[Federal Register Volume 76, Number 183 (Wednesday, September 21, 2011)]
[Notices]
[Pages 58549-58553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-24175]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65344; File No. SR-NYSEArca-2011-48]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change To List and Trade Shares of the Teucrium Wheat
Fund, the Teucrium Soybean Fund and the Teucrium Sugar Fund Under NYSE
Arca Equities Rule 8.200, Commentary .02
September 15, 2011.
I. Introduction
On July 11, 2011, 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 Teucrium Wheat Fund, the Teucrium Soybean
Fund, and the Teucrium Sugar Fund under Commentary .02 to NYSE Arca
Equities Rule 8.200. The proposed rule change was published for comment
in the Federal Register on August 1, 2011.\3\ The Commission received
no comments on the proposal. This order grants approval of the proposed
rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 64967 (July 26,
2011), 76 FR 45885 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to list and trade shares (``Shares'') of the
Teucrium Wheat Fund, the Teucrium Soybean Fund, and the Teucrium Sugar
Fund (each a ``Fund'' and, collectively, ``Funds'') \4\ pursuant to
NYSE Arca Equities Rule 8.200, Commentary .02, which permits the
trading of Trust Issued Receipts either by listing or pursuant to
unlisted trading privileges.\5\ The Funds are commodity pools that are
series of the Teucrium Commodity Trust (``Trust''), a Delaware
statutory trust. The Funds are managed and controlled by Teucrium
Trading, LLC (``Sponsor''). The Sponsor is a Delaware limited liability
company that is registered as a commodity pool operator with the
Commodity Futures Trading Commission (``CFTC'') and is a member of the
National Futures Association.
---------------------------------------------------------------------------
\4\ See Amendment No. 3 to Form S-1 for Teucrium Commodity
Trust, dated June 3, 2011 (File No. 333-167591) relating to the
Teucrium Wheat Fund; Amendment No. 3 to Form S-1 for Teucrium
Commodity Trust, dated June 3, 2011 (File No. 333-167590) relating
to the Teucrium Soybean Fund; and Amendment No. 3 to Form S-1 for
Teucrium Commodity Trust, dated June 3, 2011 (File No. 333-167585)
relating to the Teucrium Sugar Fund (each, a ``Registration
Statement,'' and, collectively, the ``Registration Statements'').
\5\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to
Trust Issued Receipts 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.
---------------------------------------------------------------------------
Teucrium Wheat Fund
The investment objective of the Teucrium Wheat Fund is to have the
daily changes in percentage terms of the Shares' net asset value
(``NAV'') reflect the daily changes in percentage terms of a weighted
average of the closing settlement prices for three futures contracts
for wheat (wheat futures contracts generally referred to herein as
``Wheat Futures Contracts'') that are traded on the Chicago Board of
Trade (``CBOT''), specifically: (1) The second-to-expire CBOT Wheat
Futures Contract, weighted 35%; (2) the third-to-expire CBOT Wheat
Futures Contract, weighted 30%; and (3) the CBOT Wheat Futures Contract
expiring in the December following the expiration month of the third-
to-expire contract, weighted 35%. The weighted average of the three
above-referenced Wheat Futures Contracts is referred to herein as the
``Wheat Benchmark,'' and the three Wheat Futures Contracts that at any
given time make up the Wheat Benchmark are referred to herein as the
``Wheat Benchmark Component Futures Contracts.''
