
[Federal Register Volume 77, Number 41 (Thursday, March 1, 2012)]
[Notices]
[Pages 12631-12635]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-4915]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66466; File No. SR-NYSEArca-2011-97]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change Relating to Listing and Trading of 
Shares of the Teucrium Agriculture Fund Under NYSE Arca Equities Rule 
8.200

February 24, 2012.

I. Introduction

    On December 20, 2011, 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 
Agriculture Fund under Commentary .02 to NYSE Arca Equities Rule 8.200. 
The proposed rule change was published for comment in the Federal 
Register on January 10, 2012.\3\ The Commission received no comments on 
the proposal. This order grants approval of the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 66098 (January 4, 
2012), 77 FR 1526 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade shares (``Shares'') of the 
Teucrium Agriculture Fund (``Fund'') pursuant to NYSE Arca Equities 
Rule 8.200, Commentary .02, which permits the trading of Trust Issued 
Receipts either by listing or pursuant to unlisted trading 
privileges.\4\ The Fund 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''), which 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. The Bank of New York Mellon (``Custodian'' or 
``Administrator'') is the custodian, transfer agent, and administrator 
for the Fund. Foreside Fund Services, LLC (``Distributor'') is the 
distributor for the Fund's Shares.
---------------------------------------------------------------------------

    \4\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to 
Trust Issued Receipts that invest in ``Financial Instruments.'' The 
term ``Financial Instruments,'' as defined in Commentary .02(b)(4) 
to NYSE Arca Equities Rule 8.200, means any combination of 
investments, including cash; securities; options on securities and 
indices; futures contracts; options on futures contracts; forward 
contracts; equity caps, collars and floors; and swap agreements.
    \5\ See Amendment No. 1 to Form S-1 for the Trust, dated 
December 5, 2011 (File No. 333-173691) relating to the Fund 
(``Registration Statement'').
---------------------------------------------------------------------------

Teucrium Agriculture Fund

    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 
(``Underlying Fund Average'') of the NAVs per share of four other 
commodity pools that are series of the Trust and are sponsored by the 
Sponsor: Teucrium Corn Fund, Teucrium Wheat Fund, Teucrium Soybean 
Fund, and Teucrium Sugar Fund (collectively, ``Underlying Funds'').\6\ 
The Fund seeks to achieve its investment objective by investing under 
normal market conditions \7\ in the publicly-traded shares of each 
Underlying Fund so that the Underlying Fund Average will have a 
weighting of 25% for each Underlying Fund, and the Fund's assets will 
be rebalanced, generally on a daily basis, to maintain the approximate 
25% allocation to each Underlying Fund. The Fund does not intend to 
invest directly in futures contracts (``Futures Contracts'') or other 
Commodity Interests (as defined below), although it reserves the right 
to do so in the future, including if an Underlying Fund ceases 
operations or if shares of an Underlying Fund cease trading on the 
Exchange.
---------------------------------------------------------------------------

    \6\ Additional information regarding the Underlying Funds is 
included in the Commission orders approving the listing and trading 
of the Underlying Funds and in their corresponding registration 
statements. See Securities Exchange Act Release Nos. 62213 (June 3, 
2010), 75 FR 32828 (June 9, 2010) (SR-NYSEArca-2010-22) (order 
approving listing on the Exchange of Teucrium Corn Fund); 65344 
(September 15, 2011), 76 FR 58549 (September 21, 2011) (SR-NYSEArca-
2011-48) (order approving listing on the Exchange of the Teucrium 
Wheat Fund, Teucrium Soybean Fund, and Teucrium Sugar Fund). See 
also Amendment No. 4 to the Registration Statement on Form S-1 for 
Teucrium Commodity Trust, dated May 26, 2010 (File No. 333-162033) 
relating to the Teucrium Corn Fund; Amendment No. 3 to Form S-1 for 
Teucrium Commodity Trust, dated June 3, 2011 (File No. 333-167591) 
relating to the Teucrium Wheat Fund; Amendment No. 3 to Form S-1 for 
Teucrium Commodity Trust, dated June 3, 2011 (File No. 333-167590) 
relating to the Teucrium Soybean Fund; and Amendment No. 3 to Form 
S-1 for Teucrium Commodity Trust, dated June 3, 2011 (File No. 333-
167585) relating to the Teucrium Sugar Fund.
    \7\ The term ``under normal market conditions'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the commodity markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
---------------------------------------------------------------------------

