
[Federal Register: July 21, 2008 (Volume 73, Number 140)]
[Notices]
[Page 42380-42385]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21jy08-96]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58161; File No. SR-Amex-2008-39]


Self-Regulatory Organizations; American Stock Exchange LLC; Order
Granting Approval of Proposed Rule Change, as Modified by Amendment No.
1 Thereto, Relating to the Listing and Trading of Trust Issued Receipts
That Directly Hold Investments in Certain Financial Instruments and To
Permit the Listing and Trading of Shares of Fourteen Funds of the
Commodities and Currency Trust

July 15, 2008.

I. Introduction

    On May 9, 2008, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change seeking to: (1) Amend Commentary .07 to Amex Rule
1202 to permit the listing and trading of certain trust issued receipts
(``TIRs'') that directly hold any combination of investments including
cash, securities, options on securities and indices, commodities,
futures contracts, options on futures contracts, forward contracts,
equity caps, collars, and floors, and swap agreements (collectively,
``Financial Instruments''); and (2) list and trade the shares
(``Shares'') of fourteen funds (``Funds'') of the Commodities and
Currency Trust (``Trust'') based on certain commodity indexes,
commodities, and currencies pursuant to Commentary .07 to Amex Rule
1202, as proposed to be amended. On June 4, 2008, the Exchange filed
Amendment No. 1 to the proposed rule change. The proposed rule change
was published for comment in the Federal Register on June 12, 2008.\3\
The Commission received no comments regarding the proposal. This order
approves the proposed rule change, as modified by Amendment No. 1
thereto.
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    \1\15 U.S.C. 78s(b)(1).
    \2\17 CFR 240.19b-4.
    \3\See Securities Exchange Act Release No. 57932 (June 5, 2008),
73 FR 33467 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to amend Commentary .07 to Amex Rule 1202 to
permit the listing and trading of certain TIRs that directly hold any
combination of investments in Financial Instruments.\4\ In addition,
the Exchange proposes to list and trade the Shares of the Funds
pursuant to Commentary .07 to Amex Rule 1202, as proposed to be
amended.
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    \4\ The Exchange represents that permissible securities in
connection with Financial Instruments would not include foreign
equity securities.
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Proposed Amendments to Commentary .07 to Amex Rule 1202

    Commentary .07 to Amex Rule 1202 currently permits the Exchange to
list and trade TIRs where the underlying trust holds ``Investment
Shares.'' \5\ As a result, TIRs that are listed pursuant to current
Commentary .07 to Amex Rule 1202 are required to be in the form of a
``master-feeder'' structure, whereby the listed security holds or
invests in the security of the fund that is investing in the prescribed
financial instruments.
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    \5\ Investment Shares are defined in Commentary .07(b)(1) to
Amex Rule 1202 as securities that are (a) issued by a trust,
partnership, commodity pool, or other similar entity that invests in
any combination of futures contracts, options on futures contracts,
forward contracts, commodities, swaps or high credit quality short-
term fixed-income securities or other securities, and (b) issued and
redeemed daily at net asset value (``NAV'') in amounts correlating
to the number of receipts created and redeemed in a specified
aggregate minimum number. See Commentary .07(a) to Amex Rule 1202.
See also Securities Exchange Act Release No. 53105 (January 11,
2006), 71 FR 3129 (January 19, 2006) (SR-Amex 2005-059) (approving,
among other things, the adoption of Commentary .07 to Amex Rule
1202).
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    As a result of a recent interpretation by the staff of the Internal
Revenue Service relating to the inability to interpose a grantor trust
in order to utilize a certain tax reporting form, the Exchange has been
notified that the need for the current master-feeder structure set
forth in Commentary .07 to Amex Rule 1202 is no longer necessary. The
Exchange represents that there are no substantive differences between
the proposed structure (TIRs directly holding Financial Instruments)
and the current master-feeder structure (TIRs holding Investment Shares
that invest in certain financial instruments). Amex states that its
proposal would provide an alternative for issuers so that TIRs may be
listed and traded on the Exchange that directly invest in or hold
Financial Instruments, rather than through an additional security of a
fund.
    Specifically, the proposal seeks to expand the application of
Commentary .07 to Amex Rule 1202 to both Investment Shares and
Financial Instruments. Accordingly, new Commentary .07(b)(4) to Amex
Rule 1202 would be added to define ``Financial Instrument'' as any
combination of cash, securities, options on securities and indices,
commodities, futures contracts, options on futures contracts, forward
contracts, equity caps, collars, and floors, and swap agreements. Amex
seeks to add the term ``Financial Instrument'' to where the term
``Investment Shares'' appears throughout Commentary .07 to Amex Rule
1202 to indicate that TIRs directly holding Financial Instruments may
be listed and traded on the Exchange.

