
[Federal Register: January 6, 2009 (Volume 74, Number 3)]
[Notices]               
[Page 490-492]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06ja09-84]                         


[[Page 490]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59173; File No. SR-NYSEArca-2008-125]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating 
to the Listing of Units of the United States Short Oil Fund

December 29, 2008.
    On November 18, 2008, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade units (``Units'') of the United 
States Short Oil Fund, LP (``USSO'' or ``Partnership''). The proposed 
rule change was published in the Federal Register on December 1, 2008 
for a 15-day comment period.\3\ The Commission received no comments on 
the proposal. On December 29, 2008, the Exchange filed Amendment No. 1 
to the proposed rule change.\4\ This order provides notice of the 
filing of Amendment No. 1 and approves the proposed rule change, as 
modified by Amendment No. 1 thereto, on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 58994 (November 21, 
2008), 73 FR 72892 (``Notice'').
    \4\ In Amendment No. 1, NYSE Arca: (1) Represented that the 
Units satisfy the requirements of NYSE Arca Equities Rule 8.300 and 
thereby qualify for listing on the Exchange; (2) designated the 
Futures Contracts (as defined herein) as the sole underlying 
benchmark investment, commodity, or asset for purposes of NYSE Arca 
Equities Rule 8.300(d)(2)(ii); and (3) clarified that price 
information for the Futures Contracts is calculated or available on 
at least a 15-second delayed basis.
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I. Description of the Proposal

    NYSE Arca, through its wholly owned subsidiary, NYSE Arca Equities, 
Inc. (``NYSE Arca Equities''), proposes to list and trade the Units of 
USSO pursuant to NYSE Arca Equities Rule 8.300, which governs the 
trading of Partnership Units.\5\ USSO, a Delaware limited partnership, 
is managed and controlled by United States Commodity Funds LLC 
(``General Partner''), a single member limited liability company that 
is (1) registered as a commodity pool operator with the Commodity 
Futures Trading Commission (``CFTC'') and (2) a member of the National 
Futures Association. The General Partner is not affiliated with a 
broker-dealer. USSO will comply with the requirements of Rule 10A-3 
under the Act \6\ as it applies to limited partnerships.
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    \5\ USSO has filed with the Commission Amendment No. 1 to Form 
S-1, dated September 29, 2008 (File No. 333-152386) (``Registration 
Statement'').
    \6\ 17 CFR 240.10A-3.
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    The investment objective of USSO is to have the changes in 
percentage terms of the Units' net asset value (``NAV'') inversely 
reflect the changes in percentage terms of the spot price of light, 
sweet crude oil delivered to Cushing, Oklahoma, as measured by the 
changes in the price of the futures contract on light, sweet crude oil 
as traded on the New York Mercantile Exchange (``NYMEX''). The futures 
contract employed is the near month expiration contract, except when 
the near month contract is within two weeks of expiration, in which 
case the futures contract will be the next month contract to expire 
(``Benchmark Futures Contract''), less USSO's expenses.\7\ In pursuing 
this objective, the primary focus of the General Partner will be taking 
short positions in futures contracts \8\ and the management of 
investments in short-term obligations of the United States of two years 
or less (``Treasuries''), and cash and/or cash equivalents for 
margining purposes and as collateral.
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    \7\ The Benchmark Futures Contract will be changed or ``rolled'' 
from the near month contract to expire to the next month contract to 
expire during one day.
    \8\ The net assets of USSO will consist primarily of short 
positions in futures contracts for crude oil, heating oil, gasoline, 
natural gas, and other petroleum-based fuels that are traded on 
NYMEX, ICE Futures, or other U.S. and foreign exchanges 
(collectively, ``Futures Contracts''). USSO may also take short 
positions in other crude oil-related investments such as cash-
settled options on Futures Contracts, forward contracts for crude 
oil, and over-the-counter transactions that are based on the price 
of crude oil and other petroleum-based fuels, Futures Contracts, and 
indices based on the foregoing (collectively, ``Other Crude Oil-
Related Investments'').
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    Additional information about USSO, including its investing strategy 
and holdings, Basket Amount calculation, creations and redemptions of 
Units, dissemination and availability of information, trading rules, 
trading halts, surveillance, and information bulletin, among other 
things, is contained in the Notice and the Registration Statement.\9\
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    \9\ See supra notes 3 and 5. Terms referred to, but not defined 
herein, have the same meaning set forth in the Notice.
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II. Discussion and Commission Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \10\ and the rules and regulations thereunder applicable to a 
national securities exchange.\11\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\12\ 
which requires, among other things, that the Exchange's rules be 
designed to 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.
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    \10\ 15 U.S.C. 78f.
    \11\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange proposes to list and trade the Units pursuant to NYSE 
Arca Equities Rule 8.300. NYSE Arca represents that the Units satisfy 
the applicable requirements of Rule 8.300, which includes initial and 
continued listing criteria.\13\
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    \13\ See supra note 4.
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    The Commission believes that the proposal to list and trade the 
Units on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\14\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. Quotation and last-sale 
information regarding the Units will be disseminated through the 
facilities of the CTA. The value of the underlying benchmark 
investment, commodity, or asset of the Units (the price information for 
applicable Futures Contracts) will be calculated and available on a 
real-time basis at least every 15 seconds between 10 a.m. and 2:30 p.m. 
Eastern Time (``ET''), the normal NYMEX trading hours for the Futures 
Contracts.\15\
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    \14\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \15\ See supra note 4.
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    In addition, USSO's total portfolio composition will be disclosed 
each business day that the NYSE Arca is open for trading on USSO's Web 
site, which is publicly accessible at no charge. This disclosure will 
include, as applicable, the name and value of each Crude Oil Interest, 
the specific types of Other Crude Oil-Related Investments and 
characteristics of such Other Crude Oil-Related Investments, 
Treasuries, and the amount of cash and cash equivalents

