Document ID: SEC-2010-0445-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-03-24T04:00Z

[Federal Register: March 24, 2010 (Volume 75, Number 56)]
[Notices]               
[Page 14237-14243]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr24mr10-140]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61721; File No. SR-NYSEArca-2010-14]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing of the United States 
Brent Oil Fund, LP

March 16, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on March 3, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III 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.
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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 proposes to list and trade pursuant to NYSE Arca 
Equities Rule 8.300 units (``Units'') of the United States Brent Oil 
Fund, LP (``USBO'' or ``Partnership''). The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and http://www.nyse.com.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Under NYSE Arca Equities Rule 8.300, the Exchange may propose to 
list and/or trade pursuant to unlisted trading privileges (``UTP'') 
Partnership Units.\3\ The Exchange proposes to list and trade the Units 
of United States Brent Oil Fund, LP pursuant to NYSE Arca Equities Rule 
8.300.\4\ The Commission has previously approved listing of similar 
limited partnerships on the American Stock Exchange LLC (``Amex'') (now 
known as NYSE Amex LLC),\5\ trading of such securities on the Exchange 
pursuant to UTP,\6\ and, subsequently, their listing on the 
Exchange.\7\ The Commission has also

[[Page 14238]]

approved listing on the Exchange of the United States Short Oil Fund, 
LP.\8\
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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). On July 11, 2007, the 
Commission approved the Exchange's proposal to trade pursuant to UTP 
Partnership Units of the United States Natural Gas Fund, LP. 
Securities Exchange Act Release No. 56042 (July 11, 2007), 72 FR 
39118 (July 17, 2007) (SR-NYSEArca-2007-45).
    \4\ USBO has filed with the Commission Amendment No. 2 to Form 
S-1, dated January 22, 2010 (File No. 333-162015) (the 
``Registration Statement''). Unless otherwise noted, descriptions 
herein relating to USBO are based on the Registration Statement.
    \5\ 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 United States Oil Fund, LP); 56831 
(November 21, 2007), 72 FR 67612 (November 29, 2007) (SR-Amex-2007-
98) (order approving Amex listing of United States 12 Month Oil 
Fund, LP and United States 12 Month Natural Gas Fund, LP); 55632 
(April 13, 2007), 72 FR 19987 (April 20, 2007) (SR-Amex-2006-112) 
(order approving Amex listing of United States Natural Gas Fund, 
LP); 57188 (January 23, 2008), 73 FR 5607 (January 30, 2008) (SR-
Amex-2007-70) (order approving Amex listing of United States Heating 
Oil Fund, LP and United States Gasoline Fund, LP).
    \6\ 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 United States 12 Month Oil Fund, LP and 
United States 12 Month Natural Gas Fund, LP); Securities Exchange 
Act Release No. 56042 (July 11, 2007), 72 FR 39118 (July 17, 2007) 
(SR-NYSEArca-2007-45) (order approving UTP trading of United States 
Natural Gas Fund, LP); Securities Exchange Act Release No. 57294 
(February 8, 2008), 73 FR 8917 (February 15, 2008) (SR-NYSEArca-
2007-78) (order approving UTP trading of United States Heating Oil 
Fund, LP and United States Gasoline Fund, LP).
    \7\ See Securities Exchange Act Release No. 58965 (November 17, 
2008), 73 FR 71078 (November 24, 2008) (order approving listing on 
the Exchange of United States Oil Fund, LP, United States 12 Month 
Oil Fund, LP, United States Heating Oil Fund, LP, United States 
Gasoline Fund, LP, United States 12 Month Natural Gas Fund, LP and 
United States Natural Gas Fund, LP).
    \8\ See Securities Exchange Act Release No. 59173 (December 29, 
2008), 74 FR 490 (January 6, 2009) (SR-NYSEArca-2008-125) (order 
approving listing and trading of United States Short Oil Fund, LP).
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    The Exchange proposes to list and trade pursuant to NYSE Arca 
Equities Rule 8.300 Units of USBO. According to the Registration 
Statement, the net assets of USBO will consist primarily of investments 
in futures contracts for crude oil, heating oil, gasoline, natural gas 
and other petroleum-based fuels that are traded on the ICE Futures 
Exchange, New York Mercantile Exchange (the ``NYMEX''), or other U.S. 
and foreign exchanges (collectively, ``Futures Contracts''). USBO may 
also invest in other crude oil-related investments such as cash-settled 
options on Futures Contracts, forward contracts for crude oil, cleared 
swap contracts and over-the-counter transactions that are based on the 
price of crude oil and other petroleum-based fuels, Futures Contracts 
and indices based on the foregoing (``Other Crude Oil-Related 
Investments'' and, together with Futures Contracts, ``Crude Oil 
Interests'').
    USBO will invest in Crude Oil Interests to the fullest extent 
possible without being leveraged or unable to satisfy its current or 
potential margin or collateral obligations with respect to its 
investments in Futures Contracts and Other Crude Oil-Related 
Investments. The primary focus of the General Partner will be investing 
in Futures Contracts and the management of investments in short-term 
obligations of the United States of two years or less (``Treasuries''), 
cash and/or cash equivalents for margining purposes and as collateral.
    USBO will comply with the requirements of Rule 10A-3 \9\ under the 
Securities Exchange Act of 1934 (``Act'') \10\ as it applies to limited 
partnerships. In addition, USBO will comply with the requirements of 
