.......................  Long..................         4.33
    Sugar 11..............  Long..................         4.08
    Coffee `C'/Colombian...........  Long..................         3.70
    Soybean Oil....................  Long..................         3.30
    Soybean Meal...................  Long..................         3.10
                                                            ------------
        Long Agriculture Positions.  ......................        23.71
    Wheat/No. 2 Soft Red...........  Short.................         5.58
    Wheat/No. 2 Hard Winter........  Short.................         3.60
    Cotton/1\1/16\.................  Short.................         3.59
                                    ------------------------------------
        Short Agriculture Positions  ......................        12.77
                                    ------------------------------------
            Total Agriculture        ......................        36.48
             Positions.
Metals:
    Gold...........................  Long..................         8.58
    Silver.........................  Long..................         4.17
                                                            ------------
        Long Metals Positions......  ......................        12.75
    Copper High Grade..............  Short.................         4.64
                                                            ------------
        Short Metals Positions.....  ......................         4.64
                                                            ------------
            Total Metals Positions.  ......................        17.39
Livestock:
    Cattle Live....................  Short.................         3.87
    Hogs Lean......................  Short.................         2.80
                                                            ------------
        Short Livestock Positions..  ......................         6.67
------------------------------------------------------------------------

    These are the actual signals and weights of the Index as of 
September 30, 2011, and are not the actual signals or weights of the 
Fund.
    The Index construction rules and other information about the Index 
can be found on Morningstar's Web site at http://indexes.morningstar.com, which is publicly available at no charge.
    Long/Short Portfolio of Commodity Futures. The Fund will invest 
directly in a diverse portfolio of exchange-traded commodity futures 
contracts that provide long/short exposure to the global commodity 
markets. By investing long/short, the Fund will seek to generate 
attractive total returns from positive or negative commodity price 
changes and positive or negative roll yield. Like most commodity 
futures investors, the Fund will replace expiring futures contracts 
with more distant contracts to avoid taking physical delivery of a 
commodity. This replacement of expiring contracts with more distant 
contracts is referred to as ``roll.'' To maintain exposure to commodity 
futures over an extended period, before contracts expire, the Commodity 
Sub-Advisor will roll the futures contracts throughout the year into 
new contracts so as to maintain a fully invested position.
    The Commodity Sub-Advisor will employ a proprietary methodology in 
assessing commodity market movements and in determining the Fund's 
long/short commodity futures positions. Generally, the Commodity Sub-
Advisor will employ momentum-based modeling (quantitative formulas that 
evaluate trend relationships between the changes in prices of futures 
contracts and trading volumes for a specific commodity) to estimate 
forward-looking prices and to evaluate the return impact of futures 
contract rolls. To determine the direction of the commodity futures 
position, either long or short (or flat in the case of energy futures 
contracts), the Commodity Sub-Advisor will calculate a roll-adjusted 
price that accounts for the current spot price and the impact of roll 
yield. The

[[Page 38121]]

