71158 Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 

19Prior to demutualization, the Exchange had a 

limited number of seats and the dual affiliation 

allowed for additional access. There is no fixed 

number of Series A–1 permits today. 

20The Exchange also allows members on the 

Exchange’s trading floor to appoint inactive 

nominees pursuant to By-Law Article XII, Section 

12–10. The inactive nominee allows a Member to 

have additional flexibility in obtaining coverage on 

the trading floor. 

21 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

Exchange.19 Since demutualization, a 

Series A–1 permit has expanded a 

member’s ability to gain access to the 

Exchange at a significantly lower cost.20

Today, there are no restrictions on the 

number of permits the Exchange may 

issue and, assuming the qualifications 

are met, a member organization may 

hold any number of permits, which does 

not prevent access to the Exchange. 

The Exchange believes that this 

proposal simplifies the affiliation 

process and applies it equally to all 

members. The Exchange believes that 

allowing for affiliation where there is a 

common ownership and up to two 

affiliations is a simple, straightforward 

process for allowing access to the 

Exchange for the purpose of allowing 

floor traders to meet Exchange rules and 

for assistance with staffing issues. 

The Exchange believes that amending 

the language in Rule 908(h) will provide 

members with clarity as to permit 

transfers. Finally, requiring applicants 

to submit their information within a 90 

calendar day period, absent a showing 

of good cause, provides the Membership 

Department with information that can 

be utilized to make reasonable decisions 

concerning membership at the 

Exchange. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

No. SR–Phlx–2010–148 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File No. 

SR–Phlx–2010–148. This file number 

should be included on the subject line 

if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

Exchange. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File No. SR–Phlx–2010– 

148 and should be submitted on or 

before December 13, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29343 Filed 11–19–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63317; File No. SR– 

NYSEArca–2010–101] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to the Listing 

and Trading of the ProShares VIX 

Short-Term Futures ETF and the 

ProShares VIX Mid-Term Futures ETF 

November 16, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that, 

on November 5, 2010, NYSE Arca, Inc. 

(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade shares of the ProShares VIX ShortTerm Futures ETF and the ProShares 

VIX Mid-Term Futures ETF under NYSE 

Arca Equities Rule 8.200, Commentary 

.02. The text of the proposed rule 

change is available at the Exchange, the 

Commission’s Public Reference Room, 

and http://www.nyse.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 71159 

3Commentary .02 to NYSE Arca Equities Rule 

8.200 applies to TIRs that invest in ‘‘Financial 

Instruments.’’ The term ‘‘Financial Instruments,’’ as 

defined in Commentary .02(b)(4) to NYSE Arca 

Equities Rule 8.200, means any combination of 

investments, including cash; securities; options on 

securities and indices; futures contracts; options on 

futures contracts; forward contracts; equity caps, 

collars and floors; and swap agreements. 

4The Commission previously has approved 

listing on the Exchange under Commentary .02 to 

NYSE Arca Equities Rule 8.200 of certain securities 

issuers. See, e.g., Securities Exchange Act Release 

Nos. 58457 (September 3, 2008), 73 FR 52711 

(September 10, 2008) (SR–NYSEArca–2008–91) 

(order granting accelerated approval to list on NYSE 

Arca of 14 ProShares funds); and 58983 (November 

20, 2008), 73 FR 73368 (December 2, 2008) (SR– 

NYSEArca–2008–126) (order granting accelerated 

approval to list on NYSE Arca the GreenHaven 

Continuous Commodity Index Fund). See also 

Securities Exchange Act Release No. 58968 

(November 17, 2008), 73 FR 71082 (November 24, 

2008) (SR–NYSEArca–2008–111) (order granting 

accelerated approval of proposed rule change to 

amend NYSE Arca Equities Rule 5.2(j)(6)(v) to add 

CBOE Volatility Index (VIX) Futures to the 

definition of Futures Reference Asset). 

5Standard & Poor’s Financial Services LLC is the 

index sponsor with respect to the Indexes and has 

implemented procedures designed to prevent the 

use and dissemination of material, non-public 

information regarding the Indexes. 