Proposal To List and Trade the Shares of the Funds

    The Shares of each Fund will generally be subject to the Amex rules
applicable to TIRs. The Shares represent common units of fractional
undivided beneficial interests in, and ownership of, each Fund. Each
Fund will invest the proceeds of its offering of Shares in various
Financial Instruments that will provide exposure to the Funds'
underlying currency, commodity, or commodity index, as applicable. In
addition, the Funds will also maintain cash positions in cash or money
market instruments for the purpose of collateralizing such positions
taken in the Financial Instruments.
    Shares of seven of the Funds of the Trust will be designated as
Ultra ProShares while the Shares of the other seven Funds of the Trust
will be designated as UltraShort ProShares.\6\ Each of the Funds will
have a distinct

[[Page 42381]]

investment objective. The Funds will attempt, on a daily basis, to
achieve their investment objective by corresponding to a specified
multiple or an inverse multiple of the performance of a particular
benchmark commodities index, commodity, or currency (each an
``Underlying Benchmark'' and collectively, the ``Underlying
Benchmarks'').
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    \6\ The Funds are the: (1) Ultra DJ-AIG Commodity ProShares; (2)
UltraShort DJ-AIG Commodity ProShares; (3) Ultra DJ-AIG Agriculture
ProShares; (4) UltraShort DJ-AIG Agriculture ProShares; (5) Ultra
DJ-AIG Crude Oil ProShares; (6) UltraShort DJ-AIG Crude Oil
ProShares; (7) Ultra Gold ProShares; (8) UltraShort Gold ProShares;
(9) Ultra Silver ProShares; (10) UltraShort Silver ProShares; (11)
Ultra Euro ProShares; (12) UltraShort Euro ProShares; (13) Ultra Yen
ProShares; and (14) UltraShort Yen ProShares. See Exhibit A to
Amex's proposed rule change on Form 19b-4.
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    Six Funds will be based on the following Underlying Benchmark
indexes: (1) The Dow Jones-AIG Commodity Index\SM;\ (2) the Dow Jones-
AIG Crude Oil Sub-Index\SM\; and (3) the Dow Jones-AIG Agriculture Sub-
Index\SM\ (each, an ``Underlying Index'' and collectively, the
``Underlying Indexes''). Four Funds will be based on the following
Underlying Benchmark commodities: (1) Gold; and (2) silver (each, an
``Underlying Commodity'' and collectively, the ``Underlying
Commodities''). Lastly, four Funds will be based on the following
Underlying Benchmark currencies versus the U.S. dollar: (1) The Euro;
and (2) the Japanese Yen (each, an ``Underlying Currency'' and
collectively, the ``Underlying Currencies'').
    The Exchange proposes to list and trade the Shares of the Funds,
that seek daily investment results, before fees and expenses, that
correspond to twice (200%) the daily performance of the Underlying
Benchmark (the ``Ultra Funds''). If each such Fund is successful in
meeting its investment objective, the NAV \7\ of the Shares of each
such Fund is expected to gain on a percentage basis, approximately
twice as much as each such Fund's respective Underlying Benchmark when
the price of the Underlying Benchmark increases on a given day, and
should lose approximately twice as much when such price declines on a
given day, before fees and expenses.
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    \7\ 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. In
particular, NAV includes any unrealized profit or loss on open swaps
and futures contracts and any other credit or debit accruing to a
Fund but unpaid or not received by a Fund.
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    The Exchange also proposes to list and trade Shares of the Funds,
that seek daily investment results, before fees and expenses that
correspond to twice the inverse (-200%) of the daily performance of the
Underlying Benchmark (the ``UltraShort Funds''). If each such Fund is
successful in meeting its objective, the NAV of the Shares of each such
Fund is expected to increase approximately twice as much, on a
percentage basis, as the respective Underlying Benchmark loses on a
given day, or should decrease approximately twice as much as the
respective Underlying Benchmark gains when the Underlying Benchmark
rises on a given day, before fees and expenses.
    Detailed discussions regarding each of the Underlying Benchmarks,
the structure and management of the Funds, the investment objective for
each of the Funds, the Portfolio Investment Methodology, policies and
procedures for creating and redeeming Shares of the Funds, the Funds'
investment techniques, and NAV, among others, can be found in the
Notice.\8\ In addition, the Exchange states that the Registration
Statement for each Fund will provide a detailed description, including,
