[Federal Register Volume 78, Number 3 (Friday, January 4, 2013)]
[Notices]
[Pages 785-791]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-31668]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68547; File No. SR-NYSEArca-2012-120]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change To List and Trade Shares of the United 
States Asian Commodities Basket Fund Under NYSE Arca Equities Rule 
8.200

December 28, 2012.

I. Introduction

    On October 25, 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 (``Shares'') of the 
United States Asian Commodities Basket Fund (``Fund'') under NYSE Arca 
Equities Rule 8.200. The proposed rule change was published for comment 
in the Federal

[[Page 786]]

Register on November 13, 2012.\3\ The Commission received no comments 
on the proposed rule change. 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. 68173 (November 6, 
2012), 77 FR 67712 (``Notice'').
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II. Description of Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Fund pursuant 
to NYSE Arca Equities Rule 8.200, Commentary .02.\4\ The Shares 
represent beneficial ownership interests in the Fund.\5\ The Fund is a 
commodity pool that is a series of the United States Commodity Funds 
Trust I (``Trust''), a Delaware statutory trust. The Fund is managed 
and controlled by United States Commodity Funds LLC (``Sponsor''), a 
Delaware limited liability company that is registered as a commodity 
pool operator with the Commodity Futures Trading Commission (``CFTC'') 
and is a member of the National Futures Association. Brown Brothers 
Harriman & Co. Inc. is the administrator for the Trust 
(``Administrator'').
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    \4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, means any combination of 
investments, including cash; securities; options on securities and 
indices; futures contracts; options on futures contracts; forward 
contracts; equity caps, collars, and floors; and swap agreements.
    \5\ See Amendment No. 2 to the registration statement on Form S-
1 for the United States Commodity Funds Trust I, dated June 18, 2012 
(File No. 333-177188) relating to the Fund (``Registration 
Statement'').
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    The net assets of the Fund will consist of (a) investments in 
futures contracts for Asian commodities (collectively, ``Futures 
Contracts'') that are traded on the Chicago Mercantile Exchange 
(``CME''), Chicago Board of Trade (``CBOT''), the New York Mercantile 
Exchange (``NYMEX''), Commodity Exchange, Inc. (``COMEX''), ICE Futures 
US (``ICE US''), ICE Futures Canada (``ICE Canada''), ICE Futures 
Europe (``ICE Europe''), London Metal Exchange (``LME''), Tokyo 
Commodity Exchange (``TOCOM''), Dubai Mercantile Exchange (``DME''), 
and Bursa Malaysia (``Malaysia'') (each a ``Futures Exchange'' and 
collectively, ``Futures Exchanges''), and (b) if applicable, other 
Asian commodities-related investments such as exchange-listed, cash-
settled options on Futures Contracts, forward contracts for Asian 
commodities, cleared swap contracts, and over-the-counter transactions 
that are based on the price of Asian commodities, Futures Contracts, 
and indices based on the foregoing (collectively, ``Other Asian 
Commodities-Related Investments'' and, together with Futures Contracts, 
``Asian Commodities Interests''). The Fund will also invest in short-
term obligations of the United States of two years or less 
(``Treasuries''), cash, and cash equivalents for margining purposes and 
as collateral.
    The Fund will invest in Asian Commodities Interests, to the fullest 
extent possible, without being leveraged or unable to satisfy its 
current or potential margin and/or collateral obligations with respect 
to its investments in Futures Contracts and Other Asian Commodities-
Related Investments.\6\ The primary focus of the Sponsor will be the 
investment in Futures Contracts and the management of the Fund's 
investments in Treasuries, cash, and cash equivalents for margining 
purposes and as collateral.
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    \6\ The Sponsor represents that the Fund will invest in Asian 
Commodities Interests in a manner consistent with the Fund's 
investment objective and not to achieve additional leverage.
