Document ID: SEC-2008-1581-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2008-11-24T05:00Z

[Federal Register: November 24, 2008 (Volume 73, Number 227)]
[Notices]               
[Page 71078-71081]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24no08-152]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58965; File No. SR-NYSEArca-2008-127]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of Proposed Rule Change 
Relating to the Listing and Trading of Units of the United States Oil 
Fund, United States Heating Oil Fund, United States Gasoline Fund, 
United States 12 Month Oil Fund, United States 12 Month Natural Gas 
Fund, and the United States Natural Gas Fund

 November 17, 2008.
    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 5, 2008, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') 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 and approving the proposed 
rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange, through its wholly-owned subsidiary NYSE Arca 
Equities, Inc. (``NYSE Arca Equities''), proposes to list the following 
Partnership Units (``Units'') pursuant to NYSE Arca Equities Rule 
8.300: United States Oil Fund, LP; United States Heating Oil Fund, LP; 
United States Gasoline Fund, LP; United States 12 Month Oil Fund, LP; 
United States 12 Month Natural Gas Fund, LP; and the United States 
Natural Gas Fund, LP (each, a ``Partnership,'' and collectively 
``Partnerships''). The text of the proposed rule change is available on 
the Exchange's Web site at http://www.nyse.com, at the Exchange's 
principal office and at 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 III 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
    Under NYSE Arca Equities Rule 8.300, the Exchange may propose to 
list and trade or trade pursuant to unlisted trading privileges 
(``UTP'') Partnership Units (``Units'').\3\ The Exchange proposes to 
list and trade the following Units pursuant to NYSE Arca Equities Rule 
8.300: United States Oil Fund, LP (``USOF''); United States Heating Oil 
Fund, LP (``USHO''); United States Gasoline Fund, LP (``USG''); United 
States 12 Month Oil Fund, LP (``12 Month Oil Fund''); United States 12 
Month Natural Gas Fund, LP (``12 Month Natural Gas Fund''); and the 
United States Natural Gas Fund, LP (``USNG''). The Commission has 
previously approved listing of the Partnerships on the NYSE Alternext 
US LLC (``NYSE Alternext US'') (formerly, the American Stock Exchange 
LLC (``Amex'')) \4\ and trading on the Exchange pursuant to UTP.\5\ 
Prior to listing on the Exchange, the issuer of the Units would be 
required to satisfy the applicable delisting procedures of NYSE 
Alternext US and applicable statutory and regulatory requirements, 
including, without limitation, Section 12 of the Securities Exchange 
Act of 1934 (``Act''),\6\ relating to listing the Units on the 
Exchange.\7\
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    \3\ On May 25, 2006, the Commission approved NYSE Arca Equities 
Rule 8.300, which sets forth the rules related to listing and 
trading criteria for Partnership Units. See Securities Exchange Act 
Release No. 53875 (May 25, 2006), 71 FR 32164 (June 2, 2006) (SR-
NYSEArca-2006-11) (approving trading pursuant to UTP of Partnership 
Units of the United States Oil Fund, LP).
    \4\ See Securities Exchange Act Release Nos. 53582 (March 31, 
2006), 71 FR 17510 (April 6, 2006) (SR-Amex-2005-127) (order 
approving Amex listing of USOF); 56831 (November 21, 2007), 72 FR 
67612 (November 29, 2007) (SR-Amex-2007-98) (order approving Amex 
listing of 12 Month Oil Fund and 12 Month Natural Gas Fund); 55632 
(April 13, 2007), 72 FR 19987 (April 20, 2007) (SR-Amex-2006-112) 
(order approving Amex listing of USNG); 57188 (January 23, 2008), 73 
FR 5607 (January 30, 2008) (SR-Amex-2007-70) (order approving Amex 
listing of USHO and USG) (collectively, the ``Amex Filings'').
    \5\ See Securities Exchange Act Release No. 56832 (November 21, 
2007), 72 FR 67328 (November 28, 2007) (SR-NYSEArca-2007-102) (order 
approving UTP trading of 12 Month Oil Fund and 12 Month Natural Gas 
Fund); Securities Exchange Act Release No. 56042 (July 11, 2007), 72 
FR 39118 (July 17, 2007) (SR-NYSEArca-2007-45) (order approving UTP 
trading of USNG); Securities Exchange Act Release No. 57294 
(February 8, 2008), 73 FR 8917 (February 15, 2008) (SR-NYSEArca-
2007-78) (order approving UTP trading of USHO and USG) 
(collectively, with the orders cited in note 3, supra, the ``UTP 
Filings'').
    \6\ 15 U.S.C. 78(l).
    \7\ The Exchange will seek the voluntary consent of the issuer 
of the Units currently listed on NYSE Alternext U.S. to be delisted 
from NYSE Alternext U.S. and listed on the Exchange.
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    Descriptions of the Partnerships and the Units are included in the 
Amex Filings, the UTP Filings, and the respective Registration 
Statements, as amended, for the Units.\8\ The Exchange represents that 
the Units satisfy the requirements of Rule 8.300 and thereby qualify 
for listing on the Exchange. The Exchange states that all of the facts 
describing the Partnerships and the Units contained in the Amex Filings 
are true and correct as of the date of this filing. The Exchange states 
further that the representations included in the Amex Filings relating 
to the dissemination and availability of information regarding the 
Units will apply to listing and trading of the Units on the Exchange. 
To the extent NYSE

