Document ID: SEC-2012-1573-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-09-24T04:00Z

[Federal Register Volume 77, Number 185 (Monday, September 24, 2012)]
[Notices]
[Pages 58881-58889]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23461]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67882; File No. SR-NYSEArca-2012-102]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of Twelve 
Funds of the Direxion Shares ETF Trust II Under NYSE Arca Equities Rule 
8.200

September 18, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on September 5, 2012, NYSE Arca, Inc. 
(``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II 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 shares of twelve funds of 
the Direxion Shares ETF Trust II under NYSE Arca Equities Rule 8.200, 
Commentary .02. The text of the proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

[[Page 58882]]

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    NYSE Arca Equities Rule 8.200, Commentary .02 permits the trading 
of Trust Issued Receipts (``TIRs'') either by listing or pursuant to 
unlisted trading privileges (``UTP'').\3\ The Exchange proposes to list 
and trade the shares (``Shares'') of the following pursuant to NYSE 
Arca Equities Rule 8.200: Direxion Daily Gold Bear 1X Shares; Direxion 
Daily Gold Bull 3X Shares; Direxion Daily Gold Bear 3X Shares; Direxion 
Daily Silver Bear 1X Shares; Direxion Daily Silver Bull 3X Shares; 
Direxion Daily Silver Bear 3X Shares; Direxion Daily Japanese Yen Bull 
3X Shares; Direxion Daily Japanese Yen Bear 3X Shares; Direxion Daily 
Dollar Bull 3X Shares; Direxion Daily Dollar Bear 3X Shares; Direxion 
Daily Euro Bull 3X Shares; and Direxion Daily Euro Bear 3X Shares (each 
a ``Fund'' and, collectively, ``Funds'').\4\ All Funds except for the 
Direxion Daily Gold Bear 1X Shares and Direxion Daily Silver Bear 1X 
Shares are also referred to herein as ``Leveraged Funds,'' and the 
Direxion Daily Gold Bear 1X Shares and Direxion Daily Silver Bear 1X 
Shares are also referred to herein as ``Bear 1X Funds.'' \5\
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    \3\ 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.
    \4\ See Pre-Effective Amendment No. 1 to Form S-1, dated October 
13, 2010 (``Registration Statement'') (File No. 333-168227). The 
description of the Funds and the Shares contained herein is based, 
in part, on the Registration Statement.
    \5\ Terms relating to the Funds and the Shares referred to, but 
not defined, herein are defined in the Registration Statement.
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    Each Leveraged Fund seeks a multiple or inverse multiple (plus or 
minus 300%) of the return (before fees and expenses) of its target 
benchmark commodity or currency on a given day. The Leveraged Funds 
seek to provide daily leveraged investment results, before fees and 
expenses, which correspond to the performance of an underlying 
benchmark commodity or currency.
    Each Bear 1X Fund seeks-100% of the return (before fees and 
expenses) of its target benchmark commodity on a given day. The Bear 1X 
Funds seek to provide daily investment results, before fees and 
expenses, which inversely correspond to the performance of an 
underlying benchmark commodity.
    The Exchange notes that the Commission has previously approved 
other issues of TIRs, including leveraged TIRs, for listing and trading 
on the American Stock Exchange LLC (``Amex''),\6\ trading on NYSE Arca 
pursuant to UTP,\7\ and listing and trading on NYSE Arca.\8\ In 
addition, the Commission has approved the listing and trading of other 
exchange-traded fund-like products linked to the performance of 
underlying commodities and currencies.\9\
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    \6\ See, e.g., Securities Exchange Act Release No. 58161 (July 
15, 2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39) (order 
approving amendments to Amex Rule 1202, Commentary .07 and listing 
on Amex of 14 funds of the Commodities and Currency Trust).
    \7\ See, e.g., Securities Exchange Act Release No. 58162 (July 
15, 2008), 73 FR 42391 (July 21, 2008) (SR-NYSEArca-2008-73) (notice 
of effectiveness of UTP trading on NYSE Arca of 14 funds of the 
Commodities and Currency Trust).
    \8\ See, e.g., Securities Exchange Act Release No. 58457 
(September 3, 2008), 73 FR 52711 (September 10, 2008) (SR-NYSEArca-
2008-91) (order approving listing and trading on NYSE Arca of 14 
funds of the Commodities and Currency Trust).
    \9\ See, e.g., Securities Exchange Act Release Nos. 54020 (June 
20, 2006), 71 FR 36579 (June 27, 2006) (SR-NYSE-2006-35) (order 
approving listing and trading on the New York Stock Exchange 
(``NYSE'') of six CurrencyShares Trusts); 55585 (April 5, 2007), 72 
FR 18500 (April 12, 2007) (SR-NYSE-2006-75) (order approving listing 
and trading on NYSE of the iShares GS Commodity Light Energy Indexed 
Trust; iShares GS Commodity Industrial Metals Indexed Trust; iShares 
GS Commodity Livestock Indexed Trust; and iShares GS Commodity Non-
Energy Indexed Trust); 56932 (December 7, 2007), 72 FR 71178 
(December 14, 2007) (SR-NYSEArca-2007-112) (order granting 
accelerated approval to list and trade iShares S&P GSCI Commodity-
Indexed Trust); and 59895 (May 8, 2009), 74 FR 22993 (May 15, 2009) 
(SR-NYSEArca-2009-40) (order granting accelerated approval to list 
and trade the ETFS Gold Trust).
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Overview of the Funds
    The Shares will be issued by Direxion Shares ETF Trust II 
(``Trust''), a Delaware statutory trust. Direxion Asset Management, LLC 
will be the sponsor (``Sponsor'') for the Trust. The Bank of New York 
Mellon (``Administrator'') will serve as the Funds' transfer agent, 
administrator and custodian. Foreside Fund Services, LLC 
(``Distributor''), will serve as the distributor of the Shares.
    According to the Registration Statement, the Leveraged Funds will 
seek daily leveraged investment results and are intended to be used as 
short-term trading vehicles. The Leveraged Funds with the word ``Bull'' 
in their name (collectively, ``Leveraged Bull Funds'') will attempt to 
provide daily leveraged investment results (before fees and expenses) 
that correlate positively to three times (300%) the daily return of a 
target benchmark, meaning a Leveraged Bull Fund will attempt to move in 
the same direction as the target benchmark. The Leveraged Funds with 
the word ``Bear'' in their name (collectively, ``Leveraged Bear 
Funds'') will attempt to provide daily leveraged investment results 
(before fees and expenses) that correlate to the inverse (opposite) of 
three times the return of a target benchmark, meaning that the 
Leveraged Bear Funds will attempt to move in the opposite or inverse 
direction of the target benchmark.
    The Bear 1X Funds will attempt to provide daily investment results 
(before fees and expenses) that correlate to the inverse (opposite) of 
the return of a target benchmark commodity, meaning that the Bear 1X 
Funds will attempt to move in the opposite or inverse direction of a 
target benchmark commodity.
Principal Investment Strategies
    According to the Registration Statement, in seeking to achieve each 
Fund's daily investment objective, the Sponsor will use statistical and 
quantitative analysis to determine the investments each Fund makes and 
the techniques it employs. Using this approach, the Sponsor will 
determine the type, quantity and mix of investment positions that the 
Sponsor believes in combination should produce daily returns consistent 
with a Fund's objective. The Sponsor will rely upon a pre-determined 
model to generate orders that result in repositioning each Fund's 
investments in accordance with its daily investment objective. As a 
consequence, if a Fund is performing as designed, the return of the 
applicable benchmark (as discussed below) will dictate the return for 
that Fund. Each Fund will pursue its investment objective regardless of 
market conditions and will not take defensive positions.
    As described in the Registration Statement, each of the Direxion 
Daily Gold Bear 1X Shares, Direxion Daily