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    The investment objective of the Fund (before fees and expenses) 
will be to have the daily changes in percentage terms of its net asset 
value (``NAV'') reflect the daily changes in percentage terms of the 
price of a basket (``Futures Basket'') of Futures Contracts selected by 
the Sponsor (``Benchmark Futures Contracts''), each of which tracks one 
of the Asian Benchmark Commodities. The ``Asian Benchmark Commodities'' 
will be commodities selected by the Sponsor \7\ based on either their 
systemic importance to Asian economies, including the three major Asian 
economies of China, Japan, and India, or the fact that there are 
futures contracts relating to the commodity or commodities that trade 
on an Asian domiciled futures exchange. The Sponsor will select the 
Asian Benchmark Commodities based on the following four criteria:
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    \7\ The Sponsor is not a broker-dealer or a registered 
investment adviser. The Sponsor represents that it will implement 
and maintain procedures designed to prevent the use and 
dissemination of material, non-public information regarding the 
Futures Basket.
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     First, the physical commodity must be one in which the 
economies of China, Japan, and India annually consume 10% or more of 
global consumption based on publically available industry and 
government statistics.
     Second, the physical commodity must be one in which, based 
on publically available industry and government statistics, China, 
Japan, and India annually produce less of the commodity than they 
typically consume, indicating that they are likely to be net importers 
of the commodity and not net exporters.
     Third, the Futures Contracts on the physical commodity 
must be traded on a regulated Futures Exchange in the United States, 
Canada, the United Kingdom, Japan, Dubai, Malaysia, or other domicile 
which allows a U.S. domiciled passive investment fund to buy and sell 
such contracts.
     Fourth and finally, the Futures Contracts traded on such 
commodities must have average open interest measured in U.S. dollars in 
excess of $150 million at the time of the commodity's selection. In the 
event the same or substantially similar physical contract is traded on 
more than one Futures Exchange, the minimum liquidity test will be 
applied to the exchange with the largest open interest U.S. dollar 
terms in that particular commodity.
    The Asian Benchmark Commodities will be selected by the Sponsor in 
accordance with the above specific quantitative data. In the first 
quarter of each calendar year, the Sponsor will reevaluate the 
selection of Asian Benchmark Commodities based on the prior year's 
data. As a result of changes in Asian commodity production, commodity 
consumption, net imports or exports of commodities, and changes in 
commodity futures contract liquidity, and in strict accordance with the 
criteria and factors listed above, the Sponsor may elect to add or 
delete a commodity from the list of Asian Benchmark Commodities, and 
thus the Futures Basket.\8\ Under normal circumstances, the Sponsor 
anticipates that any changes in either the list of Asian Benchmark 
Commodities, the list of Benchmark Futures Contracts in the Futures 
Basket, or their weightings, would be made as part of the annual review 
process and disclosed to investors with no less than 30 days advanced 
notice of the change.
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    \8\ In making any such change, the Sponsor will file a 
prospectus supplement informing investors of the proposed changes no 
less than 30 days prior to the first month in which the commodity or 
commodities added will become part of the Asian Benchmark 
Commodities, or 30 days prior to the first month in which the 
commodity or commodities deleted will no longer be part of the Asian 
Benchmark Commodities. Any changes to the eligible Asian Benchmark 
Commodities will also be published on the Web site for the Fund.
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    From time to time throughout the year, it is possible that the 
Sponsor may determine that a Futures Contract that is currently a 
Benchmark Futures Contract is no longer suitable due to changes in the 
liquidity of the Futures Contract or due to changes in the rules 
regarding that particular Futures Contract on its

