Document ID: SEC-2012-0559-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-04-09T04:00Z

[Federal Register Volume 77, Number 68 (Monday, April 9, 2012)]
[Notices]
[Pages 21114-21120]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8425]

[[Page 21114]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66717; File No. SR-NYSEArca-2012-10]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Relating to Listing and Trading of 
Shares of the BNP Paribas S&P Dynamic Roll Global Commodities Fund 
Under NYSE Arca Equities Rule 8.200

April 3, 2012.

I. Introduction

    On January 30, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares of the BNP Paribas S&P 
Dynamic Roll Global Commodities Fund under Commentary .02 to NYSE Arca 
Equities Rule 8.200. The proposed rule change was published for comment 
in the Federal Register on February 21, 2012.\3\ The Commission 
received no comments on the proposal. This order grants approval of the 
proposed rule change.
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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. 66390 (February 14, 
2012), 77 FR 10005 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade shares (``Shares'') of the 
BNP Paribas S&P Dynamic Roll Global Commodities Fund (``Fund'') under 
Commentary .02 to NYSE Arca Equities Rule 8.200, which permits the 
trading of Trust Issued Receipts (``TIRs'') either by listing or 
pursuant to unlisted trading privileges on the Exchange.\4\ The Fund is 
a series of the BNP Paribas Exchange Traded Trust (``Trust''), a 
Delaware statutory trust.\5\ Wilmington Trust Company (``Trustee''), a 
Delaware trust company, is the sole trustee of the Trust. BNP Paribas 
Quantitative Strategies, LLC (``Managing Owner''), a Delaware limited 
liability company, serves as Managing Owner of the Trust and the Fund. 
The Managing Owner is a wholly-owned subsidiary of Paribas North 
America, Inc., which is a wholly-owned, indirect subsidiary of BNP 
Paribas, which is affiliated with a broker-dealer.\6\ The Managing 
Owner is registered as a commodity pool operator with the Commodity 
Futures Trading Commission (``CFTC'') and is a member of the National 
Futures Association. The Bank of New York Mellon is the administrator 
(``Administrator'') of the Fund, as well as the custodian 
(``Custodian'') and transfer agent (``Transfer Agent''). Standard and 
Poor's is the ``Index Sponsor.'' \7\
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    \4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
TIRs that invest in ``Financial Instruments.'' The term ``Financial 
Instruments,'' as defined in Commentary .02(b)(4) to NYSE Arca 
Equities Rule 8.200, means any combination of investments, including 
cash; securities; options on securities and indices; futures 
contracts; options on futures contracts; forward contracts; equity 
caps, collars and floors; and swap agreements.
    \5\ The Trust has filed pre-effective amendments to its 
registration statement (``Registration Statement'') on Form S-1 
originally filed on November 3, 2010 (File No. 333-170314) relating 
to the Fund.
    \6\ The Managing Owner is affiliated with a broker-dealer and 
has implemented procedures designed to prevent the use and 
dissemination of material, non-public information regarding the 
Fund's portfolio.
    \7\ Standard & Poor's is not a broker-dealer, is not affiliated 
with a broker-dealer, and has implemented procedures designed to 
prevent the use and dissemination of material, non-public 
information regarding the Index (as defined below).
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Overview of the Fund

