
[Federal Register Volume 79, Number 173 (Monday, September 8, 2014)]
[Notices]
[Pages 53223-53229]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21247]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72954; File No. SR-NYSEArca-2014-91]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to Listing 
and Trading Shares of ProShares Managed Futures Strategy; ProShares 
Commodity Managed Futures Strategy; and ProShares Financial Managed 
Futures Strategy Under NYSE Arca Equities Rule 8.200

September 2, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on August 18, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.200 (``Trust Issued Receipts''): 
ProShares Managed Futures Strategy; ProShares Commodity Managed Futures 
Strategy; and ProShares Financial Managed Futures Strategy. The text of 
the proposed rule change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under Commentary .02 to NYSE Arca Equities Rule 8.200, which 
governs the listing and trading of Trust Issued Receipts that invest in 
``Investment Shares'' or ``Financial Instruments'', as defined therein: 
ProShares Managed Futures Strategy; ProShares Commodity Managed Futures 
Strategy; and ProShares Financial Managed Futures Strategy (each a 
``Fund'' and, collectively, the ``Funds'').\4\
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    \4\ For a description of ProShares Managed Futures Strategy, see 
the Trust's registration statement on Form S-1, dated June 18, 2014 
(File No. 333-196884). For a description of ProShares Commodity 
Managed Futures Strategy, see the Trust's registration statement on 
Form S-1/A, dated January 16, 2013 (File No. 333-185288). For a 
description of ProShares Financial Managed Futures Strategy, see the 
Trust's registration statement on Form S-1/A, dated February 14, 
2012 (File No. 333-178212). Each of the above-referenced 
registration statements is referred to herein as a ``Registration 
Statement'' and, collectively, the Trust's registration statements 
are referred to herein as the ``Registration Statements''. The 
description of the Funds and the Shares contained herein is based, 
in part, on the Registration Statements.

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[[Page 53224]]