6The Funds have filed a registration statement on 

Form S–3 under the Securities Act of 1933, dated 

November 5, 2010 (File No. 333–163511) 

(‘‘Registration Statement’’). The description of the 

Funds and the Shares contained herein are based 

on the Registration Statement. 

7Terms relating to the Funds, the Shares and the 

Indexes referred to, but not defined, herein are 

defined in the Registration Statement. 

8 VIX is the ticker symbol for the CBOE Volatility 

Index, a popular measure of implied volatility. The 

goal of the VIX is to estimate the implied volatility 

of the S&P 500 over the next 30 days. A relatively 

high level of the VIX corresponds to a more volatile 

U.S. equity market as expressed by more costly 

options on the S&P 500 Index. The VIX represents 

one measure of the market’s expectation of [sic] 

over the next 30 day period. It is a blend of prices 

for a range of options on the S&P 500 Index. The 

formula utilizes current market prices for a series 

of out-of-the-money calls and puts for the front 

month and second month expirations. 

9As of June 14, 2010, there was VIX Futures 

Contracts open interest on CFE of 88,366 contracts 

with a contract price of $25.55 and value of open 

interest of $2,257,751,300. Total CFE trading 

volume in 2009 in VIX Futures Contracts was 

1,143,612 contracts, with average daily volume of 

4,538 contracts. Total volume year-to-date (through 

May 31, 2010) is 1,399,709 contracts, with average 

daily volume of 13,458 contracts. (Source: 

Bloomberg and CBOE). 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

NYSE Arca Equities Rule 8.200, 

Commentary .02, permits the trading of 

Trust Issued Receipts (‘‘TIRs’’) either by 

listing or pursuant to unlisted trading 

privileges (‘‘UTP’’).3 The Exchange 

proposes to list and trade shares 

(‘‘Shares’’) of the ProShares VIX ShortTerm Futures ETF and the ProShares 

VIX Mid-Term Futures ETF (‘‘Funds’’) 

under NYSE Arca Equities Rule 8.200, 

Commentary .02.4 The Funds seek to 

provide investment results (before fees 

and expenses) that match the 

performance of a benchmark that seeks 

to offer exposure to market volatility 

through publicly traded futures markets. 

The benchmark for ProShares VIX 

Short-Term Futures ETF is the S&P 500 

VIX Short-Term Futures Index and the 

benchmark for ProShares VIX Mid-Term 

Futures ETF is the S&P 500 VIX MidTerm Futures Index (each, an ‘‘Index,’’ 

and, collectively, ‘‘Indexes’’).5 The 

Funds will invest in futures contracts 

based on the Chicago Board Options 

Exchange (‘‘CBOE’’) Volatility Index 

(‘‘VIX’’) to pursue their respective 

investment objectives. Each Fund also 

may invest in cash or cash equivalents 

such as U.S. Treasury securities or other 

high credit quality short-term fixedincome or similar securities (including 

shares of money market funds, bank 

deposits, bank money market accounts, 

certain variable-rate demand notes and 

repurchase agreements collateralized by 

government securities) that may serve as 

collateral for the futures contracts. 

ProShare Capital Management LLC 

(‘‘Sponsor’’), a Maryland limited liability 

company, serves as the Sponsor of 

ProShares Trust II (‘‘Trust’’). The 

Sponsor is a commodity pool operator 

and commodity trading advisor.6 Brown 

Brothers Harriman & Co. serves as the 

administrator (‘‘Administrator’’), 

custodian and transfer agent of the 

Funds and their respective Shares. SEI 

Investments Distribution Co. 

(‘‘Distributor’’) serves as Distributor of 

the Shares. Wilmington Trust Company, 

a Delaware banking corporation, is the 

sole trustee of the Trust. 

According to the Registration 

Statement, if a Fund is successful in 

meeting its objective, its value (before 

fees and expenses) should gain 

approximately as much on a percentage 

basis as the level of its corresponding 

Index when it rises. Conversely, its 

value (before fees and expenses) should 

lose approximately as much on a 

percentage basis as the level of its 

corresponding Index when it declines. 