    The investment objective of the Fund is to track changes, whether 
positive or negative, in the level of the S&P GSCI[supreg] Dynamic Roll 
Excess Return Index (``Index'') over time. The Fund does not intend to 
outperform the Index. The Managing Owner will seek to cause changes in 
the net asset value (``NAV'') per Share of the Fund to track changes in 
the level of the Index during periods in which the Index is rising, 
flat, or declining.
    The Fund seeks to achieve its investment objective by investing in 
exchange-traded futures (``Designated Contracts'') on the commodities 
(as set forth in Table 1 below) comprising the Index (``Index 
Commodities''), with a view to tracking the Index over time.\8\ In 
certain circumstances, and to a limited extent, the Fund may also 
invest in swap agreements based on an Index Commodity that are cleared 
through the relevant Futures Exchanges or their affiliated provider of 
clearing services (``Cleared-Swaps'') or in futures contracts 
referencing particular commodities other than the Index Commodities 
(i.e., futures contracts traded on exchanges other than the Futures 
Exchanges indicated in Table 1, including foreign exchanges) 
(``Substitute Contracts''), or in Alternative Financial Instruments \9\ 
referencing the particular Index Commodity in furtherance of its 
investment objective if, in the commercially reasonable judgment of the 
Managing Owner, such instruments tend to exhibit trading prices or 
returns that generally correlate with the Index Commodities. 
Alternative Financial Instruments, if any, will be forward agreements, 
exchange-traded cash settled options, swaps other than Cleared Swaps, 
and other over-the-counter transactions that will serve as proxies to 
one or more Index Commodities.
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    \8\ The Designated Contracts are traded on the Chicago 
Mercantile Exchange, Inc. (``CME''), COMEX (``CMX,'' a division of 
CME), Chicago Board of Trade (``CBT,'' a division of CME), NYMEX 
(``NYM,'' a division of CME), ICE Futures US (``ICE-US''), ICE 
Futures Europe (``ICE-UK''), Kansas City Board of Trade (``KBT''), 
and London Metal Exchange (``LME'') (collectively, ``Futures 
Exchanges'').
    \9\ Investing in Alternative Financial Instruments exposes the 
Fund to counterparty risk, or the risk that an Alternative Financial 
Instrument counterparty will default on its obligations under the 
Alternative Financial Instrument. The Managing Owner may select 
Alternative Financial Instrument counterparties giving due 
consideration to such factors as it deems appropriate, including, 
without limitation, creditworthiness, familiarity with the Index, 
and price. Under no circumstances will the Fund enter into 
Alternative Financial Instruments with any counterparty whose credit 
rating is lower than investment-grade as determined by a nationally 
recognized statistical rating organization (e.g., BBB- and above as 
determined by Standard & Poor's, Baa3 and above as determined by 
Moody's) at the time the Alternative Financial Instrument is entered 
into. The Fund anticipates that the counterparties to these 
Alternative Financial Instruments, if any, are likely to be banks, 
broker dealers and other financial institutions. The Fund expects 
that these Alternative Financial Instruments, if any, will be on 
terms that are standard in the market for such Alternative Financial 
Instruments.
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    Specifically, once position limits in a Designated Contract are 
reached or a Futures Exchange imposes limitations on the Fund's ability 
to maintain or increase its positions in a Designated Contract after 
reaching accountability levels or a price limit is in effect on a 
Designated Contract during the last 30 minutes of its regular trading 
session, the Fund's intention is to invest first in Cleared Swaps to 
the extent permitted under the position limits applicable to Cleared 
Swaps and appropriate in light of the liquidity in the Cleared Swaps 
market, and then, using its commercially reasonable judgment, in 
Substitute Contracts or in Alternative Financial Instruments 
(collectively, ``Other Commodity Interests,'' and together with 
Designated Contracts and Cleared Swaps, ``Index Commodity Interests''). 
By utilizing certain or all of these investments, the Managing Owner 
will endeavor to cause the Fund's performance to track the performance 
of the Index. The circumstances under which such investments in Other 
Commodity Interests may be utilized (i.e., imposition of position 
limits) are further discussed below.
    The Fund seeks to achieve its investment objective by investing in

[[Page 21115]]