NYSE Arca Equities Rule 8.300. A minimum of 100,000 Units will be 
outstanding at the commencement of trading on the Exchange.
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    \9\ 17 CFR 240.10A-3.
    \10\ 15 U.S.C. 78a.
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Overview of USBO \11\
    United States Brent Oil Fund, LP, a Delaware limited partnership, 
is a commodity pool that will issue Units. It is managed and controlled 
by its general partner, United States Commodity Funds LLC (``General 
Partner''). The General Partner is a single member limited liability 
company formed in Delaware on May 10, 2005, that is registered as a 
commodity pool operator (``CPO'') with the Commodity Futures Trading 
Commission (``CFTC'') and is a member of the National Futures 
Association (``NFA''). Prior to June 13, 2008, the General Partner's 
name was Victoria Bay Asset Management, LLC. USBO will pay the General 
Partner a management fee of 0.75% of NAV on its average net assets.
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    \11\ Terms relating to USBO referred to, but not defined, herein 
are defined in the Registration Statement.
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    The General Partner is not affiliated with a broker-dealer.
USBO Investment Objective and Policies
    According to the Registration Statement, the investment objective 
of USBO is intended to have the daily changes in percentage terms of 
its Units' net asset value (``NAV'') reflect the daily changes in 
percentage terms of the spot price of Brent crude oil as measured by 
the changes in the price of the futures contract on Brent crude oil as 
traded on ICE Futures Exchange that is the near month contract to 
expire, except when the near month contract is within two weeks of 
expiration, in which case the futures contract will be the next month 
contract to expire (the ``Benchmark Futures Contract''), less USBO's 
expenses. It is not the intent of USBO to be operated in a fashion such 
that its NAV will equal, in dollar terms, the spot price of crude oil 
or any particular futures contract based on crude oil. USBO may invest 
in Crude Oil Interests other than the Benchmark Futures Contract, 
including to comply with accountability levels and position limits.
    As a specific benchmark, the General Partner will endeavor to place 
USBO's trades in Futures Contracts and Other Crude Oil-Related-
Investments and otherwise manage USBO's investments so that ``A'' will 
be within plus/minus 10 percent of ``B'', where:
     A is the average daily change in USBO's NAV for any period 
of 30 successive valuation days, i.e., any NYSE Arca trading day as of 
which USBO calculates its NAV, and
     B is the average daily change in the price of the 
Benchmark Futures Contract over the same period.
    An investment in the Units is intended to allow both retail and 
institutional investors to easily gain exposure to the crude oil market 
in a cost-effective manner. The Units are also expected to provide 
additional means for diversifying an investor's investments or hedging 
exposure to changes in crude oil prices.
    The Benchmark Futures Contract will be changed from the near month 
contract to the next month contract over a four-day period. Each month, 
the Benchmark Futures Contract will change starting at the end of the 
day on the date two weeks prior to expiration of the near month 
contract for that month. During the first three days of the period, the 
applicable value of the Benchmark Futures Contract will be based on a 
combination of the near month contract and the next month contract as 
follows: (1) Day 1 will consist of 75% of the then near month 
contract's total return for the day, plus 25% of the total return for 
the day of the next month contract, (2) day 2 will consist of 50% of 
the then near month contract's total return for the day, plus 50% of 
the total return for the day of the next month contract, and (3) day 3 
will consist of 25% of the then near month contract's total return for 
the day, plus 75% of the total return for the day of the next month 
contract. On day 4, the Benchmark Futures Contract will be the next 
month contract to expire at that time and that contract will remain the 
Benchmark Futures Contract until the beginning of the following month's 
change in the Benchmark Futures Contract over a four-day period.
    On each day during the four-day period, the General Partner 
anticipates it will ``roll'' USBO's positions in oil investments by 
closing, or selling, a percentage of USBO's positions in Crude Oil 
Interests and reinvesting the proceeds from closing those positions in 
new Crude Oil Interests that reflect the change in the Benchmark 
Futures Contract. The anticipated monthly dates on which the Benchmark 
Futures Contract will be changed and the Crude Oil Interests will be 
``rolled'' in 2010 and subsequent years will be posted on USBO's Web 
site at http://www.unitedstatesbrentoilfund.com, and are subject to 
change without notice.
    According to the Registration Statement, the General Partner will 
employ a ``neutral'' investment strategy intended to track the changes 
in the price of the Benchmark Futures Contract regardless of whether 
the price goes up or goes down. USBO's ``neutral'' investment strategy 
is designed to permit investors generally to purchase and sell USBO's 
Units for the purpose of investing indirectly in crude oil in a cost-
effective manner, and/or to permit participants in the crude oil or 
other industries to hedge the risk of losses in their crude oil-related 
transactions. This and certain risk factors discussed in the 
Registration Statement may cause a lack of correlation between the 
changes in USBO's NAV and the changes in the price of Brent crude oil. 
For example, USBO (i) may not be able to sell/buy the