[[Page 787]]

regulated Futures Exchange.\9\ In such cases, the Sponsor would first 
attempt to select another Futures Contract based on the same commodity 
that trades on either the current regulated Futures Exchange, or trades 
on another regulated Futures Exchange, and disclose on the Fund's Web 
site and in a prospectus supplement that the new Futures Contract will 
become a Benchmark Futures Contract for the relevant Asian Benchmark 
Commodity and the prior Benchmark Futures Contract for such Asian 
Benchmark Commodity would be deleted. In the event that the Sponsor 
determined that no other existing Futures Contract is a suitable 
replacement, then the Sponsor would file a prospectus supplement and 
post on the Web site indicating that the relevant Benchmark Futures 
Contract would no longer be included as part of the Futures Basket. In 
cases where a suitable Benchmark Futures Contract no longer exists, the 
Sponsor will also remove the underlying commodity from the list of 
Asian Benchmark Commodities.\10\ Although the Sponsor would normally 
seek to provide at least 30 days' notice of any such change, specific 
circumstances could mean that the Sponsor would be unable to provide 
that amount of advanced notice.
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    \9\ An example would be a case where a Futures Contract's 
liquidity (average open interest) has decreased to under $150 
million.
    \10\ In a case where an underlying commodity is removed from the 
list of Asian Benchmark Commodities as described, if a Futures 
Contract in such commodity becomes available at some later date, the 
underlying commodity would be eligible for selection as an Asian 
Benchmark Commodity in the annual review process.
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    The Benchmark Futures Contracts may trade on any of the Futures 
Exchanges. It is not the intent of the Fund to be operated in a fashion 
such that its NAV will equal, in dollar terms, the spot price of any 
particular commodity or any particular Benchmark Futures Contract. It 
is not the intent of the Fund to be operated in a fashion such that its 
NAV will reflect the percentage change of the price of the Futures 
Basket as measured over a time period greater than one day. The Sponsor 
does not believe that is an achievable goal due to the potential impact 
of backwardation and contango on returns of any portfolio of futures 
contracts.
    The Fund will seek to achieve its investment objective by investing 
in Futures Contracts and, if applicable, Other Asian Commodities-
Related Investments such that the daily changes in the Fund's NAV will 
closely track changes in the daily price of the Futures Basket. The 
Sponsor believes changes in the price of the Benchmark Futures 
Contracts have historically exhibited a close correlation with the 
changes in the price of the corresponding Asian Benchmark Commodities. 
On any valuation day (a valuation day is any NYSE Arca trading day as 
of which the Fund calculates its NAV), each Benchmark Futures Contract 
will be the near month contract for the corresponding Asian Benchmark 
Commodity traded on the Futures Exchange where such Benchmark Futures 
Contract is listed, unless the near month contract will expire within 
four business days prior to the end of the month. Only the Benchmark 
Futures Contracts that will be reaching expiration in the upcoming 
month will be sold and the next Futures Contract for that commodity 
that expires later than the upcoming month, the next month contract, 
will be used to replace the contract being sold. Benchmark Futures 
Contracts which are not reaching expiration in the upcoming month will 
not be ``rolled'' forward.
    The Fund will invest in Benchmark Futures Contracts to the fullest 
extent possible, turning next to investments in other Futures 
Contracts, and finally to Other Asian Commodities-Related Investments 
only if required to by applicable regulatory requirements or under 
adverse market conditions.\11\ The types of regulatory requirements and 
market conditions that would cause the Fund to invest in this manner 
are of a limited nature. An example of a regulatory requirement that 
would cause the Fund to invest in Futures Contracts or Other Asian 
Commodities-Related Investments other than Benchmark Futures Contracts 
would be where the Fund received payment from an authorized purchaser 
for the issuance of a creation basket, but could not invest the payment 
in Benchmark Futures Contracts because doing so would cause the Fund to 
exceed the position limits applicable to such Benchmark Futures 
Contracts. Imposition of other regulatory requirements, such as 
accountability levels, daily price fluctuation limits, or the 
imposition of capital controls on foreign investments, may cause the 
Fund to invest in Futures Contracts or Other Asian Commodities-Related 
Investments other than Benchmark Futures Contracts.\12\ Adverse market 
conditions that the Sponsor currently anticipates could cause the Fund 
to invest in Futures Contracts and Other Asian Commodities-Related 
Investments other than the Benchmark Futures Contracts would be those 
allowing the Fund to obtain greater liquidity or to execute 
transactions with more favorable pricing.
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    \11\ ``Adverse market conditions'' as used herein includes, but 
is not limited to, those conditions whereby the Sponsor believes the 
price of the Benchmark Futures Contract appears adversely impacted 
or economically dislocated compared to substantially similar Futures 
Contracts, i.e., those futures contracts of the same commodity as 
the Benchmark Futures Contract, but traded on a different exchange.
    \12\ U.S. designated contract markets such as the CME, CBOT, 
COMEX, NYMEX, and ICE US have established accountability levels and 
position limits on the maximum net long or net short futures 
contracts in commodity interests that any person or group of persons 
under common trading control (other than as a hedge, which an 
investment by the Fund is not) may hold, own, or control. In 
addition to accountability levels and position limits, the regulated 
Futures Exchanges may also set daily price fluctuation limits on 
futures contracts. The daily price fluctuation limit establishes the 
maximum amount that the price of a futures contract may vary either 
up or down from the previous day's settlement price. Once the daily 
price fluctuation limit has been reached in a particular futures 
contract, no trades may be made at a price beyond that limit.
    Imposition of, or changes in, accountability levels, position 
limits or fluctuation limits on futures contracts could constitute a 
regulatory requirement that would cause the Fund to invest in 
Futures Contracts or Other Asian Commodities-Related Investments 
other than Benchmark Futures Contracts. All of these limits may 
potentially cause a tracking error between the price of the Shares 
and the price of the Futures Basket. This may in turn prevent 
investors from being able to effectively use the Fund as a way to 
hedge against Asian commodities-related losses or as a way to 
indirectly invest in Asian commodities.
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    More specifically, if applicable regulatory requirements or adverse 
market conditions make investing in Benchmark Futures Contracts 
impracticable, the Fund would then invest to the fullest extent 
possible in other Futures Contracts that, while relating to the same 
commodity and trading on the same Futures Exchange as a Benchmark 
Futures Contract, have a different expiration date. If and when 
investing in such other Futures Contracts becomes impracticable because 
of regulatory requirements or adverse market conditions, the Fund would 
then invest to the fullest extent possible in Futures Contracts that, 
while relating to the same commodity as the corresponding Benchmark 
Futures Contract, are traded on a different futures exchange. Only when 
the Fund has invested in Benchmark Futures Contracts and other Futures 
Contracts to the fullest extent possible in the manner described above 
will it then invest in Other Asian Commodities-Related Investments.\13\
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    \13\ The Fund anticipates that, to the extent it invests in 
Futures Contracts other than the Benchmark Futures Contracts and 
Other Asian Commodities-Related Investments that are not 
economically equivalent to the Benchmark Futures Contracts, it will 
enter into various non-exchange-traded derivative contracts to hedge 
the short-term price movements of such Futures Contracts and Other 
Asian Commodities-Related Investments against the current Benchmark 
Futures Contracts.