[[Page 71079]]

Alternext US has any affirmative obligations with respect to 
dissemination of information or key values relating to the Units, the 
Exchange represents that it would take the place of NYSE Alternext US 
in such role and discharge such obligations.
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    \8\ See USHO's Form S-1, dated April 19, 2007 (File No. 333-
142211); USG's S-1, dated April 18, 2007 (File No. 333-142206); the 
12 Month Oil Fund's Form S-1, dated July 5, 2007 (File No. 333-
144348); the 12 Month Natural Gas Fund's S-1, dated July 6, 2007 
(File No. 333-144409); USNG's Form S-1, dated October 6, 2006 (File 
No. 333-137871); USOF's Form S-1, dated May 16, 2005(File No. 333-
124950).
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    The Partnerships will comply with the requirements of Rule 10A-3 
\9\ under the Act as it applies to limited partnerships.
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    \9\ 17 CFR 240.10A-3.
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Trading Rules
    The Exchange deems the Units to be equity securities, thus 
rendering trading in the Units subject to the Exchange's existing rules 
governing the trading of equity securities. Units will trade on the 
NYSE Arca Marketplace from 4 a.m. to 8 p.m. ET. The Exchange has 
appropriate rules to facilitate transactions in the Units during all 
trading sessions. The minimum trading increment for Units on the 
Exchange will be $0.01.
    NYSE Arca Equities Rule 8.300(e) sets forth certain restrictions on 
ETP Holders acting as registered Market Makers in Units to facilitate 
surveillance. NYSE Arca Equities Rule 8.300(e)(2)-(3) requires that the 
ETP Holder acting as a registered Market Maker in the Units provide the 
Exchange with necessary information relating to its trading in the 
underlying asset or commodity, related futures or options on futures, 
or any other related derivatives. NYSE Arca Equities Rule 8.300(e)(4) 
prohibits the ETP Holder acting as a registered Market Maker in the 
Units from using any material nonpublic information received from any 
person associated with an ETP Holder or employee of such person 
regarding trading by such person or employee in the underlying asset or 
commodity, related futures or options on futures or any other related 
derivative (including the Units). In addition, NYSE Arca Equities Rule 
8.300(e)(1) prohibits the ETP Holder acting as a registered Market 
Maker in the Units from being affiliated with a market maker in the 
underlying asset or commodity, related futures or options on futures or 
any other related derivative unless adequate information barriers are 
in place, as provided in NYSE Arca Equities Rule 7.26.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Units. Trading may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Units 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 Units could be halted pursuant to the Exchange's ``circuit 
breaker'' rule.\10\ Under Rule 7.34(a)(5), if the Exchange becomes 
aware that the net asset value (``NAV'') for the Units is not being 
disseminated to all market participants at the same time, it will halt 
trading in the Units on the Exchange until such time as the NAV is 
available to all market participants. In addition, if the portfolio 
composition applicable to Units, as disseminated on the Web site for 
the Units (as identified in the Amex Filings) is not disseminated to 
all market participants at the same time, the Exchange will halt 
trading in the affected Units.
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    \10\ See NYSE Arca Equities Rule 7.12.
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Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products, including Partnership 
Units, to monitor trading in the Units. The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Units 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 Units, the applicable 