    While the Fund expects to maintain substantially all of its assets 
in shares of the Underlying Funds at all times, the Fund may hold some 
residual amount of assets in obligations of the United States 
government (``Treasury Securities'') or cash equivalents, and/or hold 
such assets in cash (generally in interest-bearing accounts). The Fund 
will earn interest income from the Treasury Securities and/or cash 
equivalents that it purchases and on the cash it holds through the 
Custodian.
    The investment objective of each Underlying Fund is to have the 
daily changes in percentage terms of its shares' NAV reflect the daily 
changes in percentage terms of a weighted average of the closing 
settlement prices for certain Futures Contracts for the commodity 
specified in the Underlying Fund's name.\8\ The Teucrium Corn Fund's 
Benchmark is: (1) The second-to-expire Futures Contract for corn traded 
on the Chicago Board of Trade (``CBOT''), weighted 35%, (2) the third-
to-expire CBOT corn Futures Contract, weighted 30%, and (3) the CBOT 
corn Futures Contract expiring in the December following the expiration 
month of the third-to-expire contract, weighted 35%. The Teucrium Wheat 
Fund's Benchmark is: (1) The second-to-expire CBOT wheat Futures 
Contract, weighted 35%, (2) the third-to-expire CBOT wheat Futures 
Contract, weighted

[[Page 12632]]

30%, and (3) the CBOT wheat Futures Contract expiring in the December 
following the expiration month of the third-to-expire contract, 
weighted 35%. The Teucrium Soybean Fund's Benchmark is: (1) The second-
to-expire CBOT soybean Futures Contract, weighted 35%, (2) the third-
to-expire CBOT soybean Futures Contract, weighted 30%, and (3) the CBOT 
soybean Futures Contract expiring in the November following the 
expiration month of the third-to-expire contract, weighted 35%, except 
that CBOT soybean Futures Contracts expiring in August and September 
will not be part of the Teucrium Soybean Fund's Benchmark because of 
the less liquid market for these Futures Contracts. The Teucrium Sugar 
Fund's Benchmark is: (1) The second-to-expire Sugar No. 11 Futures 
Contract traded on ICE Futures U.S. (``ICE Futures''),\9\ weighted 35%, 
(2) the third-to-expire ICE Futures Sugar No. 11 Futures Contract, 
weighted 30%, and (3) the ICE Futures Sugar No. 11 Futures Contract 
expiring in the March following the expiration month of the third-to-
expire contract, weighted 35%.
---------------------------------------------------------------------------

    \8\ This weighted average is referred to herein as the 
Underlying Fund's ``Benchmark,'' the Futures Contracts that at any 
given time make up an Underlying Fund's Benchmark are referred to 
herein as the Underlying Fund's ``Benchmark Component Futures 
Contracts,'' and the commodity specified in the Underlying Fund's 
name is referred to herein as its ``Specified Commodity.''
    \9\ According to the Registration Statement, although sugar 
Futures Contracts are primarily traded on the ICE Futures, they may 
also be traded on the New York Mercantile Exchange (``NYMEX'').
---------------------------------------------------------------------------

