Document ID: SEC-2010-0522-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Amex LLC
Posted Date: 2010-04-07T04:00Z

[Federal Register: April 7, 2010 (Volume 75, Number 66)]
[Notices]               
[Page 17818-17820]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ap10-117]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61807; File No. SR-NYSEAmex-2010-09]

 
Self-Regulatory Organizations; NYSE Amex LLC; Order Granting 
Approval of Proposed Rule Change Amending Its Trust Unit Rules and 
Proposing the Listing of the Nuveen Diversified Commodity Fund

March 31, 2010.
    On January 29, 2010, NYSE Amex LLC (``NYSE Amex'' 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 
amend NYSE Amex Rule 1600 et seq. to permit the listing and trading of 
shares (``Shares'') of the Nuveen Diversified Commodity Fund (the 
``Fund''). The proposed rule change was published in the Federal 
Register on March 1, 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. 61571 (February 23, 
2010), 75 FR 9265 (``Notice'').
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I. Description of the Proposal

    NYSE Amex previously adopted Rule 1600 et seq. to permit the 
listing of Trust Units, which are defined as securities that are issued 
by a trust or other similar entity that invests in the assets of a 
trust, partnership, limited liability company, corporation or other 
similar entity constituted as a commodity pool that holds investments 
comprising or otherwise based on any combination of futures contracts, 
options on futures contracts, forward contracts, swap contracts and/or 
commodities.\4\ Rule 1600 was adopted in contemplation of the listing 
of shares of the Nuveen Commodities Income and Growth Fund (the 
``Fund''), a fund sponsored by Nuveen Investments, Inc. (``Nuveen''). 
Nuveen now proposes to go forward with a listing of shares (the 
``Shares'') of the Fund under a new name, the Nuveen Diversified 
Commodity Fund, and with a modified investment plan, which is described 
in detail in the Notice.\5\ NYSE Amex Rule 1600 as currently in effect 
permits only the listing of Trust Units whose issuers utilize the 
master/feeder structure originally intended to be used for the Fund. 
According to the Exchange, due to a change in the interpretation of 
applicable tax law by the Internal Revenue Service, the originally 
expected trust reporting procedures would no longer be available under 
a master/feeder structure. Nuveen therefore proposes to modify its 
approach and have the listed Fund make its own direct investments. 
Consequently, the Exchange proposes to amend the definition of Trust 
Units in Rule 1600 to remove the master/feeder structure requirement 
and permit the listing of Trust Units where the issuer is constituted 
as a commodity pool which invests directly in commodities and commodity 
derivatives. Nuveen has represented to the Exchange that there are no 
material revisions to the Fund's structure or investment approach other 
than those described in this current filing.
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    \4\ See Securities Exchange Act Release No. 56880 (December 3, 
2007), 72 FR 69259 (December 7, 2007) (SR-Amex-2006-96) (order 
approving NYSE Amex Rule 1600 et seq.).
    \5\ See Securities Exchange Act Release No. 56465 (September 19, 
2007), 72 FR 54489 (September 25, 2007) (SR-Amex-2006-96) (notice 
providing a description of the Fund).

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[[Page 17819]]