Index Commodity Interests such that daily changes in the Fund's NAV per 
Share will be expected to track the changes in the level of the Index. 
The Fund's positions in Index Commodity Interests will be changed or 
``rolled'' on a regular basis in order to track the changing nature of 
the Index. For example, at each monthly roll determination date, roll 
algorithms measure the current shape of the forward curves of the 
eligible futures contract prices for each Index Commodity to search for 
the optimal contract months along the curve to roll into, subject to 
using only the most liquid of all available contracts of a given 
commodity. Since the futures contract being rolled out of will no 
longer be included in the Index, the Fund's investments will have to be 
changed accordingly.
    Consistent with achieving the Fund's investment objective of 
tracking the Index, the Managing Owner may, after reaching position 
limits in the Designated Contracts or when a Futures Exchange has 
imposed limitations on the Fund's ability to maintain or increase its 
positions in a Designated Contract after reaching accountability levels 
or a price limit is in effect on a Designated Contract during the last 
30 minutes of its regular trading session, cause the Fund to first 
enter into or hold Cleared Swaps and then, if applicable, enter into or 
hold Other Commodity Interests. For example, certain Cleared Swaps have 
standardized terms similar to, and are priced by reference to, a 
corresponding Designated Contract. Additionally, Alternative Financial 
Instruments that do not have standardized terms and are not exchange-
traded (``over-the-counter'' Alternative Financial Instruments) can 
generally be structured as the parties desire. Therefore, the Fund 
might first enter into multiple Cleared Swaps and then, if applicable, 
enter into over-the-counter Alternative Financial Instruments intended 
to replicate the performance of each of the Designated Contracts, or a 
single over-the-counter Alternative Financial Instrument designed to 
replicate the performance of the Index as a whole. Assuming that there 
is no default by a counterparty to an over-the-counter Alternative 
Financial Instrument, the performance of the over-the-counter 
Alternative Financial Instrument will correlate with the performance of 
the Index or the applicable Designated Contract. After reaching 
position limits in the Designated Contracts or when a Futures Exchange 
has imposed limitations on the Fund's ability to maintain or increase 
its positions in a Designated Contract after reaching accountability 
levels or a price limit is in effect on a Designated Contract during 
the last 30 minutes of its regular trading session, and after entering 
into or holding Cleared Swaps, the Fund might also enter into or hold 
over-the-counter Alternative Financial Instruments to facilitate 
effective trading, consistent with the discussion of the Fund's 
``roll'' strategy in the preceding paragraph or to alleviate overall 
deviation between the Fund's performance and that of the Index that may 
result from certain market and trading inefficiencies or other reasons.
    The Fund will invest in Index Commodity Interests to the fullest 
extent possible without being leveraged or unable to satisfy its 
expected current or potential margin or collateral obligations with 
respect to its investments in Index Commodity Interests.\10\ After 
fulfilling such margin and collateral requirements, the Fund will 
invest the remainder of its proceeds from the sale of baskets in 
obligations of the United States government (``U.S. Treasury 
Securities'') and/or hold such assets in cash, generally in interest-
bearing accounts. Therefore, the focus of the Managing Owner in 
managing the Fund will be investing in Index Commodity Interests and in 
U.S. Treasury Securities, cash and/or cash equivalents. The Fund will 
earn interest income from the U.S. Treasury Securities and/or cash 
equivalents that it purchases and on the cash it holds through the 
Custodian.
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    \10\ The Managing Owner represents that the Fund will invest in 
exchange-traded futures, Cleared Swaps, and Alternative Financial 
Instruments in a manner consistent with the Fund's investment 
objective and not to achieve additional leverage.
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    The Managing Owner will employ an investment strategy intended to 
track changes in the level of the Index regardless of whether the Index 
is rising, flat, or declining. The Fund's investment strategy will be 
designed to permit investors generally to purchase and sell the Fund's 
Shares for the purpose of investing indirectly in the global commodity 
markets in a cost-effective manner. The Managing Owner does not intend 
to operate the Fund in a fashion such that its NAV per Share will 
equal, in dollar terms, the aggregate of the spot prices of the Index 
Commodities or the price of any particular Designated Contract.
    The Index is currently composed of Designated Contracts on 24 Index 
Commodities, each of which is subject to speculative position limits 
and other position limitations, as applicable, which are imposed by 
either the CFTC or the rules of the Futures Exchanges on which the 
Designated Contracts are traded. These position limits prohibit any 
person from holding a position of more than a specific number of such 
Designated Contracts (or Substitute Contracts, if applicable). Position 
limits are fixed ceilings that the Fund would not be able to exceed 
without specific Futures Exchange authorization. Under current law, all 
Designated Contracts traded on a particular Futures Exchange that are 
held under the control of the Managing Owner, including those held by 
any future series of the Trust, are aggregated in determining the 
application of applicable position limits.
    In addition to position limits, the Futures Exchanges may establish 
daily price fluctuation limits on futures contracts. The daily price 
fluctuation limit establishes the maximum amount that the price of 
futures contracts may vary either up or down from the previous day's 
settlement price. Once the daily price fluctuation limit has been 
reached in a particular futures contract, no trades may be made at a 
price beyond that limit. Futures Exchanges may also establish 
accountability levels applicable to futures contracts. A Futures 
Exchange may order a person who holds or controls aggregate positions 
in excess of specified position accountability levels not to further 
increase the positions, to comply with any prospective limit which 
exceeds the size of the position owned or controlled, or to reduce any 
open position which exceeds position accountability levels if the 
Futures Exchange determines that such action is necessary to maintain 
an orderly market. Position limits, accountability levels, and daily 
price fluctuation limits set by the Futures Exchanges have the 
potential to cause tracking error, which could cause changes in the NAV 
per Share to substantially vary from changes in the level of the Index 
and prevent an investor from being able to effectively use the Fund as 
a way to indirectly invest in the global commodity markets.
    The Fund will be subject to these speculative position limits and 
other limitations, as applicable, and, consequently, the Fund's ability 
to issue new baskets or to reinvest income in additional Designated 
Contracts may be limited to the extent these activities would cause the 
Fund to exceed its applicable limits unless the Fund trades Cleared 
Swaps, Substitute Contracts, or other Alternative Financial Instruments 
in addition to, and as a proxy for, Designated Contracts. These limits, 
and the use of Cleared Swaps, Substitute Contracts, or other 
Alternative Financial

[[Page 21116]]