[[Page 58883]]

Gold Bull 3X Shares and Direxion Daily Gold Bear 3X Shares 
(collectively, ``Gold Funds'') and Direxion Daily Silver Bear 1X 
Shares, Direxion Daily Silver Bull 3X Shares and Direxion Daily Silver 
Bear 3X Shares (collectively, ``Silver Funds,'' and collectively with 
the Gold Funds, ``Commodity Funds'') will seek to achieve its 
investment objective by investing in futures contracts related to its 
benchmark commodity. As such, the Gold Funds will invest in gold 
futures contracts traded on the Commodity Exchange, Inc. (``COMEX,'' an 
affiliate of the CME Group, Inc. (``CME'')) (``Gold Futures 
Contracts''), and the Silver Funds will invest in silver futures 
contracts traded on COMEX (``Silver Futures Contracts,'' and, 
collectively with Gold Futures Contracts, ``Commodity Futures 
Contracts'').\10\ For each of the Commodity Funds, in the event 
position limits or position accountability levels are reached with 
respect to the applicable Commodity Futures Contracts, or if trading of 
such Commodity Futures Contracts is suspended due to price fluctuation 
limits being reached or if the CME imposes any other suspension or 
limitation on trading in a Commodity Futures Contract, the Sponsor may, 
in its commercially reasonable judgment, cause the Commodity Funds to 
obtain exposure through cash-settled, exchange-traded options on 
Commodity Futures Contracts, as applicable, and forward contracts, 
swaps,\11\ and other over-the-counter transactions that are based on 
the price of Commodity Futures Contracts, as applicable, if such 
instruments tend to exhibit trading prices or returns that correlate 
with any Commodity Futures Contract and will further the investment 
objective of such Commodity Fund (collectively, ``Commodity Financial 
Instruments'').\12\
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    \10\ Gold and Silver Futures Contracts traded on COMEX are the 
global benchmark contracts and most liquid futures contracts in the 
world for each respective commodity. As of March 15, 2012, open 
interest in Gold Futures Contracts and Silver Futures Contracts 
traded on the CME was $23.7 billion and $8.5 billion, respectively. 
Gold Futures Contracts and Silver Futures Contracts had an average 
daily trading volume in 2011 of 138,964 contracts and 63,913 
contracts, respectively. The trading hours for the Gold Futures 
Contracts and Silver Futures Contracts are 8:20 a.m. until 1:30 p.m. 
Eastern Time (``E.T.'').
    \11\ To the extent practicable, the Commodity Funds will invest 
in swaps cleared through the facilities of a centralized clearing 
house.
    \12\ According to the Registration Statement, each Fund will 
enter into swap agreements and other over-the-counter transactions 
only with large, established and well capitalized financial 
institutions that meet certain credit quality standards and 
monitoring policies. Each Fund will use various techniques to 
minimize credit risk including early termination or reset and 
payment, using different counterparties and limiting the net amount 
due from any individual counterparty.
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    The Gold Funds' benchmark will be the daily last sale price 
occurring on or before 4 p.m. E.T. of a standard Gold Futures Contract 
for 100 troy ounces of gold, specified by the CME to be of a grade and 
quality that shall assay to a minimum of 995 fineness, as measured in 
U.S. Dollars and cents per troy ounce with a minimum fluctuation of 
$0.10 per troy ounce (``Gold Benchmark Futures Contract''). The Silver 
Funds' benchmark will be the daily last sale price occurring on or 
before 4 p.m. E.T. of a standard Silver Futures Contract for 5,000 troy 
ounces of silver, specified by the CME to be at a grade and quality 
that shall assay to a minimum of 999 fineness, as measured in U.S. 
Dollars and cents per troy ounce with a minimum fluctuation of $0.10 
per troy ounce (``Silver Benchmark Futures Contract''). For both the 
Gold Benchmark Futures Contract and the Silver Benchmark Futures 
Contract, the last sale price value will be calculated as the last sale 
price published by the CME on or before 4 p.m. E.T. for the current 
active month Commodity Futures Contract.\13\ The last sale price and 
benchmark valuation may reflect trades occurring and published by the 
CME outside the normal trading session for the applicable Commodity 
Futures Contract.
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    \13\ By way of example, with respect to the Direxion Daily Gold 
Bull 3X Shares, pursuant to the Fund's investment strategy, in the 
event position limits or position accountability levels are reached 
with respect to the Gold Benchmark Futures Contract, or if trading 
of the Gold Benchmark Futures Contract is suspended due to price 
fluctuation limits being reached or if the CME imposes any other 
suspension or limitation on trading, the Sponsor may cause the Fund 
to obtain exposure through cash-settled, exchange-traded options on 
the Gold Benchmark Futures Contract and forward contracts, swaps and 
other over-the-counter transactions that are based on the price of 
the Gold Benchmark Futures Contract if such instruments tend to 
exhibit trading prices or returns that correlate with any Gold 
Benchmark Futures Contract and will further the investment objective 
of the Fund. Thus, for example, if the Fund were to have $7 million 
in net assets, the Sponsor would seek to obtain $21 million in 
exposure to the price of gold and would invest in Gold Futures 
Contracts directly and, if the Fund reaches a point where position 
limits or accountability levels in Gold Futures Contracts become 
applicable, in cleared long swap positions, as practicable in the 
Sponsor's commercially reasonable judgment, or general swaps 
referencing the Gold Futures Contracts. The particular ratio of Gold 
Futures Contracts and cash held would be dependent on the Sponsor's 
view of what will best meet the investment objective of the Fund 
(i.e., 300% exposure to Gold Futures Contracts). Conversely, in the 
case of a Bear 1X Fund, the Sponsor will utilize short positions to 
similarly gain the target exposure.
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    Each of the Direxion Daily Japanese Yen Bull 3X Shares and Direxion 
Daily Japanese Yen Bear 3X Shares (collectively, ``Yen Funds''); 
Direxion Daily Dollar Bull 3X Shares and Direxion Daily Dollar Bear 3X 
Shares (collectively, ``Dollar Funds''); and Direxion Daily Euro Bull 
3X Shares and Direxion Daily Euro Bear 3X Shares (collectively, ``Euro 
Funds,'' and collectively with the Yen Funds and Dollar Funds, 
``Currency Funds'') will seek to achieve its investment objective by 
investing in futures contracts related to its benchmark currency. As 
such, the Yen Funds will invest in Japanese Yen futures contracts 
traded on the CME (``Yen Futures Contracts''), the Euro Funds will 
invest in Euro futures traded on the CME (``Euro Futures Contracts''), 
and the Dollar Funds will invest in U.S. Dollar Index futures contracts 
traded on the ICE Futures U.S. (``ICE'') (``Dollar Futures Contracts,'' 
and, collectively with Yen Futures Contracts and Euro Futures 
Contracts, ``Currency Futures Contracts'').\14\ For each Currency Fund 
except the Dollar Funds, which invest in futures contracts that do not 
have position limits, accountability levels or price fluctuation 
limits, in the event position limits or position accountability levels 
are reached with respect to the applicable Currency Futures Contracts, 
or if trading of such Currency Futures Contracts is suspended due to 
price fluctuation limits being reached or if the CME or ICE (with 
respect to the Dollar Funds), as applicable, imposes any other 
suspension or limitation on trading in a Currency Futures Contract, the 
Sponsor may, in its commercially reasonable judgment, cause the 
Currency Funds to obtain exposure through cash-settled, exchange-traded 
options on Currency Futures Contracts, as applicable, and forward 
contracts, swaps,\15\ and other over-the-counter transactions that are 
based on the price of Currency Futures Contracts, as applicable, if 
such instruments tend to exhibit trading prices or returns that 
correlate with any Currency Futures Contract and will further the 
investment objective of such