Each Fund acquires exposure through 

VIX futures contracts traded on the 

CBOE Futures Exchange (‘‘CFE’’) (‘‘VIX 

Futures Contracts’’), such that each 

Fund has exposure intended to 

approximate the benchmark at the time 

of the net asset value (‘‘NAV’’) 

calculation.7

According to the Registration 

Statement, each Fund is not actively 

managed by traditional methods, which 

typically involve effecting changes in 

the composition of a portfolio on the 

basis of judgments relating to economic, 

financial and market considerations 

with a view toward obtaining positive 

results under all market conditions. 

Rather, the Sponsor seeks to cause the 

NAV to track the performance of an 

Index, even during periods in which 

that benchmark is flat or moving in a 

manner which causes the NAV of a 

Fund to decline. 

In seeking to achieve each Fund’s 

investment objective, the Sponsor uses 

a mathematical approach to investing. 

Using this approach, the Sponsor 

determines the type, quantity and mix 

of investment positions that the Sponsor 

believes in combination should produce 

returns consistent with such Fund’s 

objective. The Sponsor relies upon a 

pre-determined model to generate 

orders that result in repositioning the 

Funds’ investments in accordance with 

their respective investment objectives. 

VIX Futures Contracts: 

The Indexes are comprised of, and the 

value of the Funds will be based on, VIX 

Futures Contracts. VIX Futures 

Contracts are measures of the market’s 

expectation of the level of VIX at certain 

points in the future, and, as such, will 

behave differently than current, or spot, 

VIX.8 The Funds are not linked to the 

VIX, and in many cases the Indexes, and 

by extension the Funds, will 

significantly underperform the VIX. 

While the VIX represents a measure of 

the current expected volatility of the 

S&P 500 over the next 30 days, the 

prices of VIX Futures Contracts are 

based on the current expectation of 

what the expected 30-day volatility will 

be at a particular time in the future (on 

the expiration date). To illustrate, on 

July 30, 2010, the VIX was 23.5 and the 

price of the October 2010 VIX Futures 

Contracts expiring on October 20, 2010 

was 29.7. In this example, the price of 

the VIX represented the 30-day implied, 

or ‘‘spot,’’ volatility (the volatility 

expected for the period from July 30 to 

August 30, 2010) of the S&P 500, and 

the October VIX Futures Contracts 

represented forward implied volatility 

(the volatility expected for the period 

from October 20 to November 20, 2010) 

of the S&P 500.9 The VIX Futures 

Contracts trade from 9:30 a.m. to 4:15 

p.m. Eastern Time (‘‘E.T.’’) 

The S&P 500 VIX Short-Term Futures 

Index and S&P 500 VIX Mid-Term 

Futures Index 

According to the Registration 

Statement, the Indexes act as a measure 


jlentini on DSKJ8SOYB1PROD with NOTICES
71160 Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 

10A ‘‘Business Day’’ means any day other than a 

day when any of the NYSE, the NYSE Arca, the 

CBOE, or the CFE or other exchange material to the 

valuation or operation of the Funds, or the 

calculation of the VIX, options contracts underlying 

the VIX, VIX Futures Contracts or the Indexes is 

closed for regular trading. 

11Authorized Participants have a cut-off time of 

12 p.m. E.T. to place creation and redemption 

orders. 

12According to the Registration Statement, net 

asset value means the total assets of the Funds 

including, but not limited to, all cash and cash 

equivalents or other debt securities less total 

liabilities of the Funds, each determined on the 

basis of generally accepted accounting principles in 

the United States, consistently applied under the 

accrual method of accounting. Each Fund’s NAV is 

calculated at 4:15 p.m. (E.T.). 

of volatility as reflected by the price of 

certain VIX Futures Contracts (‘‘Index 

Components’’), with the price of each 

VIX Futures Contract reflecting the 

market’s expectation of future volatility. 

Each Index seeks to reflect the returns 

that are potentially available from 

holding an unleveraged long position in 

certain VIX Futures Contracts. 