[[Page 14239]]

exact amount of positions in Futures Contracts and Other Crude Oil-
Related Investments to have a perfect correlation with NAV; (ii) may 
not always be able to buy and sell Futures Contracts or Other Crude 
Oil-Related Investments at the market price; (iii) may not experience a 
perfect correlation between the Benchmark Futures Contract and the 
investments in Futures Contracts, Other Crude Oil-Related Investments 
and U.S. Treasuries, cash and cash equivalents; and (iv) will be 
required to pay brokerage fees and the management fee, which will have 
an effect on the correlation with NAV. Additional factors that may 
impact correlation with NAV are discussed in the Registration 
Statement.
    USBO will create and redeem Units only in blocks of 100,000 Units 
called Creation Baskets and Redemption Baskets, respectively. Only 
Authorized Purchasers may purchase or redeem Creation Baskets or 
Redemption Baskets.
    Clearing Broker. UBS Securities will act as a futures clearing 
broker for USBO. UBS Securities is registered in the U.S. with FINRA as 
a Broker-Dealer and with the CFTC as a Futures Commission Merchant. The 
clearing arrangements between the clearing broker and USBO generally 
are terminable by the clearing broker once the clearing broker has 
given USBO notice. Upon termination, the General Partner may be 
required to renegotiate or make other arrangements for obtaining 
similar services if USBO intends to continue trading in Futures 
Contracts or Other Crude Oil-Related Investments at its level of 
capacity at such time.
    Administrator and Custodian. Brown Brothers Harriman & Co. is 
anticipated to be the registrar and transfer agent for the Units. Brown 
Brothers Harriman & Co. is also anticipated to be the Custodian for 
USBO. In this capacity, Brown Brothers Harriman & Co. will hold USBO's 
Treasuries, cash and cash equivalents pursuant to a custodial 
agreement. In addition, Brown Brothers Harriman & Co. will perform 
certain administrative and accounting services for USBO and will 
prepare certain SEC and CFTC reports on behalf of USBO.
    Marketing Agent. USBO also plans to employ ALPS Distributors, Inc. 
as the marketing agent. USBO, through its marketing agent, will 
continuously offer Creation Baskets to and redeem Redemption Baskets 
from Authorized Purchasers and will receive and process creation and 
redemption orders from Authorized Purchasers.
Investment Strategy of USBO
    According to the Registration Statement, USBO anticipates that the 
use of Futures Contracts, together with Other Crude Oil-Related 
Investments, as necessary, will produce price and total return results 
that closely track the investment goals of USBO.
    USBO may employ spreads or straddles in its trading to mitigate the 
differences in its investment portfolio and its goal of tracking 
changes in the price of the Benchmark Futures Contract. USBO would use 
a spread when it chooses to take simultaneous long and short positions 
in futures written on the same underlying asset, but with different 
delivery months. The effect of holding such combined positions is to 
adjust the sensitivity of USBO to changes in the price relationship 
between futures contracts that will expire sooner and those that will 
expire later. USBO would use such a spread if the General Partner felt 
that taking such long and short positions, when combined with the rest 
of its holdings, would more closely track the investment goals of USBO, 
or if the General Partner felt it would lead to an overall lower cost 
of trading to achieve a given level of economic exposure to movements 
in Brent crude oil prices.
    USBO will invest only in Futures Contracts and Other Crude Oil-
