21114 Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 66390 

(February 14, 2012), 77 FR 10005 (‘‘Notice’’). 

4Commentary .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. 

5The Trust has filed pre-effective amendments to 

its registration statement (‘‘Registration Statement’’) 

on Form S–1 originally filed on November 3, 2010 

(File No. 333–170314) relating to the Fund. 

6The Managing Owner is affiliated with a brokerdealer and has implemented procedures designed to 

prevent the use and dissemination of material, nonpublic information regarding the Fund’s portfolio. 

7Standard & Poor’s is not a broker-dealer, is not 

affiliated with a broker-dealer, and has 

implemented procedures designed to prevent the 

use and dissemination of material, non-public 

information regarding the Index (as defined below). 

8The Designated Contracts are traded on the 

Chicago Mercantile Exchange, Inc. (‘‘CME’’), 

COMEX (‘‘CMX,’’ a division of CME), Chicago 

Board of Trade (‘‘CBT,’’ a division of CME), NYMEX 

(‘‘NYM,’’ a division of CME), ICE Futures US (‘‘ICE– 

US’’), ICE Futures Europe (‘‘ICE–UK’’), Kansas City 

Board of Trade (‘‘KBT’’), and London Metal 

Exchange (‘‘LME’’) (collectively, ‘‘Futures 

Exchanges’’). 

9 Investing in Alternative Financial Instruments 

exposes the Fund to counterparty risk, or the risk 

that an Alternative Financial Instrument 

counterparty will default on its obligations under 

the Alternative Financial Instrument. The Managing 

Owner may select Alternative Financial Instrument 

counterparties giving due consideration to such 

factors as it deems appropriate, including, without 

limitation, creditworthiness, familiarity with the 

Index, and price. Under no circumstances will the 

Fund enter into Alternative Financial Instruments 

with any counterparty whose credit rating is lower 

than investment-grade as determined by a 

nationally recognized statistical rating organization 

(e.g., BBB¥ and above as determined by Standard 

& Poor’s, Baa3 and above as determined by 

Moody’s) at the time the Alternative Financial 

Instrument is entered into. The Fund anticipates 

that the counterparties to these Alternative 

Financial Instruments, if any, are likely to be banks, 

broker dealers and other financial institutions. The 

Fund expects that these Alternative Financial 

Instruments, if any, will be on terms that are 

standard in the market for such Alternative 

Financial Instruments. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66717; File No. SR– 

NYSEArca–2012–10] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

Proposed Rule Change Relating to 

Listing and Trading of Shares of the 

BNP Paribas S&P Dynamic Roll Global 

Commodities Fund Under NYSE Arca 

Equities Rule 8.200 

April 3, 2012. 

I. Introduction 

On January 30, 2012, NYSE Arca, Inc. 

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

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares of the 

BNP Paribas S&P Dynamic Roll Global 

Commodities Fund under Commentary 

.02 to NYSE Arca Equities Rule 8.200. 

The proposed rule change was 

published for comment in the Federal 

Register on February 21, 2012.3 The 

Commission received no comments on 

the proposal. This order grants approval 

of the proposed rule change. 

II. Description of the Proposed Rule 

Change 

The Exchange proposes to list and 

trade shares (‘‘Shares’’) of the BNP 

Paribas S&P Dynamic Roll Global 

Commodities Fund (‘‘Fund’’) under 

Commentary .02 to NYSE Arca Equities 

Rule 8.200, which permits the trading of 

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

listing or pursuant to unlisted trading 

privileges on the Exchange.4 The Fund 

is a series of the BNP Paribas Exchange 

Traded Trust (‘‘Trust’’), a Delaware 

statutory trust.5 Wilmington Trust 

Company (‘‘Trustee’’), a Delaware trust 

company, is the sole trustee of the Trust. 

BNP Paribas Quantitative Strategies, 

LLC (‘‘Managing Owner’’), a Delaware 

limited liability company, serves as 

Managing Owner of the Trust and the 

Fund. The Managing Owner is a whollyowned subsidiary of Paribas North 

America, Inc., which is a wholly-owned, 

indirect subsidiary of BNP Paribas, 

which is affiliated with a broker-dealer.6

The Managing Owner is registered as a 

commodity pool operator with the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) and is a member 

of the National Futures Association. The 

Bank of New York Mellon is the 

administrator (‘‘Administrator’’) of the 

Fund, as well as the custodian 

(‘‘Custodian’’) and transfer agent 

(‘‘Transfer Agent’’). Standard and Poor’s 

is the ‘‘Index Sponsor.’’ 7

Overview of the Fund 

The investment objective of the Fund 

is to track changes, whether positive or 

negative, in the level of the S&P GSCI®

Dynamic Roll Excess Return Index 

(‘‘Index’’) over time. The Fund does not 

intend to outperform the Index. The 

Managing Owner will seek to cause 

changes in the net asset value (‘‘NAV’’) 

per Share of the Fund to track changes 

in the level of the Index during periods 

in which the Index is rising, flat, or 

declining. 