Unlike the Indexes, the VIX, which is 

not a benchmark for either Fund, is 

calculated based on the prices of put 

and call options on the S&P 500, which 

are traded on the CBOE. 

The S&P 500 VIX Short-Term Futures 

Index employs rules for selecting the 

Index Components and a formula to 

calculate a level for the Index from the 

prices of these components. 

Specifically, the Index Components 

represent the prices of the two near-term 

VIX futures months, replicating a 

position that rolls the nearest month 

VIX Futures Contract to the next month 

VIX Futures Contract on a daily basis in 

equal fractional amounts. This results in 

a constant weighted average maturity of 

one month. The roll period begins on 

the Tuesday prior to the monthly CFE 

VIX Futures Contracts settlement date 

and runs through the Tuesday prior to 

the subsequent month’s CFE VIX 

Futures Contract settlement date. 

The S&P 500 VIX Mid-Term Futures 

Index also employs rules for selecting 

the Index Components and a formula to 

calculate the level of the Index from the 

prices of these components. 

Specifically, the Index Components 

represent the prices for four contract 

months of VIX Futures Contracts, 

representing a market-based estimation 

of constant maturity, five-month 

forward implied VIX values. The S&P 

500 VIX Mid-Term Futures Index 

measures the return from a rolling long 

position in the fourth, fifth, sixth and 

seventh month VIX Futures Contracts, 

and rolls continuously throughout each 

month while maintaining positions in 

the fifth and sixth month contracts. This 

results in a constant weighted average 

maturity of five months. 

Calculation of the Indexes 

The level of each Index is calculated 

in accordance with the method 

described in the Registration Statement. 

The level of each Index will be 

published at least every 15 seconds both 

in real time from 9:30 a.m. to 4:15 p.m. 

E.T., and at the close of trading on each 

Business Day by Bloomberg L.P. and 

Reuters.10

The Index Components comprising 

each Index represent the prices of 

certain futures contracts on the VIX. 

Each Index takes a daily rolling long 

position in contracts of specified 

maturities and is intended to reflect the 

returns that are potentially available 

through an unleveraged investment in 

those contracts. The S&P 500 VIX ShortTerm Futures Index measures the return 

from a rolling long position in the first 

and second month VIX Futures 

Contracts. The Index rolls continuously 

throughout each month from the first 

month VIX Futures Contracts into the 

second month VIX Futures Contracts. 

The S&P 500 VIX Mid-Term Futures 

Index measures the return from a rolling 

long position in the fourth, fifth, sixth 

and seventh month VIX Futures 

Contracts. The Index rolls continuously 

throughout each month from the fourth 

month contract into the seventh month 

contract while maintaining positions in 

the fifth month and sixth month 

contracts. 

The Indexes roll on a daily basis. One 

of the effects of daily rolling is to 

maintain a constant weighted average 

maturity for the underlying futures 

contracts. Unlike equities, which 

typically entitle the holder to a 

continuing stake in a corporation, 

futures contracts normally specify a 

certain date for the delivery of the 

underlying asset or financial instrument 

or, in the case of futures contracts 

relating to indices such as the VIX, a 

certain date for payment in cash of an 

amount determined by the level of the 

underlying index. The Indexes operate 

by selling, on a daily basis, Index 

Components with a nearby settlement 

date and purchasing Index Components 

with a longer-dated settlement date. The 

roll for each contract occurs on each 

Business Day according to a predetermined schedule that has the effect 

of keeping constant the weighted 

average maturity of the relevant futures 

contracts. This process is known as 

‘‘rolling’’ a futures position, and each 

Index is a ‘‘rolling index.’’ The constant 

weighted average maturity for the 

futures underlying the S&P 500 VIX 

Short-Term Futures Index is one month 

and for the futures underlying the S&P 

500 VIX Mid-Term Futures Index is five 

months. 

Because the Indexes incorporate this 

process of rolling futures positions on a 

daily basis, and the Funds, in general, 

also roll their positions on a daily basis, 

the daily roll is not anticipated to be a 

significant source of tracking error 

between either Fund and its respective 

Index. The Indexes are based on VIX 

Futures Contracts and not the VIX, and, 

as such, neither the Funds nor the 

Indexes are expected to track the VIX. 

