Document ID: SEC-2007-1767-0001
Agency: sec
Document Type: Notice
Title: Self-regulatory organizations; proposed rule changes: NYSE Arca,  Inc.
Posted Date: 2007-12-28T05:00Z

[Federal Register: December 28, 2007 (Volume 72, Number 248)]
[Notices]               
[Page 73955-73960]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr28de07-201]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57017; File No. SR-NYSEArca-2007-108]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Order Granting Accelerated Approval of a Proposed Rule Change as 
Modified by Amendment No. 1 Thereto to Trade Shares of 11 Funds of the 
ProShares Trust Pursuant to Unlisted Trading Privileges

December 20, 2007.
    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 October 17, 2007, NYSE Arca, Inc. (``Exchange''), through its 
wholly-owned subsidiary NYSE Arca Equities, Inc. (``NYSE Arca

[[Page 73956]]

Equities''), filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been substantially prepared by the Exchange. 
On December 20, 2007, the Exchange submitted Amendment No. 1 to the 
proposed rule change. This order provides notice of the proposed rule 
change as modified by Amendment No. 1 and approves the proposed rule 
change as amended 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, proposes to trade pursuant to unlisted trading privileges 
(``UTP'') shares (``Shares'') of 11 funds (``Funds'') of the ProShares 
Trust (``Trust'') based on a domestic stock index and several fixed 
income indexes. The text of the proposed rule change is available at 
the Exchange's principal office, 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 Exchange 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 III below. The Exchange 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 trade pursuant to UTP under NYSE Arca 
Equities Rule 5.2(j)(3), Shares of ten Funds of the Trust that are 
designated as Short Funds and UltraShort Funds, and one Fund designated 
as an Ultra Fund.\3\ The Commission has approved the original listing 
and trading of the Shares on the American Stock Exchange LLC 
(``Amex'').\4\
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    \3\ The Commission has previously approved the trading of 
certain Ultra Funds, Short Funds, and UltraShort Funds of the 
ProShares Trust on the Exchange pursuant to UTP under NYSE Arca 
Equities Rule 5.2(j)(3). See Securities Exchange Act Release No. 
55125 (January 18, 2007), 72 FR 3462 (January 25, 2007) (SR-
NYSEArca-2006-87).
    \4\ See Securities Exchange Act Release No. 59998 (December 19, 
2007) (SR-Amex-2007-104) (``Amex Proposal'').
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    The Funds to be traded are as follows:

Short ProShares

    (1) Short Lehman Brothers 7-10 Year U.S. Treasury ProShares
    (2) Short Lehman Brothers 20+ Year U.S. Treasury ProShares
    (3) Short iBoxx $ Liquid Investment Grade ProShares
    (4) Short iBoxx $ Liquid High Yield ProShares
    (5) Short Dow Jones U.S. Select Telecommunications ProShares

UltraShort ProShares

    (1) UltraShort Lehman Brothers 7-10 Year U.S. Treasury ProShares
    (2) UltraShort Lehman Brothers 20+ Year U.S. Treasury ProShares
    (3) UltraShort iBoxx $ Liquid Investment Grade ProShares
    (4) UltraShort iBoxx $ Liquid High Yield ProShares
    (5) UltraShort Dow Jones U.S. Select Telecommunications ProShares