The Fund seeks to achieve its investment objective by investing
under normal market conditions in Wheat Benchmark Component Futures
Contracts or, in certain circumstances, in other Wheat Futures
Contracts traded on the CBOT, the Kansas City Board of Trade
(``KCBT''), or the Minneapolis Grain Exchange (``MGEX''), or Wheat
Futures Contracts traded on foreign exchanges. In addition, and to a
limited extent, the Fund also may invest in exchange-traded options on
Wheat Futures Contracts, and in wheat-based swap agreements that are
cleared through the CBOT or its affiliated provider of clearing
services (``Cleared Wheat Swaps'') in furtherance of the Fund's
investment objective. Specifically, once position limits in CBOT Wheat
Futures Contracts are reached, the Fund's intention is to invest first
in Cleared Wheat Swaps to the extent permitted under the position
limits applicable to Cleared Wheat Swaps and appropriate in light of
the liquidity in the Cleared Wheat Swaps market, and then, using its
commercially reasonable judgment, in other Wheat Futures Contracts
(i.e., Wheat Futures Contracts traded on KCBT, MGEX or traded on
foreign exchanges) or instruments such as cash-settled options on Wheat
Futures Contracts and forward contracts, swaps other than Cleared Wheat
Swaps, and other over-the-counter transactions that are based on the
price of wheat and Wheat Futures Contracts (collectively, ``Other Wheat
Interests,'' and together with Wheat Futures Contracts and Cleared
Wheat Swaps, ``Wheat Interests''). By utilizing certain or all of these
investments, the Sponsor will endeavor to cause the Fund's performance
to closely track that of the Wheat Benchmark.
The Fund seeks to achieve its investment objective primarily by
investing in Wheat Interests such that daily changes in the Fund's NAV
will be expected to closely track the changes in the Wheat Benchmark.
The Fund's positions in Wheat Interests will be changed or ``rolled''
on a regular basis in order to track the changing nature of the Wheat
Benchmark. For example, five times a year (on the date on which a Wheat
Futures Contract expires), the second-to-expire Wheat Futures Contract
will become the next-to-expire Wheat Futures Contract and will no
longer be a Wheat Benchmark Component Futures Contract, and the Fund's
investments will have to be changed accordingly.\6\
---------------------------------------------------------------------------
\6\ For each of the Funds, in order that the Fund's trading does
not cause unwanted market movements and to make it more difficult
for third parties to profit by trading based on such expected market
movements, the Fund's investments typically will not be rolled
entirely on that day, but rather will typically be rolled over a
period of several days.
---------------------------------------------------------------------------
Consistent with achieving the Fund's investment objective of
closely tracking the Wheat Benchmark, the Sponsor may for certain
reasons cause the Fund to enter into or hold Cleared Wheat Swaps and/or
Other Wheat Interests. For example, certain Cleared Wheat Swaps have
standardized terms similar to, and are priced by reference to, a
corresponding Wheat Benchmark
[[Page 58550]]
Component Futures Contract. Additionally, Other Wheat Interests that do
not have standardized terms and are not exchange-traded (``over-the-
counter'' Wheat Interests), can generally be structured as the parties
desire. Therefore, the Fund might enter into multiple Cleared Wheat
Swaps and/or over-the-counter Wheat Interests intended to exactly
replicate the performance of each of the three Wheat Benchmark
Component Futures Contracts, or a single over-the-counter Wheat
Interest designed to replicate the performance of the Wheat Benchmark
as a whole. Assuming that there is no default by a counterparty to an
over-the-counter Wheat Interest, the performance of the over-the-
counter Wheat Interest will necessarily correlate exactly with the
performance of the Wheat Benchmark or the applicable Wheat Benchmark
Component Futures Contract.\7\ The Fund might also enter into or hold
over-the-counter Wheat Interests to facilitate effective trading. In
addition, the Fund might enter into or hold over-the-counter Wheat
Interests that would be expected to alleviate overall deviation between
the Fund's performance and that of the Wheat Benchmark that may result
from certain market and trading inefficiencies or other reasons.