Purchases and Redemptions of Creation 

Units 

The Funds will create and redeem 

Shares from time to time in one or more 

Creation Units. A Creation Unit is a 

block of 50,000 Shares. Except when 

aggregated in Creation Units, the Shares 

are not redeemable securities. 

On any Business Day, an Authorized 

Participant may place an order with the 

Distributor to create one or more 

Creation Units.11 The total cash 

payment required to create each 

Creation Unit is the NAV of 50,000 

Shares of the Funds on the purchase 

order date plus the applicable 

transaction fee. 

The procedures by which an 

Authorized Participant can redeem one 

or more Creation Units mirror the 

procedures for the purchase of Creation 

Units. On any Business Day, an 

Authorized Participant may place an 

order with the Distributor to redeem one 

or more Creation Units. The redemption 

proceeds from a Fund consist of the 

cash redemption amount. The cash 

redemption amount is equal to the NAV 

of the number of Creation Unit(s) of a 

Fund requested in the Authorized 

Participant’s redemption order as of the 

time of the calculation of a Fund’s NAV 

on the redemption order date, less 

transaction fees. 

Availability of Information Regarding 

the Shares 

The NAV for the Funds’ Shares will 

be calculated by the Administrator once 

a day and will be disseminated daily to 

all market participants at the same 

time.12 The Exchange will make 

available on its Web site daily trading 

volume of each of the Shares, closing 

prices of such Shares, and number of 

Shares outstanding. 

The closing prices and settlement 

prices of the Index Components are also 

readily available from the Web sites of 

the CFE (http://www.cfe.cboe.com), 

automated quotation systems, published 

or other public sources, or on-line 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 71161 

13See NYSE Arca Equities Rule 7.12. 

14 17 CFR 240.10A–3. 

information services such as Bloomberg 

or Reuters. Complete real-time data for 

component futures underlying the 

Indexes is available by subscription 

from Reuters and Bloomberg. The CFE 

also provides delayed futures 

information on current and past trading 

sessions and market news free of charge 

on its Web site (http:// 

www.cfe.cboe.com). The specific 

contract specifications for component 

futures underlying the Indexes are also 

available on such Web sites, as well as 

other financial informational sources. 

Quotation and last-sale information 

regarding the Shares will be 

disseminated through the facilities of 

the Consolidated Tape Association 

(‘‘CTA’’). In addition, the Funds’ Web 

site at http://www.proshares.com will 

display the end of day closing Index 

levels and NAV. 

The Funds will provide Web site 

disclosure of portfolio holdings daily 

and will include, as applicable, the 

notional value (in U.S. dollars) of VIX 

Futures Contracts and characteristics of 

such instruments and cash equivalents, 

and amount of cash held in the portfolio 

of the Funds. This Web site disclosure 

of the portfolio composition of the 

Funds will occur at the same time as the 

disclosure by the Funds of the portfolio 

composition to Authorized Participants 

so that all market participants are 

provided portfolio composition 

information at the same time. Therefore, 

the same portfolio information will be 

provided on the public Web site as well 

as in electronic files provided to 

Authorized Participants. Accordingly, 

each investor will have access to the 

current portfolio composition of the 

Funds through the Funds’ Web site. 

In addition, in order to provide 

updated information relating to the 

Funds for use by investors and market 

professionals, an updated Indicative 

Optimized Portfolio Value (‘‘IOPV’’) will 

be calculated. The IOPV is an indicator 

of the value of the VIX Futures 

Contracts and cash and/or cash 

equivalents less liabilities of a Fund at 

the time the IOPV is disseminated. 

NYSE Arca calculates and disseminates 

every 15 seconds throughout the trading 

day an updated IOPV. The IOPV is 

calculated by the NYSE Arca using the 

prior day’s closing net assets of a Fund 

as a base and updating throughout the 

trading day changes in the value of the 

Funds’ holdings. 

