[Federal Register Volume 79, Number 213 (Tuesday, November 4, 2014)]
[Notices]
[Pages 65437-65443]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-26125]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73464; File No. SR-NYSEArca-2014-120]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to Listing and Trading Shares of the
Sit Rising Rate Fund Under NYSE Arca Equities Rule 8.200
October 29, 2014.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on October 16, 2014, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 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 the Sit Rising
Rate Fund under NYSE Arca Equities Rule 8.200. 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.
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'').\4\ The Exchange proposes to list
and trade shares (``Shares'') of the Sit Rising Rate Fund (``Fund'')
pursuant to NYSE Arca Equities Rule 8.200. The Fund is a series of the
ETF Managers Group Commodity Trust I (the ``Trust''), a Delaware
statutory trust.\5\
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\4\ 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.
\5\ The Trust submitted a registration statement with respect to
the Fund on Form S-1 under the Securities Act of 1933 (``1933 Act'')
on October 7, 2014 (File No. 333-199190) (the ``Registration
Statement''). The description of the Fund and the Shares contained
herein are based, in part, on the Registration Statement.
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The Exchange notes that the Commission has previously approved the
listing and trading of other issues of TIRs on the American Stock
Exchange LLC,\6\ trading on NYSE Arca pursuant to UTP,\7\ and listing
on NYSE Arca.\8\ In
[[Page 65438]]
addition, the Commission has approved the listing and trading of other
exchange-traded fund-like products linked to the performance of
underlying currencies and commodities.\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).
\7\ See, e.g., Securities Exchange Act Release No. 58163 (July
15, 2008), 73 FR 42391 (July 21, 2008) (SR-NYSEArca-2008-73).
\8\ See, e.g., Securities Exchange Act Release No. 70209 (August
15, 2013), 78 FR 51269 (June 24, 2013) (SR-NYSEArca-2013-60);
Securities Exchange Act Release No. 58457 (September 3, 2008), 73 FR
52711 (September 10, 2008) (SR-NYSEArca-2008-91).
\9\ See, e.g., Securities Exchange Act Release Nos. 56131 (July
25, 2007), 77 FR 42212 (August 1, 2007) (SR-NYSEArca-2007-57) (order
approving listing and trading on NYSE Arca of shares of eight issues
of Commodity Trust Shares); 57456 (March 7, 2008), 73 FR 13599
(March 13, 2008) (SR-NYSEArca-2007-91) (order granting accelerated
approval for NYSE Arca listing and trading of shares of the iShares
GS Commodity Trusts); 59781 (April 17, 2009), 74 FR 18771 (April 24,
2009) (SR-NYSEArca-2009-28) (order granting accelerated approval for
NYSE Arca listing and trading of shares of the ETFS Silver Trust);
59895 (May 8, 2009), 74 FR 22993 (May 15, 2009) (SR-NYSEArca-2009-
40) (order granting accelerated approval for NYSE Arca listing the
ETFS Gold Trust); 62527 (July 19, 2010), 75 FR 43606 (July 26, 2010)
(SR-NYSEArca-2010-44) (order approving listing and trading on NYSE
Arca of shares of the United States Commodity Index Fund).
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According to the Registration Statement, the Fund's sponsor and
investment manager is ETF Managers Capital LLC (``ETFMC'' or the
``Sponsor''), a limited liability company that is a commodity pool
operator (``CPO'') that is registered with the Commodity Futures
Trading Commission (``CFTC'') \10\ and is a member of the National
Futures Association (``NFA''). U.S. Bancorp Fund Services will be the
transfer agent and for the Shares and administrator for the Fund.
Esposito Securities LLC (the ``Distributor'') will provide statutory
and wholesaling distribution services.
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\10\ The Sponsor is not a broker-dealer or affiliated with a
broker-dealer.
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Fund's Investment Objective and Strategy
The Fund's investment objective will be to profit from rising
interest rates by tracking the performance of a portfolio (the
``Benchmark Portfolio'') consisting of exchange traded futures
contracts and options on futures on 2, 5 and 10-year U.S. Treasury
securities (``Treasury Instruments'') weighted to achieve a targeted
negative 10-year average effective portfolio duration (the ``Benchmark
Component Instruments''). The Fund will seek to achieve its investment
objective by investing in the Benchmark Component Instruments currently
constituting the Benchmark Portfolio. The Benchmark Portfolio will be
maintained by Sit Fixed Income Advisors II, LLC (``Sit'') and will be
rebalanced, reconstituted, or both, monthly, typically on the 15th of
each month and on the next business day if the 15th is a holiday,
weekend, or other day on which the national exchanges are closed, to
maintain a negative 10-year average effective duration. The Benchmark
Portfolio will maintain a net short position in Treasury Instruments.