[[Page 58884]]

Currency Fund (collectively, ``Currency Financial Instruments'').
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    \14\ The CME constitutes the largest regulated foreign exchange 
marketplace in the world, with over $100 billion in daily liquidity. 
As of March 15, 2012, open interest in Euro Futures Contracts and 
Yen Futures Contracts traded on the CME and, for Dollar Futures 
Contracts, on the ICE, were $42.7 billion, $20.8 billion, and $4.8 
billion, respectively. Euro Futures Contracts, Yen Futures 
Contracts, and Dollar Futures Contracts had an average daily trading 
volume in 2011 of 325,103, 106,824, and 27,258 contracts, 
respectively. The trading hours for the Euro Futures Contracts and 
Yen Futures Contracts are 8:20 a.m. until 3 p.m. E.T., and the 
trading hours for the Dollar Futures Contracts are 8 p.m. E.T. until 
5 p.m. E.T. the following day.
    \15\ To the extent practicable, the Currency Funds will invest 
in swaps cleared through the facilities of a centralized clearing 
house.
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    The benchmark for the Yen Funds will be the last sale price 
occurring on or before 4 p.m. E.T. of a standard Yen Futures Contract 
for 12,500,000 Japanese Yen, priced in U.S. Dollars and traded on the 
CME (``Yen Benchmark Futures Contract''). The benchmark for the Euro 
Funds will be the last sale price occurring on or before 4 p.m. E.T. of 
a standard Euro Futures Contract for 125,000 Euro, priced in U.S. 
Dollars and traded on the CME (``Euro Benchmark Futures Contract''). 
For both the Yen Benchmark Futures Contract and Euro Benchmark Futures 
Contract, the last sale price value will be calculated as the last sale 
price published by the CME on or before 4 p.m. E.T. for the current 
active month Currency Futures Contract. The last sale price and 
benchmark valuation may reflect trades occurring and published by the 
CME outside the normal trading session for the applicable Currency 
Futures Contract.
    The benchmark for the Dollar Funds will be the last sale price 
occurring on or before 4 p.m. E.T. of a standard Dollar Futures 
Contract for $1,000 times the U.S. Dollar Index value as measured in 
U.S. Dollars and traded on the ICE (``Dollar Benchmark Futures 
Contract'' and, collectively with the Gold Benchmark Futures Contract, 
Silver Benchmark Futures Contract, Yen Benchmark Futures Contract, and 
the Euro Benchmark Futures Contract, ``Benchmark Futures Contracts''). 
The U.S. Dollar Index indicates the general international value of the 
U.S. Dollar.\16\ The U.S. Dollar Index does this by geometrically 
weighting the exchange rates between the U.S. Dollar and six major 
world currencies. The U.S. Dollar Index consists of the following six 
currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish 
Krona, and Swiss Franc. The components and weightings are held 
constant, and have not changed since the introduction of the Euro. 
Because the U.S. Dollar Index is geometrically weighted, holding the 
individual currencies in their specified weights will not necessarily 
mimic U.S. Dollar Index moves. The last sale price for the Dollar 
Benchmark Futures Contract will be calculated using the last sale price 
published by the ICE on or before 4 p.m. E.T. for the current active 
month Dollar Futures Contract.
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    \16\ The U.S. Dollar Index was created by the U.S. Federal 
Reserve in 1973. Following the ending of the 1944 Bretton Woods 
Agreement, which had established a system of fixed exchange rates, 
the U.S. Federal Reserve Bank began the calculation of the U.S. 
Dollar Index to provide an external bilateral trade-weighted average 
of the U.S. Dollar as it freely floated against global currencies. 
Futures contracts based on the U.S. Dollar Index were listed on 
November 20, 1985, and are now available only on the ICE electronic 
trading platform. Options on the futures contracts began trading on 
September 3, 1986, and are available both on the ICE electronic 
trading platform and on the ICE options trading floor.
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    In seeking its investment objective, each Fund will invest in 
Commodity or Currency Futures Contracts, as applicable, including (but 
not limited to) \17\ the Fund's related Benchmark Futures Contract, as 
well as Commodity or Currency Financial Instruments in certain 
circumstances. Assets of each Fund not invested in Commodity Futures 
Contracts, Currency Futures Contracts, or other Commodity Financial 
Instruments or Currency Financial Instruments, as applicable, will be 