The NYSE Arca disseminates the 

IOPV. In addition, the IOPV is 

published on the NYSE Arca’s Web site 

and is available through on-line 

information services such as Bloomberg 

and Reuters. 

The IOPV disseminated during the 

Core Trading Session should not be 

viewed as an actual real-time update of 

the NAV, which is calculated only once 

a day. The IOPV also should not be 

viewed as a precise value of the Shares. 

The Exchange believes that 

dissemination of the IOPV provides 

additional information regarding the 

Funds that is not otherwise available to 

the public and is useful to professionals 

and investors in connection with the 

related Shares trading on the Exchange 

or the creation or redemption of such 

Shares. 

Additional information regarding the 

Funds and the Shares, including 

investment strategies, risks, creation and 

redemption procedures, fees, portfolio 

holdings disclosure policies, 

distributions and taxes is included in 

the Registration Statement. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Shares will trade on 

the NYSE Arca Marketplace from 4 a.m. 

to 8 p.m. E.T. The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in NYSE 

Arca Equities Rule 7.6, Commentary .03, 

the minimum price variation (‘‘MPV’’) 

for quoting and entry of orders in equity 

securities traded on the NYSE Arca 

Marketplace is $0.01, with the exception 

of securities that are priced less than 

$1.00 for which the MPV for order entry 

is $0.0001. 

The trading of the Shares will be 

subject to NYSE Arca Equities Rule 

8.200, Commentary .02(e), which sets 

forth certain restrictions on ETP Holders 

acting as registered Market Makers in 

Trust Issued Receipts to facilitate 

surveillance. See ‘‘Surveillance’’ below 

for more information. 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares. 

Trading may be halted because of 

market conditions or for reasons that, in 

the view of the Exchange, make trading 

in the Shares inadvisable. These may 

include: (1) The extent to which trading 

is not occurring in the underlying 

futures contracts; or (2) whether other 

unusual conditions or circumstances 

detrimental to the maintenance of a fair 

and orderly market are present. In 

addition, trading in Shares will be 

subject to trading halts caused by 

extraordinary market volatility pursuant 

to the Exchange’s ‘‘circuit breaker’’ 

rule 13 or by the halt or suspension of 

trading of the underlying futures 

contracts. 

The Exchange represents that the 

Exchange may halt trading during the 

day in which the interruption to the 

dissemination of the IOPV, the value of 

the Index, the VIX or the value of the 

underlying VIX Futures Contracts 

occurs. If the interruption to the 

dissemination of the IOPV, the value of 

the Index, the VIX or the value of the 

underlying VIX Futures Contracts 

persists past the trading day in which it 

occurred, the Exchange will halt trading 

no later than the beginning of the 

trading day following the interruption. 

In addition, if the Exchange becomes 

aware that the NAV with respect to the 

Shares is not disseminated to all market 

participants at the same time, it will halt 

trading in the Shares until such time as 

the NAV is available to all market 

participants. 

The Funds will meet the initial and 

continued listing requirements 

applicable to Trust Issued Receipts in 

NYSE Arca Equities Rule 8.200 and 

Commentary .02 thereto. With respect to 

application of Rule 10A–3 under the 

Act,14 the Shares must be in compliance 

with NYSE Arca Equities Rule 5.3 and 

Rule 10A–3 under the Act. A minimum 

of 100,000 Shares of each of the Funds 

will be outstanding as of the start of 

trading on the Exchange. 

Surveillance 

The Exchange intends to utilize its 

existing surveillance procedures 

applicable to derivative products, 

including Trust Issued Receipts, to 

monitor trading in the Shares. The 

Exchange represents that these 

procedures are adequate to properly 

monitor Exchange trading of the Shares 

in all trading sessions and to deter and 

detect violations of Exchange rules and 

applicable federal securities laws. 