Instruments, in addition to or as a proxy for Designated Contracts, may 
affect the correlation between changes in the NAV per Share and changes 
in the level of the Index, and the correlation between the market price 
of the Shares, as traded on the Exchange, and the NAV per Share.
    The Fund does not intend to limit the size of the offering and will 
attempt to expose substantially all of its proceeds to the Index 
Commodities utilizing Index Commodity Interests. If the Fund encounters 
position limits, accountability levels, or price fluctuation limits for 
Designated Contracts and/or Cleared Swaps, it may then, if permitted 
under applicable regulatory requirements, purchase Alternative 
Financial Instruments and/or Substitute Contracts listed on other 
domestic or foreign exchanges. However, the commodity futures contracts 
available on such foreign exchanges may have different underlying 
sizes, deliveries, and prices. In addition, the commodity futures 
contracts available on these exchanges may be subject to their own 
position limits and accountability levels. In any case, notwithstanding 
the potential availability of these instruments in certain 
circumstances, position limits could force the Fund to limit the number 
of baskets that it sells.

Description of the Index

    The Index aims to reflect the return of an investment in a world 
production-weighted portfolio comprised of the principal physical 
commodities that are the subject of active, liquid futures markets. The 
Index employs a flexible and systematic futures contract rolling 
methodology, which seeks to maximize yield from rolling long futures 
contracts in certain markets (backwardated markets) and minimize roll 
loss from rolling long futures positions in certain markets (contangoed 
markets).
    The Index was developed by the Index Sponsor and is an index on a 
world production-weighted basket of principal physical commodities. The 
Index reflects the level of commodity prices at a given time and is 
designed to be a measure of the return over time of the markets for 
these commodities. The Index is an excess return commodity index 
comprised of Designated Contracts that are replaced periodically.\11\ 
The commodities represented in the Index, each an Index Commodity, are 
those physical commodities on which active and liquid contracts are 
traded on trading facilities in major industrialized countries. The 
Index Commodities are weighted, on a production basis, to reflect the 
relative significance (in the view of the Index Sponsor) of those Index 
Commodities to the world economy. The fluctuations in the level of the 
Index are intended generally to correlate with changes in the prices of 
those physical Index Commodities in global markets.
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    \11\ The process of periodically replacing a futures contract 
prior to its expiration is known as ``rolling'' a contract or 
position. An index that includes an assumed return on a hypothetical 
portfolio of 3-month Treasury bills or any other risk free component 
is known as a ``total return'' index. An ``excess return'' index 
excludes returns on a hypothetical portfolio of 3-month Treasury 
bills or any other risk free component.
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    The Index utilizes the S&P GSCI[supreg] Dynamic Roll Index 
Methodology, a monthly futures contract rolling methodology that 
determines the new futures contract months for the underlying 
commodities. The S&P GSCI[supreg] Dynamic Roll Index Methodology is 
designed to maximize yield from rolling long futures contracts in 
backwardated markets and minimize roll loss from rolling long futures 
positions in contangoed markets. A ``backwardated'' market means a 
market in which the prices of certain commodity futures contracts are 
higher for contracts with shorter-term expirations than for contracts 
with longer-term expirations. A ``contangoed'' market means a market in 
which the prices of certain commodity futures contracts are lower for 
contracts with shorter-term expirations than for contracts with longer-
term expirations.
    The Index is comprised of Designated Contracts, which are futures 
contracts on the Index Commodities. The Index Commodities are 
diversified across five different categories: energy, agriculture, 
industrial metals, precious metals, and livestock. The Index reflects 
the return associated with the change in prices of the underlying 
Designated Contracts on the Index Commodities together with the ``roll 
yield'' (as discussed below) associated with these Designated Contracts 
(the price changes of the Designated Contracts and roll yield, taken 
together, constitute the ``excess return'' reflected by the Index). 
There is no limit on the number of Designated Contracts that may be 
included in the Index. Any contract satisfying the eligibility criteria 
will become a Designated Contract and will be included in the Index. 
All of the Designated Contracts are exchange-traded futures contracts.
    A fundamental characteristic of the Index is that as a result of 
being comprised of futures contracts on the applicable Index Commodity, 
the Fund must be managed to ensure it does not take physical delivery 
of each respective Index Commodity. This is achieved through a process 
referred to as ``rolling'' under which a given futures contract during 
a month in which it approaches its settlement date is rolled forward to 
a new contract date (i.e., the futures contract is effectively ``sold'' 
to ``buy'' a longer-dated futures contract). All Designated Contracts 
will be deemed to be rolled before their respective maturities into 
futures contracts in the more-distant future.
    Roll yield is generated during the roll process from the difference 
in price between the near-term and longer-dated futures contracts. The 
futures curve is a hypothetical curve created by plotting futures 
contract prices for a particular Index Commodity. When longer-dated 
contracts are priced lower than the nearer contract and spot prices, 
the market, which is in ``backwardation,'' is represented by a downward 
sloping futures curve, and positive roll yield is generated when 
higher-priced near-term futures contracts are ``sold'' to ``buy'' lower 
priced longer-dated contracts. When the opposite is true and longer-
dated contracts are priced higher, the market, which is in 
``contango,'' is represented by an upward sloping futures curve, and 
negative roll yields result from the ``sale'' of lower priced near-term 
futures contracts to ``buy'' higher priced longer-dated contracts. 
While many of the Index Commodities may have historically exhibited 
consistent periods of backwardation, backwardation will most likely not 
exist at all times. Moreover, certain of the Index Commodities may have 
historically traded in contangoed markets.