The Fund seeks to achieve its 

investment objective by investing in 

exchange-traded futures (‘‘Designated 

Contracts’’) on the commodities (as set 

forth in Table 1 below) comprising the 

Index (‘‘Index Commodities’’), with a 

view to tracking the Index over time.8 In 

certain circumstances, and to a limited 

extent, the Fund may also invest in 

swap agreements based on an Index 

Commodity that are cleared through the 

relevant Futures Exchanges or their 

affiliated provider of clearing services 

(‘‘Cleared-Swaps’’) or in futures 

contracts referencing particular 

commodities other than the Index 

Commodities (i.e., futures contracts 

traded on exchanges other than the 

Futures Exchanges indicated in Table 1, 

including foreign exchanges) 

(‘‘Substitute Contracts’’), or in 

Alternative Financial Instruments 9

referencing the particular Index 

Commodity in furtherance of its 

investment objective if, in the 

commercially reasonable judgment of 

the Managing Owner, such instruments 

tend to exhibit trading prices or returns 

that generally correlate with the Index 

Commodities. Alternative Financial 

Instruments, if any, will be forward 

agreements, exchange-traded cash 

settled options, swaps other than 

Cleared Swaps, and other over-thecounter transactions that will serve as 

proxies to one or more Index 

Commodities. 

Specifically, once position limits in a 

Designated Contract are reached or a 

Futures Exchange imposes limitations 

on the Fund’s ability to maintain or 

increase its positions in a Designated 

Contract after reaching accountability 

levels or a price limit is in effect on a 

Designated Contract during the last 30 

minutes of its regular trading session, 

the Fund’s intention is to invest first in 

Cleared Swaps to the extent permitted 

under the position limits applicable to 

Cleared Swaps and appropriate in light 

of the liquidity in the Cleared Swaps 

market, and then, using its 

commercially reasonable judgment, in 

Substitute Contracts or in Alternative 

Financial Instruments (collectively, 

‘‘Other Commodity Interests,’’ and 

together with Designated Contracts and 

Cleared Swaps, ‘‘Index Commodity 

Interests’’). By utilizing certain or all of 

these investments, the Managing Owner 

will endeavor to cause the Fund’s 

performance to track the performance of 

the Index. The circumstances under 

which such investments in Other 

Commodity Interests may be utilized 

(i.e., imposition of position limits) are 

further discussed below. 

The Fund seeks to achieve its 

investment objective by investing in 


pmangrum on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices 21115 

10The Managing Owner represents that the Fund 

will invest in exchange-traded futures, Cleared 

Swaps, and Alternative Financial Instruments in a 

manner consistent with the Fund’s investment 

objective and not to achieve additional leverage. 

Index Commodity Interests such that 

daily changes in the Fund’s NAV per 

Share will be expected to track the 

changes in the level of the Index. The 

Fund’s positions in Index Commodity 

Interests will be changed or ‘‘rolled’’ on 

a regular basis in order to track the 

changing nature of the Index. For 

example, at each monthly roll 

determination date, roll algorithms 

measure the current shape of the 

forward curves of the eligible futures 

contract prices for each Index 

Commodity to search for the optimal 

contract months along the curve to roll 

into, subject to using only the most 

liquid of all available contracts of a 

given commodity. Since the futures 

contract being rolled out of will no 

longer be included in the Index, the 

Fund’s investments will have to be 

changed accordingly. 

Consistent with achieving the Fund’s 

investment objective of tracking the 

Index, the Managing Owner may, after 

reaching position limits in the 

Designated Contracts or when a Futures 

Exchange has imposed limitations on 

the Fund’s ability to maintain or 

increase its positions in a Designated 

Contract after reaching accountability 

levels or a price limit is in effect on a 

Designated Contract during the last 30 

minutes of its regular trading session, 

cause the Fund to first enter into or hold 

Cleared Swaps and then, if applicable, 

enter into or hold Other Commodity 

Interests. For example, certain Cleared 

Swaps have standardized terms similar 

to, and are priced by reference to, a 

corresponding Designated Contract. 

Additionally, Alternative Financial 

Instruments that do not have 

standardized terms and are not 

exchange-traded (‘‘over-the-counter’’ 

Alternative Financial Instruments) can 

generally be structured as the parties 

desire. Therefore, the Fund might first 

enter into multiple Cleared Swaps and 

then, if applicable, enter into over-thecounter Alternative Financial 

Instruments intended to replicate the 

performance of each of the Designated 

Contracts, or a single over-the-counter 

Alternative Financial Instrument 

designed to replicate the performance of 

the Index as a whole. Assuming that 

there is no default by a counterparty to 

an over-the-counter Alternative 

Financial Instrument, the performance 

of the over-the-counter Alternative 

Financial Instrument will correlate with 

the performance of the Index or the 

applicable Designated Contract. After 

reaching position limits in the 

Designated Contracts or when a Futures 

Exchange has imposed limitations on 

the Fund’s ability to maintain or 

increase its positions in a Designated 

Contract after reaching accountability 

levels or a price limit is in effect on a 

Designated Contract during the last 30 

minutes of its regular trading session, 

and after entering into or holding 

Cleared Swaps, the Fund might also 

enter into or hold over-the-counter 

Alternative Financial Instruments to 

facilitate effective trading, consistent 

with the discussion of the Fund’s ‘‘roll’’ 

strategy in the preceding paragraph or to 

alleviate overall deviation between the 

Fund’s performance and that of the 

Index that may result from certain 

market and trading inefficiencies or 

other reasons. 

The Fund will invest in Index 

Commodity Interests to the fullest 

extent possible without being leveraged 

or unable to satisfy its expected current 

or potential margin or collateral 

obligations with respect to its 

investments in Index Commodity 

Interests.10 After fulfilling such margin 

and collateral requirements, the Fund 

will invest the remainder of its proceeds 

from the sale of baskets in obligations of 

the United States government (‘‘U.S. 

