
[Federal Register: April 16, 2010 (Volume 75, Number 73)]
[Notices]               
[Page 20028-20030]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16ap10-142]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61881; File No. SR-NYSEArca-2010-14]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Accelerated Approval of Proposed Rule Change Relating to the Listing of 
the United States Brent Oil Fund, LP

April 9, 2010.

I. Introduction

    On March 3, 2010, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade units of the United States Brent Oil Fund, LP. The 
proposed rule change was published for comment in the Federal Register 
on March 24, 2010.\3\ The Commission received no comments on the 
proposed rule change. This order approves the proposed rule change on 
an accelerated basis.
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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. 61721 (March 16, 
2010), 75 FR 14237 (``Notice'').
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II. Description of Proposed Rule Change

    The Exchange proposes to list and trade units (``Units'') of the 
United States Brent Oil Fund, LP (``USBO'') pursuant to NYSE Arca 
Equities Rule 8.300, which governs the listing and trading of 
partnership units on the Exchange.\4\ USBO, a Delaware limited 
partnership, is a commodity pool that is managed and controlled by its 
general partner, United States Commodity Funds LLC (``General 
Partner''). The General Partner is a single member limited liability 
company that was formed in Delaware on May 10, 2005 and is registered 
as a commodity pool operator with the Commodity Futures Trading 
Commission (``CFTC''), and is a member of the National Futures 
Association. The General Partner is not affiliated with a broker-
dealer. The Exchange represents that USBO will comply with the 
requirements NYSE Arca Equities Rule 8.300 \5\ and with the 
requirements of Rule 10A-3 under the Act \6\ as it applies to limited 
partnerships.
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    \4\ USBO has filed with the Commission Amendment No. 2 to Form 
S-1, dated January 22, 2010 (File No. 333-162015) (``Registration 
Statement'').
    \5\ The Exchange represents that a minimum of 100,000 Units will 
be outstanding at the commencement of trading on the Exchange, the 
net asset value (``NAV'') per Unit will be calculated daily, and the 
NAV and the portfolio composition will be made available to all 
market participants at the same time.
    \6\ 17 CFR 240.10A-3.
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    The net assets of USBO will consist primarily of investments in 
futures contracts for crude oil, heating oil, gasoline, natural gas and 
other petroleum-based fuels that are traded on the ICE Futures 
Exchange, New York Mercantile Exchange (``NYMEX''), or other U.S. and 
foreign exchanges (collectively, ``Futures Contracts''). USBO may also 
invest in other crude oil-related investments, such as cash-settled 
options on Futures Contracts, forward contracts for crude oil, cleared 
swap contracts 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 (``Other Crude Oil-Related 
Investments'' and, together with Futures Contracts, ``Crude Oil 
Interests'').
    USBO will invest in Crude Oil Interests to the fullest extent 
possible without being leveraged or unable to satisfy its current or 
potential margin or collateral obligations with respect to its 
investments in Futures Contracts and Other Crude Oil-Related 
Investments. The primary focus of the General Partner will be investing 
in Futures Contracts and the management of investments in short-term 
obligations of the United States of two years or less (``Treasuries''), 
cash and/or cash equivalents for margining purposes and as collateral.
    The investment objective of USBO is intended to have the daily 
changes in percentage terms of its Units' NAV reflect the daily changes 
in percentage terms of the spot price of Brent crude oil as measured by 
the changes in the price of the futures contract on Brent crude oil, as 
traded on ICE Futures Exchange that is the near-month contract to 
expire, 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 USBO's 
expenses. The General Partner will employ a ``neutral'' investment 
strategy intended to track the changes in the price of the Benchmark 
Futures Contract regardless of whether the price goes up or goes down. 
USBO may invest in Crude Oil Interests other than the Benchmark Futures 
Contract to comply with accountability levels and position limits. On 
each day during a four-day period, the General Partner anticipates it 
will ``roll'' USBO's positions in oil investments by closing, or 
selling, a percentage of USBO's positions in Crude Oil Interests and 
reinvesting the proceeds from closing those positions in new Crude Oil 
Interests that reflect the change in the Benchmark Futures Contract.
    The Exchange represents that USBO will create and redeem Units only 
in blocks of 100,000 Units called Creation Baskets and Redemption 
Baskets, respectively. Only Authorized Purchasers may purchase or 
redeem Creation Baskets or Redemption Baskets.
    Additional information regarding the Units, USBO, the investment 
objective, policies, investment strategies, accountability levels, 
position limits, calculation of NAV, availability of information, 
trading rules and halts, and surveillance procedures, among other 
things, can be found in the Registration Statement and in the Notice, 
as applicable.\7\
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    \7\ See supra notes 3 and 4.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that NYSE Arca's 
proposal to list and trade the Units is consistent with