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[[Page 788]]

    The Sponsor will endeavor to place the Fund's trades in Asian 
Commodities Interests and otherwise manage the Fund's investments so 
that ``A'' will be within plus/minus 10 percent of ``B,'' where:
     A is the average daily percentage change in the Fund's NAV 
for any period of 30 successive valuation days (i.e., any NYSE Arca 
trading day as of which the Fund calculates its NAV); and
     B is the average daily percentage change in the price of 
the Futures Basket over the same period.
    The current Asian Benchmark Commodities, the Sponsor's estimate of 
the percentage of global production and consumption for each commodity 
that is attributable to China, Japan, and India combined, and the 
current assigned base weight of each commodity for use in the Futures 
Basket are shown in the table below.

                                           Asian Benchmark Commodities
                                            (as of December 31, 2011)
----------------------------------------------------------------------------------------------------------------
                                                                   China, Japan,   China, Japan,
                                                                    and India's     and India's
                                                                     share of        share of      Current base
                            Commodity                                 global          global          weight
                                                                    production      consumption      (percent)
                                                                     (percent)       (percent)
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Crude Oil.......................................................             5.9            19.0              22
Gasoil..........................................................             5.9            19.0               2
Corn............................................................            23.3            24.6              10
Soybeans........................................................             9.1            32.1              10
Wheat...........................................................            32.3            32.6              10
Copper..........................................................             4.8            60.9              10
Zinc............................................................            34.5            48.9               5
Nickel..........................................................             4.3            41.6               5
Sugar...........................................................            24.4            26.2               5
Platinum........................................................               0            41.9               5
Gold............................................................            13.1            63.8               5
Silver..........................................................            15.1            66.8               5
Canola Oil......................................................              15            44.7               2
Palm Oil........................................................               0            40.1               2
Rubber..........................................................            14.6            47.3               2
                                                                 -----------------------------------------------
    Total.......................................................  ..............  ..............             100
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    A list of the current Benchmark Futures Contracts and their 
weighting in the Futures Basket is shown in the table below.