Treasury Securities’’) and/or hold such 

assets in cash, generally in interestbearing accounts. Therefore, the focus of 

the Managing Owner in managing the 

Fund will be investing in Index 

Commodity Interests and in U.S. 

Treasury Securities, cash and/or cash 

equivalents. The Fund will earn interest 

income from the U.S. Treasury 

Securities and/or cash equivalents that 

it purchases and on the cash it holds 

through the Custodian. 

The Managing Owner will employ an 

investment strategy intended to track 

changes in the level of the Index 

regardless of whether the Index is rising, 

flat, or declining. The Fund’s 

investment strategy will be designed to 

permit investors generally to purchase 

and sell the Fund’s Shares for the 

purpose of investing indirectly in the 

global commodity markets in a costeffective manner. The Managing Owner 

does not intend to operate the Fund in 

a fashion such that its NAV per Share 

will equal, in dollar terms, the aggregate 

of the spot prices of the Index 

Commodities or the price of any 

particular Designated Contract. 

The Index is currently composed of 

Designated Contracts on 24 Index 

Commodities, each of which is subject 

to speculative position limits and other 

position limitations, as applicable, 

which are imposed by either the CFTC 

or the rules of the Futures Exchanges on 

which the Designated Contracts are 

traded. These position limits prohibit 

any person from holding a position of 

more than a specific number of such 

Designated Contracts (or Substitute 

Contracts, if applicable). Position limits 

are fixed ceilings that the Fund would 

not be able to exceed without specific 

Futures Exchange authorization. Under 

current law, all Designated Contracts 

traded on a particular Futures Exchange 

that are held under the control of the 

Managing Owner, including those held 

by any future series of the Trust, are 

aggregated in determining the 

application of applicable position 

limits. 

In addition to position limits, the 

Futures Exchanges may establish daily 

price fluctuation limits on futures 

contracts. The daily price fluctuation 

limit establishes the maximum amount 

that the price of futures contracts 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. Futures 

Exchanges may also establish 

accountability levels applicable to 

futures contracts. A Futures Exchange 

may order a person who holds or 

controls aggregate positions in excess of 

specified position accountability levels 

not to further increase the positions, to 

comply with any prospective limit 

which exceeds the size of the position 

owned or controlled, or to reduce any 

open position which exceeds position 

accountability levels if the Futures 

Exchange determines that such action is 

necessary to maintain an orderly 

market. Position limits, accountability 

levels, and daily price fluctuation limits 

set by the Futures Exchanges have the 

potential to cause tracking error, which 

could cause changes in the NAV per 

Share to substantially vary from changes 

in the level of the Index and prevent an 

investor from being able to effectively 

use the Fund as a way to indirectly 

invest in the global commodity markets. 

The Fund will be subject to these 

speculative position limits and other 

limitations, as applicable, and, 

consequently, the Fund’s ability to issue 

new baskets or to reinvest income in 

additional Designated Contracts may be 

limited to the extent these activities 

would cause the Fund to exceed its 

applicable limits unless the Fund trades 

Cleared Swaps, Substitute Contracts, or 

other Alternative Financial Instruments 

in addition to, and as a proxy for, 

Designated Contracts. These limits, and 

the use of Cleared Swaps, Substitute 

Contracts, or other Alternative Financial 


pmangrum on DSK3VPTVN1PROD with NOTICES
21116 Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices 

11The process of periodically replacing a futures 

contract prior to its expiration is known as ‘‘rolling’’ 

a contract or position. An index that includes an 

assumed return on a hypothetical portfolio of 3- 

month Treasury bills or any other risk free 

component is known as a ‘‘total return’’ index. An 

‘‘excess return’’ index excludes returns on a 

hypothetical portfolio of 3-month Treasury bills or 

any other risk free component. 

Instruments, in addition to or as a proxy 

for Designated Contracts, may affect the 

correlation between changes in the NAV 

per Share and changes in the level of the 

Index, and the correlation between the 

market price of the Shares, as traded on 

the Exchange, and the NAV per Share. 

The Fund does not intend to limit the 

size of the offering and will attempt to 

expose substantially all of its proceeds 

to the Index Commodities utilizing 

Index Commodity Interests. If the Fund 

encounters position limits, 

accountability levels, or price 

fluctuation limits for Designated 

Contracts and/or Cleared Swaps, it may 

then, if permitted under applicable 

regulatory requirements, purchase 

Alternative Financial Instruments and/ 

or Substitute Contracts listed on other 

domestic or foreign exchanges. 

However, the commodity futures 

contracts available on such foreign 

exchanges may have different 

underlying sizes, deliveries, and prices. 

In addition, the commodity futures 

contracts available on these exchanges 

may be subject to their own position 

limits and accountability levels. In any 

case, notwithstanding the potential 

availability of these instruments in 

certain circumstances, position limits 

could force the Fund to limit the 

number of baskets that it sells. 

Description of the Index 

The Index aims to reflect the return of 

an investment in a world productionweighted portfolio comprised of the 

principal physical commodities that are 

the subject of active, liquid futures 

markets. The Index employs a flexible 

and systematic futures contract rolling 

methodology, which seeks to maximize 

yield from rolling long futures contracts 

in certain markets (backwardated 

markets) and minimize roll loss from 

rolling long futures positions in certain 

markets (contangoed markets). 