---------------------------------------------------------------------------
\7\ Each of the Funds face the risk of non-performance by the
counterparties to over-the-counter contracts. Unlike in futures
contracts, the counterparty to these contracts is generally a single
bank or other financial institution, rather than a clearing
organization backed by a group of financial institutions. As a
result, there will be greater counterparty credit risk in these
transactions. The creditworthiness of each potential counterparty
will be assessed by the Sponsor. The Sponsor will assess or review,
as appropriate, the creditworthiness of each potential or existing
counterparty to an over-the-counter contract pursuant to guidelines
approved by the Sponsor. The creditworthiness of existing
counterparties will be reviewed periodically by the Sponsor.
---------------------------------------------------------------------------
The Fund will invest in Wheat 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 Wheat Interests.\8\ 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 (``Treasury Securities'') or cash equivalents, and/or hold
such assets in cash (generally in interest-bearing accounts).
Therefore, the focus of the Sponsor in managing the Fund is investing
in Wheat Interests and in Treasury Securities, cash and/or cash
equivalents. Each of the Funds will earn interest income from the
Treasury Securities and/or cash equivalents that it purchases and on
the cash it holds through each Fund's custodian, the Bank of New York
Mellon (``Custodian'' or ``Administrator'').
---------------------------------------------------------------------------
\8\ The Sponsor represents that the Fund will invest in Wheat
Interests in a manner consistent with the Fund's investment
objective and not to achieve additional leverage.
---------------------------------------------------------------------------
Teucrium Soybean Fund
The investment objective of the Teucrium Soybean Fund is to have
the daily changes in percentage terms of the Shares' NAV reflect the
daily changes in percentage terms of a weighted average of the closing
settlement prices for three futures contracts for soybeans (soybean
futures contracts generally referred to herein as ``Soybean Futures
Contracts'') that are traded on the CBOT. Generally, the three Soybean
Futures Contracts will be: (1) Second-to-expire CBOT Soybean Futures
Contract, weighted 35%; (2) the third-to-expire CBOT Soybean Futures
Contract, weighted 30%; and (3) the CBOT Soybean Futures Contract
expiring in the November following the expiration month of the third-
to-expire contract, weighted 35%. The weighted average of the three
above-referenced Soybean Futures Contracts is referred to herein as the
``Soybean Benchmark,'' and the three Soybean Futures Contracts that at
any given time make up the Soybean Benchmark are referred to herein as
the ``Soybean Benchmark Component Futures Contracts.''
The Fund seeks to achieve its investment objective by investing
under normal market conditions in Soybean Benchmark Component Futures
Contracts or, in certain circumstances, in other Soybean Futures
Contracts traded on CBOT or Soybean Futures Contracts traded on foreign
exchanges. In addition, and to a limited extent, the Fund also may
invest in exchange-traded options on Soybean Futures Contracts and in
soybean-based swap agreements that are cleared through the CBOT or its
affiliated provider of clearing services (``Cleared Soybean Swaps'') in
furtherance of the Fund's investment objective. Specifically, once CBOT
position limits in Soybean Futures Contracts are reached, the Fund's
intention is to invest first in Cleared Soybean Swaps to the extent
permitted under the CBOT position limits applicable to Cleared Soybean
Swaps and appropriate in light of the liquidity in the Cleared Soybean
Swaps market, and then, using its commercially reasonable judgment, in
other Soybean Futures Contracts (i.e., Soybean Futures Contracts traded
on foreign exchanges) and instruments such as cash-settled options on
Soybean Futures Contracts and forward contracts, swaps other than
Cleared Soybean Swaps, and other over-the-counter transactions that are
based on the price of soybeans and Soybean Futures Contracts
(collectively, ``Other Soybean Interests,'' and together with Soybean
Futures Contracts and Cleared Soybean Swaps, ``Soybean Interests'').
The Fund seeks to achieve its investment objective primarily by
investing in Soybean Interests such that daily changes in the Fund's
NAV will be expected to closely track the changes in the Soybean
Benchmark. The Fund's positions in Soybean Interests will be changed or
``rolled'' on a regular basis in order to track the changing nature of
the Soybean Benchmark. For example, five times a year (on the date on
which certain Soybean Futures Contracts expire), a particular Soybean
Futures Contract will no longer be a Soybean Benchmark Component
Futures Contract, and the Fund's investments will have to be changed
accordingly.