Related Investments that are traded in sufficient volume to permit, in 
the opinion of the General Partner, ease of taking and liquidating 
positions in these financial interests. While Brent crude oil Futures 
Contracts traded on the ICE Futures Exchange can be physically settled, 
USBO does not intend to take or make physical delivery. However, USBO 
may from time to time trade in Other Crude Oil-Related Investments, 
including contracts based on the spot price of crude oil.
    While USBO expects its ratio of margin and collateral posted to 
total assets to generally range from 10% to 20%, the General Partner 
endeavors to have the value of USBO's Treasuries, cash and cash 
equivalents, whether held by USBO or posted as margin or collateral, at 
all times approximate the aggregate market value of USBO's obligations 
under its Futures Contracts and Other Crude Oil-Related Investments. 
Borrowings will not be used by USBO, unless USBO is required to borrow 
money in the event of physical delivery, USBO trades in cash 
commodities, or for short-term needs created by unexpected redemptions. 
USBO does not plan to establish credit lines.
    According to the Registration Statement, as part of its Other Crude 
Oil-Related Investments, USBO may purchase options on crude oil Futures 
Contracts on principal futures exchanges in pursuing its investment 
objective. USBO may enter into cleared swaps and non-exchange-traded 
derivatives transactions (also known as over-the-counter contracts), 
which are usually entered into between two parties. Each party to such 
contract bears the credit risk that the other party may not be able to 
perform its obligations under its contract.
    Some crude oil-based derivatives transactions contain fairly 
generic terms and conditions and are available from a wide range of 
participants. Other crude oil-based derivatives have highly customized 
terms and conditions and are not as widely available. Many of these 
over-the-counter contracts are cash-settled forwards for the future 
delivery of crude oil- or petroleum-based fuels that have terms similar 
to the Futures Contracts. Others take the form of ``swaps'' in which 
the two parties exchange cash flows based on pre-determined formulas 
tied to the crude oil spot price, forward crude oil price, the 
Benchmark Futures Contract price, or other crude oil futures contract 
price. Certain of these swaps may be cleared through clearinghouses and 
have margin and other requirements akin to those found in futures 
contracts. USBO may also enter into over-the-counter derivative 
contracts such as swaps or cash-settled forwards for the future 
delivery of crude oil- or petroleum-based fuels that are not cleared. 
For example, USBO may enter into over-the-counter derivative contracts 
whose value will be tied to changes in the difference between the crude 
oil spot price, the Benchmark Futures Contract price, or some other 
futures contract price traded on New York Mercantile Exchange or ICE 
Futures Exchange and the price of other Futures Contracts that may be 
invested in by USBO.
    According to the Registration Statement, to protect itself from the 
credit risk that arises in connection with such over-the-counter Other 
Crude Oil-Related Investments, USBO will enter into agreements with 
each counterparty that provide for the netting of its overall exposure 
to its counterparty, such as the agreements published by the 
International Swaps and Derivatives Association, Inc. USBO will also 
require that the counterparty be highly rated and/or provide collateral 
or other credit support to address USBO's exposure to the counterparty. 
The creditworthiness of each potential counterparty will be