The Index was developed by the 

Index Sponsor and is an index on a 

world production-weighted basket of 

principal physical commodities. The 

Index reflects the level of commodity 

prices at a given time and is designed 

to be a measure of the return over time 

of the markets for these commodities. 

The Index is an excess return 

commodity index comprised of 

Designated Contracts that are replaced 

periodically.11 The commodities 

represented in the Index, each an Index 

Commodity, are those physical 

commodities on which active and liquid 

contracts are traded on trading facilities 

in major industrialized countries. The 

Index Commodities are weighted, on a 

production basis, to reflect the relative 

significance (in the view of the Index 

Sponsor) of those Index Commodities to 

the world economy. The fluctuations in 

the level of the Index are intended 

generally to correlate with changes in 

the prices of those physical Index 

Commodities in global markets. 

The Index utilizes the S&P GSCI®

Dynamic Roll Index Methodology, a 

monthly futures contract rolling 

methodology that determines the new 

futures contract months for the 

underlying commodities. The S&P 

GSCI® Dynamic Roll Index 

Methodology is designed to maximize 

yield from rolling long futures contracts 

in backwardated markets and minimize 

roll loss from rolling long futures 

positions in contangoed markets. A 

‘‘backwardated’’ market means a market 

in which the prices of certain 

commodity futures contracts are higher 

for contracts with shorter-term 

expirations than for contracts with 

longer-term expirations. A 

‘‘contangoed’’ market means a market in 

which the prices of certain commodity 

futures contracts are lower for contracts 

with shorter-term expirations than for 

contracts with longer-term expirations. 

The Index is comprised of Designated 

Contracts, which are futures contracts 

on the Index Commodities. The Index 

Commodities are diversified across five 

different categories: energy, agriculture, 

industrial metals, precious metals, and 

livestock. The Index reflects the return 

associated with the change in prices of 

the underlying Designated Contracts on 

the Index Commodities together with 

the ‘‘roll yield’’ (as discussed below) 

associated with these Designated 

Contracts (the price changes of the 

Designated Contracts and roll yield, 

taken together, constitute the ‘‘excess 

return’’ reflected by the Index). There is 

no limit on the number of Designated 

Contracts that may be included in the 

Index. Any contract satisfying the 

eligibility criteria will become a 

Designated Contract and will be 

included in the Index. All of the 

Designated Contracts are exchangetraded futures contracts. 

A fundamental characteristic of the 

Index is that as a result of being 

comprised of futures contracts on the 

applicable Index Commodity, the Fund 

must be managed to ensure it does not 

take physical delivery of each respective 

Index Commodity. This is achieved 

through a process referred to as 

‘‘rolling’’ under which a given futures 

contract during a month in which it 

approaches its settlement date is rolled 

forward to a new contract date (i.e., the 

futures contract is effectively ‘‘sold’’ to 

‘‘buy’’ a longer-dated futures contract). 

All Designated Contracts will be 

deemed to be rolled before their 

respective maturities into futures 

contracts in the more-distant future. 

Roll yield is generated during the roll 

process from the difference in price 

between the near-term and longer-dated 

futures contracts. The futures curve is a 

hypothetical curve created by plotting 

futures contract prices for a particular 

Index Commodity. When longer-dated 

contracts are priced lower than the 

nearer contract and spot prices, the 

market, which is in ‘‘backwardation,’’ is 

represented by a downward sloping 

futures curve, and positive roll yield is 

generated when higher-priced near-term 

futures contracts are ‘‘sold’’ to ‘‘buy’’ 

lower priced longer-dated contracts. 

When the opposite is true and longerdated contracts are priced higher, the 

market, which is in ‘‘contango,’’ is 

represented by an upward sloping 

futures curve, and negative roll yields 

result from the ‘‘sale’’ of lower priced 

near-term futures contracts to ‘‘buy’’ 

higher priced longer-dated contracts. 

While many of the Index Commodities 

may have historically exhibited 

consistent periods of backwardation, 

backwardation will most likely not exist 

at all times. Moreover, certain of the 

Index Commodities may have 

historically traded in contangoed 

markets. 

Index Methodology 

The Designated Contracts currently 

included in the Index, the Futures 

Exchanges on which they are traded, 

their market symbols and trading times, 

and their reference percentage dollar 

weights are set forth below in Table 1. 


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12The TVM with respect to any Designated 

Contract is the quotient of (i) the product of (a) the 

total annualized quantity traded of such Designated 

Contract during the relevant calculation period and 

(b) the sum of the products of (x) the Designated 

Contract production weight of each Designated 

Contract included in the S&P GSCI and (y) the 

corresponding average month-end settlement price 

of the first nearby contract expiration of such 

Designated Contracts during the relevant period, 

and (ii) the product of (a) the targeted amount of 

investment in the S&P GSCI and related indices that 

needs to be supported by liquidity in the relevant 

Designated Contracts (currently $190 billion) and 

(b) the Designated Contract production weight of 

such Designated Contract. 

13The TVMT is the TVM level, specified by S&P, 

which triggers a recalculation of the Designated 

Contract production weights for all Designated 

Contracts on an Index Commodity if the TVM of 

any such Designated Contract falls below such 

level. 