    Each Fund is a series of the ProShares Trust II (``Trust''), a 
Delaware statutory trust. ProShare Capital Management LLC (``Sponsor'') 
is the Trust's Sponsor and Wilmington Trust Company is the Trust's 
trustee. Brown Brothers Harriman & Co. serves as the administrator 
(``Administrator''), custodian, and transfer agent of the Funds. SEI 
Investments Distribution Co. serves as distributor of the Shares 
(``Distributor'').
    The Commission originally approved listing and trading of the 
Shares of the Funds on NYSE Arca.\5\ The Commission subsequently 
approved listing and trading of Shares of the Funds on the BATS 
Exchange, Inc. (``BATS Exchange'' or ``BATS).\6\ Shares of the Funds 
have not commenced listing and trading on any national securities 
exchange. The Trust now wishes to list and trade Shares of the Funds on 
NYSE Arca.
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    \5\ See Securities Exchange Act Release Nos. 66002 (December 19, 
2011), 76 FR 80433 (December 23, 2011) (SR-NYSEArca-2011-94) (``NYSE 
Arca Notice''); 66334 (February 6, 2012), 77 FR 7219 (February 10, 
2012) (SR-NYSEArca-2011-94) (order approving listing and trading on 
NYSE Arca of Shares of ProShares Managed Futures Strategy; ProShares 
Commodity Managed Futures Strategy; and ProShares Financial Managed 
Futures Strategy) (``NYSE Arca Order'', and, together with the NYSE 
Arca Notice, the ``NYSE Arca Release'').
    \6\ See Securities Exchange Act Release Nos. 68257 (November 19, 
2012), 77 FR 70500 (November 26, 2012) (SR-BATS-2012-044) (notice of 
proposed rule change to list and trade on BATS of ProShares Managed 
Futures Strategy; ProShares Commodity Managed Futures Strategy; and 
ProShares Financial Managed Futures Strategy) (``BATS Notice''); 
68619 (January 10, 2013), 78 FR 3489 (January 16, 2013) (SR-BATS-
2012-044) (order approving listing and trading on BATS Exchange of 
ProShares Managed Futures Strategy; ProShares Commodity Managed 
Futures Strategy; and ProShares Financial Managed Futures Strategy) 
(``BATS Order'', and together with the BATS Notice, the ``BATS 
Release'').
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Description of the Shares and the Funds
    According to the Registration Statement, ProShares Managed Futures 
Strategy will seek to provide investment results (before fees and 
expenses) that correspond to the performance of the S&P Strategic 
Futures Index (``SFI'' or ``Index''). ProShares Commodity Managed 
Futures Strategy and ProShares Financial Managed Futures Strategy will 
seek to provide investment results (before fees and expenses) that 
correspond to the performance of a sub-index of the Index (``Sub-
Index'').\7\ ProShares Commodity Managed Futures Strategy will seek to 
provide investment results (before fees and expenses) that correspond 
to the performance of the S&P Strategic Commodities Futures Index 
(``SCFI''), a Sub-Index of the SFI. ProShares Financial Managed Futures 
Strategy will seek to provide investment results (before fees and 
expenses) that correspond to the performance of the S&P Strategic 
Financial Futures Index (``SFFI''), another Sub-Index of the SFI.\8\
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    \7\ Previously, as described in the BATS Release and the NYSE 
Arca Release, ProShares Managed Futures Strategy sought to provide 
investment results (before fees and expenses) that corresponded to 
the performance of the S&P Dynamic Futures Index (the ``DFI''), and 
ProShares Commodity Managed Futures Strategy and ProShares Financial 
Managed Futures sought to provide investment results (before fees 
and expenses) that corresponded to the performance of a sub-index of 
the DFI. The SFI is a new index that is based on and is 
substantially similar to the DFI and each of the Sub-Indexes is 
substantially similar to its corresponding sub-index of the DFI 
(i.e., the S&P Dynamic Commodities Futures Index and the S&P Dynamic 
Financial Futures Index, respectively) except as further described 
below.
    \8\ The Index (like the DFI) is composed of unleveraged 
positions in U.S. exchange-traded futures contracts on sixteen 
different tangible commodities (``Commodity Futures Contracts''), as 
well as U.S. exchange-traded futures contracts on eight different 
financials, such as major currencies and U.S. Treasury securities 
(``Financial Futures Contracts'' and together with the Commodity 
Futures Contracts, ``Index Components''). The Index Components are 
traded on the Chicago Mercantile Exchange, Inc. (``CME''), COMEX (a 
division of CME), Chicago Board of Trade (``CBOT,'' a division of 
CME), NYMEX (a division of CME), and ICE Futures US (``ICE'') 
(collectively, ``Futures Exchanges''). The Index Components in which 
the Funds will invest are referred to herein as ``Futures 
Contracts''.
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    The description of the Index and Sub-Indexes to be utilized by the 
Funds (i.e., SFI, SCFI and SFFI) has been modified in the following 
respects from the DFI and their sub-indexes as described in the BATS 
Release:
    The SFI, SCFI and SFFI weight each component based on an equal risk 
contribution methodology, rather than the current methodology for the 
DFI and its sub-indexes, which utilize production levels (for 
weightings of the Commodity Futures Contracts) and gross domestic 
product (``GDP'') (for weightings of the Financial Futures Contracts). 
The Index Components are rebalanced each month based on the historical 
volatility of each Index Component, as well as the correlation of each 
Index Component to the other contracts included in the SFI. The 
objective of this methodology is that no single Index Component exposes 
the SFI, SCFI and SFFI to greater risk than any other Index Component.
    Due to this change, there is no longer an annual weighting process; 
weights are determined (and the Index is correspondingly repositioned) 
on a monthly basis.
    Index Component weights are determined monthly (based on an equal 
risk contribution methodology, as referenced above). These weights are 
implemented as of each monthly rebalance.
    Index Component weights are fixed each year and rebalanced back to 
their annual base weight monthly. During this monthly rebalancing, the 
Index will also ``roll'' certain of its positions from the current 
contract to a contract further from settlement.
    With the exception of the changes described above and in 
information included in ``The Index and the Sub-Indexes'' below, all 
representations made in the BATS Release, including those pertaining to 
the methodology for the Index and the Sub-Indexes, remain as described 
therein. The components of the SFI, SCFI and SFFI are identical to the 
components of the DFI and the corresponding sub-indexes of the DFI, 
except that weightings of components of the SFI and the Sub-Indexes 
differ from the weightings of components of the DFI and its 
corresponding sub-indexes.
The Index and the Sub-Indexes
    The following charts reflect the weighting schemes for the Index 
and each Sub-Index as of May 31, 2014. The weights will be determined 
each month and implemented as of the next monthly rebalancing. For the 
Index, the initial Index weights, together with information about the 
exchange and trading hours for each Index Component, are as follows 
(rounded to the nearest one-hundredth):