futures price for a commodity that has positive roll yield (described 
as ``backwardation'') is adjusted up and the price for a commodity that 
has negative roll yield (described as ``contango'') is adjusted down. 
Generally, if a commodity's roll-adjusted price exceeds its 12-month 
moving average, the Fund expects to be long the commodity futures 
contract. Conversely, if the roll-adjusted price is below its 12-month 
moving average, the Fund expects to be short the commodity futures 
contract except for energy contracts which will be flat, i.e., in cash. 
The Commodity Sub-Advisor may exercise discretion in its long/short 
decisions and the timing and implementation of the Fund's commodity 
investments to seek to benefit from trading on commodity price 
momentum.
    The Commodity Sub-Advisor's long/short commodity investment program 
rules are proprietary, were developed by its senior portfolio 
management team, and expand upon the rules governing the Index. Upon 
completing the initial investment of the net proceeds of the offering, 
the Fund expects that the commodity futures contracts, their relative 
weights, and long/short direction will substantially replicate the 
constituent holdings and weights of the Index. Although the Commodity 
Sub-Advisor may exercise discretion in deciding which commodities to 
invest in, typically, the Fund expects to follow certain rules 
pertaining to eligible commodity futures contracts, weights, 
diversification, rebalancing, and annual reconstitution that are the 
same as those for the Index in order to minimize the divergence between 
the price behavior of the Fund's commodity futures portfolio and the 
price behavior of the Index (referred to as ``tracking error''). Over 
time, the Fund's commodity investments managed pursuant to the 
Commodity Sub-Advisor's long/short commodity investment program may 
differ from those of the Index.
    In addition, in actively managing the Fund's long/short portfolio 
of commodity futures contracts, the Commodity Sub-Advisor will seek to 
add value compared with the Index by implementing the following 
proprietary investment methods: (i) Trading contracts in advance of 
monthly index rolls; (ii) individual commodity futures contract 
selection; and (iii) active implementation. As a result, the roll 
dates, terms, underlying contracts, and contract prices selected by the 
Commodity Sub-Advisor may vary significantly from the Index based upon 
the Commodity Sub-Advisor's implementation of the long/short commodity 
investment program in light of the relative value of different contract 
terms. The Commodity Sub-Advisor's active management approach will be 
market-driven and opportunistic and is intended to minimize market 
impact and avoid market congestion during certain days of the trading 
month.
    Integrated Options Strategy. The Fund will employ a commodity 
option writing strategy that seeks to produce option premiums for the 
purpose of enhancing the Fund's risk-adjusted total return over time. 
Option premiums generated by this strategy may also enable the Fund to 
more efficiently implement its distribution policy. There can be no 
assurance that the Fund's options strategy will be successful.
    Pursuant to the options strategy, the Fund may sell commodity call 
or put options, which will all be exchange-traded, on a continual basis 
on up to approximately 25% of the notional value of each of its 
corresponding commodity futures contracts that, in the Commodity Sub-
Advisor's determination, have sufficient option trading volume and 
liquidity. Initially, the Fund expects to sell commodity options on 
approximately 15% of the notional value of each of its commodity 
futures contracts. If the Commodity Sub-Advisor buys the commodity 
futures contract, they will sell a call option on the same underlying 
commodity futures contract. If the Commodity Sub-Advisor shorts the 
commodity futures contract, they will sell a put option on the same 
underlying commodity futures contract (except in the case of energy 
futures contracts). The Commodity Sub-Advisor may exercise discretion 
with respect to commodity futures contract selection. Due to trading 
and liquidity considerations, the Commodity Sub-Advisor may determine 
that it is in the best interest of Fund shareholders to sell options on 
like commodities (for example, gas oil and heating oil are like 
commodities) and not matched commodity futures contracts.
    Since the Fund's option overwrite is initially expected to 
represent 15% of the notional value of each of its commodity futures 
contract positions, the Fund will retain the ability to benefit from 
the full capital appreciation potential beyond the strike price on the 
majority (85% or more) of its long and/or short commodity futures 
contracts. An important objective of the Fund's long/short commodity 
investment strategy will be to retain capital appreciation potential 
with respect to the major portion of the Fund's portfolio.
    When initiating new trades, the Fund expects to sell covered in-
the-money options. Because the Fund will hold options until expiration, 
the Fund may have uncovered out-of-the-money options in its portfolio 
depending on price movements of the underlying futures contracts.\12\ 
This element of the Fund's options strategy increases the Fund's gap 
risk, which is the risk that a commodity price will change from one 
level to another with no trading in between. In the event of an extreme 
market change or gap move in the price of a single commodity, the 
Fund's options strategy may result in increased exposure to that 
commodity from any uncovered options.
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    \12\ While the Fund intends to only write covered options, in 
certain circumstances as described below, the Fund may continue to 
hold options that due to subsequent trades become out-of-the-money 
and would be uncovered options. An out-of-the-money option becomes 
worthless after its expiration and there is no expectation that it 
will be exercised (and there is no resulting exposure risk for the 
Fund). For example, if the Fund is long wheat futures and sells 
covered call options on wheat futures, subsequent price movements in 
wheat futures may result in the Commodity Sub-Advisor, on behalf of 
the Fund, reversing from a long position to a short position. In 
this example, the Commodity Sub-Advisor would then sell its long 
wheat futures contracts and hold onto the out-of-the-money call 
option. At the same time, to effect its short position, the 
Commodity Sub-Advisor would short wheat futures contracts and sell 
covered put options on wheat futures. The Fund will rebalance its 
positions no less frequently than monthly and as such it is 
anticipated that no out-of-the-money option position would be 
uncovered for longer than one month.
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    Generally, the Fund expects to sell short-term commodity options 
with terms of one to three months. Subject to the foregoing 
limitations, the implementation of the options strategy will be within 
the Commodity Sub-Advisor's discretion. Over extended periods of time, 
the ``moneyness'' of the commodity options may vary significantly. Upon 
sale, the commodity options may be ``in-the-money,'' ``at-the-money,'' 
or ``out-of-the-money.'' A call option is said to be ``in-the-money'' 
if the exercise price is below current market levels, ``out-of-the-
money'' if the exercise price is above current market levels, and ``at-
the-money'' if the exercise price is at current market levels. 
Conversely, a put option is said to be ``in-the-money'' if the exercise 
price is above the current market levels and ``out-of-the-money'' if 
the exercise price is below current market levels.
    If the Commodity Sub-Advisor determines the Fund should have long 
exposure to an individual commodity futures contract, it will invest 
long in the commodity futures contract and sell call options on the 
same underlying commodity futures contract with the same strike price 
and expiration date. If the Commodity Sub-Advisor determines the Fund 
should have short exposure to