                                                               Benchmark Futures Contracts
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                                                                                                                                                Futures
                                          Primary futures       Trading hours (eastern   Contract ticker or  Contract                            basket
              Commodity                       exchange                  time)                   code           size      Pricing convention    weighting
                                                                                                                                               (percent)
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Crude Oil-Light/Sweet-Brent.........  ICE Europe.............  8 p.m.-6 p.m.*.........  CO.................     1,000  USD/bbl...............       20.0
Crude Oil-Medium-DME/Oman...........  DME/CME**..............  6 p.m.-5:15 p.m.*......  OQD................     1,000  USD/bbl...............        2.0
Gasoil..............................  ICE Europe.............  8 p.m.-6 p.m.*.........  QS.................       100  USD/Tonne.............        2.0
Corn................................  CBOT...................  8:30 a.m.-12:15 p.m....  ZC.................     5,000  c/bu..................       10.0
Soybeans............................  CBOT...................  8:30 a.m.-12:15 p.m....  ZS.................     5,000  c/bu..................       10.0
Wheat...............................  CBOT...................  8:30 a.m.-12:15 p.m....  ZW.................     5,000  c/bu..................       10.0
Copper..............................  COMEX..................  8:10 a.m.-1 p.m........  HG.................    25,000  USD/lb................       10.0
Zinc................................  LME....................  8 p.m.-2 p.m...........  LX.................        25  USD/Tonne.............        5.0
Nickel..............................  LME....................  8 p.m.-2 p.m...........  LN.................         6  USD/Tonne.............        5.0
Sugar...............................  ICE US.................  3:30 a.m.-2 p.m........  SB.................   112,000  c/lb..................        5.0
Platinum............................  TOCOM ***..............  7 p.m.-1:30 a.m.*......  JA.................       500  JPY/g.................        5.0
Gold................................  COMEX..................  8:20 a.m.-1:30 p.m.....  GC.................       100  USD/T.Oz..............        5.0
Silver..............................  COMEX..................  8:25 a.m.-1:25 p.m.....  SI.................     5,000  USD/T.Oz..............        5.0
Canola Oil..........................  ICE Canada.............  8 p.m.-2:15 p.m........  RS.................        20  CAD/Tonne.............        2.0
Palm Oil............................  Bursa Malaysia/CME **..  7 p.m.-3:50 a.m.*......  KO.................        25  MYR/Tonne.............        2.0
Rubber..............................  TOCOM..................  7 p.m.-1:30 a.m.*......  JN.................     5,000  JPY/kg................        2.0
                                                                                                                                              ----------
    Total...........................  .......................  .......................  ...................  ........  ......................        100
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* Trading ends on next calendar day.
** Non-U.S. Futures Contracts that are also cross-listed on the CME and trade during U.S. market hours.
*** A substantially similar, but not identical, physically settled Futures Contract trades in the U.S. on the CME.


[[Page 789]]

    The Sponsor believes that market arbitrage opportunities will cause 
daily changes in the Fund's Share price on the Exchange to closely 
track daily changes in the Fund's NAV per Share. The Sponsor believes 
that the net effect of this expected relationship and the expected 
relationship described above between the Fund's NAV and the Futures 
Basket will be that the daily changes in the price of the Fund's Shares 
on the Exchange will closely track in percentage terms, changes in the 
Futures Basket less the Fund's expenses.
    The Sponsor will employ a ``neutral'' investment strategy intended 
to track the changes in the Futures Basket regardless of whether the 
price goes up or goes down. The Fund's ``neutral'' investment strategy 
is designed to permit investors generally to purchase and sell the 
Fund's Shares for the purpose of trading indirectly in the commodities 
market in a cost-effective manner, and/or to permit participants in the 
commodities or other industries to hedge the risk of losses in their 
Asian Commodities Interests. Accordingly, depending on the investment 
objective of an individual investor, the risks generally associated 
with investing in the Asian commodities market and/or the risks 
involved in hedging may exist. In addition, an investment in the Fund 
involves the risk that the changes in the price of the Fund's Shares 
will not accurately track changes in the Futures Basket and that 
changes in the Benchmark Futures Contracts will not closely correlate 
with changes in the prices of the corresponding Asian Benchmark 
Commodities. Furthermore, the Fund will also hold Treasuries, cash, 
and/or cash equivalents to meet its current or potential margin or 
collateral requirements with respect to its investments in Asian 
Commodities Interests and invest cash not required to be used as margin 
or collateral. The Fund does not expect there to be any meaningful 
correlation between the performance of the Fund's investments in 
Treasuries, cash, and/or cash equivalents and the changes in the prices 
of commodities or Asian Commodities Interests. While the level of 
interest earned on or the market price of these investments may in some 
respect correlate to changes in the prices of commodities, this 
correlation is not anticipated as part of the Fund's efforts to meet 
its objective.
    Each month, the Benchmark Futures Contracts will change, starting 
four business days prior to the end of the month. Only the near month 
Benchmark Futures Contracts that will be reaching expiration in the 
upcoming month will be sold. The next Benchmark Futures Contract for 
the relevant Asian Benchmark Commodity that expires later than the 
upcoming month, the ``next month contract,'' will be used to replace 
the Benchmark Futures Contract being sold. Near month Benchmark Futures 
Contracts which are not reaching expiration in the upcoming month will 
not be ``rolled'' forward. During the first three days of such period, 
the applicable value of each Benchmark Futures Contract being rolled 
forward will be based on a combination of the corresponding near month 
contract and the next month contract as follows:
    (1) Day 1 will consist of 75% of the then near month contract's 
total return for the day, plus 25% of the total return for the day of 
the next month contract,
    (2) Day 2 will consist of 50% of the then near month contract's 
total return for the day, plus 50% of the total return for the day of 
the next month contract, and
    (3) Day 3 will consist of 25% of the then near month contract's 
total return for the day, plus 75% of the total return for the day of 
the next month contract.