[[Page 53225]]



                                                                      Index Weights
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                           Weight                             Weight                             Weight
       Sub-index            (%)             Sector             (%)            Component           (%)            Exchange            Trading hours \9\
--------------------------------------------------------------------------------------------------------------------------------------------------------
SCFI...................      52.36  Energy................      11.72  Light Crude...........       3.02  NYMEX (CME)...........  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........                                     Heating Oil...........       3.21  NYMEX (CME)...........  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........                                     RBOB Gasoline.........       3.22  NYMEX (CME)...........  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........                                     Natural Gas...........       2.27  NYMEX (CME)...........  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  Industrial Metals.....      3.207  Copper................       3.32  COMEX (CME)...........  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  Precious Metals.......       5.09  Gold..................       1.99  COMEX (CME)...........  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........                                     Silver................       1.37  COMEX (CME)...........  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  Livestock.............      14.23  Lean Hogs.............       4.59  CME...................  10:05 a.m.-2:55 p.m.;
                                                                                                                                   Daily trading halts:
                                                                                                                                   5:00 p.m.-6:00p.m.
                         .........                                     Live Cattle...........       9.64  CME...................  10:05 a.m.-2:55 p.m.;
                                                                                                                                   Daily trading halts
                                                                                                                                   5:00 p.m.-6:00 p.m.
                         .........  Grains................       8.08  Corn..................       2.24  CBOT (CME)............  8:00 p.m.-2:15 p.m.
                                                                                                                                   next day.
                         .........                                     Soybeans..............       2.89  CBOT (CME)............  8:00 p.m.-2:15 p.m.
                                                                                                                                   next day.
                         .........                                     Wheat.................       2.96  CBOT (CME)............  8:00 p.m.-2:15 p.m.
                                                                                                                                   next day.
                         .........  Softs.................      11.65  Coffee................       1.58  ICE...................  4:15 a.m.-1:30 p.m.
                         .........                                     Cocoa.................       3.70  ICE...................  4:45 a.m.-1:30 p.m.
                         .........                                     Sugar.................       3.24  ICE...................  3:30 a.m.-1:00 p.m.
                         .........                                     Cotton................       3.13  ICE...................  9:00 p.m.-2:20 p.m.
                                                                                                                                   next day.
SFFI...................      47.64  Australian Dollar.....       4.78  Australian Dollar.....  .........  CME...................  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  British Pound.........       6.35  British Pound.........  .........  CME...................  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  Canadian Dollar.......       6.67  Canadian Dollar.......  .........  CME...................  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  Euro..................       5.72  Euro..................  .........  CME...................  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  Japanese Yen..........       4.96  Japanese Yen..........  .........  CME...................  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  Swiss Franc...........       5.07  Swiss Franc...........  .........  CME...................  6:00 p.m.-5:15 p.m.
                                                                                                                                   next day.
                         .........  U.S. Treasury                8.39  U.S. Treasury Notes...  .........  CBOT (CME)............  6:00 p.m.-5:00 p.m.
                                     Notes.\10\                                                                                    next day.
                         .........  U.S. Treasury                5.71  U.S. Treasury Bonds...  .........  CBOT (CME)............  6:00 p.m.-5:00 p.m.
                                     Bonds.\11\                                                                                    next day.
                        -----------                        -----------                        -----------
    Totals.............        100                                100                                100
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    For the SCFI, the initial Sub-Index weightings are as follows:
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    \9\ All times are Eastern Time (``E.T.'', inclusive of 
electronic and open outcry trading sessions, as applicable.
    \10\ ``U.S. Treasury Notes'' refers to 10 year U.S. Treasury 
Note futures.
    \11\ ``U.S. Treasury Bonds'' refers to those futures with 
underlying bonds of a remaining term to call or maturity of 15-25 
years.