physical commodities included in, or options, futures or options on 
futures on, or any other derivatives based on such commodities, through 
ETP Holders, in connection with such ETP Holders' proprietary or 
customer trades which they effect on any relevant market. With regard 
to the petroleum-based and natural gas futures underlying the Units, 
the Exchange can obtain market surveillance information, including 
customer identity information, with respect to transactions occurring 
on the New York Mercantile Exchange and the InterContinental Exchange 
pursuant to its comprehensive information sharing agreements with each 
of those exchanges. All of the other trading venues on which current 
applicable petroleum-based and natural gas futures are traded are 
members of the Intermarket Surveillance Group (``ISG'') and the 
Exchange therefore has access to all relevant trading information with 
respect to those contracts without any further action being required on 
the part of the Exchange. A list of ISG members is available at http://
www.isgportal.org.
    In addition, to the extent that a Partnership invests in petroleum-
based, natural gas and similar futures contracts traded on other 
exchanges, not more than 10% of the weight of the Partnership assets in 
the aggregate shall consist of such futures contracts whose principal 
trading market is not a member of ISG or is a market with which the 
Exchange does not have a comprehensive surveillance sharing agreement.
    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 (``Bulletin'') of the special 
characteristics and risks associated with trading the Units. 
Specifically, the Bulletin will discuss the following: (1) The risks 
involved in trading the Units during the Opening and Late Trading 
Sessions when an updated Indicative Partnership Value will not be 
calculated or publicly disseminated; (2) the procedures for purchases 
and redemptions of Units (and that Units 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 Units; (4) how 
information regarding the Indicative Partnership Value is disseminated; 
(5) the requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Units prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that each Partnership is 
subject to various fees and expenses described in the relevant 
registration statement.
    The Bulletin will also reference the fact that there is no 
regulated source of last sale information regarding physical 
commodities, that the Commission has no jurisdiction over the trading 
of heating oil, gasoline, crude oil, natural gas or petroleum-based 
fuels, and that the CFTC has regulatory jurisdiction over the trading 
of petroleum-based and natural gas futures contracts and related 
options.

[[Page 71080]]

    The Bulletin will also discuss any exemptive, no-action and 
interpretive relief granted by the Commission from any rules under the 
Act.
    The Bulletin will also disclose that the NAV for the Units will be 
calculated after 4:00 p.m. ET each trading day.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\11\ in general, and furthers the objectives of Section 
6(b)(5),\12\ 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 the Units on the 
Exchange, to the benefit of investors and the marketplace. In addition, 
the listing and trading criteria set forth in Rule 8.300 are intended 
to protect investors and the public interest.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
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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. 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2008-127 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2008-127. 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 inspection 
and copying 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 the 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 Number SR-NYSEArca-2008-127 and should 
be submitted on or before December 15, 2008.