On day 4, such Benchmark Futures Contract will be the next month 
contract to expire at that time. That contract will remain the 
Benchmark Futures Contract until the following month's change in the 
Benchmark Futures Contract, the period for which begins four business 
days prior to the end of the month.

    The Sponsor will attempt to manage the credit risk of the Fund by 
following certain trading limitations and policies. In particular, the 
Fund intends to post margin and collateral and/or hold liquid assets 
that will be equal to approximately the face amount of the Asian 
Commodity Interests it holds. The Sponsor will implement procedures 
that will include, but will not be limited to, executing and clearing 
trades and entering into over-the-counter transactions only with 
parties it deems creditworthy and/or requiring the posting of 
collateral by such parties for the benefit of the Fund to limit its 
credit exposure. To reduce the credit risk that arises in connection 
with over-the-counter derivative contracts, the Fund will generally 
enter into an agreement with each counterparty based on the Master 
Agreement published by the International Swaps and Derivatives 
Association, Inc. (``ISDA'') that provides for the netting of its 
overall exposure to its counterparty.
    The creditworthiness of each potential counterparty will be 
assessed by the Sponsor. The Sponsor will assess or review, as 
appropriate, the creditworthiness of each potential or existing 
counterparty to an over-the-counter contract pursuant to guidelines 
approved by the Sponsor. Furthermore, the Sponsor on behalf of the Fund 
will only enter into over-the-counter contracts with counterparties who 
are, or are affiliates of, (a) Banks regulated by a United States 
federal bank regulator, (b) broker-dealers regulated by the Commission, 
(c) insurance companies domiciled in the United States, and (d) 
producers, users, or traders of commodities, whether or not regulated 
by the CFTC. Existing counterparties will be reviewed periodically by 
the Sponsor. The Fund also may require that the counterparty be highly 
rated and/or provide collateral or other credit support.
    A more detailed description of the Fund and the Shares, as well as 
of the investment strategies and risks, creation and redemption 
procedures, and fees, among other things, is included in the Notice and 
the Registration Statement, as applicable.\14\
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    \14\ See supra notes 3 and 5.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \15\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\16\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\17\ 
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 requirements of NYSE Arca 
Equities Rule 8.200 and Commentary .02 thereto to be listed and traded 
on the Exchange.
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    \15\ 15 U.S.C. 78f.
    \16\ 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).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\18\ which sets

[[Page 790]]