The Exchange’s current trading 

surveillances focus on detecting 

securities trading outside their normal 

patterns. When such situations are 

detected, surveillance analysis follows 

and investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. The Exchange is able 

to obtain information regarding trading 

in the Shares, options, futures or 

options on futures on, Shares through 

ETP Holders, in connection with such 

ETP Holders’ proprietary or customer 

trades through ETP Holders which they 

effect on any relevant market. The 

Exchange can obtain market 


jlentini on DSKJ8SOYB1PROD with NOTICES
71162 Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 

15 15 U.S.C. 78f(b). 

16 15 U.S.C. 78f(b)(5). 

surveillance information, including 

customer identity information, with 

respect to transactions occurring on the 

exchanges that are members of the 

Intermarket Surveillance Group (‘‘ISG’’), 

including the CBOE and CFE. A list of 

ISG members is available at http:// 

www.isgportal.org. 

The Exchange also has a general 

policy prohibiting the distribution of 

material, non-public information by its 

employees. 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders in an Information Bulletin 

of the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Bulletin 

will discuss the following: (1) The risks 

involved in trading the Shares during 

the Opening and Late Trading Sessions 

when an updated IOPV will not be 

calculated or publicly disseminated; (2) 

the procedures for purchases and 

redemptions of Shares in Creation 

Baskets and Redemption Baskets (and 

that Shares are not individually 

redeemable); (3) NYSE Arca Equities 

Rule 9.2(a), which imposes a duty of 

due diligence on its ETP Holders to 

learn the essential facts relating to every 

customer prior to trading the Shares; (4) 

the requirement that ETP Holders 

deliver a prospectus to investors 

purchasing newly issued Shares prior to 

or concurrently with the confirmation of 

a transaction; and (6) trading 

information. 

In addition, the Information Bulletin 

will advise ETP Holders, prior to the 

commencement of trading, of the 

prospectus delivery requirements 

applicable to the Funds. The Exchange 

notes that investors purchasing Shares 

directly from the Funds will receive a 

prospectus. ETP Holders purchasing 

Shares from the Funds for resale to 

investors will deliver a prospectus to 

such investors. The Information Bulletin 

will also discuss any exemptive, noaction and interpretive relief granted by 

the Commission from any rules under 

the Act. 

In addition, the Information Bulletin 

will reference that the Funds are subject 

to various fees and expenses described 

in the Registration Statement. The 

Information Bulletin will also reference 

that the Commodity Futures Trading 

Commission has regulatory jurisdiction 

over futures contracts traded on U.S. 

markets. 

The Information Bulletin will also 

disclose the trading hours of the Shares 

of the Funds and that the NAV for the 

Shares is calculated after 4:15 p.m. E.T. 

each trading day. The Bulletin will 

disclose that information about the 

Shares of the Funds is publicly available 

on the Funds’ Web site. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) of the 

Act,15 in general, and furthers the 

objectives of Section 6(b)(5),16 in 

particular, in that it is 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, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. The 

Exchange believes that the proposed 

rule change will permit the listing of an 

additional issuance of Trust Issued 

Receipts on the Exchange that will 

enhance competition, to the benefit of 

investors and the marketplace. In 

addition, the listing and trading criteria 

set forth in Rule 8.200 are intended to 

protect investors and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2010–101 on 

the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2010–101. This 

file number should be included on the 

subject line if e-mail is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street, NE., 

Washington, DC 20549–1090 on official 

business days between 10 a.m. and 3 

p.m. Copies of the filing will also be 

available for inspection and copying at 

the Exchange’s principal office. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NYSEArca–2010–101 and 

should be submitted on or before 

December 13, 2010. 


jlentini on DSKJ8SOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 224 / Monday, November 22, 2010 / Notices 71163 

17 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 3 15 U.S.C. 78f(b). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29351 Filed 11–19–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63321; File No. SR–BX– 

2010–077] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

and Immediate Effectiveness of 

Proposed Rule Change to Establish a 

Pilot Program to List Series With 

Additional Expiration Months for Each 

Class of Options Opened for Trading 

on BOX 

November 16, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that, on 

November 10, 2010, NASDAQ OMX BX, 

Inc. (the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Chapter IV, Section 6 (Series of Options 