but not limited to, the structure, creation/redemption process,
investment objective and strategies, characteristics, tax status, and
distributions. Investors are directed to each Fund's Registration
Statement for a complete explanation.
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    \8\See Notice, supra note 3. Terms used but not otherwise
defined herein shall have the same meanings as referenced in the
Notice.
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    Availability of Information Regarding the Shares. The Web sites for
the Fund and/or the Exchange, which are publicly accessible at no
charge, will contain the following information: (1) The daily current
NAV per Share, the prior business day's NAV per Share, and the reported
closing price; (2) the mid-point of the bid-ask price in relation to
the NAV per Share as of the time it is calculated (the ``Bid-Ask
Price''); \9\ (3) calculation of the premium or discount of such price
against the NAV per Share; (4) data in chart form displaying the
frequency distribution of discounts and premiums of the Bid-Ask Price
against the NAV per Share, within appropriate ranges for each of the
four previous calendar quarters; (5) the applicable prospectus; and (6)
other quantitative information.
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    \9\ The Bid-Ask Price of Shares is determined using the highest
bid and lowest offer as of the time of calculation of the NAV.
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    As described above, the NAV per Share will be calculated and
disseminated daily.\10\ Amex will disseminate for the Funds on a daily
basis by means of the Consolidated Tape Association/Consolidated
Quotation High Speed Lines information with respect to the
corresponding Indicative Fund Value (as discussed below), recent NAV
per Share, and the number of Shares outstanding. The Exchange will also
make available on its Web site daily trading volume of the Shares and
closing prices of the Shares.
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    \10\ The Exchange stated that it would obtain a representation
from the Trust, prior to the listing of the Shares, that the NAV per
Share will be calculated daily and made available to all market
participants at the same time.
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    Each Fund's total portfolio composition will be disclosed on the
Web site of the Trust (http://www.proshares.com) or another relevant
Web site as determined by the Trust and/or the Exchange. The Trust will
provide Web site disclosure of portfolio holdings daily and will
include, as applicable, the names and number of Financial Instruments
and characteristics of such instruments and cash equivalents, and
amount of cash held in the portfolio of each Fund. This Web site
disclosure of the portfolio composition of each Fund will occur at the
same time as the disclosure by the Managing Owner of the portfolio
composition to Authorized Participants so that all market participants
are provided portfolio composition information at the same time.
Therefore, the same portfolio information will be provided on the
public Web site as well as in electronic files provided to Authorized
Participants. Accordingly, each investor will have access to the
current portfolio composition of each Fund through the Trust's Web site
and/or at the Exchange's Web site at http://www.amex.com.
    The value of each Underlying Benchmark will be updated intra-day on
a real time basis as its components change in price. The daily closing
index value and the percentage change in the daily closing index value
for each Underlying Index will be publicly available on various Web
sites, such as http://www.ino.com and http://www.finance.yahoo.com. Dow
Jones will disseminate the levels for each of the Underlying Indexes at
least every 15 seconds from 8 a.m. to 3 p.m. ET and will publish daily
Underlying Index levels at approximately 5 p.m. ET each business day on
its Web site at http://www.djindexes.com. Data regarding each
Underlying Index is also available from the respective index provider
to subscribers. In addition, data is also available regarding the
underlying component commodities of each Underlying Index from those
futures exchanges that list and trade futures contracts on those
commodities. Several independent data vendors also package and
disseminate index data in various value-added formats (including
vendors displaying both index constituents and index levels and vendors
displaying index levels only).
    Real-time dissemination of spot pricing for gold, silver, euro, and
Japanese yen is available on a 24-hour basis worldwide from various
major market data vendors. Data regarding spot pricing of the
Underlying

[[Page 42382]]