[[Page 20029]]

the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\8\ In particular, the 
Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\9\ which requires that an exchange have 
rules designed, among other things, 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 previously approved the listing and trading of other petroleum-
based funds that are substantially similar to USBO.\10\
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    \8\ In approving this 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).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ See, e.g., Securities Exchange Act Release Nos. 53582 
(March 31, 2006), 71 FR 17510 (April 6, 2006) (SR-Amex-2005-127) 
(order approving listing and trading on the American Stock Exchange 
LLC (``Amex'') of United States Oil Fund, LP); 56831 (November 21, 
2007), 72 FR 67612 (November 29, 2007) (SR-Amex-2007-98) (order 
approving listing and trading on the Amex of 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) 
(order approving listing and trading on the Amex of United States 
Natural Gas Fund, LP); 57188 (January 23, 2008), 73 FR 5607 (January 
30, 2008) (SR-Amex-2007-70) (order approving listing and trading on 
the Amex of United States Heating Oil Fund, LP and United States 
Gasoline Fund, LP); 58965 (November 17, 2008), 73 FR 71078 (November 
24, 2008) (SR-NYSEArca-2008-127) (order approving listing and 
trading on the Exchange of United States Oil Fund, LP, United States 
12 Month Oil Fund, LP, United States Heating Oil Fund, LP, United 
States Gasoline Fund, LP, United States 12 Month Natural Gas Fund, 
LP and United States Natural Gas Fund, LP); and 59173 (December 29, 
2008), 74 FR 490 (January 6, 2009) (SR-NYSEArca-2008-125) (order 
approving listing and trading on the Exchange of United States Short 
Oil Fund, LP).
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    The Commission finds that the proposal to list and trade the Units 
on the Exchange is also consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\11\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors, of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information for the Units will be disseminated through the 
facilities of the Consolidated Tape Association, and the Indicative 
Partnership Value (``IPV'') will be calculated, updated and 
disseminated on a per-Unit basis every 15 seconds during the Exchange's 
Core Trading Session by one or more major market data vendors. In 
addition, USBO will make available on its Web site on each business day 
its total portfolio composition that will include, as applicable, the 
name and value of each Crude Oil Interest, the specific types of Other 
Crude Oil-Related Investments, Treasuries, and the amount of cash and 
cash equivalents held in USBO's portfolio. With respect to information 
regarding the underlying Futures Contracts, ICE Futures Exchange 
disseminates price information on the Futures Contracts traded on the 
ICE Futures Exchange on a real-time basis during normal trading hours 
on the ICE Futures Exchange from 8 p.m. to 6 p.m. Eastern Time. With 
respect to any Futures Contracts that are traded on NYMEX, NYMEX 
disseminates price information on a real-time basis during normal 
trading hours on NYMEX from 10 a.m. to 2:30 p.m. E.T.
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    \11\ 15 U.S.C. 78k-l(a)(1)(C)(iii).
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    The Commission further believes that the proposal 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. The Commission 
notes that if the Exchange becomes aware that the NAV or the portfolio 
composition applicable to the Units is not disseminated to all market 
participants at the same time, the Exchange will halt trading in the 
Units. Further, if the indicative partnership value or the underlying 
benchmark investment, commodity or asset applicable to the Units is not 
being disseminated as required, the Exchange may halt trading during 
the day in which the interruption first occurs; if the interruption 
persists past the trading day on which it occurred, the Exchange will 
halt trading no later than the beginning of the trading day following 
the interruption.\12\
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    \12\ Trading in the Units may also be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Units inadvisable. These may include: The extent to 