TABLE 1 

Futures exchange Index commodity Trading symbol Trading times 

(eastern time) 

2011% dollar 

weights 

CBT ........................................................... Chicago Wheat ......................................... W ...................... 09:30–13:15 3.00 

KBT ............................................................ Kansas City Wheat ................................... KW .................... 09:30–13:15 0.69 

CBT ........................................................... Corn .......................................................... C ....................... 09:30–13:15 3.37 

CBT ........................................................... Soybeans .................................................. S ....................... 09:30–13:15 2.36 

ICE–US ...................................................... Coffee ....................................................... KC ..................... 03:30–14:00 0.76 

ICE–US ...................................................... Sugar #11 ................................................. SB ..................... 03:30–14:00 2.25 

ICE–US ...................................................... Cocoa ........................................................ CC .................... 04:00–14:00 0.39 

ICE–US ...................................................... Cotton #2 .................................................. CT ..................... 21:00–14:30 1.24 

CME ........................................................... Lean Hogs ................................................ LH ..................... 09:05–13:00 1.59 

CME ........................................................... Live Cattle ................................................. LC ..................... 09:05–13:00 2.59 

CME ........................................................... Feeder Cattle ............................................ FC ..................... 09:05–13:00 0.44 

NYM/ICE–US ............................................. Crude Oil ................................................... CL ..................... 09:00–14:30 34.71 

NYM ........................................................... Heating Oil ................................................ HO .................... 09:00–14:30 4.66 

NYM ........................................................... RBOB Gasoline ........................................ RB ..................... 09:00–14:30 4.67 

ICE–UK ...................................................... Brent Crude Oil ......................................... LCO .................. 19:00–17:00 15.22 

ICE–UK ...................................................... Gasoil ........................................................ LGO .................. 19:00–17:00 6.30 

NYM/ICE–US ............................................. Natural Gas ............................................... NG .................... 09:00–14:30 4.20 

LME ........................................................... Aluminum .................................................. MAL .................. 11:00–10:45 2.70 

LME ........................................................... Copper ...................................................... MCU ................. 11:00–10:45 3.66 

LME ........................................................... Lead .......................................................... MPB .................. 11:00–10:45 0.51 

LME ........................................................... Nickel ........................................................ MNI ................... 11:00–10:45 0.82 

LME ........................................................... Zinc ........................................................... MZN .................. 11:00–10:45 0.72 

CMX ........................................................... Gold .......................................................... GC .................... 08:20–13:30 2.80 

CMX ........................................................... Silver ......................................................... SI ...................... 08:25–13:25 0.36 

The quantity of each of the Designated 

Contracts included in the Index 

(‘‘Contract Production Weight’’ or 

‘‘CPW’’) is determined on the basis of a 

five-year average, referred to as the 

‘‘world production average,’’ of the 

production quantity of the underlying 

commodity as published by a number of 

official sources as provided in the S&P 

GSCI® Dynamic Roll Index 

Methodology. However, if an Index 

Commodity is primarily a regional 

commodity, based on its production, 

use, pricing, transportation, or other 

factors, the Index Sponsor, in 

consultation with the Index Committee 

(described below), may calculate the 

weight of that Index Commodity based 

on regional, rather than world, 

production data. At present, natural gas 

is the only Index Commodity the 

weights of which are calculated on the 

basis of regional production data, with 

the relevant region defined as North 

America. 

The five-year average is updated 

annually for each Index Commodity 

included in the Index, based on the 

most recent five-year period (ending 

approximately one and a half years prior 

to the date of calculation and moving 

backwards) for which complete data for 

all commodities is available. The 

calculation of the CPW of each 

Designated Contract is derived from 

world or regional production averages, 

as applicable, of the relevant Index 

Commodity, and is based on the total 

quantity traded for the relevant 

Designated Contract and the world or 

regional production average, as 

applicable, of the underlying Index 

Commodity. However, if the volume of 

trading in the relevant Designated 

Contract, as a multiple of the production 

levels of the Index Commodity 

(‘‘Trading Volume Multiple’’ or 

‘‘TVM’’),12 is below a specified 

threshold (‘‘Trading Volume Multiple 

Threshold’’ or ‘‘TVMT’’),13 the CPW of 

the Designated Contract is reduced until 

the threshold is satisfied. This is 

designed to ensure that trading in each 

Designated Contract is sufficiently 

liquid relative to the production of the 

Index Commodity. 

In addition, the Index Sponsor 

performs this calculation on a monthly 

basis and, if the TVM of any Designated 

Contract is below the TVMT, the 

composition of the Index is reevaluated, 

based on the criteria and weighting 

procedure described above. This 

procedure is undertaken to allow the 

Index to shift from Designated Contracts 

that have lost substantial liquidity into 

more liquid contracts during the course 

of a given year. As a result, it is possible 

that the composition or weighting of the 

Index will change on one or more of 

these monthly evaluation dates. The 

likely circumstances under which the 

Index Sponsor would be expected to 

change the composition of the Index 

during a given year, however, are (1) a 

substantial shift of liquidity away from 

a Designated Contract included in the 

Index as described above, or (2) an 

emergency, such as a natural disaster or 

act of war or terrorism, that causes 

trading in a particular contract to cease 

permanently or for an extended period 

of time. In either event, the Index 

Sponsor will publish the nature of the 

changes through Web sites, news media, 

or other outlets, with as much prior 

notice to market participants as is 

reasonably practicable. Moreover, 

regardless of whether any changes have 

occurred during the year, the Index 

Sponsor reevaluates the composition of 

the Index at the conclusion of each year, 

based on the above criteria, and other 

commodities that satisfy that criteria, if 

any, will be added to the Index while 

commodities included in the Index that 

no longer satisfy that criteria, if any, 

will be deleted. 