Index Methodology

    The Designated Contracts currently included in the Index, the 
Futures Exchanges on which they are traded, their market symbols and 
trading times, and their reference percentage dollar weights are set 
forth below in Table 1.

[[Page 21117]]

                                                     Table 1
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                                                                                Trading times     2011% dollar
        Futures exchange           Index commodity        Trading symbol       (eastern time)        weights
----------------------------------------------------------------------------------------------------------------
CBT............................  Chicago Wheat.....  W......................       09:30-13:15              3.00
KBT............................  Kansas City Wheat.  KW.....................       09:30-13:15              0.69
CBT............................  Corn..............  C......................       09:30-13:15              3.37
CBT............................  Soybeans..........  S......................       09:30-13:15              2.36
ICE-US.........................  Coffee............  KC.....................       03:30-14:00              0.76
ICE-US.........................  Sugar 11.  SB.....................       03:30-14:00              2.25
ICE-US.........................  Cocoa.............  CC.....................       04:00-14:00              0.39
ICE-US.........................  Cotton 2.  CT.....................       21:00-14:30              1.24
CME............................  Lean Hogs.........  LH.....................       09:05-13:00              1.59
CME............................  Live Cattle.......  LC.....................       09:05-13:00              2.59
CME............................  Feeder Cattle.....  FC.....................       09:05-13:00              0.44
NYM/ICE-US.....................  Crude Oil.........  CL.....................       09:00-14:30             34.71
NYM............................  Heating Oil.......  HO.....................       09:00-14:30              4.66
NYM............................  RBOB Gasoline.....  RB.....................       09:00-14:30              4.67
ICE-UK.........................  Brent Crude Oil...  LCO....................       19:00-17:00             15.22
ICE-UK.........................  Gasoil............  LGO....................       19:00-17:00              6.30
NYM/ICE-US.....................  Natural Gas.......  NG.....................       09:00-14:30              4.20
LME............................  Aluminum..........  MAL....................       11:00-10:45              2.70
LME............................  Copper............  MCU....................       11:00-10:45              3.66
LME............................  Lead..............  MPB....................       11:00-10:45              0.51
LME............................  Nickel............  MNI....................       11:00-10:45              0.82
LME............................  Zinc..............  MZN....................       11:00-10:45              0.72
CMX............................  Gold..............  GC.....................       08:20-13:30              2.80
CMX............................  Silver............  SI.....................       08:25-13:25              0.36
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    The quantity of each of the Designated Contracts included in the 
Index (``Contract Production Weight'' or ``CPW'') is determined on the 
basis of a five-year average, referred to as the ``world production 
average,'' of the production quantity of the underlying commodity as 
published by a number of official sources as provided in the S&P 
GSCI[supreg] Dynamic Roll Index Methodology. However, if an Index 
Commodity is primarily a regional commodity, based on its production, 
use, pricing, transportation, or other factors, the Index Sponsor, in 
consultation with the Index Committee (described below), may calculate 
the weight of that Index Commodity based on regional, rather than 
world, production data. At present, natural gas is the only Index 
Commodity the weights of which are calculated on the basis of regional 
production data, with the relevant region defined as North America.
    The five-year average is updated annually for each Index Commodity 
included in the Index, based on the most recent five-year period 
(ending approximately one and a half years prior to the date of 
calculation and moving backwards) for which complete data for all 
commodities is available. The calculation of the CPW of each Designated 
Contract is derived from world or regional production averages, as 
applicable, of the relevant Index Commodity, and is based on the total 
quantity traded for the relevant Designated Contract and the world or 
regional production average, as applicable, of the underlying Index 
Commodity. However, if the volume of trading in the relevant Designated 
Contract, as a multiple of the production levels of the Index Commodity 
(``Trading Volume Multiple'' or ``TVM''),\12\ is below a specified 
threshold (``Trading Volume Multiple Threshold'' or ``TVMT''),\13\ the 
CPW of the Designated Contract is reduced until the threshold is 
satisfied. This is designed to ensure that trading in each Designated 
Contract is sufficiently liquid relative to the production of the Index 
Commodity.
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    \12\ The TVM with respect to any Designated Contract is the 
quotient of (i) the product of (a) the total annualized quantity 
traded of such Designated Contract during the relevant calculation 
period and (b) the sum of the products of (x) the Designated 
Contract production weight of each Designated Contract included in 
the S&P GSCI and (y) the corresponding average month-end settlement 
price of the first nearby contract expiration of such Designated 
Contracts during the relevant period, and (ii) the product of (a) 
the targeted amount of investment in the S&P GSCI and related 
indices that needs to be supported by liquidity in the relevant 
Designated Contracts (currently $190 billion) and (b) the Designated 
Contract production weight of such Designated Contract.
    \13\ The TVMT is the TVM level, specified by S&P, which triggers 
a recalculation of the Designated Contract production weights for 
all Designated Contracts on an Index Commodity if the TVM of any 
such Designated Contract falls below such level.
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    In addition, the Index Sponsor performs this calculation on a 
monthly basis and, if the TVM of any Designated Contract is below the 
TVMT, the composition of the Index is reevaluated, based on the 
criteria and weighting procedure described above. This procedure is 
undertaken to allow the Index to shift from Designated Contracts that 
have lost substantial liquidity into more liquid contracts during the 
course of a given year. As a result, it is possible that the 
composition or weighting of the Index will change on one or more of 
these monthly evaluation dates. The likely circumstances under which 
the Index Sponsor would be expected to change the composition of the 
Index during a given year, however, are (1) a substantial shift of 
liquidity away from a Designated Contract included in the Index as 
described above, or (2) an emergency, such as a natural disaster or act 
of war or terrorism, that causes trading in a particular contract to 
cease permanently or for an extended period of time. In either event, 
the Index Sponsor will publish the nature of the changes through Web 
sites, news media, or other outlets, with as much prior notice to 
market participants as is reasonably practicable. Moreover, regardless 
of whether any changes have occurred during the year, the Index Sponsor 
reevaluates the composition of the Index at the conclusion of each 
year, based on the above criteria, and other commodities that satisfy 
that criteria, if any, will be added to the Index while commodities 
included in the Index that no longer satisfy that criteria, if any, 
will be deleted.
    The Index Sponsor also determines whether modifications in the 
selection criteria or the methodology for

