
[Federal Register Volume 76, Number 18 (Thursday, January 27, 2011)]
[Notices]
[Pages 4963-4965]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1728]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63753; File No. SR-NYSEArca-2010-110]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change To List and Trade Shares of the Teucrium Natural 
Gas Fund

January 21, 2011.

I. Introduction

    On December 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 shares of the Teucrium Natural 
Gas Fund under NYSE Arca Equities Rule 8.200. The proposed rule change 
was published for comment in the Federal Register on December 15, 
2010.\3\ The Commission received no comments on the proposal. This 
order approves the proposed rule change.
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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. 63493 (December 9, 
2010), 75 FR 78290 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade shares (``Shares'') of the 
Teucrium Natural Gas Fund (``Fund'') pursuant to NYSE Arca Equities 
Rule 8.200. NYSE Arca Equities Rule 8.200, Commentary .02, permits the 
trading of Trust Issued Receipts either by listing or pursuant to 
unlisted trading privileges.\4\
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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.
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    The Shares represent beneficial ownership interests in the Fund, 
which is a commodity pool that is a series of the Teucrium Commodity 
Trust (``Trust''), a Delaware statutory trust.\5\ The Fund is managed 
and controlled by Teucrium Trading, LLC (``Sponsor''). The Sponsor is a 
Delaware limited liability company that is registered as a commodity 
pool operator with the Commodity Futures Trading Commission (``CFTC'') 
and is a member of the National Futures Association.
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    \5\ See Amendment No. 1 to registration statement on Form S-1 
for Teucrium Commodity Trust, dated September 7, 2010 (File No. 333-
167593) relating to the Teucrium Natural Gas Fund (``Registration 
Statement'').
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    The investment objective of the Fund is to have the daily changes 
in percentage terms of the Shares' net asset value (``NAV'') reflect 
the daily changes in percentage terms of a weighted average of the 
following: the nearest to spot month March, April, October and November 
Henry Hub Natural Gas Futures Contracts (``Natural Gas Futures 
Contracts'') traded on the NYMEX, weighted 25% equally in each contract 
month, less the Fund's expenses.\6\ The Sponsor employs a ``neutral'' 
investment strategy intended to track the changes in the Gas Benchmark 
regardless of whether the Gas Benchmark goes up or down.
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    \6\ This weighted average of the four referenced Natural Gas 
Futures Contracts is referred to herein as the ``Gas Benchmark,'' 
and the four Natural Gas Futures Contracts that at any given time 
make up the Gas Benchmark are referred to herein as the ``Gas 
Benchmark Component Futures Contracts.''
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    The Fund seeks to achieve its investment objective by investing 
under normal market conditions in Gas Benchmark Component Futures 
Contracts or, in certain circumstances, in other Natural Gas Futures 
Contracts traded on the New York Mercantile Exchange (``NYMEX''), 
Intercontinental Exchange (``ICE''), and other foreign exchanges. In 
addition, and to a limited extent, the Fund will invest in natural gas-
based swap agreements that are cleared through the ICE or its 
affiliated provider of clearing services (``Cleared Natural Gas 
Swaps'') to the extent permitted and appropriate in light of the 
liquidity in the Cleared Natural Gas Swap market. Once position limits 
in Natural Gas Futures Contracts are applicable, the Fund may also 
invest first in Cleared Natural Gas Swaps to the extent permitted by 
the position limits applicable to Cleared Natural Gas Swaps and 
appropriate in light of the liquidity in the Cleared Natural Gas Swaps 
market, and then in contracts and instruments such as cash-settled 
options on Natural Gas Futures Contracts and forward contracts, swaps 
other than Cleared Natural Gas Swaps, and other over-the-counter 
transactions that are based on the price of natural gas and Natural Gas 
Futures Contracts (collectively, ``Other Natural Gas Interests'' and 
together with Natural Gas Futures Contracts and Cleared Natural Gas 
Swaps, ``Natural Gas Interests'').\7\
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    \7\ The Fund will invest in Natural Gas Interests in a manner 
consistent with the Fund's investment objective and not to achieve 
additional leverage.
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    The Exchange represents that the Fund will meet the initial and 
continued listing requirements applicable to Trust Issued Receipts in 
NYSE Arca Equities Rule 8.200 and Commentary .02 thereto. With respect 
to application of Rule 10A-3 under the Act,\8\ the Trust will rely on 
the exception contained in Rule 10A-3(c)(7).\9\ A minimum of 100,000 
Shares will be outstanding as of the start of trading on the Exchange.
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    \8\ 17 CFR 240.10A-3.
    \9\ 17 CFR 240.10A-3(c)(7).
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    Additional details regarding the trading policies of the Fund, 
creations and redemptions of the Shares, Natural Gas Interests and 
other aspects of the natural gas and Natural Gas Interest markets, 
investment risks, Benchmark performance, NAV calculation, the 
dissemination and availability of information about the underlying 
assets, trading halts, applicable trading rules, surveillance, and the 
Information Bulletin, among other things, can be found in the Notice 
and/or the Registration Statement, as applicable.\10\
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    \10\ See supra notes 3 and 5.
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III. Discussion and Commission's Findings