Consistent with achieving the Fund's investment objective of
closely tracking the Soybean Benchmark, the Sponsor may for certain
reasons cause the Fund to enter into or hold Cleared Soybean Swaps and/
or Other Soybean Interests. For example, certain Cleared Soybean Swaps
have standardized terms similar to, and are priced by reference to, a
corresponding Soybean Benchmark Component Futures Contract.
Additionally, Other Soybean Interests that do not have standardized
terms and are not exchange-traded (``over-the-counter'' Soybean
Interests) can generally be structured as the parties desire.
Therefore, the Fund might enter into multiple Cleared Soybean Swaps
and/or over-the-counter Soybean Interests intended to exactly replicate
the performance of each of the three Soybean Benchmark Component
Futures Contracts, or a single over-the-counter Soybean Interest
designed to replicate the performance of the Soybean Benchmark as a
whole. Assuming that there is no default by a counterparty to an over-
the-counter Soybean Interest, the performance of the over-the-counter
Soybean Interest will necessarily correlate exactly with the
performance of the Soybean Benchmark or the applicable Soybean
Benchmark Component Futures Contract. The Fund might also enter into or
hold over-the-counter Soybean Interests to facilitate effective
trading, consistent with the discussion of the Fund's ``roll'' strategy
in the preceding paragraph. In addition, the Fund might enter into or
hold over-the-counter Soybean Interests that would be expected to
alleviate overall deviation between the Fund's
[[Page 58551]]
performance and that of the Soybean Benchmark that may result from
certain market and trading inefficiencies or other reasons.
The Fund will invest in Soybean 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 Soybean Interests.\9\ After fulfilling such margin
and collateral requirements, the Fund will invest the remainder of its
proceeds from the sale of baskets in Treasury Securities or cash
equivalents, and/or hold such assets in cash (generally in interest-
bearing accounts). Therefore, the focus of the Sponsor in managing the
Fund is investing in Soybean Interests and in Treasury Securities, cash
and/or cash equivalents.
---------------------------------------------------------------------------
\9\ The Sponsor represents that the Fund will invest in Soybean
Interests in a manner consistent with the Fund's investment
objective and not to achieve additional leverage.
---------------------------------------------------------------------------
Teucrium Sugar Fund
The investment objective of the Teucrium Sugar Fund is to have the
daily changes in percentage terms of the Shares' NAV reflect the daily
changes in percentage terms of a weighted average of the closing
settlement prices for three futures contracts for sugar (sugar futures
contracts generally referred to herein as ``Sugar Futures Contracts'')
that are traded on ICE Futures US (``ICE Futures''), specifically: (1)
The second-to-expire Sugar No. 11 Futures Contract (a ``Sugar No. 11
Futures Contract''), weighted 35%; (2) the third-to-expire Sugar No. 11
Futures Contract, weighted 30%; and (3) the Sugar No. 11 Futures
Contract expiring in the March following the expiration month of the
third-to-expire contract, weighted 35%. The weighted average of the
three above-referenced Sugar No. 11 Futures Contracts is referred to
herein as the ``Sugar Benchmark,'' and the three Sugar No. 11 Futures
Contracts that at any given time make up the Sugar Benchmark are
referred to herein as the ``Sugar Benchmark Component Futures
Contracts.''