Benchmark commodities (gold and silver) is publicly available on a 24-
hour basis from various financial information service providers, such
as Reuters and Bloomberg. In addition, the daily London fix for gold
and silver is also disseminated by various market data vendors and is
available from the LBMA Web site at http://www.lbma.org.uk. The closing
and settlement prices of the futures contracts held by the Funds are
also readily available from CME, NYMEX, CBOT, ICE/NYBOT, LME, automated
quotation systems, published or other public sources, or on-line
information services such as Bloomberg or Reuters. There is
considerable public price and data information regarding the Underlying
Benchmark currencies (euro and Japanese yen). Spot pricing related to
the foreign currency exchange is available to investors and market
professionals on a 24-hour basis. A variety of public Web sites and
professional and subscription services provide market and price
information regarding the euro and the yen. Current spot prices are
also generally available from foreign exchange dealers.
    To provide updated information relating to the Funds for use by
investors, professionals, and persons wishing to create or redeem the
Shares, the Exchange will disseminate an updated ``Indicative Fund
Value.'' The Indicative Fund Value will be disseminated on a per-Share
basis at least every 15 seconds during regular Amex trading hours of
9:30 a.m. to 4 p.m. ET. The Indicative Fund Value will be calculated
based on the cash required for creations and redemptions for a Fund,
adjusted to reflect the price changes of the Financial Instruments.
    Criteria for Initial and Continued Listing. The Funds will be
subject to the criteria in Commentary .07(d) of Amex Rule 1202 for
initial and continued listing of the Shares. The Funds will accept
subscriptions for Shares in Creation Units from Authorized Participants
expected to be in a range from $20 to $70 per Share during an initial
offering period, commencing with the initial effective date of the
prospectus and terminating no later than the 90th day following such
date, subject to certain exceptions. The anticipated minimum number of
Shares for each Fund to be outstanding at the start of trading will be
50,000 Shares. The Exchange represents that, for the initial and
continued listing of the Shares, the Shares must be in compliance with
Section 803 of the Amex Company Guide and Rule 10A-3 under the Act.\11\
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    \11\See 17 CFR 240.10A-3.
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    Trading Rules. The Shares are equity securities subject to Amex
rules governing the trading of equity securities, including, among
others, rules governing priority, parity, and precedence of orders,
specialist responsibilities and account opening, and customer
suitability (Amex Rule 411). Initial equity margin requirements of 50%
will apply to transactions in the Shares. The Shares will trade on Amex
until 4 p.m. ET each business day and will trade in a minimum price
variation of $0.01 pursuant to Amex Rule 127-AEMI. Trading rules
pertaining to odd-lot trading in Amex equities (Amex Rule 205-AEMI),
stop and stop limit orders for securities that are derivatively priced
(Amex Rule 154-AEMI), and the prevention of trade-through transactions
of protected quotations (Amex Rule 126A-AEMI) will also apply to the
Shares.
    Specialist transactions in the Shares made in connection with the
creation and redemption of Shares will not be subject to the
prohibitions of Amex Rule 190(a).\12\ The Shares will generally be
subject to the Exchange's stabilization rule (Amex Rule 170), except
that specialists may buy on ``plus ticks'' and sell on ``minus ticks,''
in order to bring the Shares into parity with (i) The underlying asset
or commodity on which the Shares are based, (ii) the NAV of the Shares,
or (iii) the futures contract(s) on the underlying asset or commodity
on which the Shares are based.\13\
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    \12\ Amex Rule 190(a) states that no specialist or his member
organization, or any member, officer, employee, or approved person
therein, may, directly or indirectly, effect any business
transaction with a company or any officer, director or 10%
stockholder of a company in which stock the specialist is
registered. See Commentary .05 to Amex Rule 190 (exempting
specialists registered in a security issued by a trust, listed
pursuant to, among other rules, Amex Rule 1202, from the
requirements of Amex Rule 190(a)).
    \13\ See Commentary .07(f) to Amex Rule 1202.
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    The trading of the Shares will also be subject to certain conflict
of interest provisions set forth in Commentary .07(e) to Amex Rule
1202. Lastly, Commentary .07(g)(3) to Amex Rule 1202 prohibits the
specialist in the Shares from using any material, non-public
information received from any person associated with a member, member
organization, or employee of such person regarding trading by such
person or employee in the Underlying Index commodities, related
futures, or options on futures, or any other related derivatives.
    Surveillance. The Exchange represents that its surveillance
procedures are adequate to detect and deter violations of Exchange
rules relating to the trading of the Shares. The surveillance
procedures will be similar to those used for other commodity-based
TIRs, Commodity-Based Trust Shares, Currency Trust Shares, and
exchange-traded funds and will incorporate and rely upon existing Amex
surveillance procedures governing options and equities.
    The Exchange represents that it currently has in place
comprehensive surveillance sharing agreements with ICE, LME, and NYMEX
for the purpose of providing information in connection with the trading
in futures contracts traded on their respective exchanges comprising
the Underlying Benchmarks, and notes that CBOT, CME, and NYBOT are
members of the Intermarket Surveillance Group. As a result, the
Exchange asserts that market surveillance information is available from
relevant futures exchanges, if necessary, due to regulatory concerns
that may arise in connection with the futures contracts
    Information Circular. Amex will distribute an Information Circular
to its members in connection with the trading of the Shares. The
Information Circular will discuss the special characteristics and risks
of trading this type of security, such as commodity or currency
fluctuation risk. Specifically, the Information Circular, among other
things, will discuss: (1) What the Shares are and how Shares are
created and redeemed; (2) the requirement that members and member firms
deliver a prospectus to investors purchasing the Shares prior to or
concurrently with the confirmation of a transaction, applicable Amex
rules; (3) dissemination information and trading information; (4)
applicable suitability rules;\14\ (5) that the Fund is subject to
various fees and expenses described in the Registration Statement; (6)
that there is no regulated source of last-sale information regarding
physical commodities and currencies, that the SEC has no jurisdiction
over the trading of physical commodities or currencies, and that the
CFTC has regulatory jurisdiction over the trading