    The Fund was formed as a Delaware statutory trust on December 7, 
2005 pursuant to a Declaration of Trust signed by Wilmington Trust 
Company, as the Delaware Trustee.\6\ The Fund's primary investment 
objective is to seek total return through broad exposure to the 
commodities markets. The Fund's secondary objective is to provide 
investors with monthly income and capital distributions not commonly 
associated with commodity investments. The Fund intends to pursue its 
investment objective by utilizing: (a) An actively managed rules-based 
commodity investment strategy, whereby the Fund will invest in a 
diversified basket of commodity futures and forward contracts with an 
aggregate notional value substantially equal to the net assets of the 
Fund; and (b) a risk management program designed to moderate the 
overall risk and return characteristics of the Fund's commodity 
investments. The Fund will invest in commodity futures and forward 
contracts, options on commodity futures and forward contracts and over-
the-counter (``OTC'') commodity options in the following commodity 
groups: energy, industrial metals, precious metals, livestock, 
agriculturals, and tropical foods and fibers and may in the future 
include other commodity investments that become the subject of 
commodity futures trading.
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    \6\ The Fund, as a commodity pool, will not be subject to 
registration and regulation under the Investment Company Act of 1940 
(the ``1940 Act'').
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    The Fund is a commodity pool and is managed by Nuveen Commodities 
Asset Management, LLC (the ``Manager''). The Manager is registered as a 
commodity pool operator (the ``CPO'') and a commodity trading advisor 
(the ``CTA'') with the Commodity Futures Trading Commission (``CFTC'') 
and is a member of the National Futures Association (``NFA''). The 
Manager will serve as the CPO and a CTA of the Fund and will determine 
the Fund's overall investment strategy, including: (i) The selection 
and ongoing monitoring of the Fund's sub-advisors; (ii) the management 
of the Fund's business affairs; and (iii) the provision of certain 
clerical, bookkeeping and other administrative services. Gresham 
Investment Management LLC (the ``Commodity Sub-Advisor'') will invest 
on a notional basis substantially all of the Fund's assets in commodity 
futures and forward contracts pursuant to the commodity investment 
strategy and a risk management program.\7\ The Commodity Sub-Advisor is 
a Delaware limited liability company and is registered with the CFTC as 
a CTA and a CPO and is a member of the NFA. The Commodity Sub-Advisor 
is also registered with the Commission as an investment adviser. Nuveen 
Asset Management (the ``Collateral Sub-Advisor''), an affiliate of the 
Manager, will invest the Fund's collateral in short-term, investment-
grade quality debt instruments. The Collateral Sub-Advisor is 
registered with the Commission as an investment adviser.
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    \7\ The Fund does not intend to utilize leverage. However, the 
Fund may borrow for temporary or emergency purposes in an amount up 
to 5% of the value of the Fund's net assets should the need arise. 
Such short-term borrowings would mature in less than 60 days from 
the date of borrowing. In order to facilitate any such borrowing, 
the Fund intends to establish a standby credit facility with State 
Street Bank and Trust Company that will be entered into as of the 
closing of the offering of its common shares. Any temporary or 
emergency borrowings would be used to provide the Fund with added 
potential flexibility in managing short-term portfolio liquidity 
needs and managing the payment of distributions.
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    The Exchange states that the Shares will conform to the initial and 
continued listing criteria under NYSE Amex Rule 1602 and that the Fund 
has represented to the Exchange that, for initial and continued listing 
of the Shares, it will be in compliance with Section 803 of the NYSE 
Amex Company Guide (Independent Directors and Audit Committee) and Rule 
10A-3 under the Act.\8\ Additional information regarding the Fund, the 
Shares, the Fund's investment objectives, strategies, policies, and 
restrictions, fees and expenses, availability of information, trading 
rules, and surveillance procedures, among other things, can be found in 
the Notice.\9\
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    \8\ 17 CFR 240.10A-3.
    \9\ See supra note 3.
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II. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \10\ and the rules and regulations thereunder applicable to a 
national securities exchange.\11\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\12\ 
which requires, among other things, that the Exchange's rules be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Commission notes that the Shares must comply with 
the requirements of NYSE Amex Rule 1600 et seq. to be listed and traded 
on the Exchange.
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    \10\ 15 U.S.C. 78f.
    \11\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \12\ 17 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,\13\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. The daily settlement 
prices for the commodity futures and forward contracts held by the Fund 
are publicly available on the Web sites of the futures and forward 
exchanges trading the particular contracts. Various data vendors and 
news publications publish futures prices and data. The Exchange 
represents that futures, forwards and related exchange traded options 
quotes and last sale information for the commodity contracts are widely 
disseminated through a variety of market data vendors worldwide, 
including Bloomberg and Reuters. In addition, the Exchange further 
represents that complete real-time data for such futures, forwards and 
exchange traded options is available by subscription from Reuters and 
Bloomberg. The relevant futures and forward exchanges also provide 
delayed futures and forward contract information on current and past 
trading sessions and market news free of charge on their respective Web 
sites. The contract specifications for the futures and forward 
contracts are also available from the futures and forward exchanges on 
their Web sites as well as other financial informational sources.
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    \13\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Fund's total portfolio holdings will also be disclosed and 
updated on its Web site on each business day that the Exchange is open 
for trading.\14\ This Web site disclosure of portfolio holdings (as of 
the previous day's close) will be made daily and will include, as 
applicable: (a) The name and value of each commodity investment; (b) 
the value of over-the-counter commodity put options, if any, and the 
value of the collateral as represented by cash; (c) cash equivalents; 
and (d) debt securities held in the Fund's portfolio. The values of the 
Fund's portfolio holdings will, in