[[Page 38122]]

an individual commodity futures contract, it will short the commodity 
futures contract and sell put options on the same underlying commodity 
futures contract with the same strike price and expiration date.
    An exception is made for commodities in the energy sector since 
prices of those contracts are extremely sensitive to geopolitical 
events and not necessarily driven by supply-demand imbalances. If the 
Commodity Sub-Advisor determines the Fund should have long exposure to 
an energy futures contract, the Fund will only sell call options on 
that contract. If the Commodity Sub-Advisor determines the Fund should 
have short exposure to an energy futures contract, the Fund will move 
to cash (i.e., a flat position) for that contract and will not sell 
call or put options on that contract.
    Collateral Portfolio. The Fund's commodity investments will, at all 
times, be fully collateralized. The notional value of the Fund's 
commodity exposure is expected to be approximately equal to the market 
value of the collateral. The Fund's commodity investments generally 
will not require significant outlays of principal. Approximately 25% of 
the Fund's net assets will be initially committed as ``initial'' and 
``variation'' margin to secure the futures contracts. These assets will 
be placed in one or more commodity futures accounts maintained by the 
Fund at BCI and will be held in cash or invested in U.S. Treasury bills 
and other direct or guaranteed debt obligations of the U.S. government 
maturing within less than one year at the time of investment. The 
remaining collateral (approximately 75% of the Fund's net assets) will 
be held in a separate collateral investment account managed by the 
Collateral Sub-Advisor.
    The Fund's assets held in this separate collateral account will be 
invested in cash equivalents or short-term debt securities with final 
terms not exceeding one year at the time of investment. These 
collateral investments shall be rated at all times at the applicable 
highest short-term or long-term debt or deposit rating or money market 
fund rating as determined by at least one nationally recognized 
statistical rating organization. These collateral investments will 
consist primarily of direct and guaranteed obligations of the U.S. 
government and senior obligations of U.S. government agencies and may 
also include, among others, money market funds and bank money market 
accounts invested in U.S. government securities, as well as repurchase 
agreements collateralized with U.S. government securities.

Commodity Futures Contracts and Related Options

    Investments in individual commodity futures contracts and options 
on futures contracts historically have had a high degree of price 
variability and may be subject to rapid and substantial price changes, 
which could affect the value of the Shares. The Fund will invest in a 
diverse portfolio of exchange-traded commodity futures contracts and 
exchange-traded options on commodity futures contracts. The Fund 
expects to make investments in the most actively traded commodity 
futures contracts in the four main commodity sectors in the global 
commodities markets, as described above. Options on commodity futures 
contracts are contracts giving the purchaser the right, as opposed to 
the obligation, to acquire or to dispose of the commodity futures 
contract underlying the option on or before a future date at a 
specified price.
    The potential Fund investments in futures contracts and options on 
such futures contracts are traded on U.S. and non-U.S. exchanges, 
including the Chicago Board of Trade (``CBOT''), the Chicago Mercantile 
Exchange (``CME''), the ICE Futures Europe, the ICE Futures U.S., the 
New York Mercantile Exchange (``NYMEX'') and the New York Commodities 
Exchange (``COMEX''), and the Kansas City Board of Trade (``KBOT'').