The Fund seeks to achieve its investment objective by investing
under normal market conditions in Sugar Benchmark Component Futures
Contracts or, in certain circumstances, in other Sugar Futures
Contracts traded on ICE Futures or the New York Mercantile Exchange
(``NYMEX''), or Sugar Futures Contracts traded on foreign exchanges. In
addition, and to a limited extent, the Fund also may invest in
exchange-traded options on Sugar Futures Contracts and in sugar-based
swap agreements that are cleared through ICE Futures or its affiliated
provider of clearing services (``Cleared Sugar Swaps'') in furtherance
of the Fund's investment objective. Specifically, once accountability
levels in Sugar No. 11 Futures Contracts traded on ICE Futures are
reached, the Fund's intention is to invest first in Cleared Sugar Swaps
to the extent permitted under the accountability levels applicable to
Cleared Sugar Swaps and appropriate in light of the liquidity in the
Cleared Sugar Swaps market, and then, using its commercially reasonable
judgment, in other Sugar Futures Contracts (i.e., Sugar Futures
Contracts traded on the NYMEX or foreign exchanges) and instruments
such as cash-settled options on Sugar Futures Contracts and forward
contracts, swaps other than Cleared Sugar Swaps, and other over-the-
counter transactions that are based on the price of sugar and Sugar
Futures Contracts (collectively, ``Other Sugar Interests,'' and
together with Sugar Futures Contracts and Cleared Sugar Swaps, ``Sugar
Interests'').
The Fund seeks to achieve its investment objective primarily by
investing in Sugar Interests such that daily changes in the Fund's NAV
will be expected to closely track the changes in the Sugar Benchmark.
The Fund's positions in Sugar Interests will be changed or ``rolled''
on a regular basis in order to track the changing nature of the Sugar
Benchmark. For example, four times a year (on the date on which a Sugar
No. 11 Futures Contract expires), a particular Sugar No. 11 Futures
Contract will no longer be a Sugar Benchmark Component Futures
Contract, and the Fund's investments will have to be changed
accordingly.
Consistent with achieving the Fund's investment objective of
closely tracking the Sugar Benchmark, the Sponsor may for certain
reasons cause the Fund to enter into or hold Cleared Sugar Swaps and/or
Other Sugar Interests. For example, certain Cleared Sugar Swaps have
standardized terms similar to, and are priced by reference to, a
corresponding Sugar Benchmark Component Futures Contract. Additionally,
Other Sugar Interests that do not have standardized terms and are not
exchange-traded, referred to as ``over-the-counter'' Sugar Interests,
can generally be structured as the parties desire. Therefore, the Fund
might enter into multiple Cleared Sugar Swaps and/or over-the-counter
Sugar Interests intended to exactly replicate the performance of each
of the three Sugar Benchmark Component Futures Contracts, or a single
over-the-counter Sugar Interest designed to replicate the performance
of the Sugar Benchmark as a whole. Assuming that there is no default by
a counterparty to an over-the-counter Sugar Interest, the performance
of the over-the-counter Sugar Interest will necessarily correlate
exactly with the performance of the Sugar Benchmark or the applicable
Sugar Benchmark Component Futures Contract. The Fund might also enter
into or hold over-the-counter Sugar Interests other than Sugar
Benchmark Component Futures Contracts to facilitate effective trading,
consistent with the discussion of the Fund's ``roll'' strategy in the
preceding paragraph. In addition, the Fund might enter into or hold
over-the-counter Sugar Interests that would be expected to alleviate
overall deviation between the Fund's performance and that of the Sugar
Benchmark that may result from certain market and trading
inefficiencies or other reasons.
The Fund will invest in Sugar 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 Sugar Interests.\10\ After fulfilling such margin
and collateral requirements, the Fund will invest the remainder of its
proceeds from the sale of baskets in Treasury Securities or cash
equivalents, and/or hold such assets in cash (generally in interest-
bearing accounts). Therefore, the focus of the Sponsor in managing the
Fund is investing in Sugar Interests and in Treasury Securities, cash
and/or cash equivalents.
---------------------------------------------------------------------------
\10\ The Sponsor represents that the Fund will invest in Sugar
Interests in a manner consistent with the Fund's investment
objective and not to achieve additional leverage.