[[Page 491]]

held in USSO's portfolio. NYSE Arca will calculate and disseminate 
through the facilities of CTA/CQ High Speed Lines an IPV, on a per Unit 
basis, updated every 15 seconds between 10 a.m. and 2:30 p.m. ET.\16\ 
Additionally, the IPV will be published on the NYSE Arca's Web site and 
will be available through on-line information services such as 
Bloomberg and Reuters.
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    \16\ See Notice supra note 3, 73 FR at 72896, n.16, and 
accompanying text.\
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    Lastly, the Administrator will calculate NAV once each trading day 
and the NAV for a particular trading day will be released after 4 p.m. 
ET. The Administrator will calculate NAV as of the earlier of the close 
of the New York Stock Exchange or 4 p.m. ET. USSO will use the NYMEX 
closing price (determined at the earlier of the close of that Exchange 
or 2:30 p.m. ET) for the contracts held on NYMEX, but will calculate or 
determine the value of all other USSO investments as of the earlier of 
the close of the NYSE Arca Core Trading Session or 4 p.m. ET.
    The Commission also believes that the proposal to list and trade 
the Units is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Units appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. NYSE Arca Equities Rule 8.300(d)(2)(ii) provides that NYSE 
Arca Equities will consider removing from listing Partnership Units if 
the value of the underlying benchmark investment, commodity or asset is 
no longer calculated or available on at a least a 15-second delayed 
basis or NYSE Arca Equities stops providing a hyperlink on its Web site 
to any such investment, commodity or asset value. In addition, if the 
value of the underlying benchmark investment, commodity or asset or IPV 
applicable to the Units is not being disseminated as required, the 
Exchange may halt trading in the Units during the day on which the 
interruption first occurs. If such interruption 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. 
Under NYSE Arca Equities Rule 7.34(a)(5), if the Exchange becomes aware 
that the NAV for the Units is not being disseminated to all market 
participants at the same time, it will halt trading in the Units on the 
Exchange until such time as the NAV is available to all market 
participants. Further, if the portfolio composition applicable to the 
Units (disseminated via USSO's Web site) is not disseminated to all 
market participants at the same time, the Exchange will halt trading in 
the affected Units. Moreover, NYSE Arca Equities Rule 8.300(e) limits 
certain dealings and trading activity of ETP Holders acting as 
registered Market Makers in Units, prescribes various recordkeeping and 
disclosure requirements for ETP Holders, and prohibits the use of any 
material non-public information regarding trading in the underlying 
physical asset or commodity, futures or options on futures, or any 
other related derivatives.
    The Commission further believes that the trading rules and 
procedures to which the Units will be subject pursuant to this proposal 
are consistent with the Act. The Exchange has represented that the 
Units are equity securities subject to NYSE Arca's rules governing the 
trading of equity securities.
    In support of this proposal, the Exchange has made the following 
representations:
    1. The Units satisfy the requirements of NYSE Arca Equities Rule 
8.300, which includes the initial and continued listing criteria for 
Partnership Units.\17\
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    \17\ See supra note 4.
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    2. The Exchange's surveillance procedures are adequate to properly 
monitor trading of the Units in all trading sessions and to deter and 
detect violations of Exchange rules and applicable federal securities 
laws.
    3. The Exchange will distribute an Information Bulletin, the 
contents of which are more fully described in the Notice, to ETP 
Holders in connection with the trading of the Units.
    4. USSO will comply with the requirements of Rule 10A-3 under the 
Act \18\ as it applies to limited partnerships.
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    \18\ 17 CFR 240.10A-3.