The Index Sponsor also determines 

whether modifications in the selection 

criteria or the methodology for 


pmangrum on DSK3VPTVN1PROD with NOTICES
21118 Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices 

14The ‘‘roll weight’’ of each Index Commodity 

reflects the fact that the positions in the Designated 

Contracts must be liquidated or rolled forward into 

more distant contract expirations as they near 

expiration. If actual positions in the relevant 

markets were rolled forward, the roll would likely 

need to take place over a period of days. Because 

the Index is designed to replicate the return of 

actual investments in the underlying Designated 

Contracts, the rolling process incorporated in the 

Index also takes place over a period of days at the 

beginning of each month, referred to as the ‘‘Roll 

Period.’’ On each day of the Roll Period, the ‘‘roll 

weights’’ of the first nearby contract expirations on 

a particular Index Commodity and the more distant 

contract expiration into which it is rolled are 

adjusted, so that the hypothetical position in the 

Designated Contract on the Index Commodity that 

is included in the Index is gradually shifted from 

the first nearby contract expiration to the more 

distant contract expiration pursuant to the S&P 

GSCI® Dynamic Roll Index Methodology. 

15See Notice and Registration Statement, supra 

notes 3 and 5, respectively. 

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). 

18 15 U.S.C. 78k–1(a)(1)(C)(iii). 

determining the composition and 

weights of and for calculating the Index 

are necessary or appropriate in order to 

assure that the Index represents a 

measure of commodity market return. 

The Index Sponsor has the discretion to 

make any such modifications. 

Calculation of the Closing Value of the 

Index 

The value, or the total dollar weight, 

of the Index on each business day is 

equal to the sum of the dollar weights 

of each of the Index Commodities. The 

dollar weight of each Index Commodity 

on any given day is equal to the product 

of (i) the weight of such Index 

Commodity, (ii) the daily contract 

reference price for the appropriate 

Designated Contracts, and (iii) the 

applicable ‘‘roll weights’’ during a Roll 

Period.14

The daily contract reference price 

used in calculating the dollar weight of 

each Index Commodity on any given 

day is the most recent daily contract 

reference price for the applicable 

Designated Contract made available by 

the Futures Exchange on which it 

trades, except that the daily contract 

reference price for the most recent prior 

day will be used if the Futures Exchange 

is closed or otherwise fails to publish a 

daily contract reference price on that 

day. If the Futures Exchange fails to 

make a daily contract reference price 

available or if the Index Sponsor 

determines, in its reasonable judgment, 

that the published daily contract 

reference price reflects manifest error, 

the relevant calculation will be delayed 

until the price is made available or 

corrected. If the daily contract reference 

price is not made available or corrected 

by 4 p.m., Eastern Time, the Index 

Sponsor may determine, in its 

reasonable judgment, the appropriate 

daily contract reference price for the 

applicable Designated Contract in order 

to calculate the Index. 

The Index Committee 

The Index Sponsor has established an 

‘‘Index Committee’’ to oversee the daily 

management and operations of the 

Index, and is responsible for all 

analytical methods and calculation of 

the Index. The Index Committee is 

comprised of full-time professional 

members of the Index Sponsor’s staff. At 

each meeting, the Index Committee 

reviews any issues that may affect Index 

constituents, statistics comparing the 

composition of the Index to the market, 

commodities that are being considered 

as candidates for addition to the Index, 

and any significant market events. In 

addition, the Index Committee may 

revise Index policy covering rules for 

selecting commodities or other matters. 

The Index Sponsor considers 

information about changes to the Index 

and related matters to be potentially 

market-moving and material. Therefore, 

all Index Committee discussions are 

confidential. 

In addition, the Index Sponsor has 

established a ‘‘Commodity Index 

Advisory Panel’’ to assist it with the 

operation of the Index. The Commodity 

Index Advisory Panel meets on an 

annual basis and at other times at the 

request of the Index Committee. The 

principal purpose of the Commodity 

Index Advisory Panel is to advise the 

Index Committee with respect to, among 

other things, the calculation of the 

Index, the effectiveness of the Index as 

a measure of commodity futures market 

return, and the need for changes in the 

composition or the methodology of the 

Index. The Commodity Index Advisory 

Panel acts solely in an advisory and 

consultative capacity. The Index 

Committee makes all decisions with 

respect to the composition, calculation, 

and operation of the Index. The Index 

Advisory Panel representatives include 

employees of S&P indices, McGraw-Hill 

Financial, and clients of S&P indices. 

Certain of the members of the Index 

Advisory Panel may be affiliated with 

entities which, from time to time, may 

have investments linked to the S&P 

GSCI or other S&P commodities indices, 

either through transactions in the 

contracts included in the S&P GSCI and 

other S&P commodities indices, or 

futures contracts or derivative products 

linked to the S&P commodities indices. 

The Index Committee and the 

Commodity Index Advisory Panel are 

subject to procedures designed to 

prevent the use and dissemination of 

material, non-public information 

regarding the Index. 