Additional Product Information

    Commencing with the Fund's first distribution, the Fund intends to 
make regular monthly distributions to its shareholders (stated in terms 
of a fixed cents per share distribution rate) based on the past and 
projected performance of the Fund. Among other factors, the Fund will 
seek to establish a distribution rate that roughly corresponds to the 
Manager's projections of the total return that could reasonably be 
expected to be generated by the Fund over an extended period of time. 
Each monthly distribution will not be solely dependent on the amount of 
income earned or capital gains realized by the Fund, and such 
distributions may from time to time represent a return of capital and 
may require that the Fund liquidate investments. As market conditions 
and portfolio performance may change, the rate of distributions on the 
Shares and the Fund's distribution policy could change. The Fund 
reserves the right to change its distribution policy and the basis for 
establishing the rate of its monthly distributions, or may temporarily 
suspend or reduce distributions without a change in policy, at any time 
and may do so without prior notice to shareholders.
    Under the Fund's intended operational procedures, the Fund's net 
asset value (``NAV'') will be calculated after the close of the 
Exchange (normally 4:00 p.m. Eastern Time or ``E.T.''), on each day 
that the Exchange is open.\13\ The normal trading hours for those 
investments of the Fund traded on the various commodity exchanges may 
differ from the normal trading hours of the Exchange, which are from 
9:30 a.m. to 4:00 p.m. E.T. Therefore, there may be time periods during 
the trading day where the Shares will be trading on the Exchange, but 
the futures contracts on various commodity exchanges will not be 
trading. The value of the Shares may accordingly be influenced by the 
non-concurrent trading hours between the Exchange and the various 
futures exchanges on which the futures contracts based on the 
underlying commodities are traded.
---------------------------------------------------------------------------

    \13\ NAV per Share will be computed by dividing the value of all 
assets of the Fund (including any accrued interest and dividends), 
less all liabilities (including accrued expenses and distributions 
declared but unpaid), by the total number of Shares outstanding. The 
Fund will publish its NAV on its Web site on a daily basis, rounded 
to the nearest cent.
    For purposes of determining the NAV of the Fund, portfolio 
instruments will be valued primarily by independent pricing services 
approved by the Manager at their market value. The Manager will 
review the values as determined by the independent pricing service 
and discuss those valuations with the pricing service if appropriate 
based on pricing oversight guidelines established by the Manager 
that it believes are consistent with industry standards. If the 
pricing services are unable to provide a market value or if a 
significant event occurs such that the valuation(s) provided are 
deemed unreliable, the Fund may value portfolio instrument(s) at 
their fair value, which will be generally the amount that the Fund 
might reasonably expect to receive upon the current sale or closing 
of a position. The fair value of an instrument will be based on the 
Manager's good faith judgment and may differ from subsequent quoted 
or published prices.
---------------------------------------------------------------------------

    The Fund will not continuously offer Shares and will not provide 
daily redemptions. Rather, if a shareholder determines to buy 
additional Shares or sell Shares already held, the shareholder may do 
so by trading on the Exchange through a broker or otherwise. Shares of 
the Fund may trade on the Exchange at prices higher or lower than NAV. 
Because the market value of the Fund's Shares may be influenced by such 
factors as distribution levels (which are in turn affected by 
expenses), distribution stability, NAV, relative demand for and supply 
of such Shares in the market, general market and economic conditions, 
and other factors beyond the Fund's control, the Fund cannot guarantee 
that Shares will trade

[[Page 38123]]

at a price equal to or higher than NAV in the future. Shares will be 
registered in book entry form through the Depository Trust & Clearing 
Corporation.
    Additional information regarding the Fund, the Shares, the Fund's 
investment strategies, risks, fees, portfolio holdings and disclosure 
policies, distributions, availability of information, trading rules and 
halts, and surveillance procedures, among other things, can be found in 
the Notice and the Registration Statement, as applicable.\14\
---------------------------------------------------------------------------

    \14\ See Notice and Registration Statement, supra notes 3 and 5, 
respectively.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\15\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\16\ which 
requires, among other things, that the Exchange's rules be designed to 
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 Fund and the Shares must comply with the rules of the Exchange, 
including the requirements of NYSE Amex Rule 1600 et seq., to be listed 
and traded on the Exchange.
---------------------------------------------------------------------------