    Each Underlying Fund seeks to achieve its investment objective by 
investing under normal market conditions in Benchmark Component Futures 
Contracts or, in certain circumstances, in other Futures Contracts for 
its Specified Commodity. In addition, and to a limited extent, an 
Underlying Fund also may invest in exchange-traded options on Futures 
Contracts for its Specified Commodity and in swap agreements based on 
its Specified Commodity that are cleared through a futures exchange or 
its affiliated provider of clearing services (``Cleared Swaps'') in 
furtherance of the Underlying Fund's investment objective. Once 
position limits or accountability levels on Futures Contracts on an 
Underlying Fund's Specified Commodity are reached, each Underlying 
Fund's intention is to invest first in Cleared Swaps based on its 
Specified Commodity to the extent practicable under the position limits 
or accountability levels applicable to such Cleared Swaps and 
appropriate in light of the liquidity in the market for such Cleared 
Swaps, and then in contracts and instruments such as cash-settled 
options on Futures Contracts and forward contracts, swaps other than 
Cleared Swaps, and other over-the-counter transactions that are based 
on the price of its Specified Commodity or Futures Contracts on its 
Specified Commodity (collectively, ``Other Commodity Interests,'' and, 
together with Futures Contracts and Cleared Swaps, ``Commodity 
Interests''). By utilizing certain or all of these investments, the 
Sponsor will endeavor to cause each Underlying Fund's performance to 
closely track that of its Benchmark.
    The Underlying Funds seek to achieve their investment objectives 
primarily by investing in Commodity Interests such that daily changes 
in the Underlying Fund's NAV will be expected to closely track the 
changes in its Benchmark. Each Underlying Fund's positions in Commodity 
Interests will be changed or ``rolled'' on a regular basis in order to 
track the changing nature of its Benchmark. For example, several times 
a year (on the dates on which Futures Contracts on the Underlying 
Fund's Specified Commodity expire), a particular Futures Contract will 
no longer be a Benchmark Component Futures Contract, and the Underlying 
Fund's investments will have to be changed accordingly. In order that 
the Underlying Funds' trading does not cause unwanted market movements 
and to make it more difficult for third parties to profit by trading 
based on such expected market movements, the Underlying Funds' 
investments typically will not be rolled entirely on that day, but 
rather will typically be rolled over a period of several days.
    Consistent with achieving each Underlying Fund's investment 
objective of closely tracking its Benchmark, the Sponsor may for 
certain reasons cause the Underlying Fund to enter into or hold Futures 
Contracts other than the Benchmark Component Futures Contracts, Cleared 
Swaps and/or Other Commodity Interests. For example, certain Cleared 
Swaps have standardized terms similar to, and are priced by reference 
to, a corresponding Benchmark Component Futures Contract. Additionally, 
Other Commodity Interests that do not have standardized terms and are 
not exchange-traded, referred to as ``over-the-counter'' Commodity 
Interests, can generally be structured as the parties to the Commodity 
Interest contract desire. Therefore, an Underlying Fund might enter 
into multiple Cleared Swaps and/or over-the-counter Commodity Interests 
related to its Specified Commodity that are intended to exactly 
replicate the performance of Benchmark Component Futures Contracts of 
the Underlying Fund, or a single over-the-counter Commodity Interest 
designed to replicate the performance of its Benchmark as a whole. 
Assuming that there is no default by a counterparty to an over-the-
counter Commodity Interest, the performance of the Commodity Interest 
will necessarily correlate exactly with the performance of the 
Underlying Fund's Benchmark or the applicable Benchmark Component 
Futures Contract.\10\ The Underlying Funds might also enter into or 
hold Commodity Interests other than Benchmark Component Futures 
Contracts to facilitate effective trading. In addition, an Underlying 
Fund might enter into or hold Commodity Interests related to its 
Specified Commodity that would be expected to alleviate overall 
deviation between the Underlying Fund's performance and that of its 
Benchmark that may result from certain market and trading 
inefficiencies or other reasons.
---------------------------------------------------------------------------

    \10\ With respect to the Underlying Funds, the creditworthiness 
of each potential counterparty will be assessed by the Sponsor. The 
Sponsor will assess or review, as appropriate, the creditworthiness 
of each potential or existing counterparty to an over-the-counter 
contract pursuant to guidelines approved by the Sponsor.
---------------------------------------------------------------------------