Ultra ProShares

    (1) Ultra Dow Jones U.S. Select Telecommunications ProShares
    Each of the Funds will have a distinct investment objective. The 
Funds will attempt, on a daily basis, to achieve their investment 
objective by corresponding to a specified multiple of the performance, 
the inverse performance, or an inverse multiple of the performance of a 
particular fixed income or equity securities index, as briefly 
described below. The Funds will be based on the following benchmark 
indexes: (1) Lehman Brothers 7-10 Year U.S. Treasury Index, (2) Lehman 
Brothers 20+ Year U.S. Treasury Index, (3) iBoxx $ Liquid Investment 
Grade Index, (4) iBoxx $ Liquid High Yield Index, and (5) the Dow Jones 
Select Telecommunications Index (the ``Underlying Indexes'').
    Certain Funds seek daily investment results, before fees and 
expenses, that correspond to the inverse or opposite of the daily 
performance (-100%) of the Underlying Indexes (the ``Short Funds''). If 
such a Fund is successful in meeting its objective, the net asset value 
(the ``NAV'') of the Fund's shares should increase approximately as 
much, on a percentage basis, as the respective Underlying Index loses 
when the prices of the securities in the Index decline on a given day, 
or should decrease approximately as much as the respective Index gains 
when the prices of the securities in the index rise on a given day, 
before fees and expenses.
    Certain Funds seek daily investment results, before fees and 
expenses that correspond to twice the inverse or opposite of the daily 
performance (-200%) of the Underlying Indexes (the ``UltraShort 
Funds''). If such a Fund is successful in meeting its objective, the 
NAV the Fund's shares should increase approximately twice as much, on a 
percentage basis, as the respective Underlying Index loses when the 
prices of the securities in the Index decline on a given day, or should 
decrease approximately twice as much as the respective Underlying Index 
gains when the prices of the securities in the index rise on a given 
day, before fees and expenses. The Short Funds and UltraShort Funds 
each have investment objectives that seek investment results 
corresponding to an inverse performance of the Underlying Indexes and 
are collectively referred to as the ``Bearish Funds.''
    One Fund, the Ultra Dow Jones Select Telecommunications ProShares 
Fund, seeks daily investment results, before fees and expenses, that 
corresponds to twice the daily performance (200%) of the Underlying 
Index (the ``Ultra Fund'' or the ``Bullish Fund''). This Fund, if 
successful in meeting its investment objective, should gain, on a 
percentage basis, approximately twice as much as the Fund's Underlying 
Index when the price of the securities in such Index increase on a 
given day, and should lose approximately twice as much when such prices 
decline on a given day.
    The financial instruments to be held by any of the Funds may 
include stock index futures contracts; options on futures contracts; 
options on securities and indices; equity caps, collars, and floors as 
well as swap agreements, forward contracts, repurchase agreements, and 
reverse repurchase agreements (the ``Financial Instruments''). Money 
market instruments include U.S. government securities and repurchase 
agreements.

The Underlying Indexes

    The Lehman Brothers 7-10 Year U.S. Treasury Index is market-
capitalization-weighted and includes all publicly issued, U.S. Treasury 
securities that have a remaining maturity of between seven and ten 
years and have more than $250 million par outstanding. The index value 
is calculated and published daily by 10 p.m. Eastern Time (``E.T.'').
    The Lehman Brothers 20+ Year U.S. Treasury Index is market-
capitalization-weighted and includes all publicly issued, U.S. Treasury 
Securities that have a remaining maturity greater than

[[Page 73957]]

20 years and have more than $150 million par outstanding. The index 
value is calculated and published daily by 10 p.m. E.T.
    The iBoxx $ Liquid Investment Grade Index is a rules-based index 
consisting of up to 100 highly liquid, investment-grade, U.S.-dollar-
denominated corporate bonds with a minimum amount outstanding of $500 
million that seeks to maximize liquidity while maintaining 
representation of the broader investment-grade corporate bond market. 
The index consists of issuers domiciled in the U.S., Bermuda, Cayman 
Islands, Canada, Japan or Western Europe. The index is equally priced 
weighted and is re-balanced monthly. The index value is calculated and 
published daily by 4:30 p.m. E.T.
    The iBoxx $ Liquid High Yield Index is a rules-based index 
consisting of up to 50 of the most liquid, high-yield, U.S.-dollar-
denominated corporate bonds with a minimum amount outstanding of $200 
million that seeks to maximize liquidity while maintaining 
representation of the broader high-yield corporate bond market. The 
index consists of issuers domiciled in the United States, Bermuda, 
Cayman Islands, Canada, Japan, or Western Europe. The index is equally 
priced weighted and is re-balanced monthly. The index value is 
calculated and published daily by 4:30 p.m. E.T.
    The Dow Jones U.S. Select Telecommunications Index is a float-
adjusted market-capitalization-weighted index designed to measure the 
performance of the telecommunications economic sector of the U.S. 
equity market. Component companies include fixed line and mobile 
telecommunications companies. Component weights are capped for 
diversification. The index includes all common stocks of companies in 
the Dow Jones U.S. Select Telecommunications Index that are categorized 
as belonging to the telecommunications sector, based on Industry 
Classification Benchmark (ICB) definitions. The company at the 90% 
cumulative market capitalization of the index must have a float-
adjusted market capitalization of at least $75 million. The Index value 
is calculated and distributed every 15 seconds during Amex's trading 
hours.
    Additional information regarding the Underlying Indexes and the 
Funds is included in the Amex Proposal.
Availability of Information About the Shares and the Underlying Indexes
    The Trust's Web site, which is and will be publicly accessible at 
no charge, will contain the following information for each Fund's 
Shares: (1) The prior business day's closing NAV, the reported closing 
price, and a calculation of the premium or discount of such price in 
relation to the closing NAV; (2) data for a period covering at least 
the four previous calendar quarters (or the life of a Fund, if shorter) 
indicating how frequently each Fund's Shares traded at a premium or 
discount to NAV based on the daily closing price and the closing NAV, 
and the magnitude of such premiums and discounts; (3) its prospectus 
and/or product description; and (4) other quantitative information such 
as daily trading volume. The prospectus and/or product description for 
each Fund will inform investors that the Trust's Web site has 
information about the premiums and discounts at which the Fund's Shares 
have traded.
    According to the Amex Proposal, Amex will disseminate for each Fund 
on a daily basis every 15 seconds by means of Consolidated Tape 
Association (``CTA'') and CQ High Speed Lines information with respect 
to an Indicative Intra-Day Value (``IIV''), the recent NAV, the number 
of shares outstanding, the estimated cash amount, and the total cash 
amount per Creation Unit. Amex will make available on its Web site 
daily trading volume, the closing price, the NAV, and the final 
dividend amounts to be paid for each Fund.
    Each Fund's total portfolio composition will be disclosed on the 
Trust's Web site (http://www.proshares.com) or another relevant Web site as 