---------------------------------------------------------------------------
The Exchange represents that the Funds will meet the initial and
continued listing requirements applicable to Trust Issued Receipts in
NYSE Arca Equities Rule 8.200 and Commentary .02 thereto. The Exchange
further represents that, with respect to application of Rule 10A-3
under the Act,\11\ the Trust will rely on the exception contained in
Rule 10A-3(c)(7),\12\ and a minimum of 100,000 Shares for each Fund
will be outstanding as of the start of trading on the Exchange.
---------------------------------------------------------------------------
\11\ 17 CFR 240.10A-3.
\12\ 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------
Additional details regarding the Trust; Funds; Shares; trading
policies of the Funds; creations and redemptions of the Shares; Wheat,
Soybean, and Sugar Futures Contracts; position, accountability, price
fluctuation, and other limits on Wheat, Soybean, and
[[Page 58552]]
Sugar Futures Contracts; investment risks; Wheat, Soybean, and Sugar
Benchmarks; NAV calculation; the dissemination and availability of
information about the underlying assets; trading halts; applicable
trading rules; surveillance; and the Information Bulletin, among other
things, can be found in the Notice and/or the Registration Statements,
as applicable.\13\
---------------------------------------------------------------------------
\13\ See Notice and Registration Statements, supra notes 3 and
4, respectively.
---------------------------------------------------------------------------
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 Funds is consistent with the
requirements of Section 6 of the Act and the rules and regulations
thereunder applicable to a national securities exchange.\14\ In
particular, the Commission finds that the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act,\15\
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 Funds 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.
---------------------------------------------------------------------------
\14\ 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).
\15\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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,\16\ 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 for the Shares will be available via the Consolidated
Tape Association, and each Wheat, Soybean, and Sugar Benchmark will be
disseminated by one or more major market data vendors every 15 seconds
during the NYSE Arca Core Trading Session of 9:30 a.m. to 4 p.m.
Eastern Time (``E.T.''). In addition, an updated Indicative Trust Value
(``ITV''), which is calculated by using the prior day's closing NAV per
Share of each Fund as a base and updating that value throughout the
trading day to reflect changes in the value of the Wheat, Soybean and
Sugar Benchmark Component Futures Contracts, as applicable, and other
financial instruments, if any, for each Fund will be disseminated on a
per-Share basis by one or more major market data vendors every 15
seconds during the NYSE Arca Core Trading Session.\17\ The NAV for the
Funds will be calculated by the Administrator once a day and will be
disseminated daily to all market participants at the same time.\18\
Each Fund will provide website disclosure of portfolio holdings daily
and will include, as applicable, the names, quantity, price and market
value of Wheat, Soybean and Sugar Benchmark Component Futures
Contracts, as applicable, and other financial instruments, if any, and
the characteristics of such instruments and cash equivalents, and
amount of cash held in the portfolios of the Funds. The closing price
and settlement prices of the Wheat Futures Contracts and Soybean
Futures Contracts are readily available from CBOT, and of the Sugar No.
11 Futures Contracts from ICE Futures. The Exchange represents that
quotation and last sale information for the Wheat Futures Contracts,
Soybean Futures Contracts and Sugar No. 11 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 such contracts is available
by subscription from Reuters and Bloomberg. CBOT and ICE Futures also
provide delayed futures information on current and past trading
sessions and market news free of charge on their websites. The specific
contract specifications for such contracts are also available at the
CBOT and ICE Futures websites, as well as other financial informational
sources. The spot prices of wheat, soybeans, and sugar are also
available on a 24-hour basis from major market data vendors. In
addition, the website for the Funds and/or the Exchange will contain
the prospectus and additional data relating to NAV and other applicable
quantitative information.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\17\ The normal trading hours for Wheat Futures Contracts on the
CBOT are 10:30 a.m. E.T. to 2:15 p.m. E.T.; the normal trading hours
for Soybean Futures Contracts on the CBOT are 10:30 a.m. E.T. to
2:15 p.m. E.T.; and the normal trading hours for Sugar No. 11
Futures Contracts on ICE Futures are 3:30 a.m. E.T. to 2 p.m. E.T.