    The Underlying Funds invest in Commodity Interests to the fullest 
extent possible without being leveraged \11\ or unable to satisfy their 
expected current or potential margin or collateral obligations with 
respect to their investments in Commodity Interests. After fulfilling 
such margin and collateral requirements, the Underlying Funds will 
invest the remainder of the proceeds from the sale of baskets in 
Treasury Securities or cash equivalents, and/or hold such assets in 
cash. Therefore, the focus of the Sponsor in managing the Underlying 
Funds is investing in Commodity Interests and in Treasury Securities, 
cash and/or cash equivalents. The Underlying Funds will earn interest 
income from the Treasury Securities and/or cash equivalents that it 
purchases and on the cash it holds through the Custodian.
---------------------------------------------------------------------------

    \11\ The Sponsor represents that the Fund and Underlying Funds 
will invest in their applicable Commodity Interests in a manner 
consistent with their respective investment objectives and not to 
achieve additional leverage.
---------------------------------------------------------------------------

    The Sponsor will endeavor to place the Fund's trades in the 
Underlying Funds and otherwise manage the Fund's investments so that 
the Fund's average daily tracking error against the Underlying Fund 
Average will be less than 10 percent over any period of 30 trading 
days. More specifically, the Sponsor will endeavor to manage the Fund 
so that A will be within plus/minus 10 percent of B, where A is the 
average daily change in the Fund's NAV for any period of 30 successive 
valuation days, i.e., any trading day as

[[Page 12633]]

of which the Fund calculates its NAV, and B is the average daily change 
in the Underlying Fund Average over the same period.\12\
---------------------------------------------------------------------------

    \12\ The Sponsor believes that market arbitrage opportunities 
will cause the Fund's Share price on the NYSE Arca to closely track 
the Fund's NAV per Share. The Sponsor believes that the net effect 
of this expected relationship and the expected relationship 
described above between the Fund's NAV and the Underlying Fund 
Average will be that the changes in the price of the Fund's Shares 
on the NYSE Arca will closely track, in percentage terms, changes in 
the Underlying Fund Average.
---------------------------------------------------------------------------

    The Sponsor will employ a ``neutral'' investment strategy intended 
so that the Fund will track the changes in the Underlying Fund Average 
and each Underlying Fund will track the changes in its Benchmark 
regardless of whether the Underlying Fund Average or Benchmark goes up 
or down. According to the Registration Statement, the Fund's and 
Underlying Funds' ``neutral'' investment strategies are designed to 
permit investors generally to purchase and sell the Fund's Shares for 
the purpose of investing indirectly in the agricultural commodities 
market in a cost-effective manner. Such investors may include 
participants in agricultural industries and other industries seeking to 
hedge the risk of losses in their commodity-related transactions, as 
well as investors seeking exposure to the agricultural commodities 
market. The Sponsor does not intend to operate the Fund or an 
Underlying Fund in a fashion such that its per share NAV will equal, in 
dollar terms, the spot price of a unit of a Specified Commodity or the 
price of any particular Futures Contract.
    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. The Exchange 
further represents that, with respect to application of Rule 10A-3 
under the Act,\13\ the Trust will rely on the exception contained in 
Rule 10A-3(c)(7),\14\ and a minimum of 100,000 Shares for the Fund will 
be outstanding as of the start of trading on the Exchange.
---------------------------------------------------------------------------

    \13\ 17 CFR 240.10A-3.
    \14\ 17 CFR 240.10A-3(c)(7).
---------------------------------------------------------------------------

    Additional details regarding the Trust; Fund; Shares; Underlying 
Funds; Commodity Interests and other aspects of the applicable 
commodities markets; trading policies of the Fund; creations and 
redemptions of the Shares; Underlying Fund Average and Underlying Fund 
Benchmarks; investment risks; fees; NAV calculation; the dissemination 
and availability of information about the underlying assets of the Fund 
and the Underlying Funds; trading halts; applicable trading rules; 
surveillance; and the Information Bulletin, among other things, can be 
found in the Notice and/or the Registration Statement,\15\ as 
applicable, and the registration statements relating to the Underlying 
Funds and the releases approving the listing and trading of the 
Underlying Funds, as applicable.\16\
---------------------------------------------------------------------------