held in cash or invested in cash equivalents and/or U.S. Treasury 
Securities or other high credit quality short-term fixed-income or 
similar securities (such as shares of money market funds, bank 
deposits, bank money market accounts, certain variable rate-demand 
notes, and repurchase agreements collateralized by government 
securities, whether denominated in U.S. or the applicable foreign 
currency with respect to a Currency Fund) that serve as collateral for 
Commodity Futures Contracts, Currency Futures Contracts, and Commodity 
or Currency Financial Instruments, as applicable.
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    \17\ A Fund, in seeking to achieve its investment objective by 
investing in futures contracts related to its target benchmark, may 
be invested in futures contracts that are not the current active 
month futures contracts on which the Fund's target benchmark is 
based. For example, if, on a date in September 2012, the current 
active month futures contract with respect to a target benchmark is 
December 2012, a Fund may have a portion of its assets in the 
October 2012 or February 2013 contracts. A Fund may use this 
flexibility, for example, in case of liquidity issues with respect 
to the applicable, current active month futures contracts or when 
deciding when to roll the Fund's assets into the next current active 
month contract.
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    At the close of the U.S. equity markets each trading day, each Fund 
will position its portfolio to ensure that the Fund's exposure to its 
benchmark is consistent with the Fund's stated goals. The impact of 
market movements during the day will determine whether a portfolio 
needs to be repositioned. If the target benchmark has risen on a given 
day, a Leveraged Bull Fund's net assets should rise, meaning their 
exposure may need to be increased. Conversely, if the target benchmark 
has fallen on a given day, a Leveraged Bull Fund's net assets should 
fall, meaning their exposure may need to be reduced.
    If a Leveraged Bull Fund is successful in meeting its objective, 
its value in a given day (before fees and expenses) should gain 
approximately three times as much on a percentage basis as its 
corresponding benchmark when the benchmark rises during a given day. 
Conversely, its value in a given day (before fees and expenses) should 
lose approximately three times as much on a percentage basis as the 
corresponding benchmark when the benchmark declines during a given day. 
Each Leveraged Bull Fund will acquire long exposure through investment 
in Commodity or Currency Futures Contracts, including (but not limited 
to) the applicable Benchmark Futures Contracts, and, once position 
limits or position accountability levels are reached, trading of such 
Commodity or Currency Futures Contracts is suspended due to price 
fluctuation limits being reached, or if the CME or ICE, as applicable, 
imposes any other suspension or limitation on trading in a Commodity or 
Currency Futures Contract, in Commodity Financial Instruments or 
Currency Financial Instruments, as applicable, such that each Leveraged 
Bull Fund has approximately 300% exposure to the corresponding 
benchmark at the time of the net asset value (``NAV'') calculation.
    If a Leveraged Bear Fund is successful in meeting its objective, 
its value in a given day (before fees and expenses) should gain 
approximately three times as much on a percentage basis as its 
corresponding benchmark loses when the benchmark falls in a given day. 
Conversely, its value in a given day (before fees and expenses) should 
lose approximately three times as much on a percentage basis as the 
corresponding benchmark gains when the benchmark rises in a given day. 
Each Leveraged Bear Fund will acquire short exposure through investment 
in Commodity or Currency Futures Contracts, including (but not limited 
to) the applicable Benchmark Futures Contracts, and, once position 
limits or position accountability levels are reached, trading of such 
Commodity or Currency Futures Contracts is suspended due to price 
fluctuation limits being reached, or if the CME or ICE, as applicable, 
imposes any other suspension or limitation on trading in a Commodity or 
Currency Futures Contract, in Commodity Financial Instruments or 
Currency Financial Instruments, as applicable, such that each Leveraged 
Bear Fund has approximately -300% exposure to the corresponding 
benchmark at the time of the NAV calculation.
    If a Bear 1X Fund is successful in meeting its objective, its value 
in a given day (before fees and expenses) should gain approximately an 
equal amount on