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 for 
the Shares will be disseminated through the facilities of the 
Consolidated Tape Association (``CTA''). The intraday, closing prices, 
and settlement prices of the 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. Complete real-
time data for the Futures Contracts is available by subscription from 
Reuters and Bloomberg. 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. The specific 
contract specifications for the Futures Contracts are also available on 
such Web sites, as well as other financial informational sources. 
Information regarding exchange-traded cash-settled options and cleared 
swap contracts will be available from the applicable exchanges and 
major market data vendors. Further, the Fund will provide Web site 
disclosure of portfolio holdings daily and will include, as applicable, 
the composite value of the total portfolio; the name, percentage 
weighting, and value of each Benchmark Futures Contract; the specific 
types, percentage weightings, and values of Other Asian Commodities-
Related Investments and characteristics of such Other Asian 
Commodities-Related Investments; the name and value of each Treasury 
security and cash equivalent; and the amount of cash held in the Fund's 
portfolio. This Web site disclosure 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. In addition, on each business 
day that the Exchange is open for trading, the Fund will disclose on 
its Web site the contents and percentage weighting of the Futures 
Basket and the list and percentage weighting of the Asian Benchmark 
Commodities. The sources the Sponsor uses to determine global 
production, consumption, and economic tendencies will also be available 
on the Fund's Web site. The intraday indicative fund value (``IFV'') 
\19\ will be widely disseminated by one or more major market data 
vendors at least every 15 seconds during the NYSE Arca Core Trading 
Session.\20\ In addition, the value of the Futures Basket will be 
disseminated at least every 15 seconds. The NAV of the Fund will be 
released after 4:00 p.m. E.T. and will be disseminated daily to all 
market participants at the same time.\21\ The Exchange will make 
available on its Web site daily trading volume of the Shares, closing 
prices of the Shares, and number of Shares outstanding.
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    \18\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \19\ The IFV will be calculated by using the prior day's closing 
NAV per Share of the Fund as a base and updating that value 
throughout the trading day to reflect changes in the most recently 
reported price level of the Benchmark Futures Contracts as reported 
by Bloomberg, L.P. or another reporting service. The Exchange 
represents that the normal trading hours of the Futures Exchanges 
vary, with some Futures Exchanges ending their trading hours before 
the close of the NYSE Arca Core Trading Session (for example, the 
normal trading hours of the NYMEX are 10:00 a.m. to 2:30 p.m. 
Eastern Time or ``E.T.''). When the Fund holds Futures Contracts 
from Futures Exchanges with different trading hours than the 
Exchange, there will be a gap in time at the beginning and/or the 
end of each day during which the Shares are traded on NYSE Arca, but 
real-time Futures Exchange trading prices for Futures Contracts 
traded on such Futures Exchanges are not available. During such gaps 
in time, the IFV will be calculated based on the end of day price of 
such Futures Contracts from the relevant Futures Exchange's 
immediately previous trading session. In addition, other Futures 
Contracts, Other Asian Commodities-Related Investments, and 
Treasuries held by the Fund will be valued by the Administrator, 
using rates and points received from client-approved third party 
vendors (such as Reuters and WM Company) and advisor quotes, and 
these investments will not be included in the IFV.
    \20\ According to the Exchange, several major market data 
vendors display and/or make widely available IFVs taken from the CTA 
or other data feeds.
    \21\ Trading during the Core Trading Session (9:30 a.m. to 4:00 
p.m. E.T.) on the Exchange typically closes at 4:00 p.m. E.T. The 
Administrator will use the closing prices on the relevant Futures 
Exchanges of the Benchmark Futures Contracts (determined at the 
earlier of the close of such exchange or 2:30 p.m. E.T.) for the 
contracts traded on the Futures Exchanges, but will calculate or 
determine the value of all other Fund investments using market 
quotations, if available, or other information customarily used to 
determine the fair value of such investments as of the earlier of 
the close of the NYSE Arca or 4:00 p.m. E.T.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair 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 IFV, the value of the Futures Basket, or the value 
of the underlying Futures Contracts occurs. If the interruption 
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 futures contracts, or if 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.\22\ The Exchange 
states that it has a general policy prohibiting the distribution of 
material, non-public information by its employees. Moreover, the 
trading of the Shares will be subject to NYSE Arca Equities Rule 8.200, 
Commentary .02(e), which sets forth certain restrictions on Equity 
Trading Permit (``ETP'') Holders \23\ acting as registered Market 
Makers \24\ in Trust Issued Receipts to facilitate surveillance. The 
Exchange is able to obtain information regarding trading in the Shares, 
the physical commodities included in, or options, futures, or options 
on futures on, Shares through ETP Holders, in connection with such ETP 
Holders' proprietary trades or customer trades through ETP Holders 
which they effect on any relevant market. The Exchange can obtain 
market surveillance information, including customer identity 
information, with respect to transactions occurring on exchanges that 
are members of the Intermarket Surveillance Group (``ISG''), including 
CME, COMEX, CBOT, NYMEX, ICE US, ICE Canada, DME, and Malaysia. In 
addition, the Exchange has entered into comprehensive surveillance 
sharing agreements with ICE Europe and LME that apply with respect to 
trading in the applicable Futures Contracts. The Sponsor represents 
that it will implement and maintain procedures designed to prevent the 
use and dissemination of material non-public information regarding the 
Futures Basket.
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    \22\ 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 halted if the 
circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been 
reached. 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.
    \23\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \24\ See NYSE Arca Equities Rule 1.1(v) (defining Market Maker).
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    The Exchange represents that the Shares are deemed to be equity

[[Page 791]]