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assessed by the General Partner, as described in the Registration 
Statement.
USBO's Units
    According to the Registration Statement, the offering of USBO's 
Units is a best efforts offering. USBO will continuously offer Creation 
Baskets consisting of 100,000 Units through the Marketing Agent, to 
Authorized Purchasers. It is expected that on the effective date, the 
initial Authorized Purchaser will, subject to conditions, purchase one 
or more initial Creation Baskets of 100,000 Units at a price per unit 
equal to $50. It is expected that the proceeds from that purchase will 
be invested on that day and that USBO's initial per Unit net asset 
value will be established as of 4 p.m. Eastern time (``E.T.'') that 
day. Authorized Purchasers will pay a $1,000 fee for each order to 
create one or more Creation Baskets or redeem one or more Redemption 
Baskets. The Marketing Agent will receive, for its services as 
marketing agent to USBO, a marketing fee of 0.06% on assets up to the 
first $3 billion and 0.04% on assets in excess of $3 billion, provided, 
however, that in no event may the aggregate compensation paid to the 
Marketing Agent and any affiliate of the General Partner for 
distribution-related services in connection with the offering of Units 
exceed ten percent (10%) of the gross proceeds of the offering.
    The total deposit required to create each basket (``Creation Basket 
Deposit'') will be an amount of Treasuries and/or cash that is in the 
same proportion to the total assets of USBO (net of estimated accrued 
but unpaid fees, expenses and other liabilities) on the date the order 
to purchase is accepted as the number of Units to be created under the 
purchase order is in proportion to the total number of Units 
outstanding on the date the order is received. The General Partner 
determines, directly in its sole discretion or in consultation with the 
Administrator, the requirements for Treasuries and the amount of cash, 
including the maximum permitted remaining maturity of a Treasury and 
proportions of Treasuries and cash that may be included in deposits to 
create baskets. The Marketing Agent will publish such requirements at 
the beginning of each business day. The amount of cash deposit required 
will be the difference between the aggregate market value of the 
Treasuries required to be included in a Creation Basket Deposit as of 4 
p.m. E.T. on the date the order to purchase is properly received and 
the total required deposit.
Impact of Accountability Levels and Position Limits
    According to the Registration Statement, the Benchmark Futures 
Contract is currently traded on the ICE Futures Exchange without 
specific accountability levels or position limits. However, the ICE 
Futures Exchange's daily position management regime requires that any 
position greater than 500 contracts in the nearest two months to expire 
must be reported to the ICE Futures Exchange on a daily basis. 
According to the Registration Statement, the ICE Futures Exchange has 
powers to prevent the development of excessive positions or unwarranted 
speculation or any other undesirable situation and may take any steps 
necessary to resolve such situations including the ability to mandate 
limitations on the size of such positions or to reduce positions where 
appropriate.
    If USBO is required to limit or reduce the size of its positions in 
Brent crude oil contracts on the ICE Futures Exchange, it may then, if 
permitted under applicable regulatory requirements, purchase Futures 
Contracts on the NYMEX or other exchanges that trade listed crude oil 
futures. According to the Registration Statement, the Futures Contracts 
available on the NYMEX are comparable to the contracts on the ICE 