IV. Commission's Findings and Order Granting Accelerated Approval of 
the Proposed Rule Change

    After careful consideration, the Commission finds that the proposed 
rule change is consistent with the requirements of the Act and the 
rules and regulations thereunder applicable to a national securities 
exchange.\13\ In particular, the Commission believes that the proposal 
is consistent with Section 6(b)(5) of the Act,\14\ which requires, 
among other things, that the rules of a national securities exchange be 
designed to promote just and equitable principles of trade, 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 it has approved the listing 
and trading of the Units on Amex,\15\ now known as NYSE Alternext US, 
and the trading of the Units pursuant to UTP on the Exchange.\16\
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    \13\ In approving this 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).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ See Amex Filings, supra, note 4.
    \16\ See UTP Filings, supra, note 5.
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    The Commission believes that the proposal to list and trade the 
Units on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\17\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. The Exchange has stated 
that the representations included in the Amex Filings relating to the 
dissemination and availability of information regarding the Units will 
apply to the listing and trading of the Units on the Exchange, and, to 
the extent NYSE Alternext U.S. (formerly Amex) has any affirmative 
obligations with respect to dissemination of information or key values 
relating to the Units, the Exchange represents that it would take the 
place of NYSE Alternext U.S. in such role and discharge such 
obligations.\18\ The Commission notes that, at a minimum, the Units 
must comply with NYSE Arca Equities Rules 8.300(d)(2)(ii) and (iii), 
which relate to the regular dissemination of the value of the 
underlying benchmark investment, commodity, or asset and the Indicative 
Partnership Value, respectively, for continued trading of the Units on 
the Exchange.
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    \17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \18\ See Amex Filings, supra, note 4.
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    The Commission also believes that the proposal to list and trade 
the Units is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Units appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that, under NYSE Arca Equities Rule 
7.34(a)(5), if the Exchange becomes aware that the NAV for the Units is 
not being disseminated to all market participants at the same time, it 
will halt trading in the Units on the Exchange until such time as the 
NAV is available to all market participants. In addition, if the 
portfolio composition applicable to the Units, as disseminated on the 
Web site for the Units (as identified in the Amex Filings), is not 
disseminated to all

[[Page 71081]]

market participants at the same time, the Exchange will halt trading in 
the affected Units. Moreover, NYSE Arca Equities Rule 8.300(e) limits 
certain dealings and trading activity of ETP Holders acting as 
registered Market Makers in Units, prescribes various recordkeeping and 
disclosure requirements for ETP Holders, and prohibits the use of any 
material non-public information regarding trading in the underlying 
physical asset or commodity, futures or options on futures, or any 
other related derivatives.
    The Commission further believes that the trading rules and 
procedures to which the Units will be subject pursuant to this proposal 
are consistent with the Act. The Exchange has represented that the 
Units are equity securities subject to NYSE Arca's rules governing the 
trading of equity securities.
    In support of this proposal, the Exchange has made the following 
representations:
    (1) The Units satisfy the requirements of NYSE Arca Equities Rule 
8.300, which includes the initial and continued listing criteria for 
Partnership Units.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor trading of the Units in all trading sessions and to deter and 
detect violations of Exchange rules and applicable federal securities 
laws.
    (3) The Exchange will distribute an Information Bulletin, the 
contents of which are more fully described above, to its ETP Holders in 
connection with the trading of the Units.
    (4) The Partnerships will comply with the requirements of Rule 10A-
3 under the Act \19\ as it applies to limited partnerships.
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    \19\ 17 CFR 240.10A-3.
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    This approval order is based on the Exchange's representations.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\20\ for approving the proposed rule change prior to the 30th 
day after the date of publication of notice in the Federal Register. 
The Commission notes that it has previously approved the listing and 
trading of the Units on Amex \21\ and believes that the Exchange's 
proposal to list and trade such Units does not appear to present any 
novel or significant regulatory issues. As such, the Commission 
believes that accelerating approval of this proposal should benefit 
investors by creating, without undue delay, additional competition in 
the market for such products.
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    \20\ 15 U.S.C. 78s(b)(2).
    \21\ See Amex Filings, supra, note 4. The Units have also been 
approved for trading on the Exchange pursuant to UTP. See UTP 
Filings, supra, note 5.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NYSEArca-2008-127) be, and 
it hereby is, approved on an accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).
    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-27880 Filed 11-21-08; 8:45 am]

BILLING CODE 8011-01-P