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 and the Shares will meet the initial and continued 
listing requirements applicable to Trust Issued Receipts in NYSE Arca 
Equities Rule 8.200 and Commentary .02 thereto.
    (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, which include 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) 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 IFV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares in creation baskets and redemption baskets (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 IFV is disseminated; (e) that a 
static IFV will be disseminated, between the close of trading on the 
applicable Futures Exchange and the close of the NYSE Arca Core Trading 
Session; (f) 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 (g) trading information.
    (5) With respect to application of Rule 10A-3 under the Act,\25\ 
the Trust relies on the exception contained in Rule 10A-3(c)(7).\26\
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    \25\ 17 CFR 240.10A-3.
    \26\ 17 CFR 240.10A-3(c)(7).
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    (6) The Asian Benchmark Commodities will be selected by the Sponsor 
in accordance with the above four specific quantitative criteria. In 
the first quarter of each calendar year, the Sponsor will reevaluate 
the selection of Asian Benchmark Commodities based on the prior year's 
data. As a result of changes in Asian commodity production, commodity 
consumption, net imports or exports of commodities, and changes in 
commodity futures contract liquidity, and in strict accordance with the 
criteria and factors set forth above, the Sponsor may elect to add or 
delete a commodity from the list of Asian Benchmark Commodities, and 
thus the Futures Basket. In making any such change, the Sponsor will 
file a prospectus supplement informing investors of the proposed 
changes no less than 30 days prior to the first month in which the 
commodity or commodities added will become part of the Asian Benchmark 
Commodities, or 30 days prior to the first month in which the commodity 
or commodities deleted will no longer be part of the Asian Benchmark 
Commodities. Any changes to the eligible Asian Benchmark Commodities 
will also be published on the Web site for the Fund.
    (7) The Fund will invest in Benchmark Futures Contracts to the 
fullest extent possible, turning next to investments in other Futures 
Contracts, and finally to Other Asian Commodities-Related Investments 
only if required to by applicable regulatory requirements or in adverse 
market conditions, each as described herein. The Sponsor represents 
that the Fund will invest in Asian Commodities Interests in a manner 
consistent with the Fund's investment objective and not to achieve 
additional leverage.
    (8) With respect to the Fund's investments in Futures Contracts 
traded on exchanges, not more than 10% of the weight of such Futures 
Contracts in the aggregate shall consist of components whose principal 
trading market is not a member of ISG or is a market with which the 
Exchange does not have a comprehensive surveillance sharing agreement.
    (9) The Sponsor will attempt to manage the credit risk of the Fund 
by following certain trading limitations and policies, including, but 
not limited to the following: (a) The Fund intends to post margin and 
collateral and/or hold liquid assets that will be equal to 
approximately the face amount of the Asian Commodity Interests it 
holds; (b) the Sponsor will implement procedures that will include, but 
will not be limited to, executing and clearing trades and entering into 
over-the-counter transactions only with parties it deems creditworthy 
and/or requiring the posting of collateral by such parties for the 
benefit of the Fund to limit its credit exposure; and (c) with respect 
to over-the-counter derivative contracts, the Fund will generally enter 
into an agreement with each counterparty based on the Master Agreement 
published by ISDA that provides for the netting of its overall exposure 
to its counterparty.
    (10) In addition, the Sponsor will assess or review, as 
appropriate, the creditworthiness of each potential or existing 
counterparty to an over-the-counter contract pursuant to guidelines 
approved by the Sponsor. Furthermore, the Sponsor on behalf of the Fund 
will only enter into over-the-counter contracts with counterparties who 
are, or are affiliates of, (a) banks regulated by a United States 
federal bank regulator, (b) broker-dealers regulated by the Commission, 
(c) insurance companies domiciled in the United States, and (d) 
producers, users, or traders of commodities, whether or not regulated 
by the CFTC. Existing counterparties will be reviewed periodically by 
the Sponsor. The Fund also may require that the counterparty be highly 
rated and/or provide collateral or other credit support.
    (11) A minimum of 100,000 Shares of the Fund will be outstanding 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.\27\
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    \27\ The Commission notes that it does not regulate the market 
for futures in which the Fund plans to take positions, which is the 
responsibility of the CFTC. The CFTC has the authority to set limits 
on the positions that any person may take in futures. These limits 
may be directly set by the CFTC or by the markets on which the 
futures are traded. The Commission has no role in establishing 
position limits on futures even though such limits could impact an 
exchange-traded product that is under the jurisdiction of the 
Commission.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \28\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \28\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the proposed rule change (SR-NYSEArca-2012-120) be, and 
it hereby is, approved.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-31668 Filed 1-3-13; 8:45 am]
BILLING CODE 8011-01-P