Futures Exchange, but they may have different underlying commodities, 
sizes, deliveries, and prices. The Futures Contracts available on the 
NYMEX are subject to accountability levels and position limits. In 
addition, USBO may invest in Other Crude Oil-Related Investments, as 
described above.
Calculation of NAV
    USBO's NAV is calculated by (1) taking the current market value of 
its total assets, and (2) subtracting any liabilities. Brown Brothers 
Harriman & Co., the Administrator, will calculate the NAV of USBO once 
each New York Stock Exchange (``NYSE'') trading day. The NAV for a 
particular trading day will be released after 4 p.m. E.T. Trading 
during the Core Trading Session on the NYSE Arca typically closes at 4 
p.m. E.T. The Administrator will use the ICE Futures Exchange 
settlement price (a weighted average price of trades during a three 
minute settlement period from 2:27 p.m., E.T.) for the contracts traded 
on the ICE Futures Exchange, but will calculate or determine the value 
of all other USBO investments, as of the earlier of the close of the 
NYSE Arca or 4 p.m. E.T. in accordance with the Administrative Agency 
Agreement among Brown Brothers Harriman & Co., USBO and the General 
Partner.
    In addition, Futures Contracts, Other Crude Oil-Related Investments 
and Treasuries held by USBO will be valued by the Administrator, using 
rates and points received from client-approved third party vendors 
(such as Reuters and WM Company) and advisor quotes. These investments 
will not be included in the Indicative Partnership Value (``IPV'', as 
discussed below). The IPV is based on the prior day's NAV and moves up 
and down solely according to changes in the Benchmark Futures Contracts 
for Brent crude oil traded on the ICE Futures Exchange.
    As discussed above, USBO will create and redeem Units only in 
blocks of 100,000 Units called Creation Baskets and Redemption Baskets, 
respectively. The price of each Unit offered in Creation Baskets on any 
day will be the total NAV of USBO calculated as of the close of the 
NYSE on that day divided by the number of issued and outstanding Units.
    The creation and redemption of baskets will only be made in 
exchange for delivery to USBO or the distribution by USBO of the amount 
of Treasuries and any cash represented by the baskets being created or 
redeemed, the amount of which will be based on the combined NAV of the 
number of Units included in the baskets being created or redeemed as of 
4 p.m. E.T. on the day the order to create or redeem baskets is 
properly accepted. Additional procedures relating to the creation and 
redemption of Units are described in the Registration Statement.
Dissemination and Availability of Information
    Price of Futures Contracts. The applicable Futures Contracts are 
the underlying benchmark investment, commodity or asset, as applicable, 
for purposes of NYSE Arca Equities Rule 8.300(d)(2)(ii).\12\
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    \12\ NYSE Arca Equities Rule 8.300(d)(2)(ii) provides that NYSE 
Arca Equities will consider removing from listing Partnership Units 
if the value of the underlying benchmark investment, commodity or 
asset is no longer calculated or available on at a least a 15-second 
delayed basis or NYSE Arca Equities stops providing a hyperlink on 
its Web site to any such investment, commodity or asset value.
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    The ICE Futures Exchange disseminates price information on the 
Futures Contracts traded on the ICE Futures Exchange on a real-time 
basis during normal trading hours on the ICE Futures Exchange from 8 
p.m. E.T. to 6 p.m. E.T. With respect to any Futures Contracts that are 
traded on NYMEX, NYMEX disseminates price information