Thus, there is a gap in time at the end of each day during which the
Funds' Shares are traded on the NYSE Arca, but real-time CBOT
trading prices for Wheat Futures Contracts and Soybean Futures
Contracts traded on CBOT, and real-time ICE Futures trading prices
for Sugar No. 11 Futures Contracts, are not available. As a result,
during those gaps there will be no update to the ITV. Therefore, a
static ITV will be disseminated, between the close of trading on
CBOT for Wheat Futures Contracts and Soybean Futures Contracts, and
on ICE Futures for Sugar No. 11 Futures Contracts, and the close of
the NYSE Arca Core Trading Session.
\18\ For each Fund, the NAV will be calculated by taking the
current market value of the Fund's total assets and subtracting any
liabilities. Under the Funds' current operational procedures, the
Administrator will generally calculate the NAV of the Funds' Shares
as of 4 p.m. E.T. The NAV for a particular trading day will be
released after 4:15 p.m. E.T.
---------------------------------------------------------------------------
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 ITV or the value of the underlying futures
contracts or the applicable benchmark occurs. If the interruption to
the dissemination of the ITV, the value of the underlying futures
contracts or the applicable benchmark 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,
the website disclosure of the portfolio composition of each Fund 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 website 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
sites. 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
[[Page 58553]]
market are present.\19\ 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 \20\ acting as registered
Market Makers \21\ in Trust Issued Receipts to facilitate surveillance.
---------------------------------------------------------------------------
\19\ With respect to trading halts, the Exchange may consider
other relevant factors in exercising its discretion to halt or
suspend trading in the Shares of the Funds. Trading in the Shares of
the Funds will be subject to halts caused by extraordinary market
volatility pursuant to the Exchange's circuit breaker rules in NYSE
Arca Equities Rule 7.12. 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.
\20\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
\21\ See NYSE Arca Equities Rule 1.1(u) (defining Market Maker).
---------------------------------------------------------------------------
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 Funds will meet the initial and continued listing
requirements applicable to Trust Issued Receipts 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 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 the Funds' futures contracts traded on
exchanges, not more than 10% of the weight of such futures contracts 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 ITV will not be calculated or publicly
disseminated; (b) the procedures for purchases and redemptions of
Shares in creation baskets and redemption 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 ITV is disseminated; (e) that a
static ITV will be disseminated, between the close of trading on the
applicable futures exchange and the close of the NYSE Arca Core Trading
Session; (f) 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 (g) trading information.
(6) A minimum of 100,000 Shares will be outstanding as of the start
of trading on the Exchange.
(7) With respect to the application of Rule 10A-3 under the Act,
the Trust will rely on the exception contained in Rule 10A-3(c)(7).\22\
---------------------------------------------------------------------------
\22\ See supra notes 11 and 12 and accompanying text.
---------------------------------------------------------------------------
This approval order is based on all of the Exchange's
representations.\23\ The Commission notes that the Funds are
substantially similar to another fund, the shares of which have been
approved for the listing and trading on the Exchange by the
Commission.\24\
---------------------------------------------------------------------------
\23\ 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.
\24\ See Securities Exchange Act Release No. 62213 (June 3,
2010), 75 FR 32828 (June 9, 2010) (SR-NYSEArca-2010-22) (approving
the listing and trading on the Exchange of the Teucrium Corn Fund).
---------------------------------------------------------------------------
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \25\ and the
rules and regulations thereunder applicable to a national securities
exchange.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\26\ that the proposed rule change (SR-NYSEArca-2011-48) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
---------------------------------------------------------------------------
\27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-24175 Filed 9-20-11; 8:45 am]
BILLING CODE 8011-01-P