There will normally be substantially more net short exposure than net
long exposure. The Fund will not use futures contracts or options to
obtain leveraged investment results. The Benchmark Component
Instruments constituting the Benchmark Portfolio and anticipated
rebalancing dates, as well as the daily holdings of the Fund, will be
available on the Fund's Web site at www.risingratefund.com.
The weightings of the Treasury Instruments constituting the
Benchmark Portfolio and the Fund will be based on each maturity's
duration contribution. Longer duration treasuries will account for a
more meaningful portion of the Fund's price sensitivity to changes in
interest rates. As of October 9, 2014, the Benchmark Portfolio
consisted of:
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Treasury instrument (%) % of Portfolio
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2 Year U.S. Treasury Futures............................ 45
5 Year U.S. Treasury Futures............................ 30
5 Year U.S. Treasury Call Options....................... 15
10 Year U.S. Treasury Put Options....................... 10
---------------
100
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The relative weightings of the Benchmark Component Instruments will
be shifted between maturities only when there are material changes in
the shape of the yield curve, for example, if the Federal Reserve began
raising short term interest rates more than long term interest rates.
In such an instance, Sit, which maintains the Benchmark Portfolio, will
increase the weightings of the 2-year and reduce the weighting in the
10-year maturity Treasury Instruments. Conversely, Sit will do the
opposite if the Federal Reserve began raising long term interest rates
more than short term interest rates. Reconstitution and rebalancing
each will occur monthly, on the 15th, unless there are radical changes
in the yield curve such that effective duration is outside of a range
from negative nine to negative 11-year average effective duration, in
which case Sit will adjust the maturities of the Treasury Instruments
before the next expected monthly reconstitution.
The Benchmark Portfolio will be invested in Benchmark Component
Instruments and rebalanced, as noted above, to maintain a negative
average effective portfolio duration of approximately 10 years.
Duration is a measure of estimated price sensitivity relative to
changes in interest rates. Portfolios with longer durations are
typically more sensitive to changes in interest rates. For example, if
interest rates rise by 1%, the market value of a security with an
effective duration of 5 years would decrease by 5%, with all other
factors being constant, and likewise the market value of a security
with an effective duration of negative 5 years would increase by 5%,
with all other factors being constant. Duration estimates are based on
certain assumptions by Sit and are subject to a number of limitations.
Duration is a more accurate estimate of price sensitivity provided
interest rate changes are small and occur equally in short-term and
long-term securities. Investments in debt securities typically decrease
in value when interest rates rise. The risk is usually greater for
longer-term debt securities.
The Fund will incur certain expenses in connection with its
operations. The Fund will hold cash or cash equivalents such as U.S.
Treasuries or other high credit quality, short-term fixed-income or
similar securities (such as shares of money market funds and
collateralized repurchase agreements) for direct investment or as
collateral for the Treasury Instruments and for other liquidity
purposes and to meet redemptions that may be necessary on an ongoing
basis. These expenses and income from the cash and cash equivalent
holdings may cause imperfect correlation between changes in the Fund's
NAV and changes in the Benchmark Portfolio, because the Benchmark
Portfolio does not reflect expenses or income.
Net Asset Value
According to the Registration Statement, the net asset value
(``NAV'') of the Fund will be calculated by taking the current market
value of its total assets, subtracting any liabilities, and dividing
that total by the total number of outstanding shares.
The Administrator will calculate the NAV daily and the NAV will be
released after 4:00 p.m. Eastern Time (``E.T.''), the end of the Core
Trading Session on the Exchange. For purposes of calculating NAV, the
Administrator will use the closing price of the Treasury Instruments on
the U.S. exchanges on which the Treasury Instruments are traded
(primarily on the exchanges within the Chicago Mercantile Exchange
Group of exchanges (collectively, the ``CME'')).
Reverse repurchase agreements will generally be valued at bid
prices received from independent pricing services as of the announced
closing time for trading in such instruments.