Contracts Open for Trading) of the Rules 

of the Boston Options Exchange Group, 

LLC (‘‘BOX’’) to adopt a Pilot Program to 

list additional expiration months for 

each class of options opened for trading 

on BOX. The text of the proposed rule 

change is available from the principal 

office of the Exchange, on the 

Commission’s Web site at http:// 

www.sec.gov, at the Commission’s 

Public Reference Room and also on the 

Exchange’s Internet web site at http:// 

nasdaqomxbx.cchwallstreet.com/ 

NASDAQOMXBX/Filings/. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to adopt a 

Pilot Program to list additional 

expiration months for each class of 

options opened for trading on BOX, by 

adding proposed Supplementary 

Material .08 in Chapter IV, Section 6 of 

the BOX Rules. 

Pursuant to Chapter IV, Section 6(e) of 

the BOX Rules, BOX currently opens 

four expiration months for each class of 

options open for trading on BOX, the 

first two being the two nearest months, 

regardless of the quarterly cycle on 

which that class trades; the third and 

fourth being the next two months of the 

quarterly cycle previously designated 

for that specific class. For example, if 

BOX listed in late May a new equity 

option on a January-April-July-October 

quarterly cycle, BOX would list the two 

nearest term months (June and July) and 

the next two months of the cycle 

(October and January). When the June 

series expires, BOX would add the 

August series as the next nearest month. 

And when the July series expires, BOX 

would add the September series. 

BOX believes that there is market 

demand for a greater number of 

expiration months. The Exchange 

therefore proposes to adopt a Pilot 

Program pursuant to which it will list 

up to an additional two expiration 

months, for a total of six expiration 

months for each class of options open 

for trading on BOX. The program will be 

effective on a pilot basis immediately 

after approval is received to establish 

the pilot program, and expiring on 

October 31, 2011. Under the proposal, 

the additional months listed pursuant to 

the pilot program will result in four 

consecutive expiration months plus two 

months from the quarterly cycle. For 

example, for option classes in the 

January cycle that have expiration 

months of June, July, October, and 

January, BOX would additionally list 

the August and September series. For 

options classes in the February quarterly 

cycle that have expiration months of 

October, November, February, and May, 

BOX would additionally list the 

December and January series. Under the 

proposal, no additional LEAP Series 

will be created. 

BOX seeks to limit the proposed rule 

change to 20 actively traded options 

classes. By limiting the pilot to a small 

number of classes, BOX will be able to 

gauge interest in the pilot while limiting 

any additional demands on system 

resources. It has been estimated that this 

pilot could add up to six or seven 

percent to current quote traffic, although 

changes in market maker quoting 

behavior may reduce that increase by up 

to half. BOX believes that a limited pilot 

is a prudent step to determine actual 

market demand for additional 

expiration months. 

If the Exchange were to propose an 

extension or an expansion of the pilot 

program, or should the Exchange 

propose to make the pilot program 

permanent, BOX will submit, along with 

any filing proposing such amendments 

to the pilot program, a pilot program 

report (‘‘Report’’) that will provide an 

analysis of the Pilot Program covering 

the first nine months of the pilot 

program and shall submit the Report to 

the Commission at least sixty (60) days 

prior to the expiration date of the pilot 

program. The Report will include, at a 

minimum: (1) Data and written analysis 

on the open interest and trading volume 

in the classes for which additional 

expiration months were opened; (2) an 

assessment of the appropriateness of the 

options classes selected for the pilot 

program; (3) an assessment of the 

impact of the pilot program on the 

capacity on BOX, OPRA, and on market 

data vendors (to the extent data from 

market data vendors is available); (4) 

any capacity problems or other 

problems that arose during the 

operation of the pilot program and how 

BOX addressed such problems; (5) any 

complaints that BOX or the Exchange 

received during the operation of the 

pilot program and how BOX and the 

Exchange addressed them; and (6) any 

additional information that would assist 

the Commission in assessing the 

operation of the Pilot Program. 

Finally, BOX represents that it has the 

necessary systems capacity to support 

new options series that will result from 

the introduction of additional expiration 

months listed pursuant to this proposed 

rule change. 

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the Act,3


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