                                                  SCFI Weights
----------------------------------------------------------------------------------------------------------------
                    Sector                        Weight  (%)               Component               Weight  (%)
----------------------------------------------------------------------------------------------------------------
Energy........................................           22.41  Light Crude.....................            5.78
                                                                Heating Oil.....................            6.16
                                                                RBOB Gasoline...................            6.15
                                                                Natural Gas.....................            4.32
Industrial Metals.............................            6.34  Copper..........................            6.34

[[Page 53226]]

 
Precious Metals...............................            6.42  Gold............................            3.81
                                                                Silver..........................            2.61
Livestock.....................................           27.72  Lean Hogs.......................            8.74
                                                                Live Cattle.....................           18.48
Grains........................................           15.43  Corn............................            4.27
                                                                Soybeans........................            5.51
                                                                Wheat...........................            5.65
Softs.........................................           22.18  Coffee..........................            3.02
                                                                Cocoa...........................            7.01
                                                                Sugar...........................            6.19
                                                                Cotton..........................            5.96
                                               ----------------                                  ---------------
    Total.....................................             100                                               100
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    Finally, for the SFFI, the initial Sub-Index weightings are as 
follows:

                                                  SFFI Weights
----------------------------------------------------------------------------------------------------------------
                    Sector                        Weight  (%)               Component               Weight  (%)
----------------------------------------------------------------------------------------------------------------
Australian Dollar.............................           10.03  Australian Dollar...............           10.03
British Pound.................................           13.30  British Pound...................           13.30
Canadian Dollar...............................           14.02  Canadian Dollar.................           14.02
Euro..........................................           11.97  Euro............................           11.97
Japanese Yen..................................           10.41  Japanese Yen....................           10.41
Swiss Franc...................................           10.61  Swiss Franc.....................           10.61
U.S. Treasury Notes...........................           17.64  U.S. Treasury Notes.............           17.64
U.S. Treasury Bonds...........................           12.01  U.S. Treasury Bonds.............           12.01
                                               ----------------                                  ---------------
    Total.....................................             100                                    ..............
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    The Exchange does not believe the changes to the SFI methodology 
will adversely impact investors. The Sponsor represents that an equal 
risk contribution methodology and monthly rebalancing (rather than an 
annual weighting process) of SFI components may reduce volatility of 
the Index and Sub-Indexes and the price of the Funds' Shares, and may 
reduce the likelihood that comparatively greater volatility in one or 
more Index Components will contribute to increased volatility in the 
price of the Funds' Shares.
Net Asset Value
    The Exchange will obtain a representation (prior to listing of a 
Fund's Shares) from the Trust that the net asset value (``NAV'') per 
Share will be calculated daily and made available to all market 
participants at the same time.
Intraday Indicative Value
    An estimated value (the ``Intraday Indicative Value'' or ``IIV'') 
that reflects a current estimated intraday value of Futures Contracts 
and other applicable holdings, cash and receivables, less liabilities 
of each Fund, will be disseminated.
    For each Fund, the IIV will be widely disseminated on a per Share 
basis by one or more major market data vendors every 15 seconds during 
the Exchange's Core Trading Session (9:30 a.m. to 4:00 p.m. E.T.)\12\ 
The value of a Share may be influenced by non-concurrent trading hours 
between the Exchange and the applicable Futures Exchanges trading 
Futures Contracts when the Shares are traded on the Exchange after 
normal trading hours of such Futures Exchanges.
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    \12\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIVs 
taken from Consolidated Tape Association (``CTA'') or other data 
feeds.
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    The IIV will be updated during the Core Trading Session when 
applicable Futures Exchanges are trading any Futures Contracts held by 
a Fund.
    However, the IIV that will be disseminated between 11:50 a.m. E.T. 
and the end of the Core Trading Session will be impacted by static 
values for certain Futures Contracts.\13\
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    \13\ The value of the IIV will be based on the underlying 