[[Page 65439]]
Intraday Indicative Value (``IIV'')
According to the Registration Statement, the Exchange will
calculate and disseminate throughout the core trading session on each
trading day an updated IIV for the Fund. The IIV will be calculated by
using the Fund's prior day's closing NAV per share as a base and
updating that value throughout the trading day to reflect changes in
the most recently reported trade price for the Benchmark Component
Instruments. The net asset value of the Fund's cash and cash equivalent
holdings, on the other hand, will not be updated throughout the day.
The IIV will be calculated on a per share basis every 15 seconds on
a delayed basis during the Core Trading Session (9:30 a.m. E.T. to 4:00
p.m. E.T.) on the Exchange. The normal trading hours of the CME are
10:00 a.m. to 2:30 p.m. E.T. This means that there is a gap in time at
the beginning and the end of each day during which the Fund's Shares
are traded on the Exchange but real-time CME trading prices for
contracts traded on the CME are unavailable. During such gaps in time
the IIV will be calculated based on the end of day price of such
contracts from the CME's immediately preceding trading session.
According to the Registration Statement, the Fund will provide the
independent third party calculator with information to calculate the
IIV, but the Fund will not be involved in the actual calculation of the
IIV and is not responsible for the calculation or dissemination of the
IIV. The Fund makes no warranty as to the accuracy of the IIV. The IIV
should not be viewed as a ``real-time'' update of NAV because the IIV
is not calculated in the same manner as NAV, which will be computed
once per day.
The Exchange disseminates the IIV through the facilities of CTA/CQ
High Speed Lines. In addition, the IIV is published on the NYSE Arca's
Web site and is available through on-line information services such as
Bloomberg and Reuters.
According to the Registration Statement, dissemination of the IIV
provides additional information that is not otherwise available to the
public and is useful to investors and market professionals in
connection with the trading of the Fund Shares on the Exchange.
Investors and market professionals are able throughout the trading day
to compare the market price of the Fund and the IIV. If the market
price of the Fund Shares diverges significantly from the IIV, market
professionals will have an incentive to execute arbitrage trades. Such
arbitrage trades can tighten the tracking between the market price of
the Fund and the IIV and thus can be beneficial to all market
participants.
The IIV should not be viewed as an actual real time update of the
NAV, because the NAV is calculated only once at the end of each trading
day based upon the relevant end of day values of the Fund's
investments. The IIV also should not be viewed as a precise value of
the Shares.
In addition to the IIV, the value of the Benchmark Portfolio
(excluding the cash and cash equivalent holdings) will be calculated
every 15 seconds on a delayed basis and disseminated through similar
means as the IIV.
Creation and Redemption of Shares
The Fund will offer and issue Shares only in aggregations of a
specified number of Shares (each, a ``Creation Unit''). Creation Unit
sizes will be 25,000 Shares per Creation Unit. The Creation Unit size
for a Fund may change. The Fund will create and redeem Shares from time
to time in one or more ``Creation Baskets'' or ``Redemption Baskets''
as described below. The creation and redemption of baskets will only
made in exchange for delivery to the Fund or the distribution by the
Fund of the amount of Treasuries and any cash represented by the
baskets being created or redeemed, the amount of which is based on the
combined NAV of the number of shares included in the baskets being
created or redeemed determined as of 4:00 p.m. E.T. on the day the
order to create or redeem baskets is properly received.
On any business day other than a day when any of the NYSE Arca, the
CME or the New York Stock Exchange are closed for regular trading
(``Business Day''), an Authorized Purchaser \11\ may place an order
with the Distributor to create one or more baskets. Purchase orders
must be placed by 12:00 p.m. E.T. or the close of regular trading on
the NYSE Arca, whichever is earlier. The day on which the Distributor
receives a valid purchase order is referred to as the purchase order
date. By placing a purchase order, an Authorized Purchaser agrees to
deposit Treasuries, cash or a combination of Treasuries and cash, as
described below. Prior to the delivery of baskets for a purchase order,
the Authorized Purchaser must also have wired to the Custodian the non-
refundable transaction fee due for the purchase order.