    \15\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \16\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\17\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available through the 
facilities of the Consolidated Tape Association (``CTA''). The daily 
settlement prices of the futures contracts and options on futures 
contracts held by the Fund are readily available from the Web sites of 
the relevant futures exchanges, automated quotation systems, published 
or other public sources, or on-line information services such as 
Bloomberg or Reuters. The relevant futures exchanges also provide 
delayed futures information on current and past trading sessions and 
market news free of charge on their respective Web sites. Futures and 
related exchange-traded options quotes and last-sale information for 
the commodity futures contracts are widely disseminated through a 
variety of market data vendors worldwide, including Bloomberg and 
Reuters, and complete real-time data for futures contracts and 
exchange-traded options is available by subscription from Reuters and 
Bloomberg. The daily returns for the Index (i.e., percentage change 
from the previous day) are posted on the Morningstar Web site by 8:00 
a.m. E.T. on the following business day, and the Index value is 
disseminated through Bloomberg and other market data vendors every 15 
seconds from 9:30 a.m. to 5:15 p.m. E.T. The Index construction rules 
and other information about the Index are publicly available on 
Morningstar's Web site at no charge. The Fund's total portfolio 
composition and the composition of the collateral portfolio will be 
disclosed on the Fund's Web site on each business day that the Exchange 
is open for trading.\18\ As noted above, the Fund's NAV will be 
calculated after the close of the Exchange (normally 4:00 p.m. E.T.), 
on each day that the Exchange is open, and disseminated daily to all 
market participants at the same time.\19\ The Fund's Web site will also 
include a form of the prospectus for the Fund, information relating to 
NAV, and other quantitative and trading information.\20\
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \18\ This Web site disclosure of portfolio holdings will be made 
daily and will include, as applicable: (a) The name, number of 
contracts or options, value per contract or option, and total value 
and percentage of the Fund's total value represented by each 
individual commodity futures contract or option to purchase a 
commodity futures contract invested in by the Fund; (b) the total 
value of the collateral as represented by cash; (c) cash 
equivalents; and (d) debt securities rated at the applicable highest 
short-term or long-term debt or deposit rating or money market fund 
rating as determined by at least one nationally recognized 
statistical rating organization held in the Fund's portfolio. The 
total portfolio holdings will be disseminated to all market 
participants at the same time.
    \19\ NAV per Share will be computed by dividing the value of all 
assets of the Fund (including any accrued interest and dividends), 
less all liabilities (including accrued expenses and distributions 
declared but unpaid), by the total number of Shares outstanding. The 
Fund will publish its NAV on its Web site on a daily basis, rounded 
to the nearest cent.
    \20\ The Exchange notes that exchange traded funds (``ETFs'') 
(and commodity pools that seek to replicate an ETF structure) 
publish intraday indicative values generally every 15 seconds (along 
with full transparency of portfolio holdings) in order to facilitate 
the arbitrage mechanism that is intended to minimize any deviation 
between the ETF's market price and the per share NAV of the ETF 
shares, which in turn facilitates the creation/redemption mechanism 
that is fundamental to ETFs. The creation/redemption mechanism is 
the process by which institutional investors make and redeem 
investments in large ``Creation Units'' of ETF Shares. Unlike ETFs, 
the Fund will not redeem its Shares, and therefore will not rely on 
a creation/redemption mechanism to create an arbitrage mechanism. 
Instead, the Manager has advised the Exchange that it expects the 
Shares to have trading characteristics similar to those of exchange-
traded closed-end funds. Because the Fund has no creation/redemption 
mechanism, the Manager has advised the Exchange that it believes 
that the publishing of an intraday indicative value for the Fund 
would serve no useful purpose for investors or the market as a 
whole, and because the Fund is actively managed, publication of its 
trades in advance would be harmful to the Fund and its shareholders.
---------------------------------------------------------------------------

    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and will be made available to all market 
participants at the same time.\21\ With respect to trading halts, the 
Exchange may consider all relevant factors in exercising its discretion 
to halt or suspend trading in the Shares, and trading may be halted 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable. In particular, if the 
Exchange becomes aware that the portfolio holdings and NAV per Share 
are not being disseminated as required, the Exchange may halt trading 
during the day in which the interruption to the dissemination of the 
portfolio holdings or NAV per Share occurs. If the interruption to the 
dissemination of the portfolio holdings or NAV per Share 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.\22\

[[Page 38124]]