[[Page 42383]]

of futures contracts and options on futures contracts; (7) the
procedures for purchases and redemptions of Shares and that Shares are
not individually redeemable but are redeemable only in one or more
Creation Units; (8) any relief, if granted, by the Commission from any
rules under the Act; (9) that the trading hours of the Shares will be
from 9:30 a.m. to 4 p.m. ET and that the NAV for the Shares will be
calculated shortly after 4 p.m. ET each trading day; and (10)
information about the Shares will be publicly available on the Amex Web
site and the Funds' Web sites.
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    \14\ The Exchange notes that pursuant to Amex Rule 411, members
and member organizations are required in connection with
recommending transactions in the Shares to have a reasonable basis
to believe that a customer is suitable for the particular investment
given reasonable inquiry concerning the customer's investment
objectives, financial situation, needs, and any other information
known by such member. See Commentary .05 to Amex Rule 411 (providing
heightened suitability requirements for derivative securities
seeking to provide investment results that either exceed the
performance of an underlying reference asset by a specified multiple
or that correspond to the inverse (opposite) of the performance of
an underlying reference asset by a specified multiple).
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    Trading Halts. The Exchange represents that the Information
Circular will also inform members of Exchange policies regarding
trading halts in the Shares. Specifically, trading in the Shares will
be halted in the event the market volatility trading halt parameters
set forth in Amex Rule 117 have been reached. Second, in addition to
the parameters set forth in Amex Rule 117, the Exchange will halt
trading in the Shares if trading in a significant number of underlying
related futures contract(s) is halted or suspended. Third, the Exchange
will halt trading if it becomes aware that a Fund's NAV or disclosure
of the portfolio composition is not being disseminated or has not been
disseminated to all market participants at the same time. Fourth, the
Exchange will halt trading in the Shares if the value of an Underlying
Benchmark is no longer calculated or available on at least a 15-second
basis through one or more major market data vendors during the time the
Shares trade on Amex or if an Indicative Fund Value per Share updated
every 15 seconds is no longer calculated or available.\15\ Fifth, with
respect to a halt in trading that is not specified above, the Exchange
may also consider other relevant factors and the existence of unusual
conditions or circumstances that may be detrimental to the maintenance
of a fair and orderly market.
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    \15\ If the value of the Underlying Benchmark or the Indicative
Fund Value is not being disseminated on at least a 15-second basis
during the hours the Shares trade on the Exchange, the Exchange may
halt trading during the day in which the interruption to the
dissemination of the value of the Underlying Benchmark or the
Indicative Fund Value occurs. If the interruption to the
dissemination of the value of the Underlying Benchmark or the
Indicative Fund Value 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.
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III. Discussion