Futures Contracts. Once a particular Futures Contract settles, a 
static closing value for that Futures Contract will be used to 
calculate the IIV, which will continue to update based on any other 
Futures Contracts that have not reached their settlement time.
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    For the Funds, the IIV will be calculated throughout the Core 
Trading Session using the prior day's closing NAV of a Fund as a base 
and updating throughout the trading day changes in the value of a 
Fund's Futures Contracts, cash equivalents, swap agreements, if 
applicable, and other applicable holdings. The IIV should not be viewed 
as an actual real-time update of the NAV because NAV is calculated only 
once each trading day at 3:00 p.m. E.T. The IIV also should not be 
viewed as a precise value of the Shares.
    Dissemination of the IIV provides additional information that is 
not otherwise available to the public in such form and may be useful to 
investors and market professionals in connection with the trading of 
Shares.
Availability of Information Regarding the Shares
    The Web site for the Funds (www.ProShares.com) and/or the Exchange, 
which are publicly accessible at no charge, will contain the following 
information: (a) The current NAV per Share daily and the prior business 
day's NAV per Share; (b) calculation of the premium or discount between 
the NAV per Share and the price or mid-point of the Bid/Ask Price of 
the Funds as of the

[[Page 53227]]

time the NAV is calculated or as of the official market close; (c) the 
prospectus; and (d) other applicable quantitative information.
    The Exchange also will disseminate on a daily basis via the CTA 
information with respect to the recent NAV and Shares outstanding. The 
Exchange will also make available on its Web site daily trading volume 
of the Shares. Daily trading volume information will also be available 
in the financial section of newspapers, their related Web sites or 
other financial Web sites, through subscription services, which can be 
accessed by authorized participants and other investors, as well as 
through other electronic services, including major public Web sites. 
The intra-day, closing, and settlement prices of the Futures Contracts 
are also readily available, as applicable, from the respective Futures 
Exchanges. Quotation and last-sale information for the Shares will be 
available via the CTA high-speed line.
Portfolio Disclosure
    Each Fund's total portfolio composition will be disclosed on such 
Fund's Web site 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, 
exposure value (in U.S. dollars) and number of Futures Contracts or 
units of swaps held by a Fund, if any, and the amount of cash or cash 
equivalents and other assets held in the portfolio of each Fund. This 
public Web site disclosure of the portfolio composition of the Funds 
will occur at the same time as the disclosure by the Sponsor 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 the Funds through the Funds' Web site, 
and/or at the Exchange's Web site.
Availability of Information About the Index and Sub-Indexes
    The daily closing Index level and the percentage change in the 
daily closing Index level for the Index and each Sub-Index will be 
publicly available from one or more major market data vendors. Data 
regarding the Index and each Sub-Index, updated every 15 seconds, is 
also available from Standard & Poor's on a subscription basis.
    Several independent data vendors also package and disseminate Index 
and Sub-Index data in various formats (including vendors displaying 
both Index constituents and Index levels and vendors displaying Index 
levels only). Data regarding the Index Components is also available 
from the Web sites of the Futures Exchanges. Data regarding the 
commodities, currencies, and Treasury securities underlying the Index 
Components is publicly available from various financial information 
service providers. Information relating to the weighting of Index 
constituents and the rules-based Index methodology is also available on 
the Web site for S&P Dow Jones Indices at www.us.spindices.com.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.200. The Exchange represents 
that, for initial and/or continued listing, each Fund will be in 
compliance with Rule 10A-3 \14\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares for each Fund will be 
outstanding at the commencement of trading on the Exchange.
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    \14\ 17 CFR 240.10A-3.
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    The trading of the Shares will be subject to NYSE Arca Equities 
Rule 8.200, Commentary .02(e), which sets forth certain restrictions on 
Equity Trading Permit (``ETP'') Holders acting as registered Market 
Makers in TIRs to facilitate surveillance. See ``Surveillance'' below 
for more information.
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares. Trading may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. These may include: (1) 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. In addition, 
trading in Shares will be subject to trading halts caused by 
extraordinary market volatility pursuant to the Exchange's ``circuit 
breaker'' rule \15\ or by the halt or suspension of trading of the 
underlying Index Components.
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    \15\ See NYSE Arca Equities Rule 7.12.
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    The Exchange represents that the Exchange may halt trading during 
the day in which an interruption to the dissemination of the IIV, the 
level of the Index (or Sub-Index) or the value of the underlying Index 
Components occurs. If an interruption to the dissemination of the IIV, 
the level of the Index (or Sub-Index) or the value of the underlying 
Index Components 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, 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.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\16\ The Exchange represents that 
these 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 federal securities laws applicable to trading on 
the Exchange.
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    \16\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.