[[Page 14241]]

on a real-time basis during normal trading hours on NYMEX from 10 a.m. 
to 2:30 p.m., E.T.
    Portfolio Disclosure. USBO's total portfolio composition will be 
disclosed each business day that the NYSE Arca is open for trading on 
USBO's Web site. The Web site disclosure of portfolio holdings will be 
made daily and will include, as applicable, the name and value of each 
Crude Oil Interest, the specific types of Other Crude Oil-Related 
Investments, Treasuries, and the amount of cash and cash equivalents 
held in USBO's portfolio. USBO's Web site is publicly accessible at no 
charge.
    Indicative Partnership Value. In order to provide updated 
information relating to USBO for use by investors and market 
professionals, an updated IPV, as described below, will be calculated 
and disseminated by one or more major market data vendors during the 
NYSE Arca Core Trading Session. The IPV is based on the prior day's NAV 
and moves up and down solely according to changes in the Benchmark 
Futures Contracts for Brent crude oil traded on the ICE Futures 
Exchange.\13\ The prices reported for the active Futures Contract month 
will be adjusted based on the prior day's spread differential between 
settlement values for that contract and the spot month contract. In the 
event that the spot month contract is also the active contract, the 
last sale price for the active contract will not be adjusted. The IPV 
disseminated during the Core Trading Session should not be viewed as an 
actual real time update of the NAV, because NAV is calculated only once 
at the end of each trading day.
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    \13\ See e-mail from Tim Malinowski, Senior Director, NYSE 
Euronext LLC, to Edward
    Cho, Special Counsel, Commission, dated March 15, 2010.
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    The IPV will be disseminated on a per Unit basis every 15 seconds 
during the NYSE Arca Core Trading Session from 9:30 a.m. E.T. to 4 p.m. 
E.T. The normal trading hours of ICE Futures Exchange are 8 p.m. E.T. 
to 6 p.m. E.T.\14\
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    \14\ Id.
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    Dissemination of the IPV provides additional information that is 
not otherwise available to the public and is useful to investors and 
market professionals in connection with the trading of USBO Units on 
the NYSE Arca. Investors and market professionals will be able 
throughout the trading day to compare the market price of USBO and the 
IPV. If the market price of USBO Units diverges significantly from the 
IPV, market professionals will have an incentive to execute arbitrage 
trades. For example, if USBO appears to be trading at a discount 
compared to the IPV, a market professional could buy USBO Units on the 
NYSE Arca and sell short futures contracts. Such arbitrage trades can 
tighten the tracking between the market price of USBO and the IPV and 
thus can be beneficial to all market participants.
    In addition, quotation and last-sale information regarding the 
Units will be disseminated through the facilities of the Consolidated 
Tape Association.
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. The Units will trade on the 
NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. The Exchange has 
appropriate rules to facilitate transactions in the Units during all 
trading sessions. The minimum trading increment for the 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 Partnership 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 
Partnership 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 Partnership 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 
Partnership Units). In addition, NYSE Arca Equities Rule 8.300(e)(1) 
provides that an ETP Holder acting as a registered Market Maker in the 
Units is obligated to comply with NYSE Arca Equities Rule 7.26 
pertaining to limitations on dealings when such Market Maker, or 
affiliate of such Market Maker, engages in certain business activities, 
as described in such rules.
    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 the Units could be halted pursuant to the Exchange's 
``circuit breaker'' rule.\15\ Under 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, 
is not disseminated to all market participants at the same time, the 
Exchange will halt trading in the affected Units.
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    \15\ See NYSE Arca Equities Rule 7.12.
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    If the value of the IPV or the underlying benchmark investment, 
commodity or asset applicable to the Units is not being disseminated as 
required, the Exchange may halt trading in the Units during the day on 
which the interruption first occurs. If such interruption persists past 
the trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption.
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 Futures Contracts, the Exchange can obtain market surveillance 
information, including customer identity information, with

[[Page 14242]]

respect to transactions occurring on ICE Futures Exchange pursuant to 
its comprehensive information sharing agreements with that exchange. 
NYMEX is a member 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.\16\
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    \16\ The Exchange notes that not all of the Crude Oil Interests 
held by the Fund may trade on exchanges that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
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    In addition, to the extent that the Partnership invests in Futures 
Contracts traded on other exchanges, not more than 10% of the weight of 
the Partnership assets in the aggregate shall consist of Crude Oil 
Interests 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 (for Futures Contracts traded on ICE Futures), or, in 
addition, part of the Core Trading Session (for Futures Contracts 
traded on NYMEX) when an updated IPV 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 IPV 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 the Partnership is 
subject to various fees and expenses described in the 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 crude oil, heating oil, gasoline, natural gas or other petroleum-
based fuels, and that the CFTC has regulatory jurisdiction over the 
trading of futures contracts traded on U.S. exchanges and related 
options.
    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 p.m. E.T. each trading day.
2. Statutory Basis
    The proposed rule change is consistent with Section 6(b) of the 
Act,\17\ in general, and furthers the objectives of Section 
6(b)(5),\18\ 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 allow the listing of the Units on the 
Exchange, which the Exchange believes will benefit both 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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    \17\ 15 U.S.C. 78f(b).
    \18\ 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. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

The Exchange has requested accelerated approval of this proposed rule 
change prior to the 30th day after the date of publication of notice in 
the Federal Register. The Commission is considering granting 
accelerated approval of the proposed rule change at the end of a 15-day 
comment period.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File No. SR-NYSEArca-2010-14 on the subject line.

Paper Comments

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

All submissions should refer to File No. SR-NYSEArca-2010-14. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/
sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official

[[Page 14243]]

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 NYSE Arca. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File No. SR-NYSEArca-2010-14 and should be submitted on or before April 
8, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-6507 Filed 3-23-10; 8:45 am]
BILLING CODE 8011-01-P