    After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\16\ In particular, the Commission believes that the proposal
is consistent with Section 6(b)(5) of the Act,\17\ which requires,
among other things, that the rules of a national securities exchange be
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and in general, to protect investors and the
public interest. The Commission notes that it has permitted the listing
and trading of exchange-traded fund-like products linked to the
performance of underlying currencies and commodities.\18\ The
Commission further notes that the shares of other UltraFunds and
UltraShort Funds based on various securities indexes have previously
been approved by the Commission.\19\
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    \16\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
    \18\ See, e.g., Securities Exchange Act Release Nos. 55632
(April 13, 2007), 72 FR 19987 (April 20, 2007) (SR-Amex-2006-112)
(approving the listing and trading of the United States Natural Gas
Fund, LP); 53582 (March 31, 2006), 71 FR 17510 (April 6, 2006) (SR-
Amex 2005-127) (approving the listing and trading of the United
States Oil Fund, LP); 53521 (March 20, 2006), 71 FR 14967 (March 24,
2006) (SR-Amex 2005-072) (approving the listing and trading of the
iShares Silver Trust); 53105 (January 11, 2006), 71 FR 3129 (January
19, 2006) (SR-Amex 2005-059) (approving the listing and trading of
the DB Commodity Index Tracking Fund); 53059 (January 5, 2006), 71
FR 2072 (January 12, 2006) (SR-Amex 2005-128) (approving the trading
of the Euro Currency Trust pursuant to unlisted trading privileges
(``UTP'')); 51058 (January 19, 2005), 70 FR 3749 (January 26, 2005)
(SR-Amex 2004-38) (approving the listing and trading of the iShares
COMEX Gold Trust); and 51446 (March 29, 2005), 70 FR 17272 (April 5,
2005) (SR-Amex-2005-032) (approving the trading of streetTRACKS Gold
Shares pursuant to UTP). See also Securities Exchange Act Release
Nos. 55029 (December 29, 2006), 72 FR 806 (January 8, 2007) (SR-Amex
2006-76) (approving the listing and trading of the DB Multi-Sector
Commodity Trust); 54450 (September 14, 2006), 71 FR 55230 (September
21, 2006) (SR-Amex 2006-44) (approving the listing and trading of
shares of the DB Currency Index Value Fund); 55292 (February 14,
2007), 72 FR 8406 (February 26, 2007) (SR-Amex 2006-86) (approving
the listing and trading of shares of the PowerShares DB U.S. Dollar
Index Bullish Fund and the PowerShares DB U.S. Dollar Index Bearish
Fund); 56969 (December 14, 2007), 72 FR 72424 (December 20, 2007)
(approving the listing and trading of shares on the GreenHaven
Continuous Commodity Index Fund).
    \19\ See, e.g., Securities Exchange Act Release Nos. 52553
(October 3, 2005), 70 FR 59100 (October 11, 2005) (SR-Amex-2004-62)
(approving the listing and trading of shares of the xtraShares
Trust); 54040 (June 23, 2006), 71 FR 37629 (June 30, 2006) (SR-Amex-
2006-41) (approving the listing and trading of shares of the
ProShares Trust); 55117 (January 17, 2007), 72 FR 3442 (January 25,
2007) (SR-Amex 2006-101) (approving the listing and trading of
shares of the ProShares Trust); 56592 (October 1, 2007), 72 FR 57364
(October 9, 2007) (SR-Amex-2007-60) (approving the listing and
trading of shares of the ProShares Trust based on international
equity indexes); and 56998 (December 19, 2007), 72 FR 73404
(December 27, 2007) (SR-Amex-2007-104) (approving the listing and
trading of shares of the ProShares Trust).
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Proposed Amendments to Commentary .07 to Amex Rule 1202

    The Commission notes that Amex's proposal to permit the listing and
trading of TIRs that directly hold any combination of investments in
Financial Instruments on the Exchange is subject to existing rules,
safeguards, and procedures governing the listing and trading of TIRs,
generally, and Commentary .07 to Amex Rule 1202, in particular. Prior
to listing and trading on the Exchange, Amex must file a separate
proposed rule change pursuant to Section 19(b) of the Act for each
series of TIRs based on separate Investment Shares or Financial
Instruments. In addition, all such securities listed and/or traded
under Commentary .07 to Amex Rule 1202, as proposed to be amended, will
be subject to the full panoply of Amex rules and procedures that
currently govern the trading of equity securities on the Exchange. The
Commission believes that the proposed rule change will facilitate the
listing and trading of additional types of exchange-traded derivative
securities products that will enhance competition among market
participants, to the benefit of investors and the marketplace.