[[Page 17820]]

each case, be determined in accordance with the Fund's valuation 
policies.
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    \14\ The total portfolio holdings will be disseminated to all 
market participants at the same time.
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    The Commission further believes that the proposal 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 Commission 
notes that the Exchange will obtain a representation from the issuer 
that the NAV per Share will be calculated daily and made available to 
all market participants at the same time.\15\ The Manager has 
represented to the Exchange that the NAV will be disseminated to all 
market participants at the same time.\16\ Additionally, if the Exchange 
becomes aware that the portfolio holdings and net asset value per share 
are not being disseminated as required, the Exchange may halt trading 
during the day in which the interruption to the dissemination of the 
portfolio holdings or net asset value per share occurs. If the 
interruption to the dissemination of the portfolio holdings or net 
asset value per share 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.\17\
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    \15\ See NYSE Amex Rule 1602 (a)(ii).
    \16\ See Notice, supra, note 3.
    \17\ See NYSE Amex Rule 1602(b)(ii).
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    In addition, each of the Manager, the Commodity Broker, and the 
Commodity Sub-Advisor have represented to the Exchange that they have 
erected and maintain firewalls within their respective institutions to 
prevent the flow of non-public information regarding the portfolio of 
underlying securities from the personnel involved in the development 
and implementation of the investment strategy to others such as sales 
and trading personnel.
    The Exchange has represented that the Shares are equity securities 
subject to the Exchange's rules governing the trading of equity 
securities. In support of this proposal, the Exchange has made 
representations, including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Amex Rule 1602.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares and to deter and detect 
violations of Exchange rules and applicable Federal securities laws.
    (3) The Exchange will distribute an Information Circular to its 
members in connection with the trading of the Shares. The Circular will 
discuss the special characteristics and risks of trading this type of 
security. Specifically, the Circular, among other things, will discuss 
what the Shares are, the requirement that members and member firms 
deliver a prospectus to investors purchasing the Shares prior to or 
concurrently with the confirmation of a transaction during the initial 
public offering, applicable NYSE Amex rules, and trading information 
and applicable suitability rules. The Circular will also explain that 
the Fund is subject to various fees and expenses described in the 
Registration Statement. The Circular will also reference the fact that 
there is no regulated source of last sale information regarding 
physical commodities and note the respective jurisdictions of the 
Commission and CFTC. The Circular will advise members of their 
suitability obligations with respect to recommended transactions to 
customers in the Shares.
    (4) The Fund will be in compliance with Rule 10A-3 under the Act. 
This approval order is based on the Exchange's representations.
    In addition, the Commission finds that the proposed changes to NYSE 
Amex Rule 1600 et seq. to amend the definition of Trust Units to remove 
the master/feeder structure requirement and to modify and update the 
rules to make them consistent with the Exchange's recent rule book 
changes are consistent with the Act.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.

III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\18\ that the proposed rule change (SR-NYSEAmex-2010-09), be, and 
it hereby is, approved.
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    \18\ 15 U.S.C. 78s(b)(2).

    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. 2010-7836 Filed 4-6-10; 8:45 am]
BILLING CODE 8011-01-P