[[Page 21118]]

determining the composition and weights of and for calculating the 
Index are necessary or appropriate in order to assure that the Index 
represents a measure of commodity market return. The Index Sponsor has 
the discretion to make any such modifications.

Calculation of the Closing Value of the Index

    The value, or the total dollar weight, of the Index on each 
business day is equal to the sum of the dollar weights of each of the 
Index Commodities. The dollar weight of each Index Commodity on any 
given day is equal to the product of (i) the weight of such Index 
Commodity, (ii) the daily contract reference price for the appropriate 
Designated Contracts, and (iii) the applicable ``roll weights'' during 
a Roll Period.\14\
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    \14\ The ``roll weight'' of each Index Commodity reflects the 
fact that the positions in the Designated Contracts must be 
liquidated or rolled forward into more distant contract expirations 
as they near expiration. If actual positions in the relevant markets 
were rolled forward, the roll would likely need to take place over a 
period of days. Because the Index is designed to replicate the 
return of actual investments in the underlying Designated Contracts, 
the rolling process incorporated in the Index also takes place over 
a period of days at the beginning of each month, referred to as the 
``Roll Period.'' On each day of the Roll Period, the ``roll 
weights'' of the first nearby contract expirations on a particular 
Index Commodity and the more distant contract expiration into which 
it is rolled are adjusted, so that the hypothetical position in the 
Designated Contract on the Index Commodity that is included in the 
Index is gradually shifted from the first nearby contract expiration 
to the more distant contract expiration pursuant to the S&P 
GSCI[supreg] Dynamic Roll Index Methodology.
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    The daily contract reference price used in calculating the dollar 
weight of each Index Commodity on any given day is the most recent 
daily contract reference price for the applicable Designated Contract 
made available by the Futures Exchange on which it trades, except that 
the daily contract reference price for the most recent prior day will 
be used if the Futures Exchange is closed or otherwise fails to publish 
a daily contract reference price on that day. If the Futures Exchange 
fails to make a daily contract reference price available or if the 
Index Sponsor determines, in its reasonable judgment, that the 
published daily contract reference price reflects manifest error, the 
relevant calculation will be delayed until the price is made available 
or corrected. If the daily contract reference price is not made 
available or corrected by 4 p.m., Eastern Time, the Index Sponsor may 
determine, in its reasonable judgment, the appropriate daily contract 
reference price for the applicable Designated Contract in order to 
calculate the Index.

