Document ID: SEC-2010-1571-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-10-15T04:00Z

[Federal Register: October 15, 2010 (Volume 75, Number 199)]
[Notices]               
[Page 63530-63532]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15oc10-151]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63067; File No. SR-NYSEArca-2010-78]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Relating to Listing and Trading Shares 
of Jefferies Commodity Real Return ETF

October 8, 2010.

I. Introduction

    On August 17, 2010, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of Jefferies Commodity Real Return 
ETF (the ``Fund''). The proposed rule change was published for comment 
in the

[[Page 63531]]

Federal Register on September 3, 2010.\3\ The Commission received no 
comments on the proposal. This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62768 (August 26, 
2010), 75 FR 54199 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares pursuant to NYSE 
Arca Equities Rule 8.200, Commentary .02, which governs the listing and 
trading of Trust Issuer Receipts (``TIRs'') that invest in ``Financial 
Instruments.'' The Exchange represents that the Shares satisfy the 
requirements of NYSE Arca Equities Rule 8.200, Commentary .02, and 
thereby qualify for listing on the Exchange.
    As described in greater detail in the Notice, the Fund will invest 
substantially all of its assets in exchange-traded futures in 
commodities that comprise the Thomson Reuters/Jefferies CRB 3 Month 
Forward Index (``Index''), or in other derivatives. The Fund 
establishes long positions in futures contracts on the nineteen 
physical commodities that comprise the Index (``Index Commodities'') 
with the goal of tracking the changes, either positive or negative, to 
the Index over time. The Managing Owner of the Fund adjusts the Fund's 
portfolio from time to time to conform to periodic changes in the 
identity and/or relative weighting of the Index Commodities.
    The Exchange deems the Shares to be equity securities, which 
subjects trading in the Shares to the Exchange's existing rules 
governing the trading of equity securities, and has represented that 
trading in the Shares on the Exchange will occur in accordance with 
NYSE Arca Equities Rule 8.200(e). The Exchange has also represented 
that it has appropriate rules to facilitate transactions in the Shares 
during all trading sessions.
    Additional details regarding the Shares and the Fund including, 
among other things, the organization and structure of the Fund, the 
dissemination and availability of information about the Fund and the 
Index, trading halts, applicable trading rules, surveillance, and the 
Information Bulletin can be found in the Notice.\4\
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    \4\ See supra note 3.
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III. Discussion and Commission's Findings

    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.\5\ In particular, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act,\6\ which requires, among other things, that the Exchange's rules 
be designed to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest.
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    \5\ In approving this proposed rule change, the Commission notes 
that it has considered the proposed rule's impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
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    The Commission notes that it has previously permitted the listing 
and trading of TIRs based on commodities indexes.\7\ In addition, the 
Shares will be listed and traded pursuant to Commentary .02 to NYSE 
Arca Equities Rule 8.200, and the Exchange represents that the Shares 
will conform to the existing initial and continued listing criteria 
under this rule.
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    \7\ See Securities Exchange Act Release No. 58457 (September 3, 
2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-2008-91) 
(Listing of fourteen funds of the Currency and Commodity Trust 
pursuant to Rule 8.200, Commentary .02.)
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    In addition, the Commission finds that the proposal to list and 
trade the Shares on the Exchange is consistent with Section 
11A(a)(1)(C)(iii) of the Act,\8\ 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.
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    \8\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Quotation and last-sale information for the Shares will be 
disseminated through the facilities of the Consolidated Tape 
Association. The Intra-day Indicative Value (``IIV'') will be published 
by the Fund's Index Calculation Agent every 15 seconds through one or 
more major market data vendors and on the Fund's Managing Owner's Web 
site. The Net Asset Value (``NAV'') of the Fund will be published by 
the Managing Owner of the Fund, and will be disseminated to all market 
participants at the same time. The Exchange has also noted that 
information regarding the closing prices and settlement prices of 
futures on the Index Commodities are readily available from Web sites 
of the applicable futures exchanges, automated quotation systems, 
published or other public sources, or online information services such 
as Bloomberg or Reuters. The relevant futures exchanges also provide 
delayed futures information on current and past trading sessions and 
market news free of charge on their respective Web sites. Moreover, the 
Fund's Web site (http://www.jamfunds.com/jcis) will also disseminate 
the Fund holdings on a daily basis.
    The Exchange shall make available on its Web site daily trading 
volume of the Shares, closing prices of the Shares, and the 
corresponding NAV. In addition, the Fund's website will provide the 
following information: (1) The current net asset value per share daily 
and the prior business day's NAV and the reported closing price; (2) 
the mid-point of the bid-ask price in relation to the NAV as of the 
time the NAV is calculated; (3) a calculation of the premium or 
discount of such price against such NAV; (4) data in chart format 
displaying the frequency distribution of discounts and premiums of the 
Bid/Ask Price against the NAV, within appropriate ranges, for each of 
the four previous calendar quarters; (5) the Fund's prospectus; and (6) 
other applicable quantitative information.
    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Exchange has represented that the NAV for the Fund will be 
disseminated to all market participants at the same time. If the 
Exchange becomes aware that the NAV with respect to the Shares is not 
being disseminated to all market participants at the same time, it will 
halt trading in the Shares until such time as the NAV is available to 
all market participants. Furthermore, the Exchange has represented that 
it may halt trading during the day in which the interruption to the 
dissemination of the IIV, the Index or the value of the underlying 
futures occurs.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading on the Exchange in the Shares may be 
halted because of market conditions or for reasons that, in the view of 
the Exchange, make trading in the Shares inadvisable. These may 
include: (1) The extent to which trading is not occurring in the 
underlying futures contracts; or (2) whether other unusual conditions 
or circumstances detrimental to the maintenance of a fair

[[Page 63532]]

and orderly market are present. In addition, trading in Shares will be 
subject to trading halts caused by extraordinary market volatility 
pursuant to the Exchange's ``circuit breaker'' rule or by the halt or 
suspension of trading in the underlying futures contracts.
    In addition, NYSE Arca Equities Rule 8.200(e) sets forth certain 
requirements for ETP Holders acting as registered Market Makers in the 
Shares to facilitate surveillance.
    In support of this proposal, the Exchange has made representations, 
including:
    (1) The Fund will meet the initial and continued listing criteria 
under NYSE Arca Equities Rule 8.200, Commentary .02.
    (2) 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 and applicable Federal 
securities laws.
    (3) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Opening and Late 
Trading Sessions when an updated IIV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares in Baskets (including noting that Shares are not individually 
redeemable); (c) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (d) how 
information regarding the IIV is disseminated; (e) the requirement that 
ETP Holders deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
and (f) trading information.
    This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \9\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \9\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-NYSEArca-2010-78), be, and 
it hereby is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25949 Filed 10-14-10; 8:45 am]
BILLING CODE 8011-01-P