determined by the Trust and/or Amex. According to the Amex Proposal, 
the Trust will provide Web site disclosure of portfolio holdings daily, 
which will include, as applicable, the names and number of shares held 
of each equity security (if applicable), the specific types of 
Financial Instruments and characteristics of such instruments, cash 
equivalents, and the amount of cash held in the portfolio of each Fund. 
This public Web site disclosure of the portfolio composition of each 
Fund will coincide with the disclosure by the Advisor of the ``IIV 
File'' (described below) and the ``PCF File'', when applicable 
(described below). Therefore, the same portfolio information (including 
accrued expenses and dividends) will be provided on the public Web 
site, as well as in the IIV File and PCF File (when applicable) 
provided to ``Authorized Participants.'' \5\ The format of the public 
Web site disclosure and the IIV File and PCF File (when applicable) 
will differ because the public Web site will list all portfolio 
holdings while the IIV File and PCF File (when applicable) will 
similarly provide the portfolio holdings but in a format appropriate 
for Authorized Participants, i.e., the exact components of a Creation 
Unit.\6\ Accordingly, each investor will have access to the current 
portfolio composition of each Fund through the Trust's Web site, at 
http://www.proshares.com, and/or at the Amex's Web site at www.amex.com.

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    \5\ An Authorized Participant is either (1) a broker-dealer or 
other participant in the continuous net settlement system of the 
National Securities Clearing Corporation (``NSCC'') or (2) a DTC 
participant, and which has entered into a participant agreement with 
the Distributor.
    \6\ The composition will be used to calculate the NAV later that 
day.
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    Amex has represented in the Amex Proposal that it will obtain a 
representation from the Trust (for each Fund), prior to listing, that 
the NAV per share for each Fund will be calculated daily and made 
available to all market participants at the same time.\7\
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    \7\ If the Amex halts trading in the Shares of the Funds because 
the NAV is not being disseminated to all market participants at the 
same time, then the Exchange would do so as well.
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    Beneficial owners of Shares (``Beneficial Owners'') will receive 
all of the statements, notices, and reports required under the 1940 Act 
and other applicable laws. They will receive, for example, annual and 
semi-annual fund reports, written statements accompanying dividend 
payments, proxy statements, annual notifications detailing the tax 
status of fund distributions, and Form 1099-DIVs. Some of these 
documents will be provided to Beneficial Owners by their brokers, while 
others will be provided by the Fund through the brokers.
    The daily closing index value and the percentage change in the 
daily closing index value for each Underlying Index will be publicly 
available on various Web sites, e.g., http://www.bloomberg.com. Data regarding 

each Underlying Index is also available from the respective index 
provider to subscribers. The value of the Dow Jones U.S. Select 
Telecommunications Index will be updated intra-day on a real-time basis 
as its individual component securities change in price. This intra-day 
value of this index will be disseminated at least every 15 seconds 
throughout Amex's trading day by Amex or another organization 
authorized by the relevant Underlying Index provider.
    Because the NSCC's system for the receipt and dissemination to its 
participants of the PCF is not currently capable of processing 
information with respect to Financial Instruments, the ProShare 
Advisors LLC, the investment advisor to each Fund (the ``Advisor''), 
has developed an ``IIV File,' which it