The Index Committee

    The Index Sponsor has established an ``Index Committee'' to oversee 
the daily management and operations of the Index, and is responsible 
for all analytical methods and calculation of the Index. The Index 
Committee is comprised of full-time professional members of the Index 
Sponsor's staff. At each meeting, the Index Committee reviews any 
issues that may affect Index constituents, statistics comparing the 
composition of the Index to the market, commodities that are being 
considered as candidates for addition to the Index, and any significant 
market events. In addition, the Index Committee may revise Index policy 
covering rules for selecting commodities or other matters.
    The Index Sponsor considers information about changes to the Index 
and related matters to be potentially market-moving and material. 
Therefore, all Index Committee discussions are confidential.
    In addition, the Index Sponsor has established a ``Commodity Index 
Advisory Panel'' to assist it with the operation of the Index. The 
Commodity Index Advisory Panel meets on an annual basis and at other 
times at the request of the Index Committee. The principal purpose of 
the Commodity Index Advisory Panel is to advise the Index Committee 
with respect to, among other things, the calculation of the Index, the 
effectiveness of the Index as a measure of commodity futures market 
return, and the need for changes in the composition or the methodology 
of the Index. The Commodity Index Advisory Panel acts solely in an 
advisory and consultative capacity. The Index Committee makes all 
decisions with respect to the composition, calculation, and operation 
of the Index. The Index Advisory Panel representatives include 
employees of S&P indices, McGraw-Hill Financial, and clients of S&P 
indices. Certain of the members of the Index Advisory Panel may be 
affiliated with entities which, from time to time, may have investments 
linked to the S&P GSCI or other S&P commodities indices, either through 
transactions in the contracts included in the S&P GSCI and other S&P 
commodities indices, or futures contracts or derivative products linked 
to the S&P commodities indices. The Index Committee and the Commodity 
Index Advisory Panel are subject to procedures designed to prevent the 
use and dissemination of material, non-public information regarding the 
Index.
    A more detailed description of the Shares, the Fund, the Index, the 
Index Commodities, investment risks, creation and redemption 
procedures, fees, trading halts, surveillance, and the Information 
Bulletin, among other things, can be found in the Notice and/or the 
Registration Statement, as applicable.\15\
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    \15\ See Notice and Registration Statement, supra notes 3 and 5, 
respectively.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change to list and trade the Shares of the Fund is consistent with the 
requirements of Section 6 of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\16\ In 
particular, the Commission finds that the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act,\17\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest. The Commission notes that 
the Fund and the Shares must comply with the requirements of NYSE Arca 
Equities Rule 8.200 and Commentary .02 thereto to be listed and traded 
on the Exchange.
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    \16\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\18\ which sets forth Congress's finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information regarding the Shares will be disseminated through the 
facilities of the Consolidated Tape Association (``CTA''). The Index 
Sponsor will calculate and publish the value of the Index continuously 
on each business day, with such values updated every 15 seconds. In 
addition, the intra-day indicative value (``IIV'') per Share of the 
Fund, which will be based on the prior day's final NAV per Share and 
adjusted every 15 seconds during the

[[Page 21119]]

NYSE Arca Core Trading Session to reflect the continuous price changes 
of the Designated Contracts and other holdings, if any, held by the 
Fund, will be widely disseminated by one or more major market data 
vendors at least every 15 seconds during the NYSE Arca Core Trading 
Session.\19\ The final NAV of the Fund and the final NAV per Share will 
be calculated as of the closing time of NYSE Arca Core Trading Session 
or the last to close of the Futures Exchanges on which the Designated 
Contracts or Substitute Contracts (which are listed on futures 
exchanges other than Futures Exchanges) are traded, whichever is later, 
and posted in the same manner.\20\ The S&P GSCI[supreg] Dynamic Roll 
Index Methodology will be provided by the Index Sponsor on its Web 
site. The Fund will provide Web site disclosure of portfolio holdings 
daily and will include, as applicable, the names, quantity, price, and 
market value of Designated Contracts, Cleared Swaps, Substitute 
Contracts, and Alternative Financial Instruments, if any, held by the 
Fund, and the characteristics of such instruments, and cash equivalents 
and amount of cash held in the portfolio of the Fund. The prices of the 
Designated Contracts, Cleared Swaps, Substitute Contracts, and 
exchange-traded cash settled options are available from the applicable 
exchanges on which they trade and from market data vendors. The closing 
prices and settlement prices of futures contracts on the Index 
Commodities are readily available from the Web sites of the applicable 
futures exchanges on which they trade, automated quotation systems, 
published or other public sources, or on-line information services such 
as Bloomberg or Reuters. The relevant futures exchanges on which the 
underlying futures contracts are listed also provide delayed futures 
information on current and past trading sessions and market news free 
of charge on their respective Web sites. The specific contract 
specifications for the futures contracts are also available on such Web 
sites, as well as other financial informational sources. In addition, 
the Managing Owner's Web site and/or the Web site of the Exchange will 
contain the prospectus and additional data relating to NAV and other 
applicable quantitative information.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \19\ According to the Exchange, several major market data 
vendors currently display and/or make widely available IIVs 
published on CTA or other data feeds.
    \20\ The Exchange represents that, although a time gap may exist 
between the close of the NYSE Arca Core Trading Session and the 
close of the Futures Exchanges on which the Designated Contracts or 
Substitute Contracts (which are listed on futures exchanges other 
than Futures Exchanges) are traded, there is no effect on the NAV 
calculations as a result.
---------------------------------------------------------------------------