[[Page 58885]]

a percentage basis as its corresponding benchmark when the benchmark 
falls in a given day. Conversely, its value in a given day (before fees 
and expenses) should lose approximately an equal amount on a percentage 
basis as the corresponding benchmark when the benchmark rises in a 
given day. Each Bear 1X Fund will acquire short exposure through 
investment in Commodity Futures Contracts, including (but not limited 
to) the applicable Benchmark Futures Contracts, and, once position 
limits or position accountability levels, if applicable, are reached, 
trading of the Commodity Futures Contracts is suspended due to price 
fluctuation limits being reached, or if the CME imposes any other 
suspension or limitation on trading in a Commodity Futures Contract, a 
Bear 1X Fund may invest in Commodity Financial Instruments such that 
each Bear 1X Fund has approximately -100% exposure to the corresponding 
benchmark at the time of the NAV calculation.
    In the event that trading of a Commodity or Currency Futures 
Contract is suspended due to price fluctuation limits being reached for 
that futures contract, or CME or ICE, as applicable imposes any other 
suspension or limitation on trading in a Commodity or Currency Futures 
Contract, the related Fund or Funds may be limited in their ability to 
seek their investment objective until trading resumes.
Creation and Redemption of Shares
    Each Fund will create and redeem Shares in ``Creation Unit'' size 
of 50,000 Shares or aggregations thereof. Except when aggregated in 
Creation Units, the Shares are not redeemable securities. Shares may be 
created or redeemed only through authorized participants, as described 
in the Registration Statement.
    On any day other than a day when any of the NYSE Arca, the NYSE, 
and, as applicable to the underlying benchmark, the CME, ICE, or COMEX 
(collectively, ``Futures Exchanges'') is closed for regular trading 
(``Business Day''), an authorized participant may place an order with 
the Distributor to create one or more Creation Units. Purchase orders 
must be placed prior to 3:30 p.m. E.T. in order to avoid higher 
transaction fees, but in no instances may purchase orders be placed 
after 4 p.m. E.T., as described in the Registration Statement. Although 
trading in a Fund's respective benchmark may continue beyond that time 
on any given trading day, the Sponsor has elected to require orders be 
placed prior to that time in order to facilitate efficient operation of 
the Funds and give the Funds adequate time to reposition their 
portfolios, strike the NAV for the Funds and prepare the needed value 
and portfolio composition disclosures for the following Business Day's 
trading. If a purchase order is received prior to the cut-off time, the 
day on which the Distributor receives a valid purchase order is the 
purchase order date. If the purchase order is received after the 
applicable cut-off time, the purchase order date will be the next day. 
Purchase orders are irrevocable. The total cash payment required to 
create each Creation Unit will be the NAV of 50,000 Shares of the 
applicable Fund on the purchase order date plus the applicable 
transaction fee.
    The procedures by which an authorized participant can redeem one or 
more Creation Units will mirror the procedures for the creation of 
Creation Units. On any Business Day, an authorized participant may 
place an order with the Distributor to redeem one or more Creation 
Units. Redemption orders must be placed by 3:30 p.m. E.T. in order to 
avoid higher transaction fees, but in no instances may redemption 
orders be placed after 4 p.m. E.T. If a redemption order is received 
prior to the applicable cut-off time, the day on which the Distributor 
receives a valid redemption order is the redemption order date. If the 
redemption order is received after the applicable cut-off time, the 
redemption order date will be the next day. Redemption orders are 
irrevocable. The redemption proceeds from a Fund will consist of the 
cash redemption amount. The cash redemption amount will be equal to the 
NAV of the number of Creation Unit(s) of such Fund requested in the 
authorized participant's redemption order as of the time of the 
calculation of such Fund's NAV on the redemption order date, less 
transaction fees.
Intraday Indicative Value (``IIV'')
    The IIV with respect to each Fund is an indicator of the value of 
the Commodity Futures Contracts and Currency Futures Contracts, as 
applicable; Commodity Financial Instruments and Currency Financial 
Instruments, if any; and cash and receivables less liabilities of a 
Fund at the time the IIV is disseminated. The IIV with respect to each 
Fund, updated every 15 seconds, will be widely disseminated by one or 
more major market data vendors during the NYSE Arca Core Trading 
Session.\18\ However, circumstances may arise in which the NYSE Arca 
Core Trading Session is in progress, but trading in Commodity or 
Currency Futures Contracts is not occurring. Such circumstances may 
result from reasons including, but not limited to, the CME or ICE, as 
applicable, having a separate holiday schedule than the NYSE Arca, the 
CME, or ICE closing prior to the close of the NYSE Arca, price 
fluctuation limits being reached in a Commodity or Currency Futures 
Contract, or the CME or ICE, as applicable, imposing any other 
suspension or limitation on trading in a Commodity or Currency Futures 
Contract. In such instances, the value of the applicable Commodity or 
Currency Futures Contracts, as well as Commodity or Currency Financial 
Instruments whose value is derived from the Commodity or Currency 
Futures Contracts, held by the Funds would be static or priced by the 
Fund at the applicable early cut-off time of the exchange trading the 
applicable Commodity or Currency Futures Contract. Moreover, any cash 
held by the Funds for collateralization purposes will be invested in 
short term treasury vehicles that do not have market exposure, such 
that their value would change throughout the trading day. As such, 
during such periods, the disseminated IIV for the affected Fund or 
Funds will be static.
---------------------------------------------------------------------------

    \18\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIVs 
taken from the Consolidated Tape Association (``CTA'') or other data 
feeds.
---------------------------------------------------------------------------