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\11\ Authorized Purchasers will be the only persons that may
place orders to create and redeem baskets. Authorized Purchasers
must be (1) registered broker-dealers or other securities market
participants, and (2) have an account with the Depository Trust
Company. To become an Authorized Purchaser, a person must enter into
an Authorized Purchaser Agreement with ETFMC. The Authorized
Purchaser Agreement provides the procedures for the creation and
redemption of baskets and for the delivery of the Treasuries and any
cash required for such creation and redemptions. The Authorized
Purchaser Agreement and the related procedures attached thereto may
be amended by the Fund, without the consent of any limited partner
or shareholder or Authorized Purchaser.
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The total deposit required to create each basket (``Creation Basket
Deposit'') is the amount of Treasuries and/or cash that is in the same
proportion to the total assets of the Fund (net of estimated accrued
but unpaid fees, expenses and other liabilities) on the purchase order
date as the number of shares to be created under the purchase order is
in proportion to the total number of shares outstanding on the purchase
order dates. ETFMC determines, directly in its sole discretion or in
consultation with the Administrator, the requirements for Treasuries
and the amount of cash, including the maximum permitted remaining
maturity of a Treasury and proportions of Treasury and cash that may be
included in deposits to create baskets. The Distributor will publish
such requirements at the beginning of each Business Day. The amount of
cash deposit required is the difference between the aggregate market
value of the Treasuries required to be included in a Creation Basket
Deposit as of 4:00 p.m. E.T. on the date the order to purchase is
properly received and the total required deposit.
The procedures by which an Authorized Purchaser can redeem one or
more baskets mirror the procedures for the creation of baskets. On any
Business Day, an Authorized Purchaser may place an order with the
Distributor to redeem one or more baskets. Redemption orders must be
placed by 12:00 p.m. E.T. or the close of regular trading on the NYSE
Arca, whichever is earlier. A redemption order so received will be
effective on the date it is received in satisfactory form by the
Distributor. The redemption procedures allow Authorized Purchasers to
redeem baskets and do not entitle an individual shareholder to redeem
any Shares in an amount less than a Redemption Basket, or to redeem
baskets other than through an Authorized Purchaser.
The redemption distribution due from the Fund will be delivered to
the Authorized Purchaser by 3:00 p.m. E.T. on the third business day
following the redemption order date if, by 3:00 p.m. E.T. on such third
business day, the Fund's account at the Depositary Trust Company
(``DTC'') has been credited
[[Page 65440]]
with the baskets to be redeemed. If the Fund's DTC account has not been
credited with all of the baskets to be redeemed by such time, the
redemption distribution will be delivered to the extent of whole
baskets received. Any remainder of the redemption distribution will be
delivered on the next business day to the extent of remaining whole
baskets received if the Fund receives the fee applicable to the
extension of the redemption distribution date which ETFMC may, from
time to time, determine and the remaining baskets to be redeemed are
credited to the Fund's DTC account by 3:00 p.m. E.T. on such next
business day. Any further outstanding amount of the redemption order
shall be cancelled.
The Exchange will obtain a representation prior to listing of the
Fund from the Trust that the NAV per Share will be calculated daily and
made available to all market participants at the same time.
The Fund will meet the initial and continued listing requirements
applicable to TIRs in NYSE Arca Equities Rule 8.200 and Commentary .02
thereto. With respect to application of Rule 10A-3 \12\ under the Act,
the Fund will rely on the exception contained in Rule 10A-3(c)(7).\13\
A minimum of 100,000 Shares of the Fund will be outstanding as of the
start of trading on the Exchange.
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\12\ 17 CFR 240.10A-3.
\13\ 17 CFR 240.10A-3(c)(7).
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The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage. That is,
the Fund's investments will not be used to seek performance that is a
multiple (e.g., 2x or 3x) or inverse multiple of the Fund's Benchmark
Portfolio.
A more detailed description of the Fund as well as investment
risks, creation and redemption procedures and fees is set forth in the
Registration Statement.
Availability of Information Regarding the Shares
The Fund's Web site, www.risingratefund.com, will be publicly
accessible at no charge prior to the public offering of Shares and will
include a form of the prospectus for that may be downloaded. The Web
site will include additional quantitative information updated on a
daily basis, including (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 (the ``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.
In addition, a basket composition file, which includes the security
names and share quantities required to be delivered in exchange for
Fund Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the Exchange via
the NSCC. The basket represents one Creation Unit of the Fund.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), Shareholder Reports and Form N-CSR. The Trust's
SAI and Shareholder Reports are available free upon request from the
Trust, and those documents and the Form N-CSR may be viewed on-screen
or downloaded from the Commission's Web site at www.sec.gov.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers.