[[Page 73958]]

will use to disclose the Funds'' holdings of Financial Instruments.\8\ 
The IIV File will contain, for the Bullish Fund (to the extent that it 
holds Financial Instruments) and Bearish Funds, information sufficient 
by itself or in connection with the PCF File and other available 
information for market participants to calculate a Fund's IIV and 
effectively arbitrage the Fund.
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    \8\ The Trust or the Advisor will post the IIV File to a 
password-protected Web site before the opening of business on each 
business day, and all Authorized Participants and the Amex will have 
access to a password and the Web site containing the IIV File. 
However, the Fund will disclose each business day to the public 
identical information, but in a format appropriate to public 
investors, at the same time the Fund discloses the IIV and PCF 
files, as applicable, to industry participants.
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Dissemination of Intra-Day Indicative Value (IIV)
    To provide updated information relating to each Fund for use by 
investors, professionals, and persons wishing to create or redeem 
Shares, Amex will disseminate through the facilities of the CTA: (1) 
Continuously throughout the Amex's trading day, the market value of a 
Share; and (2) at least every 15 seconds throughout the Amex's trading 
day, a calculation of the IIV of each Fund as calculated by the Amex 
(the ``IIV Calculator''). Comparing these two figures helps an investor 
to determine whether, and to what extent, the Shares may be selling at 
a premium or a discount to NAV.
    The IIV Calculator will calculate an IIV for each Fund in the 
manner discussed below. The IIV is designed to provide investors with a 
reference value that can be used in connection with other related 
market information. The IIV does not necessarily reflect the precise 
composition of the current portfolio held by each Fund at a particular 
point in time. Therefore, the IIV on a per Share basis disseminated 
during Amex trading hours should not be viewed as a real-time update of 
the NAV of a particular Fund, which is calculated only once a day. 
While the IIV that will be disseminated by Amex is expected to be close 
to the most recently calculated Fund NAV on a per Share basis, it is 
possible that the value of the portfolio held by a Fund may diverge 
from the IIV during any trading day. In such case, the IIV will not 
precisely reflect the value of the Fund portfolio.
Trading Halts
    The Exchange represents that it will cease trading the Shares of 
the Fund if the listing market stops trading the Shares because of a 
regulatory halt similar to a halt based on NYSE Arca Equities Rule 
7.12. UTP trading in the Shares is also governed by the trading halts 
provisions of NYSE Arca Equities Rule 7.34 relating to temporary 
interruptions in the calculation or wide dissemination of the IIV or 
the value of the underlying index.
    The Exchange may also consider all relevant factors in exercising 
its discretion to halt or suspend trading in the Shares of a Fund. 
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 securities comprising an Underlying Index and/or the Financial 
Instruments of a Fund, 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 could be halted 
pursuant to the Exchange's ``circuit breaker'' rule \9\ or by the halt 
or suspension of trading of the underlying securities.
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    \9\ See NYSE Arca Equities Rule 7.12.
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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. in accordance with 
NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading 
Sessions).\10\ The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. The minimum 
trading increment for Shares on the Exchange will be $0.01.
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    \10\ Because NSCC does not disseminate the new basket amount to 
market participants until approximately 6 p.m. to 7 p.m. E.T., an 
updated IIV cannot be calculated during the Exchange's late trading 
session (from 4:15 p.m. to 8 p.m. E.T.). Official index sponsors for 
the Underlying Indexes currently do not calculate updated index 
values during the Exchange's late trading session; however, if the 
index sponsors do so in the future, the Exchange would not trade 
this product unless such official index value is widely 
disseminated.
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Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products 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.
    The Exchange's current trading surveillance focuses on detecting 
when securities trade 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 may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members or 
affiliates of the ISG.\11\
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    \11\ A list of the current members and affiliate members of ISG 
is available at http://www.isgportal.com.

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    In addition, 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 Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
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; \12\ (3) 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; (4) how 
information regarding the IIV is disseminated; (5) 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.
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    \12\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
rule provides, with a limited exception, that prior to the execution 
of a transaction recommended to a non-institutional customer, the 
ETP Holder shall make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives, and any other information that it believes would be 
useful to make a recommendation. See Securities Exchange Act Release 
No. 54045 (June 26, 2006), 71 FR 37971 (July 3, 2006) (SR-PCX-2005-
115).
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    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the registration statements 
for the Funds.
    The Bulletin will also discuss any exemptive, no-action, and 
interpretive relief granted by the Commission from Section 11(d)(1) of 
the Act \13\ and certain rules under the Act, including Rule

[[Page 73959]]

10b-10, Rule 14e-5, Rule 10b-17, Rule 11d1-2, Rules 15c1-5 and 15c1-6, 
and Rules 101 and 102 of Regulation M under the Act.
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    \13\ 15 U.S.C. 78k(d)(1).
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    The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4 p.m. E.T. each trading day.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\14\ in general, and with 
Section 6(b)(5) of the Act,\15\ in particular, in that it is designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade, to remove impediments to a free 
and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \14\ 15 U.S.C. 78f.
    \15\ 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 would 
result in 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

    Written comments were neither solicited nor received.