    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. If the Exchange becomes aware that the NAV with respect to the 
Shares is not disseminated to all market participants at the same time, 
it will halt trading in the Shares until such time as the NAV is 
available to all market participants. Further, the Exchange represents 
that it may halt trading during the day in which an interruption to the 
dissemination of the IIV, the Index, or the value of the underlying 
futures contracts occurs. If the interruption to the dissemination of 
the IIV, the Index, or the value of the underlying futures contracts 
persists past the trading day in which it occurred, the Exchange will 
halt trading no later than the beginning of the trading day following 
the interruption. The Exchange may halt trading in the Shares if 
trading is not occurring in the underlying futures contracts, or if 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.\21\ In addition, 
the Web site disclosure of the portfolio composition of the Fund will 
occur at the same time as the disclosure by the Managing Owner of the 
portfolio composition to authorized participants so that all market 
participants are provided portfolio composition information at the same 
time. Therefore, the same portfolio information will be provided on the 
public Web site as well as in electronic files provided to authorized 
participants. Accordingly, each investor will have access to the 
current portfolio composition of the Fund through the Fund's Web site. 
The Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. 
Lastly, the trading of the Shares will be subject to NYSE Arca Equities 
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on 
ETP Holders \22\ acting as registered Market Makers \23\ in TIRs to 
facilitate surveillance.
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    \21\ 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 in the Shares will be subject to 
halts caused by extraordinary market volatility pursuant to the 
Exchange's ``circuit breaker'' rule in NYSE Arca Equities Rule 7.12 
or by the halt or suspension of trading of the underlying futures 
contracts. Trading also may be halted because of market conditions 
or for reasons that, in the view of the Exchange, make trading in 
the Shares inadvisable.
    \22\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \23\ See NYSE Arca Equities Rule 1.1(u) (defining Market Maker).
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    The Exchange has represented that the Shares are deemed to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (1) The Fund will meet the initial and continued listing 
requirements applicable to TIRs in NYSE Arca Equities Rule 8.200 and 
Commentary .02 thereto.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures applicable to derivative 
products, including TIRs, are adequate to properly monitor Exchange 
trading of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws.
    (4) With respect to Fund assets traded on exchanges, not more than 
10% of the weight of such assets in the aggregate shall consist of 
components whose principal trading market is not a member of the 
Intermarket Surveillance Group or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement.
    (5) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Opening and Late 
Trading Sessions when an updated IIV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares in baskets (and that Shares are not individually redeemable); 
(c) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due 
diligence on its ETP Holders to learn the essential facts relating to 
every customer prior to trading the Shares; (d) how information 
regarding the IIV is disseminated; (e) the requirement that ETP Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; and (f) 
trading information.

[[Page 21120]]

    (6) A minimum of 100,000 Shares of the Fund will be outstanding as 
of the start of trading on the Exchange.
    (7) With respect to application of Rule 10A-3 under the Act,\24\ 
the Fund will rely on the exception contained in Rule 10A-3(c)(7).\25\
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    \24\ 17 CFR 240.10A-3.
    \25\ 17 CFR 240.10A-3(c)(7).

This approval order is based on all of the Exchange's 
representations.\26\
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    \26\ The Commission notes that it does not regulate the market 
for futures in which the Fund plans to take positions, which is the 
responsibility of the CFTC. The CFTC has the authority to set limits 
on the positions that any person may take in futures. These limits 
may be directly set by the CFTC or by the markets on which the 
futures are traded. The Commission has no role in establishing 
position limits on futures, even though such limits could impact an 
exchange-traded product that is under the jurisdiction of the 
Commission.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \27\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
---------------------------------------------------------------------------

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

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\28\ that the proposed rule change (SR-NYSEArca-2012-10) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \28\ 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.\29\
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    \29\ 17 CFR 200.30-3(a)(12).

Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-8425 Filed 4-6-12; 8:45 am]
BILLING CODE 8011-01-P