    \15\ See Notice and Registration Statement, supra notes 3 and 5, 
respectively.
    \16\ See supra note 6.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change to list and trade the Shares of the Fund is consistent with the 
requirements of Section 6 of the Act and the rules and regulations 
thereunder applicable to a national securities exchange.\17\ In 
particular, the Commission finds that the proposed rule change is 
consistent with the requirements of Section 6(b)(5) of the Act,\18\ 
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. The Commission notes that 
the Fund and the Shares must comply with the requirements of NYSE Arca 
Equities Rule 8.200 and Commentary .02 thereto to be listed and traded 
on the Exchange.
---------------------------------------------------------------------------

    \17\ 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).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\19\ 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 and shares of the Underlying 
Funds will be disseminated through the facilities of the Consolidated 
Tape Association. In addition, the Underlying Fund Average and each 
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 p.m. Eastern Time (``E.T.''). In addition, an updated Indicative 
Fund Value (``IFV'') for the Fund, which is calculated by using the 
prior day's closing NAV per Share of the Fund as a base and updating 
that value throughout the NYSE Arca Core Trading Session to reflect 
changes in the value of the Underlying Funds' shares, and updated IFVs 
for each Underlying Fund will be widely disseminated on a per-share 
basis by one or more major market data vendors every 15 seconds during 
the NYSE Arca Core Trading Session.\20\ The NAV for the Fund will be 
calculated by the Administrator once each trading day and will be 
disseminated daily to all market participants at the same time.\21\ The 
Fund will provide Web site disclosure of portfolio holdings daily and 
will include, as applicable, the names, quantity, price, and market 
value of the Underlying Funds held by the Fund, and other financial 
instruments, if any, and the characteristics of such instruments and 
cash equivalents, and amount of cash held in the portfolio of the Fund. 
In addition, the Underlying Funds provide Web site disclosure of their 
respective portfolio holdings daily and include the names, quantity, 
price and market value of such holdings and the characteristics of such 
holdings. The closing price and settlement prices of the corn, wheat 
and soybean Futures Contracts are readily available from CBOT, and of 
sugar Futures Contracts from ICE Futures, and on other automated 
quotation systems, published or other public sources, or on-line 
information services. The Exchange represents that quotation and last 
sale information for the corn, wheat, soybean and sugar Futures 
Contracts are widely disseminated through a variety of major market 
data vendors worldwide, including Bloomberg and Reuters. In addition, 
the Exchange further represents that complete real-time data for such 
contracts is available by

[[Page 12634]]

subscription from Reuters and Bloomberg. CBOT and ICE Futures also 
provide delayed futures information on current and past trading 
sessions and market news free of charge on their Web sites. The 
specific contract specifications for such contracts are also available 
at the CBOT and ICE Futures Web sites, as well as other financial 
informational sources. The spot prices of corn, wheat, soybeans, and 
sugar are also available on a 24-hour basis from major market data 
vendors. In addition, the Web site for the Fund and/or the Exchange 
will contain the prospectus and additional data relating to NAV and 
other applicable quantitative information.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \20\ The normal trading hours for Futures Contracts may begin 
after 9:30 a.m. and end before 4 p.m. E.T., and there is a gap in 
time at the beginning and the end of each day during which the 
Underlying Funds' shares are traded on the Exchange but real-time 
trading prices for at least some of the Futures Contracts held by 
the Underlying Funds are not available. As a result, during those 
gaps there will be no update to the IFVs of the Underlying Funds 
holding such Futures Contracts, and such IFVs will be static.
    \21\ The NAV for the Fund will be calculated by taking the 
current market value of the Fund's total assets and subtracting any 
liabilities. The Administrator will calculate the NAV of the Fund as 
of the earlier of the close of the New York Stock Exchange or 4 p.m. 
E.T. The NAV for a particular trading day will be released after 
4:15 p.m. E.T.
---------------------------------------------------------------------------