A more detailed description of the 

Shares, the Fund, the Index, the Index 

Commodities, investment risks, creation 

and redemption procedures, fees, 

trading halts, surveillance, and the 

Information Bulletin, among other 

things, can be found in the Notice 

and/or the Registration Statement, as 

applicable.15

III. Discussion and Commission’s 

Findings 

After careful review, the Commission 

finds that the proposed rule change to 

list and trade the Shares of the Fund is 

consistent with the requirements of 

Section 6 of the Act 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 the requirements of 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. 

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 

forth Congress’s finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for, and 

transactions in, securities. Quotation 

and last-sale information regarding the 

Shares will be disseminated through the 

facilities of the Consolidated Tape 

Association (‘‘CTA’’). The Index 

Sponsor will calculate and publish the 

value of the Index continuously on each 

business day, with such values updated 

every 15 seconds. In addition, the intraday indicative value (‘‘IIV’’) per Share of 

the Fund, which will be based on the 

prior day’s final NAV per Share and 

adjusted every 15 seconds during the 


pmangrum on DSK3VPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices 21119 

19According to the Exchange, several major 

market data vendors currently display and/or make 

widely available IIVs published on CTA or other 

data feeds. 

20The Exchange represents that, although a time 

gap may exist between the close of the NYSE Arca 

Core Trading Session and the close of the Futures 

Exchanges on which the Designated Contracts or 

Substitute Contracts (which are listed on futures 

exchanges other than Futures Exchanges) are 

traded, there is no effect on the NAV calculations 

as a result. 

21With respect to trading halts, the Exchange may 

consider all relevant factors in exercising its 

discretion to halt or suspend trading in the Shares. 

Trading in the Shares will be subject to halts caused 

by extraordinary market volatility pursuant to the 

Exchange’s ‘‘circuit breaker’’ rule in NYSE Arca 

Equities Rule 7.12 or by the halt or suspension of 

trading of the underlying futures contracts. Trading 

also may be halted because of market conditions or 

for reasons that, in the view of the Exchange, make 

trading in the Shares inadvisable. 

22See NYSE Arca Equities Rule 1.1(n) (defining 

ETP Holder). 

23See NYSE Arca Equities Rule 1.1(u) (defining 

Market Maker). 

NYSE Arca Core Trading Session to 

reflect the continuous price changes of 

the Designated Contracts and other 

holdings, if any, held by the Fund, will 

be widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the NYSE Arca Core 

Trading Session.19 The final NAV of the 

Fund and the final NAV per Share will 

be calculated as of the closing time of 

NYSE Arca Core Trading Session or the 

last to close of the Futures Exchanges on 

which the Designated Contracts or 

Substitute Contracts (which are listed 

on futures exchanges other than Futures 

Exchanges) are traded, whichever is 

later, and posted in the same manner.20

The S&P GSCI® Dynamic Roll Index 

Methodology will be provided by the 

Index Sponsor on its Web site. The 

Fund will provide Web site disclosure 

of portfolio holdings daily and will 

include, as applicable, the names, 

quantity, price, and market value of 

Designated Contracts, Cleared Swaps, 

Substitute Contracts, and Alternative 

Financial Instruments, if any, held by 

the Fund, and the characteristics of such 

instruments, and cash equivalents and 

amount of cash held in the portfolio of 

the Fund. The prices of the Designated 

Contracts, Cleared Swaps, Substitute 

Contracts, and exchange-traded cash 

settled options are available from the 

applicable exchanges on which they 

trade and from market data vendors. 

The closing prices and settlement prices 

of futures contracts on the Index 

Commodities are readily available from 

the Web sites of the applicable futures 

exchanges on which they trade, 

automated quotation systems, published 

or other public sources, or on-line 

information services such as Bloomberg 

or Reuters. The relevant futures 

exchanges on which the underlying 

futures contracts are listed 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. In addition, the Managing 

Owner’s Web site and/or the Web site of 

the Exchange will contain the 

prospectus and additional data relating 

to NAV and other applicable 

quantitative information. 

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 IIV, the Index, or 

the value of the underlying futures 

contracts occurs. If the interruption to 

the dissemination of the IIV, the Index, 

or the value of the underlying futures 

contracts persists past the trading day in 

which it occurred, the Exchange will 

halt trading no later than the beginning 

of the trading day following the 

interruption. The Exchange may halt 

trading in the Shares if trading is not 

occurring in the underlying futures 

contracts, or if other unusual conditions 

or circumstances detrimental to the 

maintenance of a fair and orderly 

market are present.21 In addition, the 

Web site disclosure of the portfolio 

composition of the Fund will occur at 

the same time as the disclosure by the 

Managing Owner 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 

Fund through the Fund’s Web site. The 

Exchange states that it has a general 

policy prohibiting the distribution of 

material, non-public information by its 

employees. Lastly, the trading of the 

Shares will be subject to NYSE Arca 

Equities Rule 8.200, Commentary .02(e), 

which sets forth certain restrictions on 

ETP Holders 22 acting as registered 

Market Makers 23 in TIRs to facilitate 

surveillance. 

The Exchange has represented that 

the Shares are deemed to be equity 

securities, thus rendering trading in the 

Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. In support of this 

proposal, the Exchange has made 

representations, including: 

(1) The Fund will meet the initial and 

continued listing requirements 

applicable to TIRs 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, including TIRs, 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) With respect to Fund assets traded 

on exchanges, not more than 10% of the 

weight of such assets in the aggregate 

shall consist of components whose 

principal trading market is not a 

member of the Intermarket Surveillance 

Group or is a market with which the 

Exchange does not have a 

comprehensive surveillance sharing 

agreement. 