    The IIV 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. 
The IIV also should not be viewed as a precise value of the Shares.
    The value of a Share of a Fund may be influenced by non-concurrent 
trading hours between NYSE Arca and the Futures Exchanges. As a result, 
during periods when the NYSE Arca is open and one or more of the 
applicable futures exchanges is closed, trading spreads and the 
resulting premium or discount on the Shares may widen and, therefore, 
increase the difference between the price of the Shares and the NAV of 
the Shares.
    According to the Registration Statement, dissemination of the IIV 
provides additional information that is not otherwise available to the 
public and may be useful to investors and market professionals in 
connection with the trading of Shares. Investors and market 
professionals will be able throughout the trading day to compare the 
market price of a Fund and the IIV. If the market price of Shares 
diverges significantly from the IIV, market

[[Page 58886]]

professionals may have an incentive to execute arbitrage trades. Such 
arbitrage trades can tighten the tracking between the market price of a 
Fund and the IIV and thus can be beneficial to all market participants.
Availability of Information Regarding the Shares
    The current trading price per Share of each Fund (quoted in U.S. 
Dollars) will be published continuously under its ticker symbol as 
trades occur throughout each trading day via CTA, Reuters and/or 
Bloomberg.
    The Web site for the Funds and/or the Exchange, which are publicly 
accessible at no charge, will contain the following information: (a) 
The current NAV per Share daily and the prior Business Day's NAV and 
the reported closing price; (b) the mid-point of the bid-ask price in 
relation to the NAV as of the time the NAV is calculated (``Bid-Ask 
Price''); (c) calculation of the premium or discount of such price 
against such NAV; (d) the Bid-Ask Price of Shares determined using the 
highest bid and lowest offer as of the time of calculation of the NAV; 
(e) data in chart form displaying the frequency distribution of 
discounts and premiums of the Bid-Ask Price against the NAV, within 
appropriate ranges for each of the four (4) previous calendar quarters; 
(f) the prospectus; and (g) other applicable quantitative information.
    The NAV means the total assets of a Fund including, but not limited 
to, all cash and cash equivalents or other debt securities less total 
liabilities of such Fund, each determined on the basis of generally 
accepted accounting principles in the United States, consistently 
applied under the accrual method of accounting. NAV will be calculated 
at 4 p.m. E.T. Additional information regarding calculation of NAV is 
included in the Registration Statement.
    The NAV for each Fund will be calculated by the Administrator once 
a day and will be disseminated daily to all market participants at the 
same time. The Exchange also will disseminate on a daily basis via CTA 
information with respect to the recent NAV and Shares outstanding. 
Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the CTA.
    The closing and daily settlement prices for the Commodity Futures 
Contracts and Currency Futures Contracts are publicly available on the 
Web site of the CME (www.cmegroup.com) and ICE (www.theice.com), as 
applicable. Intraday prices for the Commodity and Currency Futures 
Contracts, updated at least every 15 seconds, also are publicly 
available through major market data vendors. In addition, various data 
vendors and news publications publish futures prices and data. The 
Exchange represents that futures quotes and last sale information for 
the Commodity Futures Contracts and Currency Futures Contracts are 
widely disseminated through a variety of major market data vendors 
worldwide, including Bloomberg and Reuters. In addition, the Exchange 
further represents that complete real-time data for Commodity Futures 
Contracts and Currency Futures Contracts is available by subscription 
from Reuters and Bloomberg. The applicable specific contract 
specifications for Commodity Futures Contracts and Currency Futures 
Contracts are also available from the CME and ICE Web sites referenced 
above, as well as other financial informational sources. Real-time 
dissemination of spot pricing for gold, silver, Yen, Euro, and 
currencies included in the U.S. Dollar Index is available on a 24-hour 
basis worldwide from various major market data vendors.
    In addition, there is a considerable amount of foreign currency 
price and market information available on public Web sites and through 
professional and subscription services, including price information 
with respect to currencies included in the U.S. Dollar Index. In most 
instances, real-time information is only available for a fee, and 
information available free of charge is subject to delay (typically, 15 
to 20 minutes). The U.S. Dollar Index value is disseminated every 15 
seconds by major market data vendors during the Exchange's Core Trading 
Session.
    Complete real-time data for foreign currency futures and options 
prices traded on the CME and NASDAQ OMX PHLX (``PHLX''), respectively, 
are also available by subscription from information service providers. 
The CME and PHLX also provide delayed futures and options information 
on current and past trading sessions and market news free of charge on 
their respective Web sites. Pricing information for futures and options 
on futures on the U.S. Dollar Index is available from the ICE Web site 
and major market data vendors.
    The value of the benchmarks, updated at least every 15 seconds 
during the NYSE Arca Core Trading Session, will be disseminated by one 
or more major market data vendors.
    The Sponsor will publish the NAV of each Fund and the NAV per Share 
of each Fund daily.
    The most recent end-of-day NAV of each Fund will be published under 
its own symbol as of the close of business by major market data vendors 
and on the Sponsor's Web site. In addition, the most recent end-of-day 
NAV of each Fund will be published the following morning via the CTA.
    The Funds will provide Web site disclosure of portfolio holdings 
daily and will include, as applicable, the names and value (in U.S. 
Dollars) of Commodity Futures Contracts and Currency Futures Contracts, 
as applicable; Commodity Financial Instruments and Currency Financial 
Instruments, if any; and the amount of cash and/or cash equivalents 
held in the portfolio of the Funds. This Web site disclosure of the 
portfolio composition of the Funds will occur at the same time as the 
disclosure by the Sponsor 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 
Funds through the Funds' Web site.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. The Exchange has 
appropriate rules to facilitate transactions in the Shares during all 
trading sessions. As provided in NYSE Arca Equities Rule 7.6, 
Commentary .03, the minimum price variation (``MPV'') for quoting and 
entry of orders in equity securities traded on the NYSE Arca 
Marketplace is $0.01, with the exception of securities that are priced 
less than $1.00 for which the MPV for order entry is $0.0001.
    The trading of the Shares will be subject to NYSE Arca Equities 
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on 
Equity Trading Permit (``ETP'') Holders acting as registered Market 
Makers in TIRs to facilitate surveillance. See ``Surveillance'' below 
for more information.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in certain Shares. Trading may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. These may include: (1) The extent to 
which