This Web site disclosure of the portfolio composition of the 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 Web site as well as in electronic files provided to authorized
participants. Accordingly, each investor will have access to the
current portfolio composition of the Fund through the Fund's Web site.
The IIV will be calculated by using the Fund's prior day's closing
NAV per share as a base and updating that value throughout the trading
day to reflect changes in the most recently reported trade price for
the Treasury Instruments. The IIV per Share will be widely disseminated
by one or more major market data vendors at least every 15 seconds
during the Core Trading Session.
The NAV for the Shares will be disseminated to all market
participants at the same time. The Exchange will also make available on
its Web site daily trading volume of the Shares and the closing prices
of such Shares. The intra-day closing prices and settlement prices of
the Treasury Instruments are or will be readily available from the Web
sites of the relevant exchanges on which Treasury Instruments are
traded (primarily the CME). The relevant exchanges trading Treasury
Instruments also provide delayed futures information on current and
past trading sessions and market news free of charge on their
respective Web sites.
Quotation information from brokers and dealers or major market data
vendors will be available for money market instruments and U.S.
Treasuries.
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA. In addition, the Fund's
Web site, www.risingratefund.com, will display the applicable end of
day closing NAV.
Availability of Information About the Benchmark Portfolio
The daily closing Benchmark Portfolio level and the percentage
change in the daily closing level for the Benchmark Portfolio will be
publicly available from one or more major market data vendors. Data
regarding the Benchmark Portfolio, updated every 15 seconds, will also
be available through a major market data vendor.
Data regarding the Treasury Instruments will also be available from
the CME Web site. Data regarding the Treasury securities underlying the
Treasury Instruments will be publicly available from various financial
information service providers. Information relating to the weighting of
Treasury Instruments and the Benchmark Portfolio methodology is also
available on the Web site for Fund at www.risingratefund.com.
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 4:00 a.m. to 8:00 p.m. E.T. in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). 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'')
[[Page 65441]]
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 Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.200. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \14\ under the Act, as provided by NYSE Arca
Equities Rule 5.3. A minimum of 100,000 Shares for the Fund will be
outstanding at the commencement of trading on the Exchange.
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\14\ 17 CFR 240.10A-3.
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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 the 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 trading is not occurring in the underlying securities, 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 \15\ or by the halt or suspension of trading of the
underlying securities.
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\15\ See NYSE Arca Equities Rule 7.12.
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The Exchange represents that the Exchange may halt trading during
the day in which an interruption to the dissemination of the IIV
occurs. If an interruption to the dissemination of the IIV 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.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\16\ 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 federal securities laws applicable to trading on
the Exchange.
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\16\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. 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.
FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares and underlying Treasury Instruments
with other markets and entities that are members of the Intermarket
Surveillance Group (``ISG''), and FINRA, on behalf of the Exchange, may
obtain trading information regarding trading in the Shares and
underlying Treasury Instruments from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares and underlying Treasury Instruments from markets and other
entities that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement.\17\ FINRA, on
behalf of the Exchange, is able to access, as needed, trade information
for certain fixed income securities held by the Fund reported to
FINRA's Trade Reporting and Compliance Engine (``TRACE'').
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\17\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all instruments
traded by the Fund may trade on markets that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.
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For components traded on exchanges, not more than 10% of the net
assets of the Fund shall consist of components whose principal trading
market is not a member of ISG or is a market with which the Exchange
does not have a comprehensive surveillance sharing agreement.
Furthermore, not more than 10% of the net assets of a Fund in the
aggregate shall consist of futures contracts or options contracts whose
principal market is not a member of ISG or is a market with which the
Exchange does not have a comprehensive surveillance sharing agreement.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin (``Bulletin'') of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares in Creation Basket
aggregations (and that Shares are not individually redeemable); (2)
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; (3) 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; (4) how
information regarding the IIV is disseminated; (5) 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 (6) trading information.
In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. E.T. each trading day.
The Information Circular will disclose that information about the
Shares of the Fund will be publicly available on the Fund's Web site.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \18\ 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.
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\18\ 15 U.S.C. 78f(b)(5).