    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 IFV or the Underlying Fund Average or the value of 
the applicable Benchmark Component Futures Contracts or the applicable 
Benchmark occurs. If the interruption to the dissemination of the IFV, 
the Underlying Fund Average, the value of the applicable Benchmark 
Component Futures Contracts, or the applicable Benchmark 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.\22\ 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 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 and each 
Underlying Fund through the applicable fund's Web sites. The Exchange 
may halt trading in the Shares if trading is not occurring in the 
Futures Contracts or shares of the Underlying Funds, or if other 
unusual conditions or circumstances detrimental to the maintenance of a 
fair and orderly market are present.\23\ The Exchange states that it 
has a general policy prohibiting the distribution of material, non-
public information by its employees. 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 \24\ acting as 
registered Market Makers \25\ in Trust Issued Receipts to facilitate 
surveillance.
---------------------------------------------------------------------------

    \22\ The Exchange also notes that, for each of the Underlying 
Funds, the Exchange may halt trading during the day in which an 
interruption to the dissemination of the IFV or the value of the 
applicable Benchmark Component Futures Contracts or Benchmark 
occurs.
    \23\ With respect to trading halts, the Exchange may consider 
all relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Trading in the Shares of the Fund 
will be subject to halts caused by extraordinary market volatility 
pursuant to the Exchange's circuit breaker rules in NYSE Arca 
Equities Rule 7.12. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
    \24\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \25\ See NYSE Arca Equities Rule 1.1(u) (defining Market Maker).
---------------------------------------------------------------------------

    The Exchange has represented that the Shares are deemed to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (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 applicable to derivative 
products, including Trust Issued Receipts, 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) To the extent that the Fund invests in Futures Contracts, not 
more than 10% of the weight of such Futures Contracts in the aggregate 
shall consist of components whose principal trading market is not a 
member of the Intermarket Surveillance Group (``ISG'') or is a market 
with which the Exchange does not have a comprehensive surveillance 
sharing agreement. In addition, with respect to the Underlying Funds' 
Futures Contracts traded on exchanges, not more than 10% of the weight 
of such Futures Contracts in the aggregate shall consist of components 
whose principal trading market is not a member of the ISG or is a 
market with which the Exchange does not have a comprehensive 
surveillance sharing agreement. With respect to the Underlying Funds, 
which are listed and traded on the Exchange, the Exchange can obtain 
market surveillance information from CBOT, NYMEX, and ICE Futures, 
which are ISG members, and from Kansas City Board of Trade (``KCBT'') 
and Minneapolis Grain Exchange (``MGEX'') in that the Exchange has in 
place a comprehensive surveillance sharing agreement with KCBT and 
MGEX.
    (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 IFV will not be calculated or publicly 
disseminated; (b) the procedures for purchases and redemptions of 
Shares in creation baskets and redemption baskets (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 IFV 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 for the Fund 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).\26\
---------------------------------------------------------------------------

    \26\ See supra notes 13 and 14 and accompanying text.

This approval order is based on all of the Exchange's 
representations.\27\ The Commission notes that the Fund will primarily 
invest in shares of the

[[Page 12635]]

Underlying Funds, which have been approved for listing and trading on 
the Exchange by the Commission.\28\
---------------------------------------------------------------------------

    \27\ The Commission notes that it does not regulate the market 
for futures in which the Fund and the Underlying Funds plan 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. 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, even though such limits 
could impact an exchange-traded product that is under the 
jurisdiction of the Commission.
    \28\ See supra note 6.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \29\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\30\ that the proposed rule change (SR-NYSEArca-2011-97) be, and it 
hereby is, approved.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Secretary.
[FR Doc. 2012-4915 Filed 2-29-12; 8:45 am]
BILLING CODE 8011-01-P