(5) Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders in an Information Bulletin 

of the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Bulletin 

will discuss the following: (a) The risks 

involved in trading the Shares during 

the Opening and Late Trading Sessions 

when an updated IIV will not be 

calculated or publicly disseminated; (b) 

the procedures for purchases and 

redemptions of Shares in 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 IIV is 

disseminated; (e) the requirement that 

ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (f) 

trading information. 


pmangrum on DSK3VPTVN1PROD with NOTICES
21120 Federal Register / Vol. 77, No. 68 / Monday, April 9, 2012 / Notices 

24 17 CFR 240.10A–3. 25 17 CFR 240.10A–3(c)(7). 26The 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. 

27 15 U.S.C. 78f(b)(5). 

28 15 U.S.C. 78s(b)(2). 

29 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Exchange proposes that mini-options 

contracts would be listed in only five issues, 

specifically SPDR S&P 500 (SPY), Apple, Inc. 

(AAPL), SPDR Gold Trust (GLD), Google Inc. 

(GOOG), and Amazon.com Inc. (AMZN). These 

issues were selected because they are priced greater 

than $100 and are among the most actively traded 

issues, in that the standard contract exhibits average 

daily volume (‘‘ADV’’) over the previous three 

calendar months of at least 45,000 contracts, 

excluding LEAPS and FLEX series. The Exchange 

notes that any expansion of the program would 

require that a subsequent proposed rule change be 

submitted with the Commission. 

4A high priced underlying security may have 

relatively expensive options, because a low 

percentage move in the share price may mean a 

large movement in the options in terms of absolute 

dollars. Average non-FLEX equity option premium 

per contract January 1–December 31, 2011. See 

http://www.theocc.com/webapps/monthly-volumereports?reportClass=equity. 

(6) A minimum of 100,000 Shares of 

the Fund will be outstanding as of the 

start of trading on the Exchange. 

(7) With respect to application of Rule 

10A–3 under the Act,24 the Fund will 

rely on the exception contained in Rule 

10A–3(c)(7).25

This approval order is based on all of 

the Exchange’s representations.26

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act 27 and the rules and 

regulations thereunder applicable to a 

national securities exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,28 that the 

proposed rule change (SR–NYSEArca– 

2012–10) be, and it hereby is, approved. 

For the Commission, by the Division 

of Trading and Markets, pursuant to 

delegated authority.29

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2012–8425 Filed 4–6–12; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–66725; File No. SR– 

NYSEArca–2012–26] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change to List and Trade Option 

Contracts Overlying 10 Shares of a 

Security (‘‘Mini-Options Contracts’’) 

and Implementing Rule Text Necessary 

to Distinguish Mini-Options Contracts 

From Option Contracts Overlying 100 

Shares of a Security (‘‘Standard 

Contracts’’) 

April 3, 2012. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on March 23, 

2012, NYSE Arca, Inc. (the ‘‘Exchange’’ 

or ‘‘NYSE Arca’’) 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 self-regulatory organization. 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 option contracts overlying 10 

shares of a security (‘‘mini-options 

contracts’’) and implement rule text 

necessary to distinguish mini-options 

contracts from option contracts 

overlying 100 shares of a security 

(‘‘standard contracts’’). The text of the 

proposed rule change is available at the 

Exchange, www.nyse.com, and the 

Commission’s Public Reference Room. 

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, 

of the most significant parts 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 is proposing to list and 

trade mini-options contracts and 

implement rule text necessary to 

distinguish mini-options contracts from 

standard contracts. Whereas standard 

contracts represent a deliverable of 100 

shares of an underlying security, minioptions contracts would represent a 

deliverable of 10 shares. The Exchange 

proposes to list and trade mini-options 

contracts overlying 5 high priced 

securities for which the standard 

contract overlying the same security 

exhibits significant liquidity.3 The 

Exchange believes that investors would 

benefit from the availability of minioptions contracts by making options 

overlying high priced securities more 

readily available as an investing tool 

and at more affordable and realistic 

prices, most notably for the average 

retail investor. 

For example, with Apple Inc. 

(‘‘AAPL’’) trading at $605.85 on March 

21, 2012, ($60,585 for 100 shares 

underlying a standard contract), the 605 

level call expiring on March 23 is 

trading at $7.65. The cost of the 

standard contract overlying 100 shares 

would be $765, which is substantially 

higher in notional terms than the 

average equity option price of $250.89.4

Proportionately equivalent mini-options 

contracts on AAPL would provide 

investors with the ability to manage and 

hedge their portfolio risk on their 

underlying investment, at a price of $76 

per contract. In addition, investors who 

hold a position in AAPL at less than the 

round lot size would still be able to 

avail themselves of options to manage 

their portfolio risk. For example, the 

holder of 50 shares of AAPL could write 

covered calls for five mini-options 

contracts. The table below demonstrates 

the proposed differences between a 

mini-options contracts and a standard 

contract with a strike price of $125 per 

share and a bid or offer of $3.20 per 

share: 

Standard Mini 

Share Deliverable Upon Exercise ......................................................................................................... 100 shares .................... 10 shares 

Strike Price ............................................................................................................................................ 125 ................................ 12.5 


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