[[Page 53228]]

    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and underlying futures with other 
markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG''), and FINRA, on behalf of the Exchange, may 
obtain trading information regarding trading in the Shares and 
underlying futures from such markets and other entities. In addition, 
the Exchange may obtain information regarding trading in the Shares and 
underlying futures from markets and other entities that are members of 
ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\17\ The Exchange can obtain market 
surveillance information, including customer identity information, with 
respect to transactions occurring on the Futures Exchanges, all of 
which are members of the ISG. FINRA, on behalf of the Exchange, is able 
to access, as needed, trade information for certain fixed income 
securities held by the Funds reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE'').
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    \17\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all Futures Contracts 
may trade on markets that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.
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    For components traded on exchanges, not more than 10% of the weight 
of a Fund's portfolio in the aggregate shall consist of components 
whose principal trading market is not a member of ISG or is a market 
with which the Exchange does not have a comprehensive surveillance 
sharing agreement.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in ``Creation Unit'' 
aggregations (and that Shares are not individually redeemable); (2) 
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; (3) the risks involved in trading 
the Shares during the Opening and Late Trading Sessions when an updated 
IIV will not be calculated or publicly disseminated; (4) how 
information regarding the IIV, each Fund's portfolio and the Index and 
Sub-Indexes is disseminated; (5) 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 (6) 
trading information.
    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the Registration Statements. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. E.T. each trading day.
    The Information Circular will disclose that information about the 
Shares of the Funds will be publicly available on the Funds' Web site.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \18\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \18\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 8.200 
and Commentary .02 thereto. The Exchange has in place surveillance 
procedures that are adequate to properly monitor trading in the Shares 
in all trading sessions and to deter and detect violations of Exchange 
rules and applicable federal securities laws. The Exchange may obtain 
information via ISG from other exchanges that are members of ISG or 
with which the Exchange has entered into a comprehensive surveillance 
sharing agreement. The Index Components are traded on the Futures 
Exchanges, each of which is an ISG member, and information regarding 
trading in the Index Components is available from the Web sites of the 
respective Futures Exchanges and from major market data vendors. The 
daily closing Index level and the percentage change in the daily 
closing Index level for the Index and each Sub-Index will be publicly 
available from one or more major market data vendors. Data regarding 
the Index and each Sub-Index, updated every 15 seconds during the NYSE 
Arca Core Trading Session, is also available from Standard & Poor's on 
a subscription basis. Standard & Poor's has implemented procedures 
designed to prevent the use and dissemination of material, non-public 
information regarding the Index and Sub-Indexes. Data regarding the 
commodities, currencies and Treasury securities underlying the Index 
Components is publicly available from various financial information 
service providers. The Exchange may halt trading during the day in 
which an interruption to the dissemination of the IIV, the level of the 
Index (or Sub-Index) or the value of the underlying Index Components 
occurs. If an interruption to the dissemination of the IIV, the level 
of the Index (or Sub-Index) or the value of the underlying Index 
Components 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. Quotation and last sale information for 
the Shares will be available via CTA. Each Fund's total portfolio 
composition will be disclosed on the Funds' Web site.
    The Exchange believes the proposed rule change is designed to 
protect investors and the public interest in that the Commission has 
previously approved listing an trading of Shares of the Funds on the 
Exchange and BATS,\19\ and, with the exception of the changes described 
in ``Description of the Shares and the Funds'' and in information 
included in ``The Index and the Sub-Indexes'' above, all 
representations made in the BATS Release remain as described therein. 
The Exchange believes the changes described above help perfect the 
mechanism of a free and open market and, in general, to protect 
investors and the public interest in that the components of the SFI, 
SCFI and SFFI are identical to the components of the DFI and its sub-
indexes except that individual Index and Sub-Index components are 
weighted differently. The SFI, SCFI and SFFI weight each component 
based on an equal risk contribution methodology, rather than the 
current methodology for the DFI and its sub-indexes, which utilize 
production levels (for weightings of the Commodity Futures Contracts) 
and GDP (for weightings of the Financial Futures Contracts). In 
addition, the Index Components are rebalanced each month based on the 
historical volatility of each Index Component, as well as the 
correlation of