Proposal to List and Trade the Shares of the Funds

    The Exchange proposes to list and trade the Shares pursuant to
Commentary .07 to Amex Rule 1202, as proposed to be amended.\20\ Amex
represents that the Shares will conform to the existing initial and
continued listing criteria under such rule and must be in compliance
with Section 803 of the Amex Company Guide and Rule 10A-3 under the
Act.\21\
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    \20\ The Commission believes that the Exchange's existing rules
and procedures are adequate with respect to the Shares. However, the
Commission notes that other proposed series of TIRs may require
additional Exchange rules and procedures to govern their listing and
trading on the Exchange. For example, in the case of a proposed
series of TIRs that are based on a portfolio, at least in part, of
non-U.S. equity securities, rules relating to comprehensive
surveillance sharing agreements and quantitative initial and
continued listing standards may be required.
    \21\ See supra note 11.
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    The Commission believes that the proposal to list and trade the
Shares of the Funds on the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,\22\ which sets forth Congress' finding

[[Page 42384]]

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. Quotations
and last-sale information for the Shares will be disseminated by means
of CTA and Consolidated Quotation High Speed Lines.\23\ In addition,
the value of each Underlying Benchmark will be updated intra-day on a
real time basis as its components change in price. The Indicative Fund
Value will be disseminated at least every 15 seconds throughout Amex's
trading hours, in accordance with Commentary .07(d)(2)(iii) to Amex
Rule 1202, and the NAV of each Fund will be calculated by the
Administrator and made available each business day at the times set
forth in the Notice.\24\ Real-time dissemination of spot pricing for
gold, silver, euro, and Japanese yen is available on a 24-hour basis
worldwide from various major market data vendors. Data regarding spot
pricing of the Underlying Benchmark commodities (gold and silver) is
publicly available on a 24-hour basis from various financial
information service providers, such as Reuters and Bloomberg. In
addition, the daily London fix for gold and silver is also disseminated
by various market data vendors and is available from the LBMA Web site.
The closing and settlement prices of the futures contracts held by the
Funds are also readily available from CME, NYMEX, CBOT, ICE/NYBOT, LME,
automated quotation systems, published or other public sources, or on-
line information services such as Bloomberg or Reuters. Spot pricing
related to the foreign currency exchange is available to investors and
market professionals on a 24-hour basis. A variety of public Web sites
and professional and subscription services provide market and price
information regarding the euro and the yen. Current spot prices are
also generally available from foreign exchange dealers. Moreover, each
Fund's total portfolio composition will be disclosed on the Web site of
the Trust (http://www.proshares.com) or another relevant Web site as
determined by the Trust and/or the Exchange. The Trust will provide Web
site disclosure of portfolio holdings daily and will include, as
applicable, the names and number of Financial Instruments and
characteristics of such instruments and cash equivalents, and amount of
cash held in the portfolio of each Fund. Amex will also disseminate via
CTA and Consolidated Quotation High Speed Lines various other data,
including corresponding Indicative Fund Values, recent NAV per Share,
and the number of Shares outstanding. In addition, the Exchange will
also make available on its Web site daily trading volume of the Shares,
closing prices of the Shares, and the NAV per Share. The Fund's Web
site will also contain a variety of other information for the Shares,
including a display of the applicable prospectus and quantitative
information on a per-Share basis.
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    \22\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \23\ E-mail from Daniel Mollin, Associate General Counsel, Amex,
to Edward Cho, Special Counsel, Division of Trading and Markets,
Commission, dated July 9, 2008 (confirming dissemination of
quotations and last-sale information regarding the Shares).
    \24\ See Notice, supra note 3, at 33471.
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    Furthermore, the Commission 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. The Commission notes that the Exchange will obtain a
representation from the Trust, prior to listing, that the NAV per Share
for the Funds will be calculated daily, and that the NAV will be made
available to all market participants at the same time.\25\ The Exchange
has represented that the disclosure of the portfolio composition for
each Fund will be made available to all market participants at the same
time. The Exchange may consider the suspension of trading in, or