[[Page 58887]]

trading is not occurring in Commodity Futures Contracts, Currency 
Futures Contracts, Commodity Financial Instruments, and/or Currency 
Financial Instruments, as applicable, held by the Funds, or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule \19\ or by the halt or suspension of trading of 
Commodity Futures Contracts, Currency Futures Contracts, Commodity 
Financial Instruments, and/or Currency Financial Instruments, as 
applicable. The Exchange represents that the Exchange may halt trading 
during the day in which an interruption to the dissemination of the 
IIV, trading in the applicable Commodity or Currency Futures Contract 
for each Fund, or to trading in Currency or Commodity Financial 
Instruments, as described above, occurs for each Fund. If the 
interruption to the dissemination of the IIV, trading in the applicable 
Commodity or Currency Futures Contract for each Fund, or to trading in 
Currency or Commodity Financial Instruments, as applicable, 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. In addition, 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.
---------------------------------------------------------------------------

    \19\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

    The Funds will meet the initial and continued listing requirements 
applicable to TIRs in NYSE Arca Equities Rule 8.200 and Commentary .02 
thereto. The Exchange represents that, for the initial and continued 
listing of the Shares, the Funds must be in compliance with NYSE Arca 
Equities Rule 5.3 and Rule 10A-3 under the Act.\20\ A minimum of 
100,000 Shares for each Fund will be outstanding as of the start of 
trading on the Exchange.
---------------------------------------------------------------------------

    \20\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products, including TIRs, to 
monitor trading in the Shares. The Exchange represents that these 
procedures are adequate to properly monitor Exchange trading of the 
Shares in all trading sessions and to deter and detect violations of 
Exchange rules 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 Shares, the physical 
commodities or currencies underlying options, futures or options on 
futures through ETP Holders, in connection with such ETP Holders' 
proprietary or customer trades which they effect through ETP Holders on 
any relevant market. The Exchange can obtain market surveillance 
information, including customer identity information, with respect to 
transactions occurring on the Futures Exchanges, including transactions 
in cash-settled options on Commodity or Currency Futures Contracts, 
which are members of the Intermarket Surveillance Group (``ISG'').\21\
---------------------------------------------------------------------------

    \21\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
portfolio for the Funds may trade on markets that are members of ISG 
or with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    The Exchange also has a general policy prohibiting the distribution 
of material, non-public information by its employees.
Suitability
    Currently, NYSE Arca Equities Rule 9.2(a) (Diligence as to 
Accounts) provides that an ETP Holder, before recommending a 
transaction in any security, must have reasonable grounds to believe 
that the recommendation is suitable for the customer based on any facts 
disclosed by the customer as to its other security holdings and as to 
its financial situation and needs. Further, the rule provides, with a 
limited exception, that prior to the execution of a transaction 
recommended to a non-institutional customer, the ETP Holder must make 
reasonable efforts to obtain information concerning the customer's 
financial status, tax status, investment objectives, and any other 
information that such ETP Holder believes would be useful to make a 
recommendation.
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders of the suitability requirements of NYSE Arca Equities Rule 
9.2(a) in an Information Bulletin. Specifically, ETP Holders will be 
reminded in the Information Bulletin that, in recommending transactions 
in the Shares, they must have a reasonable basis to believe that (1) 
the recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's investment objectives, financial situation, 
needs, and any other information known by such ETP Holder, and (2) the 
customer can evaluate the special characteristics, and is able to bear 
the financial risks, of an investment in the Shares. In connection with 
the suitability obligation, the Information Bulletin will also provide 
that ETP Holders must make reasonable efforts to obtain the following 
information: (1) The customer's financial status; (2) the customer's 
tax status; (3) the customer's investment objectives; and (4) such 
other information used or considered to be reasonable by such ETP 
Holder or registered representative in making recommendations to the 
customer.
    In addition, FINRA has implemented increased sales practice and 
customer margin requirements for FINRA members applicable to leveraged 
exchange-traded funds (which include the Shares) and options on 
leveraged exchange-traded funds, as described in FINRA Regulatory 
Notices 09-31 (June 2009), 09-53 (August 2009) and 09-65 (November 
2009) (collectively, ``FINRA Regulatory Notices''). ETP Holders that 
carry customer accounts will be required to follow the FINRA guidance 
set forth in these notices.
    As disclosed in the Registration Statement, each Leveraged Fund 
will seek a multiple or inverse multiple (plus or minus 300%) of the 
return (before fees and expenses) of its target benchmark commodity or 
currency on a given day, and each Bear 1X Fund will seek -100% of the 
return (before fees and expenses) of its target benchmark commodity on 
a given day. Over a period of time in excess of one day, the cumulative 
percentage increase or decrease in the NAV of the Shares of a Fund may 
diverge significantly from a multiple or inverse multiple of the 
cumulative percentage decrease or increase in the relevant benchmark 
due to a compounding effect. The Exchange's Information Bulletin 
regarding the Funds, described below, will provide information 
regarding the suitability of an investment in the Shares, as stated in 
the Registration Statement.
Information Bulletin
    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