    After careful consideration, the Commission finds that the proposed 
rule change to list and trade the Shares of the Fund is consistent with 
the requirements of the Act and the rules and regulations thereunder 
applicable to a national securities exchange.\11\ In particular, the 
Commission finds that the proposed rule change is consistent with the 
requirements of Section 6(b)(5) of the Act,\12\ which requires, among

[[Page 4964]]

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, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system.
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    \11\ 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).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is also consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\13\ which sets forth Congress's finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information regarding the Shares will be disseminated through the 
facilities of the Consolidated Tape Association (``CTA''), and the 
Benchmark will be disseminated by one or more major market data vendors 
every 15 seconds during the NYSE Arca Core Trading Session of 9:30 a.m. 
to 4:00 p.m. Eastern Time (``E.T.''). In addition, the Indicative Trust 
Value (``ITV'') will be disseminated on a per-Share basis by one or 
more major market data vendors every 15 seconds during the NYSE Arca 
Core Trading Session.\14\ The Fund will provide Web site disclosure of 
portfolio holdings daily and will include, as applicable, the names, 
quantity, price, and market value of Financial Instruments \15\ and the 
characteristics of such instruments and cash equivalents, and amount of 
cash held in the portfolio of the Fund. The closing price and 
settlement prices of the Natural Gas Futures Contracts are readily 
available from NYMEX, automated quotation systems, published or other 
public sources, or on-line information services such as Bloomberg or 
Reuters, and the spot price of natural gas also is available on a 24-
hour basis from major market data vendors. The NAV for the Fund will be 
calculated by the Administrator once a day and will be disseminated 
daily to all market participants at the same time, and the Web site for 
the Fund (http://www.teucriumnaturalgasfund.com) and/or the Exchange 
will contain the prospectus and additional data relating to NAV and 
other applicable quantitative information.
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    \13\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \14\ The normal trading hours for Natural Gas Futures Contracts 
on NYMEX are 9 a.m. to 2:30 p.m. E.T. The ITV will not be updated, 
and, therefore, a static ITV will be disseminated, between the close 
of trading on NYMEX of Natural Gas Futures Contracts and the close 
of the NYSE Arca Core Trading Session. The value of a Share may be 
influenced by non-concurrent trading hours between NYSE Arca and the 
NYMEX and ICE when the Shares are traded on NYSE Arca after normal 
trading hours of Natural Gas Futures Contracts on NYMEX.
    \15\ See supra note 4.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. If the Exchange becomes aware that the NAV with respect to the 
Shares is not disseminated to all market participants at the same time, 
it will halt trading in the Shares until such time as the NAV is 
available to all market participants. Further, the Exchange represents 
that it may halt trading during the day in which an interruption to the 
dissemination of the ITV or the value of the underlying futures 
contracts occurs. If the interruption to the dissemination of the ITV 
or the value of the underlying futures contracts persists past the 
trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption. 
In addition, the 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 Purchasers (as defined in 
the Registration Statement) 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 Purchasers. 
Accordingly, each investor will have access to the current portfolio 
composition of the Fund through the Fund's Web site. Lastly, the 
trading of the Shares will be subject to NYSE Arca Equities Rule 8.200, 
Commentary .02(e), which sets forth certain restrictions on ETP Holders 
\16\ acting as registered Market Makers \17\ in Trust Issued Receipts 
to facilitate surveillance.
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    \16\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \17\ See NYSE Arca Equities Rule 1.1(u) (defining Market Maker).
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    The Exchange has represented that the Shares are deemed 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 the following:
    (1) The Fund will meet the initial and continued listing 
requirements applicable to Trust Issued Receipts in NYSE Arca Equities 
Rule 8.200 and Commentary .02 thereto.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable Federal 
securities laws.
    (4) With respect to Fund assets traded on exchanges, not more than 
10% of the weight of such assets in the aggregate shall consist of 
components whose principal trading market is not a member of the 
Intermarket Surveillance Group or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement.
    (5) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Opening and Late 
Trading Sessions when an updated ITV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares (and that Shares are not individually redeemable); (c) NYSE Arca 
Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (d) how information regarding the ITV is 
disseminated; (e) 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 (f) trading information.
    (6) A minimum of 100,000 Shares will be outstanding as of the start 
of trading on the Exchange.
    (7) With respect to the application of Rule 10A-3 under the Act, 
the Trust will rely on the exception contained in Rule 10A-3(c)(7).\18\
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    \18\ See supra notes 8 and 9 and accompanying text.

This approval order is based on the Exchange's representations.\19\
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    \19\ The Commission notes that it does not regulate the market 
for the futures in which the Fund plans to take positions, which is 
the responsibility of the CFTC. The CFTC has the authority to set 
limits on the positions that any person may take in futures 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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[[Page 4965]]

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Act and the rules and regulations 
thereunder applicable to a national securities exchange.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-NYSEArca-2010-110) be, and 
it hereby is, approved.
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    \20\ 15 U.S.C. 78f(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-1728 Filed 1-26-11; 8:45 am]
BILLING CODE 8011-01-P