This order is based on the Exchange's representations.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\19\ for approving the proposed rule change, as modified by 
Amendment No. 1 thereto, prior to the 30th day after the date of 
publication of notice in the Federal Register. The Commission notes 
that it has previously approved the listing and trading, or trading 
pursuant to unlisted trading privileges (``UTP''), of Partnership Units 
that are similar to the Units.\20\ The Commission also notes that it 
has previously approved the listing and trading of certain funds that 
are based on underlying commodity or currency benchmarks that seek 
daily investment results, before fees and expenses, that correspond to 
twice (200%) the daily performance of the underlying benchmark or twice 
the inverse (-200%) of the daily performance of the underlying 
benchmark.\21\ No comments were received on the proposed rule change 
during the 15-day comment period, and the Commission believes that the 
Exchange's proposal to list and trade the Units, as modified by 
Amendment No. 1 thereto, does not present any novel or significant 
regulatory issues. As such, the Commission believes that accelerating 
approval of this proposal should benefit investors by creating, without 
undue delay, additional competition in the market for such products.
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    \19\ 15 U.S.C. 78s(b)(2).
    \20\ See, e.g., Securities Exchange Act Release Nos. 53582 
(March 31, 2006), 71 FR 17510 (April 6, 2006) (SR-Amex-2005-127) 
(approving the listing of units of the United States Oil Fund, LP); 
56831 (November 21, 2007), 72 FR 67612 (November 29, 2007) (SR-Amex-
2007-98) (approving the listing of units of the United States 12 
Month Oil Fund, LP and United States 12 Month Natural Gas Fund, LP); 
55632 (April 13, 2007), 72 FR 19987 (April 20, 2007) (SR-Amex-2006-
112) (approving the listing of units of the United States Natural 
Gas Fund, LP); and 57188 (January 23, 2008), 73 FR 5607 (January 30, 
2008) (SR-Amex-2007-70) (approving the listing of units of the 
United States Heating Oil Fund, LP and United States Gasoline Fund, 
LP). See also, e.g., Securities Exchange Act Release Nos. 56832 
(November 21, 2007), 72 FR 67328 (November 28, 2007) (SR-NYSEArca-
2007-102) (approving the trading of units of the United States 12 
Month Oil Fund, LP and United States 12 Month Natural Gas Fund, LP 
pursuant to UTP); 56042 (July 11, 2007), 72 FR 39118 (July 17, 2007) 
(SR-NYSEArca-2007-45) (approving the trading of units of the United 
States Natural Gas Fund, LP pursuant to UTP); and 57294 (February 8, 
2008), 73 FR 8917 (February 15, 2008) (SR-NYSEArca-2007-78) 
(approving the trading of units of the United States Heating Oil 
Fund, LP and United States Gasoline Fund, LP pursuant to UTP).
    \21\ See, e.g., Securities Exchange Act Release Nos. 58161 (July 
15, 2008), 73 FR 42380 (July 21, 2008) (SR-Amex-2008-39) (approving 
the listing of shares of the ProShares Ultra DJ-AIG Commodity, 
ProShares UltraShort DJ-AIG Commodity, ProShares Ultra DJ-AIG 
Agriculture, ProShares UltraShort DJ-AIG Agriculture, ProShares 
Ultra DJ-AIG Crude Oil, ProShares UltraShort DJAIG Crude Oil, 
ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra 
Silver, ProShares UltraShort Silver, ProShares Ultra Euro, ProShares 
UltraShort Euro, ProShares Ultra Yen, and ProShares UltraShort Yen 
Funds (collectively, the ``Funds'')); and 58457 (September 3, 2008), 
73 FR 52711 (September 10, 2008) (SR-NYSEArca-2008-91) (approving 
the listing of shares of the Funds on the Exchange).
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1 to the proposed rule change, 
including whether Amendment No. 1 is consistent with the Act. Comments 
may be submitted by any of the following methods:

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Electronic Comments

     Use the Commission's Internet comment form (http://
www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2008-125 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, and 100 F Street, NE., Washington, DC 20549-
1090.

All submissions should refer to File Number SR-NYSEArca-2008-125. This 
file number should be included on the subject line if e-mail 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 inspection 
and copying in the Commission's Public Reference Room, 100 F Street, 
NE., Washington, DC 20549, on official business days between the hours 
of 10 a.m. and 3 p.m. Copies of 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-2008-125 and should 
be submitted on or before January 26, 2009.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\22\ that the proposed rule change (SR-NYSEArca-2008-125), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved on 
an accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-31352 Filed 1-5-09; 8:45 am]

BILLING CODE 8011-01-P