[[Page 58888]]

will discuss the following: (1) 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; (2) except for the 
Dollar Funds, a static IIV may be disseminated between the close of 
trading of all applicable Commodity or Currency Futures Contracts on 
Futures Exchanges and the close of the NYSE Arca Core Trading Session; 
(3) the procedures for purchases and redemptions of Shares in Creation 
Units (and that Shares are not individually redeemable); (4) 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; (5) how information regarding the IIV is 
disseminated; (6) 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 (7) trading information.
    In addition, the Information Bulletin will advise ETP Holders, 
prior to the commencement of trading, of the prospectus delivery 
requirements applicable to the Funds. The Exchange notes that investors 
purchasing Shares directly from the Funds will receive a prospectus. 
ETP Holders purchasing Shares from the Funds for resale to investors 
will deliver a prospectus to such investors. The Information Bulletin 
will also discuss any exemptive, no-action and interpretive relief 
granted by the Commission from any rules under the Act.
    The Information Bulletin will further advise ETP Holders that FINRA 
has implemented increased sales practice and customer margin 
requirements for FINRA members applicable to leveraged exchange-traded 
funds (which include the Shares) and options on leveraged exchange-
traded funds, as described in the FINRA Regulatory Notices.
    In addition, the Information Bulletin will reference that the Funds 
are subject to various fees and expenses described in the Registration 
Statements. The Information Bulletin will also reference that the 
Commodity Futures Trading Commission has regulatory jurisdiction over 
the trading of futures contracts traded on U.S. markets.
    The Information Bulletin will also disclose the trading hours of 
the Shares of the Funds and that the NAV for the Shares is calculated 
after 4 p.m. E.T. each trading day. The Bulletin will disclose that 
information about the Shares of the Funds is publicly available on the 
Funds' Web site.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \22\ that an exchange have rules 
that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 8.200 
and Commentary .02 thereto. The Exchange has in place surveillance 
procedures that are adequate to properly monitor trading in the Shares 
in all trading sessions and to deter and detect violations of Exchange 
rules and applicable Federal securities laws. The Exchange may obtain 
information via ISG from other exchanges that are members of ISG or 
with which the Exchange has entered into a comprehensive surveillance 
sharing agreement. The intra-day futures prices, closing price and 
settlement prices of the Commodity or Currency Futures Contracts held 
by the Funds are also available from the COMEX, CME, ICE, automated 
quotation systems, published or other public sources, or on-line 
information services. Quotation and last-sale information for the 
Shares will be available via CTA. Each Fund's total portfolio 
composition will be disclosed on the Funds' Web site or another 
relevant Web site. Each of the Commodity Funds will seek to achieve its 
investment objective by primarily investing in Commodity Futures 
Contracts. For each of the Commodity Funds, in the event position 
limits or position accountability levels are reached with respect to 
the applicable Commodity Futures Contracts, or if trading of such 
Commodity Futures Contracts is suspended due [sic] price fluctuation 
limits being reached or if the CME imposes any other suspension or 
limitation on trading in a Commodity Futures Contract, the Sponsor may, 
in its commercially reasonable judgment, cause the Commodity Funds to 
obtain exposure through cash-settled, exchange-traded options on 
Commodity Futures Contracts, as applicable, and forward contracts, 
swaps, and other over-the-counter transactions that are based on the 
price of Commodity Futures Contracts, as applicable, if such 
instruments tend to exhibit trading prices or returns that correlate 
with any Commodity Futures Contract and will further the investment 
objective of such Commodity Fund. Each of the Currency Funds will seek 
to achieve its investment objective primarily by investing in Currency 
Futures Contracts. For each Currency Fund (except the Dollar Funds), in 
the event position limits or position accountability levels are reached 
with respect to the applicable Currency Futures Contracts, or if 
trading of such Currency Futures Contracts is suspended due to price 
fluctuation limits being reached or if the CME or ICE (with respect to 
the Dollar Funds), as applicable, imposes any other suspension or 
limitation on trading in a Currency Futures Contract, the Sponsor may, 
in its commercially reasonable judgment, cause the Currency Funds to 
obtain exposure through cash-settled, exchange-traded options on 
Currency Futures Contracts, as applicable, and forward contracts, 
swaps, and other over-the-counter transactions that are based on the 
price of Currency Futures Contracts, as applicable, if such instruments 
tend to exhibit trading prices or returns that correlate with any 
Currency Futures Contract and will further the investment objective of 
such Currency Fund. To the extent practicable, the Commodity Funds and 
Currency Funds will invest in swaps cleared through the facilities of a 
centralized clearing house. Each Fund will enter into swap agreements 
and other over-the-counter transactions only with large, established 
and well capitalized financial institutions that meet certain credit 
quality standards and monitoring policies. Each Fund will use various 
techniques to minimize credit risk including early termination or reset 
and payment, using different counterparties and limiting the net amount 
due from any individual counterparty. The Exchange represents that the 
Exchange may halt trading during the day in which an interruption to 
the dissemination of the IIV, trading in the applicable Commodity or 
Currency Futures Contract for each Fund, or trading in Currency or 
Commodity Financial Instruments, as described above, occurs for each 
Fund. If the interruption to the dissemination of the IIV, trading in 
the applicable Commodity or Currency Futures Contract for each Fund, or 
to trading in Currency or Commodity Financial Instruments, as 
applicable, persists past the trading day in which it occurred, the 
Exchange will halt trading no later than the beginning of the trading 
day

[[Page 58889]]

following the interruption. The value of the benchmarks will be 
calculated and disseminated at least every 15 seconds during the NYSE 
Arca Core Trading Session. The Exchange will inform its ETP Holders in 
an Information Bulletin of the special characteristics and risks 
associated with trading the Shares and that FINRA has implemented 
increased sales practice and customer margin requirements for FINRA 
members applicable to leveraged exchange-traded funds and options on 
leveraged exchange-traded funds, as described in the FINRA Regulatory 
Notices.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information is publicly available regarding the 
Funds and the Shares, thereby promoting market transparency. The NAV 
per Share will be calculated daily and made available to all market 
participants at the same time. One or more major market data vendors 
will disseminate for the Funds on a daily basis information with 
respect to the recent NAV per Share and Shares outstanding. The IIV 
with respect to each Fund, updated every 15 seconds, will be widely 
disseminated by one or more major market data vendors during the NYSE 
Arca Core Trading Session.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of exchange-traded products that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding the Funds' holdings, IIV, and quotation 
and last-sale information for the Shares.

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 45 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 or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2012-102 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 Number SR-NYSEArca-2012-102. This 
file number should be included on the subject line if email 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 business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2012-102 and should 
be submitted on or before October 15, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-23461 Filed 9-21-12; 8:45 am]
BILLING CODE 8011-01-P