In addition, each of the Manager, the Commodity Sub-Advisor, and the 
Collateral Sub-Advisor has represented to the Exchange that it has 
erected and maintains firewalls within its respective institution to 
prevent the flow and/or use of non-public information regarding the 
portfolio of underlying securities from the personnel involved in the 
development and implementation of the investment strategy to others 
such as sales and trading personnel. The Commodity Sub-Advisor, the 
Collateral Sub-Advisor, any sub-adviser of either, and the respective 
related personnel of both are subject to the provisions of Rule 204A-1 
under the Advisers Act relating to codes of ethics. Morningstar, Inc. 
has erected and maintains information firewalls between the group which 
is responsible for the Index and employees of its broker-dealer 
subsidiary to prevent the flow and/or use of material non-public 
information regarding the Index from the personnel responsible for the 
Index to employees of the broker-dealer. The Exchange states that it 
has a general policy prohibiting the distribution of material, non-
public information by its employees. The Commission also notes that the 
Exchange is able to obtain information with respect to the underlying 
futures contracts and options on futures contracts from the exchanges 
listing and trading such futures contracts and options on futures 
contracts that are members of the Intermarket Surveillance Group 
(``ISG'') or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\23\
---------------------------------------------------------------------------

    \21\ See NYSE Amex Rule 1602(a)(ii). The Manager has represented 
to the Exchange that the NAV will be disseminated to all market 
participants at the same time. See Notice, supra, note 3.
    \22\ See NYSE Amex Rule 1602(b)(ii). In addition, the Exchange 
will halt trading in the Shares if the circuit breaker parameters of 
Rule 80B-NYSE Amex Equities have been reached. In exercising its 
discretion to halt or suspend trading in the Shares, the Exchange 
may consider factors such as those set forth in Rule 953NY(a), in 
addition to other factors that may be relevant. Id.
    \23\ The Exchange represents that it can obtain market 
surveillance information, including customer identity information, 
with respect to transactions occurring on exchanges that are members 
of ISG, including CME, CBOT, COMEX, NYMEX (all of which are part of 
CME Group, Inc.), and ICE Futures US. In addition, the Exchange 
currently has in place a comprehensive surveillance sharing 
agreement with each of CME, NYMEX, ICE Futures Europe, and KCBOT for 
the purpose of providing information in connection with trading in 
or related to futures contracts or options on futures contracts 
traded on those markets.
---------------------------------------------------------------------------

    The Exchange further represents 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 Fund will be subject to the criteria in NYSE Amex Rule 1602 
for initial and continued listing of the Shares.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares and to deter and detect 
violations of Exchange rules and applicable federal securities laws. 
All of the commodity futures contracts and options on commodity futures 
contracts in which the Fund will invest will be traded on regulated 
exchanges, and the Manager has represented to the Exchange that, while 
the Fund may invest in futures contracts or options on futures 
contracts which trade on markets that are not members of ISG or with 
which the Exchange does not have in place a comprehensive surveillance 
sharing agreement, such instruments will never represent more than 10% 
of the Fund's holdings.
    (3) The Exchange will distribute an Information Circular 
(``Circular'') to its members in connection with the trading of the 
Shares. The Circular will discuss the special characteristics and risks 
of trading this type of security. Specifically, the Circular, among 
other things, will discuss what the Shares are, the requirement that 
members and member firms deliver a prospectus to investors purchasing 
the Shares prior to or concurrently with the confirmation of a 
transaction during the initial public offering, applicable NYSE Amex 
rules, and trading information and applicable suitability rules. The 
Circular will also explain that the Fund is subject to various fees and 
expenses described in the Registration Statement. The Circular will 
also reference the fact that there is no regulated source of last sale 
information regarding physical commodities and note the respective 
jurisdictions of the Commission and CFTC. The Circular will also advise 
members of their suitability obligations with respect to recommended 
transactions to customers in the Shares.
    (4) For initial and continued listing of the Shares, the Fund will 
be in compliance with Rule 10A-3 under the Act.\24\
---------------------------------------------------------------------------

    \24\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (5) The Fund will not invest in swaps or over-the-counter 
derivatives.
    (6) The Fund's commodity investments will, at all times, be fully 
collateralized, and the Fund's investments will be consistent with the 
Fund's investment objective and will not be used to enhance leverage.
    (7) A minimum of 2,000,000 Shares will be required to be publicly 
distributed at the commencement of trading on the Exchange.

This approval order is based on all of the Exchange's representations 
and description of the Fund, including those set forth above and in the 
Notice.

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \25\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-NYSEAmex-2012-24) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-15492 Filed 6-25-12; 8:45 am]
BILLING CODE 8011-01-P