removal from listing of, the Shares if, among others: (1) the
underlying index or portfolio is no longer calculated or available on
at least a 15-second delayed basis through one or more major market
data vendors during the time the TIRs trade on the Exchange; or (2) the
Indicative Fund Value is no longer made available on at least a 15-
second delayed basis. Commentary .07(e) to Amex Rule 1202 restricts any
equity specialist, his member organization, or any other member,
limited partner, officer, or approved person thereof from acting as a
market maker in an underlying asset or commodity, related futures or
options on futures, or any other related derivatives, unless certain
procedures restricting the flow of material, non-public market
information are established. In addition, Commentary .07(g)(3) to Amex
Rule 1202 states that, in connection with trading the underlying
physical asset or commodity, related futures or options on futures or
any other related derivative (including TIRs), the specialist
registered as such in TIRs may not use any material, non-public
information received from any person associated with a member, member
organization, or employee of such person regarding trading by such
person or employee in the physical asset or commodity, futures or
options on futures, or any other related derivatives.
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    \25\ See infra note 26.
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    The Commission believes that the Exchange's trading halt rules are
reasonably designed to prevent trading in the Shares when transparency
is impaired. Trading in the Shares will be halted: (1) In the event the
market volatility trading halt parameters set forth in Amex Rule 117
have been reached; (2) if trading in a significant number of underlying
related futures contract(s) is halted or suspended; (3) if the Exchange
becomes aware that a Fund's NAV or disclosure of the portfolio
composition is not being disseminated or has not been disseminated to
all market participants at the same time; \26\ (4) if the value of an
Underlying Benchmark is no longer calculated or available on at least a
15-second basis through one or more major market data vendors during
the time the Shares trade on Amex or if an Indicative Fund Value per
Share updated every 15 seconds is no longer calculated or
available.\27\ With respect to a halt in trading not specified above,
the Exchange may also consider other relevant factors and the existence
of unusual conditions or circumstances that may be detrimental to the
maintenance of a fair and orderly market.
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    \26\ See also Securities Exchange Release No. 58111 (July 7,
2008), 73 FR 40643 (July 15, 2008) (SR-Amex-2008-40; SR-NASDAQ-2008-
046; SR-NYSE-2008-39; SR-NYSEArca-2008-50) (adopting, among other
things, new Amex Rule 117A and Commentary.01 thereto, which requires
that the Exchange halt trading in the Shares once it becomes aware
that the NAV for such Shares are not being disseminated to all
market participants at the same time).
    \27\ See supra note 15.
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    The Commission further believes that the trading rules and
procedures to which the Shares will be subject pursuant to this
proposal are consistent with the Act. The Exchange has represented that
the Shares are equity securities subject to Amex's rules governing the
trading of equity securities.
    In support of this proposal, the Exchange has made the following
representations:
    (1) The Shares will conform to the initial and continued listing
criteria under Commentary .07 to Amex Rule 1202, as proposed to be
amended.

[[Page 42385]]

    (2) The Exchange's surveillance procedures are adequate to deter
and detect violations of Exchange rules relating to the trading of the
Shares. Specifically, the surveillance procedures will be similar to
those used for other commodity-based TIRs, Commodity-Based Trust
Shares, Currency Trust Shares, and exchange-traded funds. In addition,
the Exchange will incorporate and rely upon existing Amex surveillance
procedures governing options and equities.
    (3) The Exchange will distribute an Information Circular, the
contents of which are more fully described herein, to its members in
connection with the trading of the Shares.
    (4) The Exchange represents that the Trust is required to comply
with Section 803 of the Amex Company Guide and Rule 10A-3 under the Act
\28\ for the initial and continued listing of the Shares.
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    \28\ 17 CFR 240.10A-3.
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    This approval order is based on the Exchange's representations.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\29\ that the proposed rule change (SR-Amex-2008-39), as modified
by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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    \30\ See 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-16614 Filed 7-18-08; 8:45 am]

BILLING CODE 8010-01-P