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-2007-108 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2007-108. 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 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 Number SR-NYSEArca-2007-108 and should 
be submitted on or before January 18, 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.\16\ Specifically, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act,\17\ which 
requires, among other things, that the rules of a national securities 
exchange be designed to prevent fraudulent and manipulative acts and 
practices, 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 believes that this proposal should 
benefit investors by increasing competition among markets that trade 
the Shares.
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    \16\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
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    In addition, the Commission finds that the proposal is consistent 
with Section 12(f) of the Act,\18\ which permits an exchange to trade, 
pursuant to UTP, a security that is listed and registered on another 
exchange.\19\ The Commission notes that it previously approved the 
listing and trading of the Shares on Amex.\20\ The Commission also 
finds that the proposal is consistent with Rule 12f-5 under the 
Act,\21\ which provides that an exchange shall not extend UTP to a 
security unless the exchange has in effect a rule or rules providing 
for transactions in the class or type of security to which the exchange 
extends UTP. The Exchange has represented that it meets this 
requirement because it 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.
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    \18\ 15 U.S.C. 78l(f).
    \19\ Section 12(a) of the Act, 15 U.S.C. 78l(a), generally 
prohibits a broker-dealer from trading a security on a national 
securities exchange unless the security is registered on that 
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act 
excludes from this restriction trading in any security to which an 
exchange ``extends UTP.'' When an exchange extends UTP to a 
security, it allows its members to trade the security as if it were 
listed and registered on the exchange even though it is not so 
listed and registered.
    \20\ See supra note 4.
    \21\ 17 CFR 240.12f-5.
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    The Commission further believes that the proposal is consistent 
with Section 11A(a)(1)(C)(iii) of the Act,\22\ 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. Quotations for and last-sale information regarding the 
Shares are disseminated through the facilities of the CTA and the 
Consolidated Quotation System. In addition, from 9:30 a.m. to 4:15 p.m. 
E.T., Amex will disseminate via the facilities of the CTA and CQ High 
Speed lines the IIV at least every 15 seconds, the market value of a 
Share for each Fund, the most recent NAV for each Fund, the number of 
Shares outstanding for each Fund, and the estimated cash amount and 
total cash amount per Creation Unit. Amex will also make available on 
its Web site daily trading volume, the closing prices, the NAV, and the 
final dividend amounts to be paid for each Fund. The Trust's Web site 
will contain a variety of other quantitative information for the Shares 
of each Fund. Finally, each Fund's total

[[Page 73960]]

portfolio composition will be disclosed on the Web site of the Trust or 
another relevant Web site.
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    \22\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Furthermore, the Commission believes that the proposal is 
reasonably designed to preclude trading of the Shares when transparency 
is impaired. Trading in the Shares will be subject to NYSE Arca 
Equities Rule 7.34, which provides that, if the listing market halts 
trading when the IIV is not being calculated or disseminated, the 
Exchange also would halt trading. The Exchange also may halt trading in 
the Shares of a Fund when trading is not occurring in the securities 
comprising an Underlying Index and/or the Financial Instruments of a 
Fund.
    The Commission notes that, if the Shares should be delisted by the 
listing exchange, the Exchange would no longer have authority to trade 
the Shares pursuant to this order.
    In support of this proposal, the Exchange has made the following 
representations:
    1. The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules.
    2. Prior to the commencement of trading, the Exchange would inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. In 
particular, the Information Bulletin would discuss 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.
    3. The Information Bulletin also would discuss the requirement that 
an ETP Holder deliver a prospectus to an investor purchasing newly 
issued Shares prior to or concurrently with the confirmation of a 
transaction.
    This approval order is based on the Exchange's representations.
    The Commission finds good cause for approving this proposal before 
the thirtieth day after the publication of notice thereof in the 
Federal Register. As noted previously, the Commission previously found 
the listing and trading of the Shares on Amex be consistent with the 
Act. The Commission presently is not aware of any regulatory issue that 
should cause it to revisit that finding or would preclude the trading 
of the Shares on the Exchange pursuant to UTP. Therefore, accelerating 
approval of this proposal should benefit investors by creating, without 
undue delay, additional competition in the market for the Shares.

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\23\ that the proposed rule change (SR-NYSEArca-2007-108), as 
amended, be and it hereby is approved on an accelerated basis.
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    \23\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E7-25207 Filed 12-27-07; 8:45 am]

BILLING CODE 8011-01-P