which trading is not occurring in the underlying Futures Contracts; 
or (2) whether other unusual conditions or circumstances detrimental 
to the maintenance of a fair and orderly market are present; or (3) 
pursuant to the Exchange's ``circuit breaker'' rule (see NYSE Arca 
Equities Rule 7.12).
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    The Exchange has represented that the Units are equity securities 
subject to the Exchange's rules governing the trading of equity 
securities. In support of this proposal, the Exchange has made 
representations, including:
    1. USBO will comply with the requirements of NYSE Arca Equities 
Rule 8.300, which includes initial and continued listing criteria.
    2. The Exchange has appropriate rules to facilitate transactions in 
this type of security in all trading sessions.
    3. The Exchange's surveillance procedures are adequate to properly 
monitor the trading of the Units in all trading sessions and to deter 
and detect violations of Exchange rules and applicable Federal 
securities laws.
    4. 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 Units. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Units during the Opening and Late 
Trading Sessions (for Futures Contracts traded on ICE Futures), or, in 
addition, part of the Core Trading Session (for Futures Contracts 
traded on NYMEX) when an updated IPV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of Units 
(and that Units are not individually redeemable); (c) NYSE Arca 
Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Units; (d) how information regarding the IPV is 
disseminated; (e) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Units prior to or concurrently 
with the confirmation of a transaction; and (f) trading information.
    5. USBO will be in compliance with Rule 10A-3 under the Act.\13\
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    \13\ 17 CFR 240.10A-3.
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    6. To the extent that USBO invests in Futures Contracts traded on 
exchanges other than ICE Futures Exchange and NYMEX, not more than 10% 
of USBO's assets in the aggregate shall consist of Crude Oil Interests 
whose principal trading market is not a member of the Intermarket 
Surveillance Group or is a market with which the Exchange does not have 
a comprehensive surveillance sharing agreement.
    This approval order is based on the Exchange's representations.\14\
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    \14\ The Commission notes that it does not regulate the market 
for the futures in which USBO plans to take positions, which is the 
responsibility of the CFTC. The CFTC has the authority to set limits 
on the positions that any person may take in futures on commodities. 
These limits may be directly set by the CFTC, or by the markets on 
which the futures are traded. The Commission has no role in 
establishing position limits on futures in commodities, even though 
such limits could impact a commodity-based exchange-traded product 
that is under the jurisdiction of the Commission.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations

[[Page 20030]]

thereunder applicable to a national securities exchange.

IV. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\15\ for approving the proposal prior to the thirtieth day 
after the publication of the Notice in the Federal Register. The 
Commission notes that it has approved the listing and trading of other 
limited partnerships, the characteristics of which are substantially 
similar to USBO.\16\ The Commission also notes that it has not received 
any comments regarding this proposal. The Commission believes that the 
proposal to list and trade the Units does not raise any novel 
regulatory issues and accelerating approval of this proposal should 
benefit investors by creating, without undue delay, additional 
competition in the market for limited partnership units.
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    \15\ 15 U.S.C. 78s(b)(2).
    \16\ See supra note 10 and accompanying text.
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\17\ that the proposed rule change (SR-NYSEArca-2010-14) be, and it 
hereby is, approved on an accelerated basis.
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    \17\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8688 Filed 4-15-10; 8:45 am]
BILLING CODE 8011-01-P