[[Page 53229]]

each Index Component to the other contracts included in the SFI. The 
objective of this methodology is that no single Index Component exposes 
the SFI, SCFI and SFFI to greater risk than any other Index Component. 
The Exchange does not believe the changes to the SFI methodology will 
adversely impact investors in that the Sponsor represents that a 
monthly equal risk contribution methodology (rather than an annual 
weighting process based on, as applicable, production and GDP factors) 
of SFI components may reduce volatility of the Index and Sub-Indexes, 
and by extension the price of the Funds' Shares, and may reduce the 
likelihood that comparatively greater volatility in one or more Index 
Components will contribute to increased volatility in the price of the 
Funds' Shares. Furthermore, such changes may benefit performance by 
granting an equal importance to beneficial trends in each market, 
rather than exaggerating the importance of one market over another 
based on outside factors such as the relative size of market.
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    \19\ See notes 5-6, supra.
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    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information is publicly available regarding the 
Funds and the Shares, thereby promoting market transparency. The NAV 
per Share will be calculated daily and made available to all market 
participants at the same time. One or more major market data vendors 
will disseminate for the Funds on a daily basis information with 
respect to the recent NAV per Share and Shares outstanding. For each 
Fund, the IIV 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.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of exchange-traded products that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding the Funds' holdings, IIV, and quotation 
and last sale information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 
exchange-traded products that are based on futures indexes and that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\20\ and Rule 19b-4(f)(6)(iii) thereunder.\21\
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-91 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-91. This 
file number should be included on the subject line if email 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 Web site viewing and 
printing in the Commission's Public Reference Section, 100 F Street 
NE., Washington, DC 20549 on official business days between 10 a.m. and 
3 p.m. Copies of the filing will also be available for inspection and 
copying at the NYSE's principal office and on its Internet Web site at 
www.nyse.com. 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-2014-91 and should be submitted on or before September 29, 
2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21247 Filed 9-5-14; 8:45 am]
BILLING CODE 8011-01-P