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[[Page 65442]]
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 Fund will seek to achieve its
investment objective by tracking the performance of the Benchmark
Portfolio. The Sponsor represents that the Trust will invest in
Treasury Instruments in a manner consistent with the Trust's investment
objective and will not use futures contracts or options to obtain
leveraged investment results. The Sponsor is not broker-dealer or
affiliated with a broker-dealer. The Sponsor represents that it will
implement and maintain procedures designed to prevent the use and
dissemination of material non-public information. 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.
FINRA, on behalf of the Exchange, will communicate as needed regarding
trading in the Shares and underlying Treasury Instruments with other
markets and other entities that are members of the ISG, and FINRA, on
behalf of the Exchange, may obtain trading information regarding
trading in the Shares and underlying Treasury Instruments from such
markets and other entities. In addition, the Exchange may obtain
information regarding trading in the Shares and underlying Treasury
Instruments from markets and other entities that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement. FINRA, on behalf of the Exchange, is able to access,
as needed, trade information for certain fixed income securities held
by the Fund reported to TRACE. For components traded on exchanges, not
more than 10% of the net assets of the Fund shall consist of components
whose principal trading market is not a member of ISG or is a market
with which the Exchange does not have a comprehensive surveillance
sharing agreement. Furthermore, not more than 10% of the net assets of
a Fund in the aggregate shall consist of futures contracts or options
contracts whose principal market is not a member of ISG or is a market
with which the Exchange does not have a comprehensive surveillance
sharing agreement. The NAV for the Shares will be disseminated to all
market participants at the same time. The Exchange will also make
available on its Web site daily trading volume of the Shares and the
closing prices of such Shares. The intra-day closing prices and
settlement prices of the Treasury Instruments are or will be readily
available from the Web sites of the relevant exchanges on which
Treasury Instruments are traded (primarily the CME). The relevant
exchanges trading Treasury Instruments also provide delayed futures
information on current and past trading sessions and market news free
of charge on their respective Web sites.
In addition, quotation information from brokers and dealers or
major market data vendors will be available for money market
instruments.
Quotation and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA. In addition, the Fund's
Web site, www.risingratefund.com, will display the applicable end of
day closing NAV.
The daily closing Benchmark Portfolio level and the percentage
change in the daily closing level for the Benchmark Portfolio will be
publicly available from one or more major market data vendors. Data
regarding the Benchmark Portfolio, updated every 15 seconds, will also
available on a major market data vendor. Data regarding the Treasury
Instruments will also available from the CME Web site. Data regarding
the Treasury securities underlying the Treasury Instruments will be
publicly available from various financial information service
providers. Information relating to the weighting of Treasury
Instruments and the Benchmark Portfolio methodology is also available
on the Web site for Fund at www.risingratefund.com.
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 trading is not
occurring in the underlying securities, or (2) whether other unusual
conditions or circumstances detrimental to the maintenance of a fair
and orderly market are present. Trading in Shares will be subject to
trading halts caused by extraordinary market volatility pursuant to the
Exchange's ``circuit breaker'' rule or by the halt or suspension of
trading of the underlying securities. The Exchange represents that the
Exchange may halt trading during the day in which an interruption to
the dissemination of the IIV occurs. If an interruption to the
dissemination of the IIV 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.
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
Shares, thereby promoting market transparency. The Fund's NAV will be
disseminated to all market participants at the same time. The IIV will
be disseminated at least every 15 seconds during the Core Trading
Session. Trading in the Shares will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule 7.12 have been reached or because
of market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. Moreover, 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.
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
an additional type of trust issued receipts that will enhance
competition among market participants, to the benefit of investors and
the marketplace. As noted above, FINRA, on the Exchange's behalf, has
in place surveillance procedures relating to trading in the Shares and
underlying Treasury Instruments 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 Fund's 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 purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of Trust Issued Receipts product that will principally
hold fixed income securities and derivatives thereon, and that will
enhance competition among market participants,
[[Page 65443]]
to the benefit of investors and the marketplace.
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 the 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 [email protected]. Please include
File Number SR-NYSEArca-2014-120 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-120. 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
10:00 a.m. and 3:00 p.m. Copies of such 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-2014-120, and
should be submitted on or before November 25, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-26125 Filed 11-3-14; 8:45 am]
BILLING CODE 8011-01-P